Job titles in startups are usually loosely defined and casually managed. In many cases, founders hand out very senior-sounding titles to their co-founders and early hires.

While everyone likes having a fancy-sounding job title, they can come back to bite the company later as it grows.

The one big title you need to have in the company is a CEO. Investors, partners, vendors, and employees all need to know who speaks authoritatively for the company. They are both the face of the company and the person with ultimate operational control.

Beyond that, in an early-stage company, titles are somewhat arbitrary. Sometimes they are silly or descriptive, but often founders give all the early employees very senior titles like CTO, CMO, or Vice President of whatever.

Early on, these inflated titles do little harm and can make everyone feel important. The problem comes later.

In most cases, your early hires would not qualify to be a “C” level officer in a mature company. They might be outstanding individual contributors but not able to manage a large team or operate at a strategic level. You might be afraid to put them in front of investors or the media because of their style or lack of professionalism.

When the company grows to the point where you need a “real” CTO, CMO, CFO, etc., you are in a tough place. There aren’t conventional titles between those and the CEO. Unless your early hire can fill those big shoes, your only option is to demote them to a lower rank and hire someone new in their place.

Imagine that, as you launched your company, you hired a skilled developer called Sarah and a friend named Joe, who knows his way around Google AdWords. As the only other people in the company, you call Sarah CTO and Joe CMO.

Two years later, you have dozens of developers, but Sarah has trouble with delegation and managing teams. She also lacks experience with organizing large development projects.

At that point, your marketing has gone beyond AdWords to include content marketing, PR, influencers, and email campaigns. Unfortunately, Joe does not have any experience with those. He does not understand how to measure and optimize any of those new channels.

Neither of these people are poor performers or bad employees; they just don’t have the skills the job requires anymore. So, you are a new CTO and CMO and demote Sarah to be a Senior Developer while Joe becomes the keyword marketing manager.

That won’t feel good.

This is a public humiliation for them. Everyone in the company, and all their friends, will see the new lower status. It is a massive blow to their egos and will impact their productivity. In many cases, they will quit rather than accept this change of title.

My recommendation is to avoid title altogether (apart from CEO) in the early days. While the company is getting started, everyone will wear many hats and may change responsibilities frequently. It is best to keep job titles vague or just skip them.

You could just say, “Sarah does our app development” or “Sarah runs engineering.” And, you might say, “Joe runs our marketing efforts” or “Joe heads or marketing initiatives.” You don’t need titles to tell investors and newer hires who these people are and what they are doing.

Then, in a few years, you can hire that fully qualified CTO and CMO without having to demote anyone. That is far less jarring.

In the meantime, you can also help Joe and Sarah find coaching to help them grow their skill sets. Ideally, by the time you need someone to be CTO or CMO, they will be ready and able to take on that responsibility. After all, you are probably going through the same growth process yourself, earning the title you had to take at the beginning.

If you need to give out specific titles, start with flexible ones. Things like “senior developer” or “director of marketing” could be the top person in the organization or someone several notches down the hierarchy.

Whichever approach you take, always consider how the company will evolve and avoid creating situations that will cause hurt feelings and bad blood down the line.