As the air gradually escapes from the hi-tech bubble, the transition from a feverish hiring frenzy to a more cautious approach is inevitable. Company success had previously been heavily weighted on headcount growth, but now efficiency of management and retention of working capital will be in laser focus. Many leaders who came up in ranks during the bubble may feel a bit constrained comparatively, depending upon their previous experience.
Having had the opportunity to collaborate with exceptional technical founders and executives, I found myself compelled to seek advice from some as a potential blueprint for growth and scale initiatives in the near future.
Ryan Houlette, VP of Engineering and Founder, and the executive team at Sense have always been focused on the long game; hiring based on defined goals, not measured from hiring exuberance.
As a technical founder/executive, what guidance would you suggest with regard to adding headcount to a growing startup? Are there levers or things that you think about in order to decide?
“One guiding principle is that I want to be reasonably confident that the role will be needed for at least a year. I don't ever want to hire someone knowing that I may have to let them go in six months. People's livelihoods need to be treated with respect and consideration. If I have a short-term staffing need, I'll look for a contractor or other solution.
I tend to be conservative by nature in hiring, since it's easier to grow a team than to shrink it. Setting a high bar for opening a req forces you to really think about what you're trying to accomplish with that hire and how important it is relative to your other priorities. Even if you have the financial resources to do so, hiring your way out of any problem is not necessarily the best choice. It can lead to a lack of focus and projects that continue on longer than they should under their own momentum. Rapid growth also brings its own organizational challenges and overheads; you aren't going to get linear speedup in delivery as you scale the team up.
Generally, I think a good rule of thumb is to assess the hiring need whenever a major strategic objective is added to the plan. If it really needs to be done in parallel to existing work, adding staff may be worth considering. The risk of increasing your burn rate too early before it is adequately supported by revenue needs to be balanced against a more subtle risk of failing to execute by peanut buttering the team too thinly across too many objectives.”
I asked the same from longtime friend and CTO, Mahesh Nair, who leans heavily on product road mapping to help justify hiring.
“Ensure that there is a good product management discipline that provides the business justification for adding and prioritizing features and capabilities on the product and technology roadmap. This process will help set the hiring timelines, velocity and determine the type of headcount to be added - full time hire, contractor resources, turnkey project deliverables or other options.”
In a situation when times are leaner, you may struggle with getting approval for a replacement headcount once someone leaves. To that, Mahesh also offered his thoughts about culture in more conservative times.
“Make a conscious ongoing investment in building and nurturing a positive work culture, a diverse and inclusive workforce, and a psychologically safe environment that fosters teamwork. To quote Michael Jordan: 'Talent wins games, but teamwork and intelligence wins championships.'"
During the boom, many companies leveraged fractional CFOs in order to afford internal talent acquisition teams and HR leadership, which, after SVB and the banking debacles, might be taking pole position once again. To wit, I am including a few points from Michael Bayer, a longtime friend and present CFO for Wasabi, whom I have had the pleasure of advising and working with previously.
“People aren’t and shouldn’t be treated as fungible. Think about who you hire, and when you hire them, carefully. These are permanent investments and the most important investments you make as a business. I look at every new hire as another family member, another mouth to feed. We need to know we have a map to the revenue to support that hire.” Part of the CFO’s role is to look forward and project, and if you can’t pay employees’ salaries, then don’t hire them. The employer compact is real and important.”
As someone that has been helping companies with acquiring talent for over 20 years, the best advice I can personally offer is to forget the job description. Those that have worked with me know that I have never been a fan of them because job descriptions are just a snapshot in time. By putting a plan together containing Objectives and Key Results (OKRs) for the particular role over the next 12 months, you will build a narrative justification for a hire. It also means that it will help in creating precision in your recruiting efforts, as well as a personal performance plan for your employee.
Kate Morgan is the Founder and CEO of Boston Human Capital Partners.