Lesson 31: Recruiting Numbers

Recruiting by the Numbers

So, you have your small core of dedicated, competent team members and you think you are ready to grow. What next?  Before you commit to scaling up your business, take a hard and honest look at where you are and determine where you want to go. One of the biggest mistakes a start-up can make is scaling too early, and it can cost you dearly.

There are five main facets of your business to assess when scaling. When we talk about scaling, we are talking about growth of different arms of your business, not just increased headcount. Think of a starfish. If you were a starfish, you wouldn’t be doing well if you had four arms that were short and stubby and one that was long. It would be hard to swim and hunt. Likewise, if you had four arms that were all similar in size and length and one that was short and stubby you may not be at as large a disadvantage as the other starfish mentioned, but you would still compare worse to starfish with five similar arms in most of the areas that matter.

The starfish is your start-up, and the arms are its dimensions: customers, products, team, financials, and business model. A healthy starfish has appendages that grow in unison with one another. Its body focuses energy on all of them equally, and should one surpass the others or fall behind, it will try to balance them out, so they are uniform.

That is how a successful start-up grows. You have a good market fit, and your customer acquisition strategy has gone through stages of evolution until your CAC (customer acquisition cost) is acceptable and your target demographic is defined. Your product has the features it needs to achieve and maintain a good market fit and you are releasing with a quality and cadence that keeps your customers interested and engaged through focusing on requested and needed features while de-prioritizing “nice to haves”. Your team is skilled, competent, responsible, and just big enough to do what needs to be done. Your financials are measured and tracked, with a focus on ROI (return on investment) in every aspect of your business. Your business model is well mapped to the market, with a feedback loop that allows you to adapt and a clear path to revenue.

If all the above sounds like you and your company, congratulations! You are among approximately 5% of start-ups. Most start-ups focus on 1 or 2 pieces and de-prioritize or ignore the others. They may have a great customer acquisition model and their product is a good market fit, but their financials are all over the place and their business model has no revenue as far as the eye can see. Maybe they are very structured, with good financial discipline, a great product that fits the market, and an idea of how to make money. However, their team is bloated, with too much specialized leadership at the top, too few ICs (individual contributors), a culture that is amorphous and full of FUD (fear, uncertainty, and doubt), and their user base is small with a very high CAC.

There is no such thing as a perfect start-up, and no two start-ups are the same, but all start-ups are similar. They all go through the same things, must overcome similar challenges, and must conform to the same basic business principles to achieve success. One measure of that success is growth. For this discussion we will go over some challenges you will go through as you scale your team size up.

From 10-25:

Growing from 10 to about 25 will take work. If your business is successful, it means that you probably have a great team of people. When you add people into that group of 10+ core members things will change quickly, most notably your culture.

One thing that allows good start-ups to be agile is their core team. If you structured your team correctly you have a well-seasoned group of about 6 to 8 competent individual contributors. Not that they don’t have titles. In the early days of a start-up, it is not uncommon to compensate skill and loyalty with a title instead of compensation. Not because you don’t want to pay your people more, but because money is scarce. Those titles, or lack of them are what can lead to a lot of cultural problems.

As you grow, you will want to bring in some specialized talent to plug up holes in your organization’s skill set. You will want to build out teams and hiring ICs to be under some of your more skilled people. You will want to bring in leadership to head up directives and ventures so you can concentrate on more CEO oriented tasks. All that sounds great, but it comes at a cost.

When you were small, everyone knew everything. What was going on with the business, who was responsible for what? Who was good at doing this or that? Once you put the hierarchy in place to grow people will lose visibility on those things. There will be people in the lunchrooms whose names you don’t know. There will be events that happen that no one makes you aware of because they are too far down in the chain to warrant your time. As the CEO, you will step away from the people you have been in the trenches with day in and day out.

When you take a step back, your absence will be felt. There is only so much time in the day and if you want your company to grow, let other people take up responsibilities you put down, but when you do, it can be uncomfortable for the people you started with, your core. They will wonder what’s going on. They will feel left out. They will fear. That is one of the two shifts in culture you must watch out for.

The other shift will happen when you bring in new people. People that have been there since the beginning will expect to still be in those intimate strategy sessions, but some of them won’t. They will be underneath a new team leader you bring in who has more experience and a deeper skill set than they do. At some point this will happen, and the people that don’t get the title will wonder why. Why didn’t they get promoted, after all they have been with you since the beginning?  Why aren’t they in the meetings with you, don’t you value them anymore? Are they getting replaced or fired?

Those questions can create a tumultuous environment. You may hear a whisper of, “it’s just not the same as it used to be.”  That is a sign you didn’t pay enough attention to your culture.

Culture shift is the number one hazard at this stage, and it can cripple a company. It can cause people to leave the company, creating holes in your organization you will struggle to fill. It can create productivity slumps that can derail all your growth plans. Fret not though, there is a path to success.

It starts with honesty and forthrightness. When you prepare for growth decide how you want to change your culture. Make conscious decisions about how you will deal with the problems you’ll encounter, what kind of organization you want to be, and what your core tenets are. Once that is done take it to your people. Talk with them about what your plans are, what you expect from them, and what they can expect as you grow to 25 people and beyond.

Let them voice their fears and concerns so you can address them directly and so that everyone can see you doing it. Show them you still value them and that you want what is best for both them and the company. Show them you have their needs in mind and that you are still a team. If you do that, you can defuse the first landmine you will encounter on your way to growth.

From 25-50:

Your culture is good, your teams are humming along, and things are getting done. Your people love what they do, and they’re invested in your vision. Sounds great, but it’s not enough. You need to expand your organization. Be careful though, there may be another land mine ahead. The short answer of why most companies can’t scale past 25 is they get betrayed by their past.

That’s a scary thought. Your company can be brought down by something you do today, without even knowing it. Fear not though, you couldn’t have done anything differently in the past if you had gone back and told yourself to. You made the best plans you could with the information you had. However, those plans just won’t work the same way they did then.

The problem with growth from 25 to 50 is process. The processes and methodologies you created and used when you were a small organization are unlikely to scale once you add complexity to them. When you were only 10 people, things may have fallen through the cracks, but it was manageable. You would put in the time, or someone else would and the tasks would get completed. When you were 25 people things still fell through the cracks, but instead of it happening in one team where it was manageable, it was happening in 2 or 3. You noticed that you didn’t get as much productivity per person as you did when you were at 10 people, but it was still within your ROI limits, so it was still manageable. Once you get to 50 everything changes.

The small inefficiencies you didn’t have time to fix before are now multiplied across too many teams to fix with ad hoc solutions. Your productivity per person has now dropped so much that your ROI is no longer acceptable. It’s time to take a hard look at why you do what you do as a company, tear down what doesn’t work, and put in place what does.

Describing what you want your devs to build in a meeting not giving you a shippable product that resembles what you had in your head? Time to do wireframes and writing user stories. Projects coming in over budget and past your deadlines?  Time to put things on a Gantt Chart and doing resource mapping. No idea where your money is going because the person who was supposed to be paying the bills hadn’t made a budget EVER?  Time for some accounting software, a budget, and mandatory executive sign offs for expenditures over $300.

You may have to build a great organization, but not everything ages gracefully. Processes don’t. The challenge isn’t over at process though. We must revisit culture again, because once your make changes and enforcing those changes the people who have been there and are used to doing things the way they used to will not be happy. No one wants to relearn something they feel they do well, and your people will not see the problems so they will believe that they do those things well. Get their buy-in, just like you did at the last stage, that your way is the right way, and that they should trust you.

There are a few ways to do that. You can show them the data. Show them how productivity has fallen off and tell them you have a solution. While this may be true it can be perceived as shifting the blame onto them, which can have negative consequences.

Another solution is to tell them you made mistakes in the past when you designed the processes, but you have a solution. They need to get onboard, and everything will work out. While this too may be true it can lose you trust as a leader, if you’re admitting that this is all because of your mistakes, why should they trust that you’ll get it right this time?

The last solution, and by far the best is to look at your whole organization honestly and rationally and analyse what is working and what isn’t. If you don’t have the knowledge or skill set to do this, then get outside help. Use your newfound understanding to create new systems and processes. Remember, don’t reinvent the wheel. You aren’t the first person to have whatever problem you’re having. Remember what it said at the beginning, start-ups are all different, but they go through the same things. Use the experiences of others to leverage your way to success. Use industry standard best practices where you can, and where you can’t try to base your systems on something that works as an existing solution to a problem like the one you are solving.

Once you have the new system designed, you need to create a step-by-step implementation plan. This is where project planning comes in very handy. Don’t get too attached to it though because no battle plan survives first contact with the enemy. You need to be prepared to make changes and adjust.

Once you are prepared to take your plans to your teams. Tell them you are ready to invest in the company’s future and that requires taking existing best practices from across the industry and standardizing to them in your organization. Be a leader and lead! This is something that must happen if everyone wants to achieve their common goal. This is a situation where being separated and above your organization benefits you. Most people will assume that you know lots of things they don’t, which you do, and that you’re doing this because you care about being successful, which you also do.

From 50-100:

If you have made it this far, then you deserve to be congratulated. I bet that’s not enough for your thoughts. I bet you want more. So, what does it take to get to the next stage?  Forget about yourself.

This stage will probably be easy, or very hard. You will either be able to let go, or you won’t, but that is what it takes. For you to get to 100 people in a typical, non-labour focused company you must replace yourself. Hire more “CEOs.”

When you first started out you did everything. You led, and you did individual contributor ship, but as the company grew you hired more ICs, promoted some to leaders, and probably hired a few from the outside. It is unlikely however that anyone at your organization knows more that you do. Why?  Because they probably learned everything about their job from you either directly or indirectly. You built the product; you set up the process; you made the first sales, and you showed everyone how to do their job and reinforced their performance with praise when they did it in a way you deemed good, and chastisement when they did it in a way you deemed bad. The unfortunate reality is that you don’t know everything, and you never did. You were smart enough to do what needed to be done, and wise enough to plan, but you don’t know what you don’t know. Fortunately, others do.

At this stage you should be able to use skilled specialists. People that are standouts in their field. Those people will bring with them knowledge and insights build on that knowledge you probably don’t have. They are your CEO replacements. CEOs of marketing, of product, of HR, sales, or of several proficiencies. They have built teams and maybe even companies. They know what it takes because they have been there, and they have done it. An organization full of division leaders like this is a force or nature, and the only thing standing in their way is you.

For those people to come onboard, and be successful, let go of your ego. Stop believing that the company would fall apart if you took the day off. Put your faith in other people’s abilities and let them do what you hire them for, without getting in their way. Not that you shouldn’t guide them, but it is to say if you hire a sales assassin that has built successful sales teams and organizations for the last 20 years you should let them do what you hired them to do without second guessing how they will do it.

This is a very difficult stage for a CEO. It is very much like letting your child go on their first date. You raised them well; you gave them the right guidance, but you still worry about what will happen. At the end of the night though, realize that they can’t be a responsible person if you don’t give them responsibility; if they have a track record of being responsible, then you can probably relax. Yes, just like your child, your company is very important to you, and yes you are terrified that if you let someone else have control terrible things could happen. However, if you want to keep growing to 100 people, and 200 people, and 500 people, and 1,000 people you will have to give up control. You can’t be everywhere, doing everything, and guiding everyone.

If you can get overcome this challenge, they you will be among the best of the best. People who have created organizations that stand on their own and are successful. Companies that can become household names.

These are not the only challenges you will face as you scale your business from 10 upwards. There are too many challenges to list, but the ones mentioned above are the big ones. Keep hiring the best people you can, automating everything you can, streamlining every process you can, and being committed to your people and you have a good chance at success.