The CEO’s role tends to be hinged on attracting, engaging, and securing customers, talent, and capital. Today, I want to focus on the activities around attracting and securing talent — the lifeblood of a company. At seed, where we invest, I tend to lean on the “slow to hire” bit. There’s value in keeping burn low until you start to see traction. But when do you speed up?
Initial hiring occurs when the founding team realizes that traction is requiring them to neglect their core duties (for example, CEOs and focus on talent, capital, strategy, and key customers). Then the first set of hires start to tap-out on capacity or need to remove themselves from certain tasks to generate leverage. It’s important to be proactive and not “play catch up” when your business is moving to product/market fit (and beyond).
We don’t want to be caught flatfooted but don’t want to engage in senseless hiring (and burn). As operational capacity proves itself (high growth and strong monthly revenues solidify this), certain account additions or expansions will create break points that reveal 1) necessary process-tooling, 2) product gaps, and/or 3) required marketing, sales, and support additions. Not to mention that employee attrition is a natural part of the business.
In a recent exchange with a founder, we looked at the sales pipeline as a guiding tool to plan business-related hiring (similarly, could look at the product roadmap/customer feedback for technical hiring). This framework could prove useful for others:
Look at existing accounts and estimate growth (both unit and dollar level) on a rolling 6 month basis. Assign a probability to existing account growth and you have a weighted growth figure.
Look at your pipeline and estimate sales wins (both unit and dollar level) on a rolling 6 month basis. Account for lag — delay between signing and accounts generating revenue. Similarly, assign a probability to each new account and derive a weighting growth figure.
What is the resulting sum look like? Does it signal that things will break? Is that process retooling, product gaps (might mean adding more engineering and design), or is it purely a business staffing issue?
Like most other things, it tends to be that multiple strategies are required. The key is to have a pipeline of talent to tap as teams determine their headcount needs — always be recruiting! Great founding teams are able to estimate the impact of pending operational retooling and feature roll-out in an effort to not over-hire and get into a “throw people at problems” mindset. They can also adjust for other factors in the business and not rely solely on numbers — what humans are great at! Further, the employee on-boarding and training tends to make or break hires in high octane phases (for another day). Rational and proactive hiring is hard to do and we’d love to hear how others approach it.
Originally published in the Dynamo Dispatch.