StartupYard, growth strategy

Notes on Scaling: Building the Right Team

Team building isn’t easy. The other day, one of our founder alumni was complaining to me about a problem he’s been having in his growing company. The problem is that as the company grows, he is finding it very hard to find people to join the team who feel as “engaged” with what the company is doing as his earlier hires.

He described what happens with his most recent hires: they go through the interviews, the onboarding process, the initial training and background on the product and train for the role they will play in the company… and then they lose interest or quit. He described a batting average of less than 1 in 3 new hires who “make it” on his team.

What he expects is what I think most Startup founders come to expect, even long after that expectation may be reasonable: that new hires be as excited about their business as they are, and that they each bring a creative energy to the team that contributes to the whole in an important and unique way.

It reminded me of the story of almost every founder I’ve known who grew a company beyond a certain point. Mergim Cahani, in his last interview with StartupYard, told a similar tale.

Finding the “Right Team”

Of course there are some aspects of this problem that are beyond a founder’s control. You don’t control the job market, for example. When unemployment is low, people may be less desperate to get a job, or stay in a job once hired.

However, in the interest of focusing on things we can control, I’m going to go through a few ideas for the founder who is finding his or her later hires harder to retain or to motivate. I’ve seen these approaches work among our own startups, although you may find they don’t fit your needs in every case.

1. Hire Contractors for Jobs that Won’t Scale

While you’re busy looking for the perfect employee, you may miss out on the perfectly adequate contractor. Some founders get so focused on the idea of team building and culture making, that they forget the immediate reasons they are looking for talent is to get specific things done.

One of our alumni recently told me about how he wished, looking back, he had hired more contractors as he was scaling the business. He realized, too late, that he had hired a number of people with the idea that they were each individually a good fit with the team, and would be long-term assets to the company. But when a pivot in the business was necessary, their jobs could not be justified in the short term.

He ended up having to let people go after making a significant investment in finding the right people for his team. That caused not only a disruption in the company, but also a good deal of pain for the core team, who lost coworkers they cared about.

There is always a danger in under-investing in your team and culture, but there is also a danger to over-investing. Some jobs may simply be better left to contract workers who are not expected to become a key part of the team.

Contractors are not only easier to work with in the short term, but they may have a mentality towards their work that the company can benefit from. A focus on getting things done quickly and correctly can be important as an antidote to mission drift within a small team.


2. Question Your Typical “Hire Type”

The definition of insanity is trying the same things over and over, expecting different results.

An interesting story one founder told me was about this very problem. He had been hiring mainly younger employees, with the idea that they would bring “creative energy” and “spirit” to the company thanks to their lack of experience and their youth.

This is the “fresh eyes” idea, and it can have a lot of merit. Many CEOs focus on hiring people who are “unspoiled” by previous experiences, and can bring positive energy to the group. The problem for this particular founder was that the strategy wasn’t working. New hires didn’t contribute much beyond what they were asked for specifically.

The other problem was that the actual work he wanted these people to do was not that intellectually challenging or difficult. The result was that new hires were not as excited or as eager to contribute as he hoped.

“They’ll all so timid,” he told me. “They don’t even ask questions when they should. They don’t know how to express any interest in what we’re doing.” Anyone who has been the new kid at a school will know that feeling. Being young and fresh may give you perspective, but it doesn’t necessarily make you ready to share.

I asked this founder, “why don’t you hire someone older? Maybe even someone near retirement age?” The thought had never occured to him. Yet, someone with a lifetime of experience may be just the right type to do a job. A startup with an average age of around 30 may lack the life experience of somebody who has had a career, and may be less ambitious or restless than a younger hire.

If you’re hiring for a role that doesn’t require up-to-date technical abilities, then there is something to be said for hiring someone older, at the end of a more humble career, rather than at the beginning of an exciting one.

3. Reconsider Worker Incentives

In the same vein as the previous point, consider also that a person hired as Employee No. 3 is not the same type of person as the one who is hired as Employee No. 30 or beyond.

Namely, the bigger you get as a company, the less attractive you are to risk-taking hires who are interested in equity participation, and the more attractive you are to the kinds of people who are looking for a steady paycheck more than the opportunity to be in on the ground floor.

Yet some startups continue to incentivize their later hires in much the same way they incentivize their earlier ones. The problem is that offering someone equity, or the “opportunity to grow in your role,” is less meaningful the larger a company becomes. Employee No. 3 knows that there is room for advancement if the company is growing. Employee No. 30 may be less sure of that. Employee No. 300 may not believe it.

Yet if we step back and recalibrate the incentives for new hires, we can find more relevant motivators for a different kind of person to hit the ground running in a young company. If you’re hiring for sales, for example, the opportunity to make bigger commissions may be more attractive than an equity stake. If you’re hiring for a technical role, then goal-oriented compensation schemes may make more sense.

Don’t be afraid to experiment with new incentive structures for newer workers. The strategies that work for the earliest team members may not work later on, as the company gets bigger.

4. Hire People Smarter Than You

A friend of mine once told me: “Maybe you’re a one in a million genius, but on the other hand, there are a thousand more like you in China.”

It may be hard to admit to yourself, but you’re probably not good at everything. Hiring people who are smarter than you is a good practice for building a team that can master new challenges together. There are many kinds of genius, and many kinds of geniuses. Recognizing ways in which people are even smarter than you are can help you hire and motivate those people to contribute to your company.

In a sense, this point is more about your mentality than about your choices. If you are looking for people to hire who are smarter than you are in some respect, you’re likely to find that there are many ways in which potential team members excel that you may have been undervaluing.

Ask yourself with each candidate: how is this person smarter than I am? Maybe they have a better “EQ” (Emotional Intelligence), instead of a higher IQ. Maybe their genius is in art or in the sciences. The deeper you dig with people, the more likely you are to find some area in which they far exceed your own abilities.

A CEO who recognizes and values the talents of other people is more likely to use those people well, and make them feel valued along the way. So hire people smarter than you.

5. Hire “Failures”

Simply put, hire people with all kinds of experience. Hire people who have started their own businesses and failed. Hire people who have made mistakes, and learned from them. Hire people who aren’t from the best schools, or who don’t have the most experience.

Hire the right people

Data shows that the average worker today will hold about 15 jobs in their lives. That’s over 3 more than the average reported by the US Bureau of Labor Statistics in the 1960s. Today, the average length of employment has dropped in developed economies to under 5 years.

What that means for you as a growing company is that you’re likely to see more turnover in your team than a small company 50 years ago. However, you’re also likely to be able to hire people with a broader set of experiences than before. It doesn’t necessarily follow that someone who has left a job after 5 years or less has “failed” at that job. Still, it’s likely they’ve made mistakes and earned experience your company can benefit from.

The tech industry practically fetishizes failure, but only failure of a certain kind. Never personal failings. Always a failure of reaching too high, and striving too hard. Never a failure caused by a simple lack of knowledge or inability to compete.

As economics author Malcolm Gladwell noted in his seminal piece on college admissions, and later in his book The Tipping Point, the average graduate of an Ivy league school like Harvard or Yale fares no better in the long term than a similar student who chooses to go to a lesser school (or is not accepted to an Ivy League school). In fact, long term, the effect on individual performance of being placed in “prestigious” surroundings and being compared to ever more successful colleagues is to cause individual productivity to drop.

The thinking goes: if I always succeed, and yet others around me are always better than me, then I must not be worth as much as they are. The “little fish” syndrome that high performers experience can extend across their whole careers. Michael Lewis, another economic writer, noted in Flashboys: A Wallstreet Revolt, that high performing software engineers at the most prestigious financial firms like Goldman Sachs were typically paid less than their lower-performing counterparts at lesser firms.

The reason? The competitive environment in high-profile companies made these employees less aware of their value to the company. In effect, those who failed to get these jobs, or who failed to stay in them, ended up benefiting financially from not being employed in the top firms. In failing at some point in their lives, these “lesser” individuals learned something their top-performing peers did not know. They learned how to value themselves.