How To Balance Experience And Cost When Building A New Company
Most of us would agree that building a successful business is contingent on hiring the right people.
Product, price, and market matter, but without the right team in place, even companies with incredible potential can stall out. However, most startup founders focus heavily on “what” they’re building without a similar amount of attention being paid to “who” they plan to build it with.
And that makes sense, up to a point. But once the widget is made and you’re starting to get valid indicators that your solution fills a need or solves a real problem, you’ll need the right team on the field in order to execute sustainably.
Think it’s not important? After analyzing over a hundred startup failure post-mortems, CB Insights listed “not having the right team” as one of the top three reasons why businesses fail, just behind “ran out of cash” and “no market need.”
Startups tend to wait too long before hiring who they really need. But just as a military commander must think about who is needed to pull off an important mission—a field leader, a pilot, troops, and behind-the-scenes intel specialists—having the proper team in place is vital to startup success.
Penny Wise, Pound Foolish
Startups frequently pursue young, inexperienced talent because they think it’s sufficient enough to get them to the next proof point while constraining costs. They figure once the business really gets going, they’ll trade up. Or they pursue the “murky middle”—someone who is somewhat experienced and therefore more expensive, but they’re not really optimizing their talent with this approach. In fact, either of these hiring philosophies can be a mistake.
Many young companies also fall into the practice of hiring only when the need becomes so acute that they cannot take the time to find top-tier talent. This is akin to starting a basketball game with only four players and then finding anyone in the gym to be player number five when you realize it’s a losing proposition. This style of ramping a business not only can take the company off track, but also decreases your chance of success.
Startups in that critical, early-growth stage cannot afford missteps. For the best chance of success, founders must figure out “who” they need most, and then pursue the very best talent to fill those roles. Yes, your cost per employee may go up, but you’ll be able to do more with less people, and bringing the right experience and a track record of success in-house dramatically increases your chance for accelerated growth.
Balancing Experience With Adaptability
Companies often place strict parameters around what they think “talent” should look like. For instance, they might require that C-level candidates have two decades of senior experience in the same industry, notable past successes, and maybe an M.B.A.
While that pedigree certainly seems ideal, such unicorns can be hard to find, especially in today’s economy where there is keen competition for top talent. Not to mention, that same-industry veteran from a Fortune 500 (who also expects an outsized annual salary) may lack some of the most important qualities needed by startups and early-stage businesses.
Although past experience is always desirable, the ability to adapt and pivot is equally important. Companies, especially young ones, rarely know what the road ahead looks like, but it’s a safe bet that it will be full of twists and turns as market disruptions occur. Look to hire people with the specific skillsets you need, but also look beyond those qualities to better define the value and suitability of the candidate.
Has the person been part of a successful startup in a different industry and is looking to do it again? Did they innovate to create a market disruption, or did they successfully pivot a business when disruption occurred? Have they demonstrated the ability to both create strategy and execute on it successfully? Experience doesn’t always have to fit the “two decades in the same industry” mold and, oftentimes at this stage, you don’t want it to.
In a rapidly shifting startup environment, companies need talented employees who are agile as well as competent and innovative, meaning past experience and industry background aren’t always the best metrics for future success.
Especially when hiring for senior-level roles, founders should be aware of their own strengths and weaknesses. Select people who have skillsets to offset your shortcomings and experiences that complement yours. This thoughtful approach brings diversity in thought and background, which is required for true innovation.
There is a strong correlation between the success of a business and the talent employed there. Almost half of all startups don’t make it to their fourth year, and the startup failure rate at four years is still close to 44 percent, according to Small Business Trends. This is why it’s so important to thoughtfully select the right team to scale your business. Even if your business is growing quickly, slow down, take a breath, and be thoughtful about not only what you are building, but also who you are going to build it with.
The article was originally published in Forbes