As a founder, when you raise money for your startup, it’s usually all about growth and that tends to mean you need to recruit and hire some staff. This is an exciting and stressful time for you and your business and having a clear plan will make it easier. In fact, your investors will expect you to have a plan.
When we receive calls from founders who have either completed or are in the process of completing a capital raise to grow their business, they generally want to talk about how they can develop a suitable recruitment strategy. The initial questions tend to be, “which roles do we need to recruit and which ones should we prioritize first?” This then flows into “what type of people are we looking for?”
Naturally, all of this comes with a sense of urgency, as investors don’t want their cash sitting in the bank, they want it used to help the business grow. If that means hiring people, then it’s time to start recruiting. So, what’s your recruitment strategy?
First, some things to keep in mind when developing your recruitment strategy:
Do startups need job descriptions?
Early stage startups are fast growing businesses with smaller teams of people and that often means “all hands on deck at all times.” So do startups actually need job descriptions?
The short answer is “yes”, because people need to know what their primary role is and the outcomes for which they are responsible and accountable. You can’t have everybody running around working on the same thing independently of each other. There needs to be some focus and direction. In startup land, opportunities, crises and existential threats can pop up at any time, and when they do, yes, everyone needs to be involved, but when these are resolved or addressed, people need to be able to flow back to their original roles and BAU.
Do startups need to think about an organizational structure, or should it be more fluid than that?
Yes, there needs to be a fundamental organizational structure, but there also needs to be a lot of flexibility in practice. It would be rare to hear anyone say in a successful startup “hey that’s not my job.” As your business grows, the need for structure becomes more necessary. It pays to think about this in advance to enable things like career progression pathways and to prevent “title creep” (when an employee’s title outweighs his or her experience and capabilities) which can create issues in attracting the right person when you need them in the future.
In HR strategy, there has always been a focus on organizational structure placing an emphasis on how many direct reports a manager has. Is this important in startups?
There is some science around this and once the number of direct reports gets to double digits, ten or more, it can become unwieldy. Five to seven is ideal, keeping in mind that the founder needs to keep focused on higher level strategy most of the time, and as reporting lines are added, that also comes with additional internal meeting times, management decisions and discussions.
Are there specific role functions that most startups need to recruit first?
This depends on the maturity of the business. For example, usually, as a startup takes in more sophisticated investor money, there is normally a push from these investors to strengthen the capabilities of the finance function. This is when you see a senior finance person, possibly a CFO, come into the organization following (or during) a funding raise, just to make sure that everything is investor friendly and the numbers are respected and trusted. This leadership role provides some financial discipline around decisions and growth, especially for companies expanding internationally, starting to open new offices and investing in new assets. It provides a level of comfort for the investors as well as added commercial discipline for the business.
At other stages it depends on what the startup is looking to do, if it’s new markets for a B2B SaaS business for example, it could be an investment in a key sales leadership role – people who can bridge or branch out into new markets. Or it may be a Chief Marketing Officer if they need to lift the sophistication of their marketing, or Customer Success and onboarding may need a lift in capability to deal with scaling issues. Often a CTO is needed who can lead a growing tech team. Each business is different of course.
What about salary brackets? How do you know how much to pay for key leadership roles?
There are a number of approaches to help with this. Firstly, you can use your market knowledge of what competitors are offering and a good recruiter who has recruited in this space can give you some general ranges. There are also pooled data sets you can find online with a bit of research although it is obviously important to note that different geographical markets have different labor costs with the data from San Francisco, for instance, being skewed because it is such an inflated, expensive labor market.
In our line of work, we get exposed to the demand for salaries from the candidates’ perspective as well as what the startups are willing to pay and where they settle when the selection decision has been made. So we always have current, actual and anecdotal salary ranges that we can share with our clients when we are scoping out a new role.
Should you “stage’” your recruitment – focusing on one or two key roles first?
Yes, it makes sense to adopt a planned approach and to hire the “heavy hitting” people first – the leaders. These people will often have their own networks and teams of people to bring with them at the junior and specialist levels and this can help reduce recruitment costs in the future. They will also like to have a say about who is in their team.
That being said, recruitment does take time and if you need those hires to drive the growth investors want to see, then you can’t wait and will need to hire junior and senior roles in parallel. In this case, it is still worthwhile keeping the senior hire recruitment process just in front of the juniors to allow for scope to involve them if possible and to enable optionality in mixing and matching personal styles and capabilities as the recruitment of the team comes together.
Okay so now you have all the key components in place for your recruitment strategy. We’ve talked about thinking through the roles your business needs, where they sit within a likely organizational structure, how much you will need to spend in terms of salary and an ideal order of priority to stage your recruitment efforts. Next step is to execute your strategy and to start recruiting!