Hiring Everybody is Good for Nobody
Startups
often rush to grab all the best available talent as quickly as possible. Six
months later, the inevitable layoffs happen. Having too many bodies is often a
bigger sin than not having enough.
General managing partner, G2T3V and Chicago High Tech Investors
In the good old days
in Chicago, if you wanted Mayor Rahm Emanuel to swing by your shop and share
the podium for the announcement, it was all a numbers game. As long as you were
willing to broadcast that you planned to hire a boatload of new bodies, Rahm
would show up without fail. He'd attend a door opening if the headcount was
high enough.
It really didn't
matter what your product or service was (although it never hurt to be a tech
biz) and, honestly, no one cared whether you were profitable or even had a
viable model with a realistic path toward future profitability. And, it never
seemed to matter whether you knew what you were going to do with all these new
heads or had an expansion plan that made sense--one that you could successfully
manage.
It was all about
headcount and bragging rights - a little bit for you and a whole bunch for him
and the city. Pretty much everyone cheered each announcement. Most of the media
went along with the program, although there was the occasional curmudgeon who
would net the new numbers against the layoffs and company closures that were
also happening around the same time. This modicum of restrained enthusiasm and
realism was regarded as bad form and sour grapes by the administration, which
believed that trees actually do grow to the sky.
These days Rahmbo is
gone and the new mayor isn't really interested, but we're still stuck with a
bunch of startups and entrepreneurs who think that it's a badge of honor (and a
source of great company pride) to hire as many people as you can. And to
do so as quickly as you can, even if you have only the foggiest notion of how
you're going to train them, deploy them and, most importantly, have them drive,
not just the headcount numbers, but the bottom line of the business as well.
It's especially scary
these days when there are at least as many businesses tightening their belts
and cutting back on their personnel as there are over-funded young businesses
(with plenty of investor, as opposed to customer, cash at least for the moment)
who are announcing hiring sprees. It's just like we saw in the dotcom gold rush
days and with just as little substance or integration and implementation
planning.
When you ask the CEOs
who are running these companies for an explanation or why they think they need
to hire 50 or 100 new employees during the coming year, you generally get two
vaguely philosophical answers, which are equally unhelpful and troublesome.
Once you hear this kind of gobbledygook, you can pretty much set your watch and
count on an announcement within six months that the company is bagging the
recruitment drive or even worse that there will be some essential downsizing
and layoffs in order to "right size" the enterprise. The truly
ignorant and/or shameless in the bunch will also tell you with a perfectly
straight face that while they're firing these folks, they're still looking to
hire others.
So, two words to the
wise. First, watch out when you hear about (or hear yourself talking about) the
company's need to grab critical talent when it's available. This basically
means to hire good people in a hurry and then hope that you'll figure out what
to do with them down the road. After all, you can't afford to let that great
talent go work somewhere else. Keeping them, and keeping them busy in the
interim, will be someone else's problem for a while, anyway.
A long time ago the
smartest recruiter I ever met warned me to resist this very temptation. He said
to always remember that the best person you interview isn't necessarily the
best person for the job you're trying to fill and that it's not your role to
find them a home in the business. Even more importantly, especially in tech
businesses, adding new people to the pile of programmers already working on a
development project that's running late generally makes things later, not
better.
Most startups never
need a bench. You need to find and hire people for real, right now, positions
who can hit the ground running and start to make a difference and a
contribution from the outset. It doesn't matter whether you've got the money to
pay them because - if they're not relatively accretive to the bottom line -
they'll be around a lot longer than the short-term cash surplus that you may be
enjoying at the moment. Hiring smart is a lot more important than hiring fast.
You don't save time or money by hurrying.
Second, most startups
also don't need a branch office, at least for a while. When Intel would
announce a new billion dollar fab plant in some foreign country, people used to
ask Andy Grove, the mastermind behind Intel's growth and decades of dominance,
what he was going to manufacture, he would say that he didn't really know. But
he did know that if he didn't start building the plant then, he wouldn't have
it ready for when it was needed down the line. I guess a genius like Grove
could get away with building massive bricks and mortar building years in
advance, particularly in a business with a seemingly infinite demand curve. But
new young businesses need to be a lot more careful and conservative about how
and when they expand - especially beyond borders.
I tell companies all
the time to "nail it before you scale it" and in an age of digital
globalization, remote intelligence, and virtual everything, it's harder and
harder to make the case that a company barely out of its britches should be
opening offices and facilities all over the place. Again, great for bragging
rights among your back home peers, but very tough on the bottom line and full
of costly surprises. I love Ireland as much as the next guy, but you'd have to
show me some very compelling math to prove that it makes sense to spend a
fortune on flights, fixtures, and facilities in some foreign country when you
haven't figured out how to make a profit at home.
Bottom line: your
business doesn't need a bench or a branch for a long time.