The evening was devoted to the challenges around scaling a startup, from 20 to 200 employees – which the Tech Superpowers’ team knows is a challenge for many companies.
Mike Oh, Tech Superpowers’ founder and President, kicked off the evening, setting the stage for the discussion. With Tech Superpowers’ 31 year history and numerous hires over the years, Mike contributed to the discussion led by Adam Fisk, Tech Superpowers’ Director of IT Services and expert facilitator.
So, what is a scaleup?
Scaling a startup from 20 to 200 employees is one of the biggest challenges and opportunities you will have as a leader.
Only about half of all startups survive their first 5 years in business. Only 1 in 200 become an actual scaleup.
What’s a scaleup? It’s a startup that has proven its business model and determined product-market fit and can demonstrate to prospective investors that it is worthy of further investment.
While many people focus their definition of scaleup around the product, finding and retaining the right people is one of a scaleup’s most challenging aspects. A company with 20 employees can be a profitable and effective small company, but a scaleup needs to have its sights set on the path to 200 people or more.
In this roundtable discussion, we broke down the discussion into four basic parts:
- How do you find and hire the right people?
- How do you keep these people? (Retention and company culture)
- How do you part ways when it comes time to do so?
- Parting tips and advice
1. Hiring the right people when scaling a startup
According to the US Department of Labor, the wrong hire is costly. The average cost of a bad hire is at least 30 percent of the employee’s first year expected earnings.
The wrong hire in a key role can be even worse. If you have a $100,000/year employee, the cost to the organization can be $30,000 or more. But this is just the beginning. What about opportunity costs? The wrong employee can stall major projects, impact overall productivity, turn off potential customers, partners, or investors, or cost you other “right fit” employees.
The hiring process often starts with job descriptions. Better job descriptions increase the quality of candidates.
Keep corporate culture top of mind throughout the hiring process. Consult with the CEO and executive team on non-negotiables, things a candidate absolutely must (or must not!) bring to the table. Make sure some of your interview questions test for non-negotiables. If a candidate doesn’t fit the culture, that doesn’t mean they’re a bad person – just a poor fit for your organization. Don’t waste any further time with them.
Important things to remember:
- Candidates are on their best behavior during a job interview. If you get red flags during the interview process, it’s not going to get better. Even if you urgently need help, don’t settle.
- When your organization is growing rapidly, a new hire’s role might be completely different in a year or two. A suitable candidate should be qualified for the current role, but their ability to grow into and learn other roles should also be considered.
- When scaling a startup, hire the person, not the paper (resume.) Drive, passion, and energy are just as important as previous job experience.
PowerUp Tip: Don’t start the job description with a list of duties. Think of it as a marketing document for your company. How can you use that job description to appeal to the right candidate? How is the company unique? What experiences will they have? How will they be able to change the world?
Hiring tools: personality surveys and assessments
Several of our roundtable members talked about their use of The Predictive Index (PI).
- The PI Job Assessment pinpoints the behavioral traits and cognitive ability someone would need to be successful in a given role.
- The PI Behavioral Assessment helps you decide if someone has the right personality for the job.
- The PI Cognitive Assessment helps you understand the speed at which someone learns new information.
The Predictive Index Cognitive Assessment is a short assessment of an individual’s general cognitive ability. It helps you understand a person’s capacity to learn, adapt, and grasp new concepts. It measures four behavioral drives: dominance, extraversion, patience, and formality. And it’s generally a good indicator of a person’s workplace behavior.
Others talked about tools such as DiSC for pre-hire assessment. (DiSC stands for the four main personality profiles described in the DiSC model: Dominance, influence, Steadiness and Conscientiousness.)
Another tool is the Schwartz value index. The Schwartz Value Survey (SVS) asks participants to conduct a self-assessment using a survey with two lists of value items. The survey helps companies decide what someone values and what drives them.
- Gallup Group’s CliftonStrengths
- Myers-Briggs Type Indicator
- Hogan Personality Inventory
- The Enneagram of Personality
- Keirsey Temperament Sorter
- Emotional Intelligence Test
- True Colors
- Values In Action (VIA) Survey
Like any tool, personality tests are not for everyone and every situation.
“Use them with caution,” says Jeff York, Haven. “There are a lot of legal implications. It would have to be baked into a thorough process or targeted for a very specific role. A lot of these (tools) aren’t necessarily valid or are overtly reviled. And just because you have a tendency to be a personality doesn’t mean you can’t be the opposite.”
While he urges caution, York also says that surveys and tests like these can give people a common language to discuss working styles. They can be good for team building and decision-making when scaling a startup. But maybe less useful in hiring.
Amy Robinson, Pivotal Moments, urges personality tool users to avoid “pigeon-holing” people.
PowerUp Resource courtesy of Companyon Ventures: Companyon Talent Management Toolkit.
Hiring a salesperson offers distinct challenges. In sales, it’s especially important to “hire the person, not the resume.” Don’t hire based on a brand name logo.
People who were successful at an established company may not do well at a startup. Salespeople are often very good at selling themselves. However, they might not be as good at selling your product, especially a technical product that is harder to grasp.
How do you find the right fit in sales?
One key piece of advice, especially for those still in the startup phase, was that the right salesperson today may not be the same person you want a year from now. It’s important that founders and organizations understand what is on their non-negotiable lists for a role and outline the goals and checkpoints in each stage of your growth plan. This will allow an organization to understand what benchmarks you’d like to see when going through the interview and hiring process for a sales role, avoiding only searching for your unicorn candidate.
Regarding sales, especially, you should always try to “hire slow and fire fast.” Slow down the process so you can accurately determine whether a potential hire is a good fit for your company when scaling a startup.
Don’t make the mistake of hiring a salesperson simply to access their existing book of business. Although it might seem beneficial to hire that salesperson to access those customers, once that rolodex is exhausted, they may stop making consistent sales or sales at all.
And don’t believe that a salesperson is going to replace your founder in the sales process. Salespeople, especially new salespeople, can’t communicate about the product more than the founder – that’s an unrealistic expectation. Instead, founders should be there to close sales, not qualify incoming sales leads.
“I think the biggest mistake I made as a founder was hiring salespeople based on the logo. Over and over, we see the folks who are really successful at a Dell or EMC, established brands with a whole support team and process where everything’s built out, do not do well in a startup where there’s no brand, you’re still fighting for product market fit, and you have to wear three to five hats.” - Tom Lazay, Companyon Ventures
PowerUp Resource courtesy of Companyon Ventures. Read here:
2. Retention and Company Culture
Onboarding to support company culture & a positive new hire experience
Once an applicant has accepted a job offer, we move into the onboarding process. How can we best introduce the new hire to the team? How can we integrate them into our company? How can we transfer years of company knowledge so they can operate effectively? How can we make the new hire feel welcome and valued?
If your new hire is effective and productive from the start, you may be tempted to do nothing. That’s a mistake. Onboarding is the manager’s responsibility. The manager must articulate the role’s flow and duties in detail and hold people accountable. One of the potential pitfalls is “unsaid expectations.”
The Tech Superpowers team recognizes 3 phases of a new hire:
Watching and learning
Taking part in the process, not at 100%
This is not a 30-day process.
Bringing something new to the company
The Unruly team uses a similar model for new employee onboarding:
Onboarding Tools for Scaling a Startup
Sometimes the best onboarding tool can be a piece of paper and a clear list of expectations. “We found that the most impactful thing is time with a manager and a simple checklist of all the things that need to be communicated,” said Emily Watson, Unruly Studios.
Notion and Asana are workflow management software tools one can use as a repository of what someone walking in the door must know. The repository can include:
- Key must read/must know information
- The “basic stuff” checklist – paperwork and benefits
- Computer access – Logins and basics like that can trip someone up in that first week.
You can also use a simple Word document. Use live documents that can change as they need updating. “No screenshots” is one company’s rule, because programs can change and then the screenshots aren’t accurate.
PowerUp Tip: Even with the importance of a direct manager’s involvement, you should still delegate when needed. Subject matter experts can take on some onboarding tasks – it shouldn’t all be the hiring manager or founder. (This also builds social connections on the team for the new hire.) Tech Superpowers have their onboarding and offboarding service, taking many of these tasks off managers' plates.
What’s a “Standard Operating Procedure” company?
Mike Oh said, “We started a long time ago with a standard operating procedure (SOP) culture.
I spent three years developing 1000 SOPs for my company. It took a long time for it to become ingrained in the organization. But the moment that a new employee writes their first SOP is a key moment. They’re transitioning from that participant role to a contributor because they’re now creating institutional knowledge. We should all celebrate that.”
SOPs also help to create a key pathway for new employees as they grow. They are more than just training resources – when well written, they convey information in a succinct and helpful format that anyone in the company can use to eliminate friction and stress in their day.
In that way, SOPs are their own cultural signal, showing your staff that you are always thinking about the future, not just trying to apply short-term fixes to everyday problems. They also show that you’re committed to the organization by making experiential knowledge accessible to all. To enhance company culture, create solid systems and processes. Often, startups skip these foundational steps during their hectic growth stage, but they’re essential when building a strong company.
At a basic level, company culture is how things get done in and around the workplace.
Culture can be informal and formal. It is how an employee experiences the workplace. Company culture includes:
- What the employees and the management team value
- How decisions are made
- Employee engagement with each other and people outside the company
- How people are hired and fired
- How the company recognizes and celebrates employees, their anniversaries, and special achievements.
We addressed the Schwartz Values Index in the section on hiring when scaling a startup, but shared values are also important to company culture. Sometimes values are so important to a company’s culture that the organization’s very corporate structure reflects this. B Corp certification designates that a business positively impacts society, employees, the community, and the environment. B Corps marry profit-making with a purpose-driven approach, adhering to rigorous social and environmental standards.
Positive company culture supports employee happiness and contentment through effective, transparent communication. “We need to make sure that when we’re talking to each other, we’re talking in a way that is receptive on both ends, clear, open, honest, and direct… all of these things.”
Ongoing employee support and how that is carried out is part of a company’s culture. For example, don’t assume a salesperson won’t need as much management as other team members. This is not the case. Amy Robinson explains, “Sales folks need the positioning, the messaging, the processes laid out for them. They need to be managed too.”
An important part of company culture is how we celebrate team milestones and achievements, an essential element in bolstering employee motivation.
When it comes to employee recognition, some people love a pat on the back but don’t want or need their names displayed in neon lights.
Sometimes sending a quick text congratulating someone on their performance goes a long way.
Jeff York declared himself a fan of “decentralizing recognition.” He pointed out that “everybody loves recognition from a CEO, but it’s the peer-to-peer and smaller things that build over time that are more impactful.”
“Sending a hand-written note,” said Mike Oh when discussing recognition. And indeed, it was agreed that this and other smaller tactics, such as a birthday celebration and praising each other for everyday achievements, are popular, especially when the startup has a small number of employees.
“Anyone in the company can nominate someone that did something well or went above and beyond. The company will always take time in their meetings to have the management team read out names of these employees, share photos, and celebrate as a company. So that’s something that has supported a huge morale improvement.” - Tracey Keisch, Evolved By Nature
How are you organized? What do you outsource?
When an organization is growing quickly or preparing for rapid growth, it’s not unusual to make decisions on what functions will remain tightly integrated and managed within the company and which functions will be outsourced.
From her experience with mission-driven and values-driven companies, Steph Solis, Axios, suggested that outsourced roles can be effectively managed by trusted partners who align with the company’s core values. She emphasized the crucial role shared values play in successful working relationships, whether in-house or outsourced. Can your outsourced provider be trusted with crucial operations and work within your stated values and parameters? Here at Tech Superpowers, we offer Managed IT Services for scaling a startup with this particular idea in mind.
Outsourcing has deep implications for company culture. You need to be able to integrate the services of outsourced partners without disrupting the existing culture. Also, consider when it might be most helpful to shift from outsourced to an in-house role. There are potential pitfalls of prematurely moving an outsourced role in-house, potentially leading to the need for re-outsourcing. Some successful long-term relationships can be sustained with outsourced firms without an urgent need to internalize functions, allowing the company to focus on key business functions.
- Think about what you should and could outsource to support continued growth.
- Document your work processes. Make things really clear. What am I responsible for? What do I need to have an opinion on? Who makes the final decision?
PowerUp Tip: Outsourcing allows businesses to quickly and easily expand, often without fixed overhead and ongoing costs.
3. When Employees Leave
Some company cultures create an environment that celebrates achievements and nurtures employee growth even if it means the employee eventually leaves the company. Scaleups can celebrate when people leave after a good run.
The group concurred on the value of investing in employee development, acknowledging that such a strategy fosters increased employee engagement and loyalty. “Startup time” is different from time as measured by an established company. What is a long time at a startup is really different.
PowerUp Tip: You can edit your team if someone is no longer a good fit. The person you want today might not be the person you want tomorrow. It’s not good for anybody involved if you just keep trying to make it work.
“Sometimes,” said Emily Wilson, “It’s not that you’re trying to eliminate a particular part of the workforce, but your organization is moving forward in order to build up for success.”
Jeff York added, “There’s a difference between letting someone go based on performance and letting someone go when your company is not succeeding or is running out of money.”
Either way, there are many scenarios in which you would need to let an employee go, but under what circumstances do you let them go, and how do you do it?
- If it isn’t the right fit, cut early. Don’t let it drag down your company too long (60-90 days).
- Set the right expectations with the remaining team. Have ambition and communicate that passion but don’t oversell it.
- Be transparent about what’s going on. Your team will know something is off if you aren’t communicative or your choices seem inconsistent. Know which members of your team you trust, want to keep, and why.
- If you let someone go based on performance, do it as a leader, thinking about the team and how it will come out healthier on the other side. This means you can do a new round of hires. The team will be thankful for it, and the company will also benefit from it.
- Maintaining your core values and hiring based on those values will help you maintain a positive mindset and keep momentum.
- Document your work processes to track what works and what doesn’t, even if the team changes.
- When you are hiring again, make sure to get to know your new team.
“There’s a difference between letting someone go based on performance and letting someone go when your company is not succeeding or is running out of money.” - Jeff York, HR Consulting, Haven
Questions to ask yourself
- Does the company have the right people (and processes) in place to make decisions (both major decisions and daily operational decisions)?
- Does the company have the right people to support product development, marketing, sales, customer service, and other operational necessities?
- Is the company organized to compete in the marketplace? And organized to grow without adding too much overhead?
4. Parting Advice
“Celebrating milestones and celebrating wins is huge. In a scaleup, you’re going so fast and you’re doing so many things, you just have to take the time and acknowledge the wins that you’re making as a team.” - Tracey Keisch, Evolved By Nature
You will need to take big sales or marketing risks to get to the next level. Make sure you have product-market fit proven, the core digital channels efficient, and operations staffed for double your size before you make the leap.
When hiring your first HR leader, focus on the ability to hire exceptional people but also ensure they can be a strong partner in the multitude of other HR areas: operations, employer branding, compliance & risk mitigation, and business partnering.
Kathryn Rose, CEO and founder of getWise, “My advice to anyone scaling a startup is to make sure the foundation of your company is set up properly. Too many companies focus on the growth engine of sales, marketing, and product, but when you start to grow and grow quickly, not having the basics like HR, finance, and legal can slow you down significantly.”
The skills required for finding product-market fit (product iteration, organizational flexibility, personal drive) are very different from those required for scaling up (operational competence, internal communications, coordination, intentional company culture). Too often, companies neglect making leadership changes or coordinating staff under a common operational vision and culture – they often fight the next war with the same army that fought the last one. The headiness of momentum can sometimes eclipse thoughtfulness.
Special thanks to Greentown Labs and FORGE for hosting this event and to the scaling a startup POWERUP Roundtable:
Mike Oh – Tech Superpowers
Adam Fisk – Tech Superpowers
Alina Ritter – Insperity
Beejal Lakhavani – REBS
David Liu – Shift Innovations
Emily Wilson – Unruly Studios
Tracey Keisch – Evolved by Nature
Bill Fistori – Boss Nine
Christina Inge – Thoughtlight Marketing
Crystal Woody – Privitar
Tom Dodge – NewView Media
David Thompson – FORGE
Steph Solis – Axios
Meg Henry – Companyon Ventures
Amy Robinson – Pivotal Moments
Roberto Jimenez– Babson and Icalia Labs
Hy Dinh – TP Tech Corp
Bobbie Carlton – Innovation Women, Carlton PR & Marketing
Jeff York – HR Consulting, Haven
Tom Lazay – Companyon Ventures