I love working with startups. Startup founders are dreamers, visionaries, rebels and artists. I am, however, reliably informed by someone who has met actual rock stars that founders are, in fact, not rock stars.
Founders tend to be unconstrained by physics and unconcerned with reality. They’ve all faced down a decision to bet on themselves over a steady pay cheque. I’m always inspired by their courage and passion.
But I don’t blindly prefer startups to big business. There are inspirations to be taken from the corporate world where people can specialise more deeply, develop greater skills from the availability of bigger training budgets, and generally have more exposure to more ‘mature’ mentors around them. Some of the most entrepreneurial people I’ve met, people whose sheer skill, drive and talent leaves me feeling utterly incompetent, have worked in the biggest companies. Sales, in particular, is a skill that seems best nurtured and honed within an established sales team.
Corporates tend towards analysis and process, startups tend towards creative problem solving and seat of the pants reactivity. Neither is right or wrong, and elements of both are necessary at different stages of the business life cycle. As Bill Aulet would put it, entrepreneurs need the spirit of pirates, but the execution skills of Navy SEALs.
Love The Sales
Dave Bishop is the technical co-founder of Love The Sales, a London-based fashion technology company, one of the best developers I know and an enormous pain to manage. LTS have recently received their second funding round and a few weeks ago Dave asked me for some advice on scaling his development team. This, it occurred to me, was a beer conversation, not a Google Hangouts conversation.
When we finally found time to sit down with the rest of the LTS team, I answered Dave’s question with deliberately provocative advice: “Do everything you can to avoid scaling your team”.
But why?
Time is the most critical finite resource.
The one unchangeable rule when building software is that you’ll never have enough time or money. Of those two, time is the more critical resource – as businesses, we need to do everything we can to cut time and effort while maintaining quality. Doing this is the most effective way to cut costs, and is a better leading indicator to track.
Think about it this way; businesses exist by creating value for customers. Sure, some just work by convincing investors that one day they’ll IPO for billions but the good kind of businesses create value.
Productivity is a function of the application of resource over time. Value is a function of the correct application of resource.
Resource could be anything – staff, server capacity, raw materials, infinite monkey labour. Money can buy resource, but nothing can buy time. It ticks by resolutely and your startup business plan or your corporate innovation project goes out of date as you fail to ship. Lean principles teach us that code, business plans, Gantt charts and financial forecasts are all just wasteful intellectual inventory until we get the product in our customers’ hands, and most importantly for our company’s survival, the cash in our bank account.
The cost of scaling
If I believe so wholeheartedly that time is the project-killer, you may be wondering why I’m not suggesting a foot to the floor charge for the finish line. More people means more resource, less time to ship. More guts! More glory!
But I just can’t get behind this charge for scale, purely because of the subsequent organisational debt it creates. Having great people is the key component to building a company of any size – I’ve never met a VC or investor that didn’t put the founder team as the biggest criteria for investment. Because people – and specifically the right people – are such a critical part of success, it just can’t be rushed or chanced.
I’m an ardent fan of Gall’s Law, especially when advising people on how to build complex technology architectures. John Gall, an American pediatrician wrote extensively on systems engineering. His law states;
A complex system that works is invariably found to have evolved from a simple system that worked. A complex system designed from scratch never works and cannot be patched up to make it work. You have to start over with a working simple system. – John Gall
Gall’s law of complex systems is as true for teams as it is for software. Companies are complex systems of people, and they invariably can’t be built to be big. Instead they need to evolve through stages of growth, finding their own way.
By adding scale to a team, we enormously increase the complexity of the network within the business. This then means:
More systems
More processes
More middle management
More necessary communication
Less effective communication
More interruptions
More expensive rounds of drinks
More politics
The weight of this non-linear growth can crush a startup, making it essential to identify and automate manual processes wherever possible, and only grow the team at the last responsible moment.
The Equity challenge / Swiss-army founders
The problem that early stage startups face, which differentiates their growth from established businesses, is the opportunity to ‘pay’ hires with equity in the business. This protects valuable cash, but has the disadvantage of driving startups towards permanent hires rather than outsourcing, contractors or temps. For a big business, the comparison is easy – salary vs operational expenditure on project delivery. For startups, nothing is easy.
The challenge for a startup is twofold. Not only do they need to attract swiss-army people who will rise to the challenges of a rapidly mutating business, but the very expertise they need is transitional and transformational. The early challenges of a startup won’t last, and this is when you find those original founders, still loyal to the company, becoming disinterested and dissatisfied, because the pace and chaos starts giving way to process and specialisation.
The truth here is that high growth companies need high growth people. The attitude and personality of your early team is more critical because startups can afford less waste than established businesses – lean thinking is not just waste reduction for manufacturing firms, but a focus on protecting those two most valuable startup resources, cash and time.
Alternatives to scaling with traditional hires
One of the biggest boons to the startup world, alongside the growth of the scalable and elastic Cloud and SaaS market, is what has been termed the ‘gig economy’. Where once young businesses were limited to personal introductions, old boy’s networks and newspaper classifieds, startups have near unlimited access to temporary talent from around the world.
Now, in addition to the pinboard in your co-working space and the extended network of LinkedIn, we also have access to the global talent pool of freelancer.com and Angel List.
In the UK, recent changes to the government’s support of apprenticeships makes this overlooked pool of diverse talent even more attractive than ever, while bootcamps like Maker’s Academy produce driven and energetic junior developers hungry for business challenges.
If you do have to hire a permanent member of staff, make sure that are clear on what commitment you can make, and what you expect from your new colleague. Are they going to have to make coffee and empty the bins? Make sure they know what they’re getting into.
And finally, don’t hire in your own image. Uber has recently done a wonderful job of proving why the all male, all white startup team doesn’t work. Strive for diversity from hire number two, and set an example to the world that race, gender and background DO make a difference to the quality of your team; the more varied it is, the more creative it will be.
A footnote
One stark warning to leave you with. Over 20 years of my career so far, the darkest, most stressful and saddest moments are when I’ve had to scale teams down.
In teams where the people are no longer right for the roles, or we simply made the wrong hire, there is a painful decision to be made and a more painful conversation to have with someone who is just about to lose a paycheque. What makes these conversations worse is that you also know that no matter how bad you feel, you’re getting the easy side of the conversation.
The best way to mitigate this situation is to only hire permanent staff when you know that you have a long term requirement for a resource, and to never, ever settle for a good-enough hire.
For many startups, scale is one of the defining success criteria, but it’s often more symptomatic of a lack of focus than an excess of cash. For business success, ruthless prioritisation beats an expanding team every time.
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