8 June 2020
The one hiring problem that slows down every scaleup’s growth
The success of your scaleup depends on your team (no worries, I will tell you why in just a second), so building the right team is your make or break factor. Luckily enough, more and more scaleup founders are getting aware of this, especially when the team size is growing rapidly.
Based on the conversations I’ve had with hundreds of scaleup founders, in this blog I’ll explain the importance of your team, the one hiring problem all scaleups face (and what they try to do in vain to solve this problem), and of course how to prevent yourself from finding yourself with this problem.
Why team performance equals company performance
I won’t bother you with all kinds of inspirational quotes about teamwork and the importance of your team, because that story probably won’t stick. A financial approach, however, is more likely to stick. So here we go.
On average 72% of the total monthly costs in scaleups are personnel costs. This includes only salary costs and social security charges. Quite a big cost item, your team, isn’t it? Now let’s imagine that your team is not performing well – which basically means that 72% of your total costs are providing you with no or too little ROI. Especially in scaleups, since most of them are funded and have negative cash flows, not getting the ROI out of your costs is killing (and in 73% of the cases it unfortunately does). So even if you would only look at teams from a financial perspective, it’s still a no brainer that team performance determines company performance.
The one hiring problem I’ve seen in hundreds of scaleups
Our product is focused on scaleups, with a sweet spot between 10 and 100 people. So for that reason I’ve spoken to hundreds of scaleup founders about their team challenges.
Making mishires is something that happens in basically every scaleup. Some of them limited to only a few ones, and some of them unfortunately have experienced the consequences of a mishire many times. An interesting fact: Making one mishire costs you on average 1.3x this person’s annual salary.
Since scaleups are playing the game of speed and agility, we tend to focus more on replacing this mishire rather than finding out how this actually happened. And if we do so, it’s more focused on why this person was a mishire rather than what makes someone a good hire.
It all comes down to one problem: We don’t really know what to look for.
Little comfort here: This is completely normal. Founders aren’t People Professionals, lots of jobs that are hired for are jobs that don’t exist in the company yet, and it’s not like you have already hired a thousand people to learn from. Unfortunately, however, mishires are extremely painful in scaleups, because they are still so small, making every hire impact the company.
So here’s how we try to solve this problem.
Scaleups are a big fan of the copy-paste technique in hiring. This means that, when hiring new people for the team, they tend to search for look-alikes of top-performers they already have in the team. Or at least the ones who are performing okay. Besides the fact that this only applies to jobs that you already have in your team, this also poses two other problems.
Problem I. What makes the top-performer a top-performer
There’s a reason why people make mishires, and that’s because we (read: human beings) can’t always accurately predict someone’s skills and behaviour.
This also applies the other way around, when analysing people in our current team. There will always be top-performers and mid/low-performers in a company. And of course you will always have an idea of what makes the mid/low-performers the mid/low-performers and the top-performers the top-performers. But you can’t know this for sure – at least not when basing this on your gut feeling only.
When trying to copy-paste top-performers, you won’t always be right in terms of skills/personality traits that identify these top-performers. Maybe you have the assumption that skill A, B and C make your top-performers the top-performers, while this is actually a result of mastering skill D and personality trait E. And as a result of that, you’re searching for the wrong people, potentially leading to more poor hires.
Problem II. Lots of top-performers, disappointing team performance
So let’s assume that you actually know what makes your top-performers the top-performers. And you succeed in hire look-alikes. Sounds great, right? If you keep growing your team with look-alikes of the top-performers, success is guaranteed.
Well, unfortunately that’s not how it works, because team performance is the results of a highly complex formula. And that formula is what we call the Team Composition. Team Composition is the combination of skills, competencies and personality traits that the people in your team represent collectively. And therefore it’s not about searching for the best people over and over again. It’s about searching for the right combination of people.
Your team composition is a proven predictor of team performance. And that makes complete sense, because have you ever seen a team that succeeded in a project in which all team members together represented the same 20% of the required skill, while the other 80% was missing? At least I didn’t.
Knowing what to look for: The power of Team Benchmarking
Knowing what to look for in a hiring setting asks for reversed thinking. And that reversed thinking actually helps you prevent this problem from happening again.
Let’s imagine the ‘traditional hiring setting’. The business grows, and therefore there’s a demand for additional team members in a certain team. Based on the experience of this team’s (hiring) manager, together with the recruiter an ‘Ideal Candidate Profile’ is made, including the criteria of the ideal hire for this team. A small, yet important note: This is subjective and often based on you guts.
Now once we have candidates in the pipeline, we try to find a way to assess the candidates’ fit with this Ideal Candidate Profile. Luckily enough, more and more scaleups start using assessments for this – which is something I would highly recommend, since it provides you with objective data rather than subjective observations.
The thing here, however, is that assessments are used to objectively assess someone’s fit with a subjectively created profile. And since we often don’t really know what to look for, this isn’t the profile to focus on.
This is where the reversed thinking comes in
Team Benchmarking is the process of assessing your team’s current composition (skills, competencies and personalities) and benchmarking the results against industry averages (comparable teams in terms of industry, company growth stage, etc.), in order to reveal risks and gaps to act on.
And guess what, you can use the exact same assessments for this as you would do for your candidates! The big difference now, compared to the traditional hiring setting, is that the ‘Ideal Candidate Profile’ is also based on data, and even the same data set that you have for each candidate.
I believe that the largest takeaway after reading this blog should be that collecting candidate data is only relevant if you start collecting team data first – because otherwise there’s no solid benchmark to compare your candidate data with. And besides that, wouldn’t it be a shame not to use your own company as a data set while it can provide you with such relevant information?
Don’t focus too much on collecting candidate data. Focus on internal data. Because only by doing so, you can claim that you know what to look for with confidence.