For a founder, building a team can be one of the biggest challenges and an incredibly important foundation for success — your team can truly make or break your startup. This is Part II in a series designed to help you as a founder or executive at a fast-growing startup create a successful team, while also scaling the hiring process itself.
If you are just joining us, check out Part I, which gets you started along the path of scaling the people process: creating your values & expectations, designating one key activity which every employee must conduct regardless of role, plotting out your key hires and hunting for them, and developing the top of your talent funnel, as well as the interview & tryout process.
The people process is probably an item on a long list of to-do’s and value-add activities that always seem to take priority. This process will help you to focus on an aspect of the business that is a strong driver of success, but often not a strong suit. Let’s jump back in with the last half of my tips:
Determine employee compensation and equity allocations.
Figuring out employee compensation is often looked at as an art rather than a science in a startup environment. But, it should be the opposite given the specific finances a venture-backed company has available under a certain timeline. Fred Wilson argues a disciplined approach to compensation, providing the founder a stronger ability to make smart financial and personnel decisions. I couldn’t agree more.
A startup should be able to create tiered compensation packages that guide their financial and hiring decisions. Start by valuing the importance of the different job categories, assigning a percentage range out of 100 points as to the amount of capital and the option pool dedicated to the different job categories. Go a step further by assigning values to people who can execute at different levels and their ability to execute different tasks – not necessarily years of experience, who they worked for before, etc. Then, assign cash/equity compensation ranges to each tier and the overall cash/equity allocation for particular hires. It’s also important to assign dollar amounts to the stock option packages for each position — do this based on your company’s best value so that your hires understand the potential of reward for their hard work. Wilson does a great job of outlining this process from a high level in his post above.
Develop an offer and negotiation process.
Most startups have loosely defined hiring processes — in part because they have other priorities and responsibilities that demand it remain casual. But, lack of structure can lead to complications during and after a new hire. A simple but effective offer & negotiation process is critical to stay organized and ensure you don’t have to clean up your own mess a few months down the road. Start by:
- Outlining job responsibilities and being very upfront. When scaling a team, startups often hire someone that is very senior to help lead the company in a specific role and oversee a future department. Often times, the person they hire comes from a larger more established company where a lot of the machine was already in place. Player-coaches are often what is needed when scaling and if you need people who can both build a team while rolling up their sleeves and completing the job at hand, it is best to be very upfront about this. The job description must be very clear i.e. how many prospects or conversions is a sales executive expected to close weekly, instead of just saying they are responsible for revenue growth. This level of detail gives the candidate a clear idea of what the job entails, and vets out those that aren’t a fit.
- Laying out two compensation packages and giving them the option to choose. Determine a range on the cash and stock compensation you are willing to provide for certain positions based on the value of executing the position responsibilities that is inline with market rates. From here, I like to make two offers, one with higher cash and less stock, one with higher stock and less cash. Allowing prospects to negotiate within these parameters ensures that you do not over-extend and it also shows the prospect’s motivations when it comes to how they view the value of cash and stock.
- Sending an offer letter with an expiration date. Most startups offer at-will employment, so the offer letter can be lightweight — in fact, your counsel should be able to provide a reusable template — but make sure you include an expiration date. Provide enough time so that they can do their homework and ask questions, but not too much time where they can shop around for different offers. I typically make offers expire in 48-72 hours depending on the situation.
Develop your on-boarding and training program.
On-boarding and ongoing training programs can separate a good team from a great team. Most solid companies are implementing high-level training strategies as part of their people process. But, it’s not as simple as just implementing job-focused training. It needs to be intrinsic in the organization, holistically educating everyone about most aspects of the overall business.
Culture training should be anchored by your own values & expectations, setting clear guidelines for those just joining the ranks and ensuring they ramp up quickly with little questions going into their role about how and where they fit in, and what is expected of them. Also, benchmarks help with culture onboarding by delineating specific timelines, such as 7, 30 or 60 days, to guide how fast new hires are expected to ramp up & what they need to do to get there. Finally, all employees should have access to a manager who can also act as a mentor of sorts – someone who has also been ramped up internally is ideal. Mentors are critical ways to infiltrate your cultural expectations throughout the organization.
Develop regular feedback sessions and reviews.
Reviews are nothing new — most companies employ some sort of annual or bi-annual reviews as part of an employee career plan. However, review programs should NOT catch them by surprise. To impact ongoing performance, managers should structure feedback and management into their daily interactions with the employee, including clear cut reactions to daily responsibility reporting and how it falls under larger strategic priorities for the employee.
Position the review instead as a means for communicating their marked improvements since the last review, and an action plan to help them improve in other areas. Managers need to focus more on being clear on where an employee stands vs. on how they feel in order to truly help them.
Develop a leadership program.
If you get to this stage – congrats, you’ve done a great job with your people process. But you can’t rest on your laurels just yet. And, you can’t just hope that leadership will happen. You should still have to teach people, recognizing their different leadership skills along the way. For instance, some managers lead by example. Some are very vocal and structured.
Great leadership programs are flexible based on the actual leaders enrolling in the program, considering their strengths and weaknesses. McKinsey & Company wrote an excellent piece on why leadership programs fail, providing a great path to work backwards in determining the tenets of your own program. Above all, find a common trait to measure the results of your program based on changes in leadership behavior, career development, etc.
As a reminder, all companies, managers and organizational structures are different. You can’t replicate a people process for every business scenario, but you need to put the work in up front to understand what your specific people process entails. Spending the time and effort upfront will answer questions that you will have to answer down the road, and will quicken the time spent overall if you follow and scale a streamlined approach to scouting, making offers, hiring, training, managing and growing a team.