The Real Risk of an Expensive Hire
We’ve all heard of transformative new hires that change the trajectory of a business. Company leadership, thrilled at their good fortune, almost always laments not hiring that person sooner. So why didn’t they? Let’s examine the most popular reasons (or excuses) for delaying such key hires, or hiring more junior (e.g. lower compensation) hires instead.
Let’s start with the math. For the sake of example, let’s say an early-stage business believes it can afford a new hire at $100k, but the market rate for an experienced, proven talent at the position is $200k. The first instinct is to say, “well, we can’t afford to pay double.” The reality is that you will never pay double. You generally know if a new hire is going to be successful in the first three months following their start date. Bad hires or bad situations are absolutely clear within the first six months and, if it’s not going to work, the bad fit must be addressed and the person removed by the end of the initial six months. Hiring mistakes happen and are rarely fatal, but failure to recognize them and take swift action can be crippling. I’ve made this mistake myself, and paid dearly for it.
Continuing this “bad fit” math scenario, if the $200k hire was the result of a proper search process, expect that they will provide more value than the $100k alternative in their time with your company. Thus, the real economic risk of hiring the proven talent is not paying 100% more, but max 50% more, and generally less.
Now, let’s examine when the more expensive hire is great. Are your best people worth at least two average team members? Especially if we’re talking about roles with direct impact on revenue generation, the right hire could pay for themselves five-to-tenfold. And, because they have the experience and a playbook to hit the ground running day one, the returns begin to accrue immediately.
“But I don’t have the time or team to run a proper search process.” Well, you’d better figure that out. Fast. Because winning is the result of execution, and you can’t do it all yourself. What do you want to get off your plate now because it’s not a good use of your skill set but it’s mission critical to the company? Given time, your business will develop its own talent. But in the early stages, you need to fill talent and experience gaps via the recruiting process. There are quality resources — human and digital — you can work with to help build your team. It’s a safe bet your investors and advisors have many that they recommend. Don’t be afraid to ask.
“We run so lean and are moving so quickly, we don’t have any formal onboarding process.” Well, you’re not alone. But, if personnel is your largest expense, then training and retaining your team to reach peak performance needs to be properly prioritized. As with the search process, there are many resources available to you to assist with standardizing and scaling onboarding and retention efforts. And, if you think about it, weakness in onboarding and retention is all the more reason to hire experienced talent who require less training and have experience getting up to speed quickly.
“We have a tight-knit team and culture and I don’t want to risk damaging it by hiring people who might not be a cultural fit” (aka, people who may be older, more experienced, etc.). You are right to prioritize culture fit and can hire accordingly. But hiring experienced talent, who have experienced scaling and managed people through growth, make it more likely, not less likely, that you will successfully scale and execute. The most significant ‘cultural damage’ often comes from running out of money, failing to execute, or growing so slowly that your current and potential investors lose interest.
There is no VC on the planet who gets excited about investing in a team that is repeatedly opting to create a playbook and toolkit from scratch when these things already exist. Get people who have the skill-sets and experience for where you are going, not for where you are today. People who have playbooks and toolkits that have been used, tested and proven.
It may not yet be on your radar, but you are in a war for talent. As we enter 2021 and have more distributed workforces than ever before, you have to be as good at talent sourcing, recruiting, and onboarding as you are at product development, customer acquisition, and retention. And guess what, the more talent you have on your team, the better you perform and thus attract ever more talent.
We see these same patterns over, and over, and over again. Your talent needs continue to grow every day. You can’t clone yourself. So go get the experienced talent you need. Because, above all, is the most important question you must ask yourself, “what is the cost of our failure to execute?”
-Randy Brandoff, TIA Ventures
