There are many tactics in the startup world, and one of the extensive ones is the tactics is that you can recruit the top 1% locally with a really good effort.
Unless you are especially well connected and extensive the odds are against you, and there is a very high chance that it’s recruitment misleading.
Most VC’s actively showcase the idea of having a local team in your city and that you shouldn’t contract them to work with any external companies or individuals. There are a few boundaries which are not considered if there is a discussion about local vs outsourced teams:
- It’s very hard to recruit great people in big startup cities like Bay Area and New York. Hiring the top 1% is a difficult task.
- Even if you decide to recruit a developer or designer internally, the cycle time can be anywhere from 1 to 9 months if you have any decent quality criteria.
- Having an internal team doesn’t guarantee any results without the right recruitment, onboarding, training, management, and culture. All of this is play a vital role.
- Your team might be short-lived and hired by Google, LinkedIn or Spotify in their attempts to compensate for their own employee nest.
- Now a days due to the developments in the gig economy, freelancing is a widespread phenomenon and there is a huge availability in the supply of talent and many people don’t want to have a regular job anyway.
- Risks of having an internal team are often not considered, including Legal and Financial risks due to the contracts and terms.
- There is an equity cost of having an internal team due to a perfect salary structures.
Hire for outcomes, not headcount
What result you want to achieve as an early start up ?
The first outcome you want to achieve in your startup is to launch your product (prototype) as soon as possible and collect feedback to decide,We are supposed to have 4-6 weeks release cycle for validating and a good approach to get first users and collect data.
A startup is an experiment in business, and survival is questionable. Since our products are crucial,why are we thinking that the team we have is different from that?
The MVP (and the team that is executing it) is just an experiment to discover the right direction for the company. So what about hiring a team after the MVP?Why would you over-invest in recruitment and retention of a team if you don’t know your startup will survive 12 months from now?
The biggest cost for startups are employee salaries. We need to go back to the drawing board and consider the outcomes we want to achieve and be more practical. The only fixed team for an early-stage startup should be the co-founders.
What about the product team? You should combine the best team at different locations to get your requirements done. There is nothing wrong about local, but global hiring gives you more options to get a great combinations and precise records.
Collective learning is vital
One of the common issues to hire an internal local team, companies are just a bunch of people working together. In the end, an employee may leave the company and take the company IP with them.
Some good companies document learnings and create systems that operate voluntarily of who does a specific task. Collective learning is a programme of documentation and operational procedures to make sure all the IP is collectively understood, and not locked into any single person.
One of the common problems with hiring is that it’s cheaper to employ an internal team than an external company or individual freelancer.
We observed that founders always calculate salaries against the fee/cost charged by a consultancy/contractor.This is a simplistic calculation.
Make sure to calculate all the combine costs of an employee and not just the salary cost. The combine cost must include ;
- Salary + Bonuses + Benefits.
- Equity compensation cost (yes, options and stock programs are a cost).
- Operational costs (e.g. a fraction of management salaries to run the team).
- Administration costs & Rent.
- Equipment and Licenses.
- Legal and other costs (e.g. if there is a litigation these costs become significant).
- Costs of replacement (e.g. due to churn you need to have a recruiting process that is not free).
- Costs of employee/performance management (HR costs)
Cloud systems have a feature called auto-scaling. Your infrastructure/servers scale up-down based on usage.This concept can be applied to recruitment too. Your startup team fixed salaries are a liability and you can’t guarantee your whole team will be fully utilized.As teams grow it’s very common that there is a huge amount of waste due to under-utilization. Also, what are you going to do if you didn’t hit your targets and you need to reduce the team? firing is hard.Depending on the runway you have and the roadmap you can increase or decrease the number of team members dynamically. Save money. Live long.
Remote teams concerns
Many companies are anxious to hire external teams because they believe that remote work and communication is inefficient.Remote will happen, regardless of internal or external teams.The trends in remote work and the gig economy tell us that it’s present among internal and external teams.
If your goal is to build a global company, there is no reason to not start right away by having a distributed team. This enhances diversity too.There are many companies (e.g. 37 signals) that publish best-practices for remote work.Any remote work issues are just unrecognizable operational issues. It’s the tip of the iceberg of a bad operational and communication process. It doesn’t have anything to do with remote work.
For example, if you don’t write meeting notes after meetings, it’s something that can have no consequences in an internal office culture, since you can catch-up at the watercooler. However, this is a big issue for a remote team, since it will be out of sync. Is this a problem of remote? No. It’s just a lack of good process around sharing information.
Focus is key
Every startup has 3 key issues – Recruitment, Product and Fundraising.
If you can choose 1 or 2 problems to focus on what would they be?I would always choose Product and Fundraising because without a sustainable product and marketing there is no point in having an internal team. You might fire the team after a period of time anyway. Your team is just a mechanism to get things done until you figure out your product-market fit and you have enough runway to think about company-building.
Not everyone’s cup-of-tea
It’s true that some teams can hire quickly in Silicon Valley and New York, but those are outliers. The top 1% startups can certainly recruit anyone locally or globally.With sufficient traction and funding the best startup in the market can do anything.
Is your startup in that category? Probably not. It’s a winner take all phenomenon and it’s at the expense of the other startups in the market. Should your strategy be aligned with the best-case scenario? You might be top 1% today, but bottom 50% tomorrow.
Recruitment needs to be sustainable. The global pool is much larger than your local pool. About alignment most founders want their teams to be super-committed to the mission and to deliver value continuously and go beyond the contract.
The truth is, very few people will work super-hard without the right incentives unless they have extreme intrinsic motivation. It doesn’t have anything to do with employment or being local.
Who prohibits you to give equity to outsourced teams or individual freelancers? can you figure out other ways to motivate an external company you are working with? You will get similar results as with a local committed team.It’s about leadership and sharing future gains.
Many consultancies, contractors and freelancers have the right mindset to work extra-hard and commit long-term to product success if given the right incentive. Not all outsourcing is the same and you could find external teams that have high intrinsic motivation to work on your product.
Hit when the Iron is hot
In startups timing is essential. If you launched a great product in a great vertical, it may still fail if the timing is wrong and users are not ready and willing to use the product.
It’s the same with recruiting an internal team.Remember, fixed costs (salaries) kill companies. There is a right timing to form an internal team, and that is when you have enough financial security to make sure you can cover for the risks involved, and even then you should question the trade-offs of having employees.
What is perfect timing ? it’s usually after heavy funding rounds or after having significant revenues to covering expenses. When you are not experiencing anymore it could make sense to hire own team and to build a stronger culture,but team might be distributed across different locations since you want to hire the best regardless of where they are.
You now have food for your thoughts to brainstorm to build the right tactic that fits you and your organization. Because, no matter what you rely on, myths should be the last thing on your mind.
Enjoy smart recruitment!