Hiring the right talent for your organisation can be a challenge for even the most mature companies; how can you succeed when still in the start-up phase?
Frank Bunte, Head of Europe at Nauto, explains how start-ups can successfully identify and hire the best talent, even with limited resources.
What challenges do B2B start-up companies face when hiring new talent, and how does this differ from larger, more mature companies?
"Start-up companies’ number one challenge stems from the fact that they are often not yet recognised in the market. Thousands of new companies emerge every month across the globe, therefore without brand awareness, be it from PR or marketing, it’s difficult to gain visibility. Without these pre-recruiting efforts of building your brand and going to tradeshows or talent fairs, people will not be aware that you exist, let alone that you are hiring.
A lack of focus on brand awareness is most likely due to limited financial or people resources. The typical start-up has an idea, and usually pulls together friends and family as an initial team. As they start to gain momentum they realise that they have a lack of skilled talent, but they haven’t necessarily allocated any early-stage financial resources to recruiting, or to raising awareness to future talent that the company exists.
The second challenge arises when the founder tries to do everything. They may be acting as both CEO and head of HR besides other functions at the same time, but they don’t necessarily have the experience to understand what’s involved in attracting and hiring the right talent.
There are two things that you need at this point; visibility in the marketplace, and a willingness to invest in on-boarding talent. It’s natural to be proud of your idea and product, and feel that people out there will see the promise in it. But people are cautious; if there’s money in the business you may be able to pay market rates, but a typical start-up can’t afford to. Instead you could try to get talent on board with a lower compensation, offering them future stock or equity in the company.
This is a high-risk approach, which may work better in the US because people there are more open to taking a risk. For example, in the US you may join a company and in three months if you don’t like it you move on. In Europe, it’s different; it’s a big decision. Is this the right company to join? How will this move further impact my career? People in Europe are more likely to opt for the safer option of cash or other immediate benefits, rather than betting on the future and whether a company will succeed in the market.
Hiring good people is a much greater challenge for a start-up or early stage companies than for a mature company. Typically, mature companies are more established, with reviews on Glass Door or other career portals as a point of reference. They can offer more mature benefits such as stock option programs. They also are typically better prepared, allocating more resources to finding, attracting and hiring talent. It’s a well-oiled machine, which leaves an impression on a candidate.
It’s common to assume you need a person for a specific role, but a start-up is a very dynamic environment, constantly changing. The roles and responsibilities of people you hire today might look very different in six months. It’s unaffordable for a start-up to hire people for the future who they may not need six months from now, so look for flexible people who are open to shaping and forming their own role. Identify a good cultural fit, with a mind-set that welcomes change. You can hire the person and get them started, and if in three months from now you need them in another area of the business, they will be capable of adapting."
How can a business leader overcome these challenges and learn to recognise the ‘right talent’?
"I’ve seen start-up companies succeed through creating a hiring panel from the very beginning. Identify people in the organisation from different regions, cultures and backgrounds, to interview the same person from a different angle. By getting more people involved in the decision, you mitigate risk that you’re hiring the wrong person.
In my experience, with the first couple of hires in a start-up, you are hiring for the future. They will help you to form the culture, with a team who buys in to the vision of the company’s future. Don’t focus just on the skill-set when hiring. Skill-set is secondary in a start-up; you need people who can solve problems, take accountability and get the job done. At this stage, every hire is key; make the wrong hire and you risk losing money and time, resources that are limited in a start-up environment.
Hires often fail when the owner or founder has a strong opinion on the kind of person the company needs, and ultimately hires someone like himself. We are all human, we do tend to hire people who are like us and have a similar background or track record. But in the early stages you need the right sparring partners; people who aren’t afraid to say no to you. Having yes-sayers may feel good, but it can suddenly fail because there is no progress without anyone to challenge you. If you want to take a start-up from an idea to a market-proven product, you need people who can offer expertise that you don’t have.
Consider assembling a board to give advice on which kind of people are needed and when. Someone with a strong recruiting background can make introductions to bring in the right people, and give advice on compensation frameworks and appropriate incentive schemes. By building this framework early on, if you come to a point where you are scaling fast and you have money raised to hire talent, you will be better prepared to make the right decisions quickly.
As a business leader joining a company to run a region, for example, I feel more positive if I have a functioning HR recruitment system behind me. My focus will be on scaling the business fast; getting the right people on board to support me is of the highest priority. If I join a business where I need to scale without a process in place I don’t feel comfortable taking on that challenge. I know that hiring people will be a nightmare if we have no idea how we will incentivise or pay them.
You’ll need to convince talent that even though you cannot pay market rates, it’s still a good decision to join your business. As well as selling a future vision, convey to them how stock will materialise over the years to come. Find the right structure of compensation; cash versus equity or perhaps other benefits such as office environment and company culture.
When you are working to attract new talent, the candidates will be able to sense whether an interview process is well thought through. The whole experience from the first touch point, through the interview process, to receiving a contract and joining the company, needs to show your organisation in the best light.
The better this process is prepared, the higher the likelihood you can convince people to join you, even if you are an early-stage company with little visibility in the market."
As the needs of the B2B audience and consumer continue to evolve, how will these changes influence the decisions made on the structuring, and hiring, of new teams?
"Start-ups have a typical cycle: you have an idea, you create a prototype, you obtain market feedback and adapt your product accordingly. It’s important to have people who understand that cycle, and that the structure of your business must constantly evolve. For example, if you build a product you will most likely find yourself in presales sooner or later because someone needs to get that product out into the market. A strong team will be prepared to do what is right for the company at any given phase. You need a company culture that is open minded and willing to adapt, with the mind-set that constant change is a positive.
Putting complex hierarchy or reporting lines into a start-up early on is not recommended, and can slow down the execution of the business. There will be new start-ups emerging in your field so the speed of execution is vital. If you are in a competitive environment you want to have the advantage by being as agile as possible.
Hiring a generalist may be a better decision than a specialist: a specialist is comfortable in an environment where they are being told what to do, or what is expected. Identify people who buy in to your vision and product, but who also take responsibility and ownership for taking it forward. They want to join you because they think it’s a great product, and they want to take accountability for making the company successful. Give them the freedom to be agile, to practise trial and error, and to fail.
Don’t just think about the structuring and hiring of your operational team; consider also the board structure of advisors who want to help you succeed. Is there diversity within the board; whose advice would you benefit from, and will you be open to advice? There are certain advisors out there who can help you put the right board together, from a strategic, growth or financial perspective.
Once the board is in place, remember it’s not set in stone. A board which is helpful to you today may not be the board which can help you in the next growth phase two years from now. As the market changes, so must your business change, but there must also be a constant review of the people who are advising you. Can they help you with the next phase of growth?
Once you’ve made the hiring decisions, let those people run the business. I have spoken to CEOs who cannot empower their staff, who feel they still need to be involved at an operational level. This is often due to them making the wrong hires, or having a lack of trust in the people hired because they didn’t involve more people in the interview process.
The wrong hires can also be avoided through external advice, regardless of the age or size of the business. I’m a big fan of working with external recruiters as early as possible; it’s typically a lower fixed cost and risk. There are many recruiters with years of experience, who know your industry and can guide you. They can help to sell the business through advice and feedback, planting a seed to get the right candidate on board sooner or later.
A good recruiter will also be your sounding board, giving you strategic advice or challenging your decisions. Do you need that person right now or should that hiring decision be put on hold for six months? The poor recruiter hires whoever you want, whereas the good recruiter will take time to understand your business, and advise you on what skills are needed. It mitigates the risk of allocating your financial resources to a hire that is not needed, or spending money on a full-time recruiter too early."
What advice would you give a start-up company looking to build the strongest team for their function?
"Seek out the right advice. Learn from others’ experience, talk to other founders and CEOs. If you don’t have recruiting capacity internally, talk to external recruiters. This doesn’t mean you must engage them in the short term, but you can seek their advice.
Don’t hire the easy people and certainly don’t hire from friends and family. It’s easy to get someone on board you have a good relationship with, but it’s also hard to get rid of them. If you want to scale your business, you need the right people and not the easy people, so even if you think this is the right person to join your business, seek other opinions. A good team doesn’t have to work in harmony, but it does have to perform well and complement each other.
Don’t expect people to be knocking on your door wanting to work for you. Be prepared to invest in building a brand, not only for consumers and buyers of your service, but also for future talent. Start as early as possible; even if you don’t need people today, there will be a tipping point where you will suddenly run short of resources and need five or six sales people. It will take time to get them on board so start early. Get professional help to screen the market. Be clear of your hiring needs in short, mid and long term, and build a pipeline of talent. Establish what you want to accomplish as a business and where your growth plan will take you.
If I join a young business, one of my first actions is to build a plan to develop our references and PR, should we get traction in three to six months. I personally start to reach out and engage with a recruiter to warm up people I want to hire in six or 12 months from now. At that time, it will be easier to get them on board if I already have PR stories and positive reviews from customers. If I only start to plant those seeds when I need people on board, it will be too late.
It’s important to also consider your market in terms of talent. If you are taking a US business into a European market, bear in mind that the US has a different culture. If they need people, they can usually get them within four weeks. In Europe, there are longer notice periods, and it’s harder to convince someone to take the risk of leaving their business to join a start-up. But if you start to build a relationship with someone you want to hire in six months’ time, you have that time to prepare them and make them feel that the risk is small. If you pursue them in six months when you need them but they’ve never hear of you, it will be impossible to recruit them.
Early stage it is key to find a recruiter with the right mentality. Building a relationship with a recruitment agency who can become a trusted advisor over the next few years is highly beneficial, especially when you are small and don’t want to take the risk of building a recruitment team right away.
A recruiting professional who works for more than one client at a time has a better understanding of the market than someone on your payroll who only hires for your own needs. In my experience, it’s much faster and more efficient to work with someone external in the early stages of your business. Worst case they can also help you to manage someone out and place them somewhere else if it’s not the right hire. It’s common to budget for finding the right person, but if it’s not working out, you can’t expect that person to be aware of this and leave on their own.
In a nutshell, people are your greatest asset to make or break. Making the right hire will help you, making the wrong hire can kill you. It’s the extreme, but if you analyse why start-ups fail it’s normally because without the right people, they can’t hit the ground running.
Even in the early days of your start-up, put recruiting on your top priority list. As well as growth and talent, establish KPIs around growing your team. Build a hiring panel, and never make a decision on your own. Take external advice, whether it’s putting someone with hiring experience on your board, or working with a professional recruiter. Allow their advice to influence the building of your brand not only towards your customers and partners, but also towards future talent.
As a CEO or founder, you may be a visionary or a thinker, but to grow a business you need operators, who will take the vision and strategy, roll up their sleeves and make it happen. Don’t underestimate the complexity of recruiting and what it takes to get the right person on board. It’s very easy to hire the wrong person, and the right person is not always who you had in mind. Don’t assume you already know the solution, and always be open to changing your mind."
Frank Bunte is Head of Europe at Nauto, and has over 15 years’ experience in high-level leadership roles in both, large enterprise companies as well as start-ups across Europe, the United States and South Africa.