Why increasing headcount won’t future-proof your fast-growth business.
Post Series A, the pressure to grow your headcount really starts to build. I’ve helped a few young companies through this phase, and I’m often asked how I approach it.
My answer? Don’t start by hiring.
Hiring may result in “growth”, but won’t necessarily result in your company being scalable. You don’t scale by increasing your headcount; you scale by maximising the productivity of every employee.
The building blocks of scale
To scale, you need to start with the right foundations:
- Purpose: are you solving a real problem?
- Product: do you have a product (that people want) that solves this problem?
- Process: do you know how to create, sell, deliver and support your product? Will it work 10x?
- People: do you know what kind of company you want to be, and who you’re going to need?
Many companies starting out will answer “no” to these questions. That’s okay – in fact, it’s good. You shouldn’t try to scale until you’ve tested a few options, and can eventually answer “yes” (or “kind of”) to the above.
With the right foundations in place, you can then start working on your building blocks e.g. the metrics you’ll target and measure, your workflows, your team structure, your tools etc.
All of the above is what is referred to as “organisation design”. Don’t skip this and move straight to hiring. We all saw the Fyre documentary on Netflix – you can’t attract a bunch of people and then work out how to build everything. Not unless you want to look like a twat.
Businesses big and small make the same mistakes when it comes to organisational design. Senior management often takes a short-sighted view, rushing to solve immediate pain points (stressed staff, lack of capacity) by hiring. But losing sight of long-term goals is dangerous, and risks your ability to meet them at all.
Stop, scale, grow
When I worked at Quill, we found ourselves in the typical fast-growth, early-stage business dilemma. Revenue was growing, processes were forming on the fly, every employee was doing multiple roles, and clients’ demands were increasing. We had lots of incoming projects that we were struggling to deliver on, and our well-intentioned plan was to hire 20+ people to grow our capabilities.
But hiring in this instance would have been a knee-jerk reaction.
It would have added manpower to processes that evolved organically from current work volumes, not processes that were carefully designed to withhold 10x new business.
At this crucial stage, bringing in more resource is not going to solve your problem. It’s probably going to make things harder.
It’s like adding extra storeys on top of a bungalow. You can keep building upwards, but if the foundations weren’t designed to withstand the pressure then at some point they’re all going to crumble.
We saw that we were in danger of heading down that path at Quill. Well, truth be told, we freaked out when we realised how expensive office space would be with all those new hires. So despite revenue and delivery pressures, we held off on hiring and reviewed our entire organisational design. We had to make sure we had it right – nothing was sacred.
“Holding off” was far from the easy route, of course. Staff were already burnt out, investors were impatient, the CEO was barely sleeping, I was developing a drinking habit. But it was the right thing to do.
The review led us to some pretty tough and risky decisions: tough because it meant making many roles redundant and recognising other staff changes were needed; risky because it meant restructuring and rebuilding our entire operating model in the middle of (what felt like) our busiest time ever.
Thankfully, it worked. I had to become a platinum blonde to hide all the hairs that turned grey in the process, but it worked.
Over the course of five months, we were able to increase our output not by growing our headcount, but by actually decreasing it, and doing things very differently. We were successful because our foundations were well-designed (quite literally, with workflows, projections and transition plans drafted onto whiteboards), our culture was strong and our CEO was brave enough to give it the go-ahead.
In time, we began hiring again. But the people we hired had different skills, and were brought on to do different things than we’d originally planned.
As a CEO or Founder, you’re going to be faced with pressures everyday – from your investors, your staff, your clients, your competitors and even your own ambitions. It will be awfully tempting to take the straightforward route: prioritising hiring, increasing headcount and … eventually buckling due to weak foundations.
So when you feel the pressure to grow your business, respond by scaling it instead.
Useful further reading:
Getting Organizational Redesign Right by Steven Aronowitz, Aaron De Smet and Deirdre McGinty for McKinsey & Company.
10 Principles of Organization Design by Gary L. Neilson, Jaime Estupiñán and Bhushan Sethi for strategy+business