Talent makes capital dance: tips on building your startup team

Tech job losses totalled 150k globally last year, and it shows no slow up in 2023. Last week Paypal, Hubspot, and IBM announced cuts. This follows January’s headcount reductions from Amazon (18k), SalesForce (8k), Meta (11k), and Twitter (5k). Andrew Jassey, Amazon CEO, and Marc Benioff, Salesforce CEO, both admitted they’d over-hired, the accelerated growth in the pandemic left them bloated facing the current economic slowdown.

Are these mass layoffs the first step towards Big Tech losing its shine? Top talent was drawn to these companies like a moth to a flame with oversized pay packets and perks galore. Now the leaner times beckon, the massage therapists and on-demand sushi bars have gone, and there is also a move to getting folks back into the office. Many laid-off workers have started their own businesses. That’s good for entrepreneurship. The combination of fewer perks and their callous handling of layoffs may leave Big Tech struggling to recruit. They’re looking suspiciously like any other corporate desk job.

It’s a correction due to complacency as admitted by Amazon and Salesforce, and whilst we’ll see another boom in hiring once the economic downturn has subsided, those affected won’t be quick to forget how Big Tech treated them. For startups, currently and in the future, this is an opportunity to attract new talent and step on the toes of the giants who have lost sight of their cultural mojo.

After startups raise money, their next biggest problem is hiring. It’s probably the most important thing a founder does. If you don’t hire well, you will not succeed – high growth ventures are a product of the team the founders build. The two key questions are identifying the type of people and skills you want to hire into your team, and NASA have a strategic approach to hiring astronauts that offers insights for startup founders on building their teams.

This is poignant to me, just 42 years too late for my ideal career. Accountant, Actuary and Astronaut were the three career choices my Careers Officer at school suggested – she knew I was space mad, but it was a bit of a joke – was a bit lazy when reading the ‘A to Z of Careers’ book. Well, I say suggested, she gave me the book and I didn’t get beyond ‘A’ and convinced her there was an entry for ‘Astronaut’. Only 565 people have been to space, only twelve have walked on the moon. I feel I’ve missed out.

There are specific qualification criteria for NASA – applicants must be US citizens, have a science or maths degree, 1,000 hours of pilot-in-command time in jet aircraft. Candidates must pass the long-duration spaceflight physical, have distant visual acuity: 20/100 or better uncorrected, correctable to 20/20, each eye; Blood pressure 140/90 measured in a sitting position; height between 62-75 inches. The starting salary is $65k, rising to $100k with experience. There will be lots of travel away from home, all expenses paid travel, with overnight allowances. No, it’s true!

But whilst these criteria are important, the most extensive evaluation and analysis in the process is of candidates’ soft skill sets, in a framework developed by Charles Pellerin, called ‘4-D’, with intuitive and sensory skills on one axis, and logic and emotional the other. This is given a 40% weighting of candidate fit and suitability to the role. The astronaut cohort are recruited against these attributes and traits to provide a balance of ‘people types’, as well as their functional expertise – people, teams, ideas, and systems are the four key dimensions:

  • Emotional & Intuitive skills: categorised as ‘Green’ people, they are people builders, care deeply about others and create loyalty. Their roles are training, coaching and leading complex teams, cultivating people and their needs.
  • Emotional & Sensory skills: ‘Yellow’ people, they are team builders and leaders, seeking harmonious teams and work with difficult and complex situation to unite them, creating trustworthy relationships.
  • Logical & Intuitive skills: ‘Blue’ People, ‘Blues’ are idea builders, fonts of creative ideas, demand innovation, and typically have roles in research and early-stage projects, visioning the best possible future.
  • Logical & Sensory skills: ‘Orange’ people, the systems builders, disciplined, focused on control and process, skills for managing late phase projects, directing, and organising people.

Astronauts are trained to be rocket pilots but hired based on their soft skills ability to perform while living on the edge, which NASA see as what truly sets them apart. That also applies to startups. One thing for sure, neither is a journey for the meek and timid. NASA’s view is that missions fail because we have the wrong people, not the wrong technology, so make your startup people centric, not product centric.

Talent makes capital dance recognises the pivotal importance of talent in a startup, and the people-teams-ideas-systems theme from Pellerin is a useful framework to consider when thinking about your startup. What are the other ingredients for a founder to consider when shaping their startup team? Here are some thoughts.

1. Spend more time on hiring and get your hands dirty The majority of founders don’t spend enough time hiring. After you figure out product-market fit, you should spend between a third and a half of your time hiring. It sounds crazy, and there will always be a ton of other work, but it’s the highest-leverage thing you can do, and great startups always have great people. You can’t outsource this, you need to be spending time identifying people, getting potential candidates to want to work at your venture, and meeting every person that comes to interview. 

Speaking of spending time, learn a role before you hire for it. If you don’t understand it, it’s hard to get the right person. The classic example of this is a founder deciding to hire a Head of Sales because he doesn’t want to do sales. This doesn’t work. Do it yourself first and learn it in detail. Great founders understand all the moving parts in their operation.

2. Have people audition instead of interviewing This is the most important tactical piece of advice I have. It is difficult to know what it’s like working with someone after a few interviews; it is quite easy to know what it’s like after working with them. Have someone do a day or two working with you before you hire her. If you’re interviewing a developer, have her write code for a real feature. For a PR person, have her write a press release and identify reporters to pitch it to. Pay them for this work. You’ll get a much better sense of how good she is at the role than you can ever get in just an interview, and she’ll get a feel for what working at your company is like too.

3. Sell your vision You need a vision in order to hire well. In addition to wanting to work with a great team, candidates need to believe in your purpose – why is this job more important than any of the others they could take? Vision gets people excited and is probably the best thing you can do to get a great team on board before you have runaway traction. A compelling vision sold well will attract the best candidates.

4. Culture-contributors are better than culture-fitters A startup culture is part of the business model and customer experience. Just like we want people to contribute new skills and ideas, we want people to contribute new culture. Hiring culture-fitters does not make your culture better. The founding team will soon be outnumbered by new hires. They will decide your future culture, not you. Treat your personal values as articles of faith. Screen candidates for these values and be willing to let an otherwise good candidate go if he is not a cultural shaper. 

Startup teams must move quickly through the forming-storming-norming-performing stages of team development identified by Tuckman, so alignment on vision and personal values, and having good social skills are vital. If these two attributes don’t exist, team members can begin to feel like rats in a maze, and not see where they’re going, and quickly the team breaks down.

5. Always be recruiting, but don’t compromise Recruiting doesn’t work as a transactional activity, view it as something you’re always doing as a strategic growth activity, not something you start when you need to fill a role. There’s a huge amount of unpredictability in the process. You’ll always need someone yesterday and it’s easy to hire someone that is not quite smart enough or a good enough fit because you really need a specific job done. 

Give yourself a candidate pipeline and create a talent pool, never compromise, it’s better to lose an average person than to hire someone mediocre. Great people attract other great people; as soon as you get a mediocre person in the building, this can unwind.

6. Be generous with equity You should be very frugal with nearly everything in a startup. Compensation for great people is an exception. Where you want to be generous is with equity. Ideally, you end up paying people slightly below market salaries but with a generous equity package. Remember that great companies are usually created by hungry, ambitious folk who want the chance to be part of something and co-create success.

Pay people enough so they don’t stress about personal cash flow. You will likely have to negotiate a little bit. Learn how to do this. In general, materially breaking your compensation structure to get someone is bad – word gets out and everyone will be upset.

7. Put rigor around the hiring process You hire better with a strong process. For example, make everyone on your team commit to a hire/no hire decision for everyone they meet, and document their thoughts and share. It’s good to have a brief in-person discussion with the entire interviewing team about candidates. Have someone take the candidate out to lunch or dinner. Insist that everyone is prepared for interviews/auditions. Make sure every candidate leaves with a positive impression of your company.

8. Don’t hire a team for silos, everyone needs to relate to customers Every team member should be driven by a desire to engage with customers,  if you can build a team that always places your customers front and centre, you’ll have no trouble meeting your revenue goals. When you’re just starting off, you may not have the resources to hire a large team so that everybody may be involved in the sales and marketing functions, including direct interaction with potential customers, so ensure that your team is equipped with the right capabilities.

9. Don’t hire a team for a startup, hire for growth potential Having mapped your future organisation, hire people who could be future team leaders. This way, when you’re ready to scale your business, there’s far less friction. It’s important that you build a team for the long term, so build your team with the future in mind, not for now or the next twelve months.

10. Hire for potential and learning, not experience Potential and experience are not mutually exclusive, but potential is far more valuable. Everyone usually hires for experience, but my view is to hire those whose potential can explode, pulling you along with them. Interviewing for experience is easy because you are discovering what someone has done. Interviewing for potential is hard because you are predicting what they will do. But hires with potential are easy to spot as they get excited talking about what they could do rather than what they have done.

Expertise becomes obsolete. To survive and grow a startup must be a learning organisation. The clearest signal of a learner is curiosity. Experimentation is crucial for driving breakthroughs in a startup, so seek curious people, who, love to learn, while experts talk about what they know.

I’ve always taken to heart the advice of Ben Horowitz, author of The Hard Thing About Hard Things, who said: We knew that if we took care of the people, the products, and the profits – in that order – we had a chance of success.

Like NASA, launch your startup with the best crew available.

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