Planning new Hires in a Startup using Capacity Matrix

August 18th, 2010 Comments Off on Planning new Hires in a Startup using Capacity Matrix

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Staffing is one of the most important aspects of company growth, and arguably most crucial factor in transformation of a startup into a stable company. The entrepreneur has to always know more than just who’s performing and who isn’t. The entrepreneur has to know who in the company is in the right place, who will be capable of managing teams as they grow, who has the capacity to see beyond the current state and will be pushing the company to the next level.

The evolution of a startup from staffing perspective is a repeating cycle of: (1) hiring people who see beyond the current state, (2) working hard and discovering the right way to incorporate their knowledge into your specific case, to streamline and optimize operations.

It’s really just these two focuses. And the CEO’s job is to always know where in the cycle the team is, what is the next milestone and what kind of talent will see over it.

In my company, Zemanta, I use a method to track our capacities, that shows me just that. It is implemented as a table (not spreadsheet), that maps persons (employees) into roles, according to their experiences.

I believe there is a rather fixed set of roles every company will eventually have to fill. It is probably even possible to formalize it to the point where you could predict the staff requirements based on desired yearly revenue.

Let’s take a look at an example evolution.

Startup company at inception

A typical tech startup might begin with a simple structure: business and tech co-founders. Their capacity matrix will be simple, but overwhelming:

in-house external
junior senior
sales founder 1 & 2
HR founder 1
accounting founder 1
finance founder 1
marketing founder 1
PR founder 1
leadership founder 1 (CEO)

founder 2 (CTO)

engineering founder 2
QA & support founder 1 & 2
design founder 2
business founder 1
IT founder 2
product founder 2
legal founder 1

It shows us two founders performing all business tasks with no external help. Note that capacity is not the same as performance. Performance will be based on many external factors, but dependent on time the particular employee has. In the presented case, both founders are severely over-stretched, and can perform reasonably well in just one or two roles, while the rest will be on back-burner.

Most important in this stage is that the founders have senior capacity in leadership. Everything else will be in flux, but without this they will never be able to attract and direct additional team members.

If the company has this kind of capacity matrix, it will inevitably be a technology and product company with good public recognition but poor business performance. Main challenge and milestone in this stage will be attracting early clients or investors, that will enable growing the team to really start working on the services/products.

And the competence matrix tells us that the only way to do this transition successfully will be to find some help for the founders to do things right…

Seed stage – proving the product

Where it will go from there really depends on specifics of the business. For instance, one of the first actions might be outsourcing:

in-house external
junior senior
sales founder 1
HR founder 1
accounting founder 1 accountans
finance founder 1
marketing founder 1
PR founder 1
leadership founder 1 (CEO)

founder 2 (CTO)

engineering developer founder 2 rentacoder.com
QA & Support founder 1 & 2
design founder 2 consultant
business founder 1
IT founder 2
product founder 2
legal founder 1 law firm

Company in this stage can afford some to spend some money on making the core team more efficient, but the flexibility of working with outside help is much appreciated, since you are still proving that the work has long-term sense. Depending on the type of product you might invest in limited number of developers.

Company’s main focus is still on product and partly marketing and business development. Key milestone to reach will be implementing key metrics that will demonstrate commercial value of the service/product and inventing the specifics of the revenue model.

The competence matrix suggests that the only way to reach next stage will be acquiring knowledge/experience/people in business side – at the end of seed stage, the company is severely over-resourced on product and technology side.

Growth – stability and focus on sales

Next might be professionalizing the development part, by hiring full time staff and possibly even engineering lead, and finding seasoned sales person to kickstart the pipeline:

in-house external
junior senior
sales founder 1 VP sales
HR COO
accounting COO accountants
finance founder 1
marketing founder 1

VP sales

consultant
PR founder 1
leadership founder 1 (CEO)

founder 2 (CTO)

engineering dev team VP engineering

founder 2

QA & Support dev team
design founder 2 consultant
business founder 1
IT founder 2
product founder 2
legal founder 1 law firm

Now, a year in, we have a decently operational company, that is starting to generate revenue, the founders can focus on monitoring the changes in the competitive landscape and the CEO’s job for the next few months (years) will be making sure the roles are performed optimally.

Company becomes sales-oriented and is all about implementing the revenue model, where VP Sales is the key person that will have to overlook, improve, do all the hard work and earn his own staff.

The Sustainable Company

The ultimate state every company should strive for, the state where company works as a stand-alone system is something like:

in-house external
junior senior
sales staff VP Sales
HR staff HR
accounting staff CFO
finance staff CFO
marketing staff CMO marketing agency
PR staff CMO PR agency
leadership CEO

CTO

engineering dev team VP Engineering
QA & Support staff CPO
design staff CMO & CPO
business staff VP Business Dev
IT staff CIO
product staff CPO
legal staff Lead Council law firm

At this time, every role has a senior manager, reporting to seasoned CEO. Everyone has well defined job descriptions and knows their role in the mechanism.

Most companies never get to this stage – they either stop growing at earlier stages, fail or get acquired. My thesis is that those that fail do so because they fail to find the people that could take them to the next level when timing is right.

Conclusion

We’ve followed a path of a fictional company on the path from idea to professional organization, which was really a process of converting inspiration into experiences. As the company’s focus moves from proving the idea, building the product, implementing the revenue model to stabilizing all aspects of operation, the right staffing will be the key driver of those transitions.

Quite possibly I’ve missed some other important roles. But I hope I managed to convey the main points:

  • CEO’s job is figuring out the details of the path between initial state (first table) and final goal (last table)
  • the areas you need top performance should have dedicated personnel, ideally seasoned
  • this same method can also be used to evaluate staffing in any sub-department
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