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You just landed your first seed check from an angel. You are about to grow out of your garage and embark on what seed checks are supposed to bring: a larger team to scale operations.
But before you start writing your job descriptions and posting them on job sites, you as a founder need to take a step back and craft a detailed people strategy, not just for the present state of your startup but with a view into the next few years. This is what HR folks call organizational design — thinking about functions, roles and skills for now and the foreseeable future.
When you’re first starting out, the founders typically end up doing everything from product development, sales, marketing and customer service. Of course, there will be role splits between founders. At my startup, I took care of technology while my co-founder handled sales. We both did a bit of product need discovery, customer service and marketing.
The moment you are ready to start building teams, you need to think about smaller organizational units or functions. The key questions to ask are:
• What are the functions my startup will need?
• What is the trigger to start this function?
• Who is the first hire in each function? (Hiring from the top or middle is better.)
• What roles will I need as each function grows?
You should ask the above questions each time you land a big fundraise.
Here is a rough guide to the first three questions. This includes some of the things we did right at our startup and some of the things we should have done better. (Note that much of this is specific to business to business (B2B) tech startups, since I have the most exposure to that world.)
• The first two formal functions will be technology and sales. Each founder should helm at least one function; you should articulate these roles to your early team.
• Once you hit five paying customers, you will need a customer success function. Many startups start this late, but having that first customer success manager hire early is important.
• Once you hit a revenue run rate of $20,000, think about a finance function. The first hire is usually an accounts manager, not necessarily a CFO.
• Next comes marketing. My co-founder and I thought about this function way too late. The right time to start this function is when it is time to make the first big change to your website. You do this when you have achieved product-market fit and are looking for a repeatable sales model.
• Another often-overlooked function is quality assurance. While it is part of technology, I would strongly recommend having a QA function very early in your startup’s life. A good rule of thumb is either, once your product reaches a point where you regularly make a fortnightly release, or when there is a strong need for regression testing (where you are testing if this new release is breaking what was working well). Your first hire should be a QA manager and their first task will be to set a rigorous process in place for each release.
• Once you hit 50 customers, you need a separate product support function that works in close conjunction with the customer success function.
• Once you hit 50 people, you need an HR function. I am not talking about running payroll and benefits, but a true HR function that acts as your people’s partner. Your first hire is an HR manager.
As you consider these functions, think through the roles in each. Apart from the first hire, it is good to have visibility into how each function will look in the future. The good thing about this approach is, when you hire the first person, you’re able to give them the vision for that function: “You are going to get the exciting job of setting up the HR function. Very soon, you will have a small team that may look like this.” Any strong hire would be excited by this prospect.
So, here is how each function will grow in roles. Once again, think about these right now, not when you have 50 people. If you think about it too late, you will realize that you have multiple roles that do the same job and you are paying them differently, resulting in unfair treatment and disgruntlement.
Here are the roles I have in each function of my startup:
• Technology: software engineer, senior software engineer, principal engineer, VP and CTO
• Sales: regional manager, regional head and CBO
• Finance: accounts manager and CFO
• Marketing: Content marketing associate and content marketing manager for the content team, digital marketing associate and digital marketing manager for the digital marketing team, inside sales executive and team leader for the inside sales team, and VP of marketing or CMO to head this function
The roles should have clear distinctions in responsibilities and skill levels. For example:
• Principal engineers have the ability to architect parts of your application.
• Senior software engineers have full-stack development capabilities.
• Software engineers have either front-end (web/mobile) or back-end development capability.
The advantage of this approach is that when you sit with them for an annual performance appraisal, you have great clarity on what each person needs to do to get to the next role. Lastly, roles should dictate titles; keep them the same for simplicity.
In Conclusion: A Valuable Organizational Design Lesson
One of the biggest lessons I have learned over the course of running three startups is this: People care a lot more about titles than you do as a founder. Your employees want to look good on LinkedIn. By thinking through functions and roles systematically and, more importantly, before you need these roles in your company, you can paint a clear vision to every new hire, create a level playing field for your people and save yourself a lot of time and energy.
July 10, 2019 at 09:07AM
Forbes – Entrepreneurs