It is not news to today’s leaders that the right talent is becoming an increasingly precious commodity. All companies must put in extra effort to ensure a business has the right people in the right place at the right time. For start-ups, however, the issue of talent is not just about the act of hiring, but also understanding the nuances of who needs to join and when.
To explore how this phenomenon is shaping start-up talent strategy, Egon Zehnder interviewed a group of leaders to understand their perspectives and experience in the marketplace with respect to talent in both staffing and the board of directors.
While it has always been a strategic challenge, current global trends make recruiting an even more complex situation, they told us.
“If you look back, since the time of the first and second Industrial Revolution, capital has been king. It guided the decisions and dictated the pace of business,” said Andre Menezes, co-founder and CEO of Next Gen Foods. During this period, talent was relatively cheap and easy to acquire. A company that was growing could focus on making its numbers, assured that it could easily replace any employees who left, he said. Now, reality is different with historical levels of employees quitting their jobs, and new companies must understand the shift. “The Great Resignation is a historical moment when talent is rising in importance in the overall work equation,” said Menezes.
This wave of change has reconfigured the talent process in the start-up world. In previous business cycles, a system of talent acquisition emerged organically: First, entrepreneurs hired from among their friends and close colleagues. As the business grew, these leaders would add more professionalized talent, and eventually, as a sign of success, perhaps a known “star” would be added to the board. But the speed and demands of business has upended that linear process.
Now, leaders must focus more clearly on each stage of their business before arriving there and make sure they acquire the talent needed to take the next step.
Stage One: Launch
At the dawn of this new business, a leader must focus on amassing a core team.
While it makes sense to hire in some key skill areas, ideally, the bulk of this team will be made up of generalists—smart, capable individuals who can wear many hats and tend to the shifting needs of a fledgling company. This early team will play a key role in determining the fate of the company. To attract talent at this stage, leaders must engage in a focused process of employment brand development by creating a compelling vision of the company taking shape. This employment brand is a critical tool to sell a potential recruit on the value of joining a work-in-progress. This document must share the founder’s vision, demonstrating the opportunity to disrupt a market or create new value. The most successful founders are able to “paint a picture” in their pitch, highlighting an employment brand that is hard to resist.
In addition to amassing talent, the Launch stage also calls for careful attention to the board. Unlike staffers who may be asked to perform an array of tasks, board members at this stage can serve as early experts who solve a specific need. So, a leader may need a technical expert, a commercial expert, a senior leader from their customer set, etc. The key, said David Rosenberg, CEO and Co-Founder of AeroFarms, is flexibility. “Boards in early-stage companies are hard. You are changing the strategy and technology and people so quickly that you need board members who can keep up with their own company’s evolution.”
One leader we interviewed told us that the right set of behavioral competencies, rather than a stellar resume, drive hiring at this stage. “Over time I have become focused on behaviors,” said Manoj Sahoo, Operating Partner at ARA Partners and CEO of a Portfolio Company. “I have seen people highly successful in their careers—the right roles, the right companies—who fail because they could not make the cultural adjustment to a start-up work environment. And I have seen guys who may not have the prefect resume, and we’re not sure they’re a fit, come on board and kill it because they have the right behavioral competencies and thrive in a start-up culture.”
Stage Two: Scale
At this phase of the new business, a leader will be looking to build on early successes and expand the company.
Hiring at this stage takes on a new mandate: Beyond talented generalists, the business in this phase needs to add expertise. The mission at the Scale stage is to start removing biases from the business. If the initial team was truly fired up by the vision and brand the founder presented, now it’s time to stress-test that vision and embrace best practices that will establish the company for growth and success. The leader must bring in experts to calibrate against the cultural aspirations. The executive team must assess for capabilities within the organization and begin building the structure that will make it competitive.
At the Scale stage it becomes increasingly important to understand not just the existing skill set of new recruits but also their potential to adapt and change as new challenges arise. In other words, it’s about being able to flex and adapt. For example, as we recently saw with the announcement of a joint venture between NotCo and Kraft Heinz, this new and much larger partner considerably shifted NotCo’s needs, calling not just for passionate individualists but team members who could comfortably interact with the big corporate entity.
At this juncture, companies find themselves advancing into new stages of funding, which also means new considerations at the board level. Financial sponsors may join the board. It’s also a time when the board will need to think more broadly about the firm’s future. With the technology of the company now proven and the business model and team demonstrating success, the board must consider if the founder/CEO is the right person for what comes next.
Stage Three: Evolve
In this stage, leaders must look to the long-term future of the company.
For many companies, a successful evolution will mean turning attention to succession issues as well as other strategic priorities. For all these reasons, the talent on the board of directors comes into focus. Now, the company needs board members that can act as strategic advisors and help the CEO navigate challenges.
One leader we interviewed reflected on how dramatically the role of his board changed after his company went public. Early close supporters, who had been instrumental in his Launch and Scale phase, had moved on. “We had new dynamics,” said Matt Crisp, President & CEO of Benson Hill. His board at this stage had to evolve. “We are now in a public market setting. Our board members are more in the limelight. They must think about their fiduciary responsibility but also a wider body of shareholders.”
At this stage, leaders must also look at their own actions and behaviors and assess what they are doing to meet the needs of a firm as it leaves the Launch and Scale stages and emerges into the Evolve space. Menezes said this was the mandate that kept him up at night. “How do I make this bigger than myself? If I get hit by a bus, how do we make sure this company endures over time and accomplishes what I dream it can do.”
Integrating Talent and Strategy Starts Now
No matter what stage your company is currently at—the key is to look ahead to the next talent challenge. The graphic below illustrates exactly that: Cycle timing is critical as start-ups mature. Rather than solely considering past experience in a talent strategy—either at the executive or the board level—companies will need to assess candidates’ potential to evolve, adapt, predict future challenges, and present solutions as the company undergoes its different stages.
If you wait until it overwhelms your company, you may have missed your window to execute a key change in your talent strategy. Don’t wait to be forced, leaders told us. Accept that this evolution in the talent process is happening and that your best move as a leader is to integrate it into your thinking now, and in the future.