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Top 5 challenges startups face while scaling up

Pedro Reis Silva

Introduction

The first year of a startup is the hardest. You and your co-founder are working out of a room in your house or apartment. You’re juggling three different jobs — one at the company, one with customers, and one with investors. 

Month after month, you and your team go through different iterations of your process. Your teams start getting more efficient and running themselves; their role becomes clear and you start delivering the product as you envisioned.

And then something magical happens. The company lands its first investment round. You can now scale the team faster than ever before, but with it also come new challenges.

Knowing this is the story of many successful scale-ups we have worked with so we put up a list of the Top 5 challenges Startups face while scaling up – and of course, what do to about them.

Keeping the culture

Those who have worked in a hyper-growth startup know the story all too well: “The team grew from 4 to 30 people in a year. It was a close group – we would share, have fun, and hang out. Now, I lost track of what my colleagues are doing or supposed to be doing.” 

The most daunting challenge for a startup is to scale up while keeping its culture intact. Companies hire people in order to expand their operations and capacity, but this can be challenging as everyone who joins your team will add their uniqueness to your culture’s DNA and work environment. With them, will come new and efficient processes – but at what cost?

This poses a dilemma for startup founders: how do you hire quality employees while maintaining your culture and values?

  • Ensure your Recruitment Strategy is designed in a way that Culture-Fit is a factor that’s evaluated throughout the process. In this step, most teams overlook the human aspect of these systems – ensure that the people involved in the process are adequately trained and interview-ready. 
  • Hire people who believe in the same cause as yours. This will help them understand what it takes for the company to succeed and grow, and will also ensure that their interests align with yours.
  • Take time to talk to your team and colleagues on a regular basis – and get feedback about how they’re feeling about the work environment, their career goals, and the company overall. You can also ask them what they think should be prioritized by management in order of importance. You may find that there are some issues that need addressing – if so, take action before it gets too far out of hand!

In the end, be mindful that culture is a co-creation. Your team will feed the culture in the way they see it – oftentimes, without being conscious about it. Be clear about the values you want to keep and make sure you set up strategies to ensure that culture is kept as you see it.

Bonus tip: HR’s most important role is not drafting contracts – keeping track of culture and ensuring your employees are happy is a fast way to increase retention and reduce unexpected setbacks of having key team members leave.

Winning in today’s talent market

By now, we trust that you are aware that the talent market has changed a lot over the last couple of years… and why.

With remote work, your talent pool is significantly larger than it used to be, as candidates are no longer limited by geography when it comes to applying to jobs. That comes with a big caveat: the same is true for companies competing for talent.

More and more markets are becoming “candidate-driven” markets. This means high-talented candidates will be very selective of companies they choose to enter a Recruitment Process. They will reject offers and drop out if it doesn’t meet market standards.

For a lot of roles and markets, standards are high. Candidates will read your review online on Glassdoor, ask the employers of your organization on Linkedin about how’s it like working there and research your company’s finances in Crunchbase. And that’s even before joining the recruitment process. In the final stages, you will need to compete on offers.

So, now more than ever, you should ask: why should they choose your company? What’s in it for them other than being a part of a high-potential startup? 

Talent attraction and direct search are just two of the blocks of a sound recruitment strategy – but most of the blocks come with having the right conversations, and making the right decisions.

  • Often our partners imagine a “perfect” candidate that we like to call a “unicorn”. Spoiler alert: they might not exist. As companies grow, you’d like for your team to be able to grow alongside it. Look for potential rather than expertise first.
  • Hire people who are willing to mentor, teach and share! As your company grows larger, upskilling needs to be a key asset of your talent strategy. But if the right people are not in the right place, you’ll be limiting your options of mid and junior talents. You might find someone who really resonates with the company’s values and you see potential – but you will have no one to teach him.
  • With Hiring Managers, we always work on a variety of topics. Make sure you assure everyone in the recruitment process has enough knowledge about the roles they are involved in, to ensure a smooth candidate experience.

Building a scalable recruitment team

One of the benefits of working as a consultant is being able to work with different types of teams. Some teams have 2 recruiters who juggle between Recruiters and HR specialists, while others have more than 20 Talent Acquisition Partners, focused on hiring for different departments and markets.

As teams grow, the most common challenge is managing a growing number of talent pipelines, alongside the capacity of recruiters. Often, the same team has to manage HR and recruitment activities, which further reduces capacity.

One of the most important things in our processes is having clear goals, metrics, and conversions. This allows team managers to have a better understanding of where our efforts are and what’s their impact. Often, we come in for a limited time to help support teams expanding technical, sales, or operations teams – in order to launch a new product or penetrate a new market.

  • Consider the flexibility of outsourcing – Across the board, the most common bottleneck is that the capacity and know-how of recruitment teams don’t grow as fast as the needs of a growing organization. This is where teams like us come in and provide our clients with embedded recruiters to fill in urgent positions or take the load of internal teams. Often we bring in the expertise to hire for a niche position.
  • Set up scalable cost-effective data systems – this has allowed us and our clients to quickly identify bottlenecks and come up with solutions to tackle them. 

Bonus tip: Make sure you count on an Applicant Tracking System that is suitable for your growing needs. You need to be provided with the information you need in order to make the right decisions when it comes to your candidates.

Scaling up processes

This is a challenge that hits close to home. We are not afraid of admitting it: we were not entirely prepared for our own growth. In 1 year, we scale our team from 15 to over 60 members. While some of the processes we had envisioned worked out – some didn’t.

As a success, we managed to retain our feedback culture with the help of organizational tools we implemented before our growth – although we fell short in some areas – namely the effectiveness and redundancy of some meetings. 

As you scale up, how do you ensure your team standups and retros are effective? Do you need to keep the same amount of meetings? Or do you need to change the format? 

We invested a lot of time reflecting on this topic, as a short feedback cycle is essential for our Recruitment process and for the know-how we deploy to our clients. 

What we started doing differently:

  • On the operational side, we build our own tools that allow us to collect data about recurring meetings and processes in order to detect earlier if a meeting is becoming redundant or something about it needs work. We took in qualitative feedback from everyone involved in these processes so that we could make accurate decisions. 
  • In the strategic end, we start considering: What will become of retros/standups when the team scales up? We run a simple thought experiment: can we see this working with 100 people? What challenges can it bring?
  • Experiment. We also gave freedom for teams to organize themselves and experiment with different models and meeting cadence.

Bonus tip: There are plenty of tools that ensure feedback, progression and trainings keep happening as organizations grow. Leverage them to your advantage!

Managing investors expectations

Investors want to see that you’re focused on the long term, and they want to know that you have a plan for how your product will grow.

They want to know that you can stay focused on building the team, customers, and product while it scales up – for this reason, forecasting the number of hires, including predicting vacancies caused by turnover are important figures to consider in your Quarterly Report.

Investors also care about your ability to pivot when necessary and iterate based on feedback from the market or customers. As an entrepreneur, it is important to keep in mind what is the expected cost of talent, as the product needs to continue to grow. 

Is your talent strategy adequate for the growth your company expects in the next half? Maybe you can cut costs by having one Fullstack Engineer do the job of multiple people – but will you have enough stability in your teams to ensure delivery and quality? 

  • Keeping track of indicators like costs-to-hire and time-to-hire. This will help your teams in their planning and forecasts.
  • Setting clear hiring goals for the quarter will help your teams stay aligned with the needs and have the right expectation.

Conclusion

All these challenges are real, but that doesn’t mean you should be deterred by them. If anything, it just means that you have to plan ahead and be prepared for them. 

You can do this by building a culture at the earliest stages of scaling up that allows anyone to easily understand how important their role is in helping the company grow and how they can help to tackle these challenges.

Find out more about how Tribe.xyz can help you with your recruitment challenges.

Pedro Reis Silva

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