Why spending more on a company’s greatest asset is money well invested.
Many years ago when at business school, I read an article in HBR suggesting that venture capitalists spend 20 per cent of their time recruiting.
The figure seemed very high at the time but, if I reflect on how my time has been split over the 17 years since we started Smedvig Capital, thinking about management teams and helping CEOs recruit the right people has certainly been one of the most important parts of my role.
Being in the growth capital space, the scope and challenge of particular roles can change significantly as a business progresses and ensuring that the right additions are made early enough reduces the chances of bottlenecks to growth from capability gaps.
There are a number of factors that lead companies to delaying recruiting decisions. They include struggling to find the time to manage the recruiting process, lacking the financial resources to recruit the ‘right’ person, believing that the business is not sufficiently developed to attract the right person and, where it is a change rather than an addition, some reluctance for personal reasons to go through the uncomfortable dynamics of changing someone in the team.
To deal with each in turn:
Given the critical importance in any business of having the right people in place, this in most cases is simply a wrong allocation of priorities – finding time for managing the process will potentially create more work in the short term but finding the right person will certainly save a great deal more time than that expended in the medium term.
Lacking the financial resources can clearly be a more challenging impediment to recruitment and in some situations cannot be immediately solved. In others it may be about re-thinking the use of available financial resources to achieve cost savings elsewhere to allow budget to be released.
Typically this is exactly where it is easy to compromise on the quality of person hired (or not hiring at all). If thought through carefully, recognition of the impact the right person might have versus the alternative use of funds will likely result in increasing the ‘spec’ of the targeted person.
The stage of development of the business may certainly prohibit access to some people who simply are not interested in taking the risk on earlier stage companies and/or have salary expectations that really are too high for the business to take on. Conversely, however, there will be individuals who feel the opposite and providing the owners take a sensible view of sharing some equity, they will likely be rewarded with highly motivated and experienced individuals who can help deliver more rapid and solid growth.
The last factor is always a difficult management challenge but particularly in earlier stage businesses where relationships may be close. It is up to the team to objectively seek to evaluate whether or not the current members have the required skillset.
The right growth capital partner can help in all of the above areas, helping from experience to evaluate existing skill sets, recognise and define early requirements for effective growth and of course providing financial resources to assist in attracting the right talent.
It is up to everyone to recognise that generally the old cliché is right – people are many companies’ greatest asset so over investing in getting the right team pays dividends.