How should we balance internal and external hires as we scale our business?
Dominic Jacquesson, VP of Insight & Talent at Index Ventures: There’s no perfect formula, but you have to balance the pros and cons of both. External hiring brings fresh perspectives, builds diversity, and you can benefit from bringing in someone with direct experience of the scaling challenges you face, rather than having someone learn on the job. It can also mean you bring in someone with specific knowledge for what you need at that time. Maybe you have an internal engineering manager who’s used to running teams of up to 20 or 30, but has never overseen a team of 80 or 90 — which is what you’re aiming for in 18 months’ time. It doesn’t mean your internal candidate won’t ever be able to do it, but can you afford the risk of them learning and proving themselves in real time?
On the other hand, you may have internal team members who are superstars, and who have risen to every challenge you’ve thrown at them. Often the feeling in early stage companies is that you don’t have time to make mistakes and can’t afford for people to be learning on the job — you are moving too fast. But the argument for internal promotion is that you’ve got to offer opportunities for your best people to progress and develop.
If you’re a high-growth startup, the company is expanding anyway, so opportunities for learning and progression will be generated naturally. It’s always good to have members of your senior team who have been with you through the journey, who are internally trusted and respected, and who are part of your cultural DNA. These individuals will also know every nuance of their role or function, be it your technical architecture, or your key commercial partners and customers.
So it’s a question of balance. If you exclusively hire externally, you will demotivate your star performers, and lose some of your essence. But exclusively promote within, and you won’t have foresight of the challenges ahead and the hard-won lessons for how to overcome them.
Generally speaking, the faster you’re scaling, the more external hiring you need to do. It’s the nature of moving very fast that there will be fewer and fewer people on your teams equipped with the skills you’ll need in the next phase, and less time to get to grips with them. Staying ahead of where the company needs to be when you’re scaling fast demands proactive and imaginative preparation for tomorrow.
A good rule of thumb is that internal promotions should make up at least 30% of your management team. Often there are one or two individuals who make it to an executive level from inside the company, and this is particularly valuable talent, because they understand the business and your values intimately. They’ve been on the whole journey. You need to be strong advocates for these individuals at board-level, because your investors might not otherwise be aware of their value, and the importance of giving them opportunities in more senior roles.
One last point. When you make external leadership hires, be very careful that a) they are clearly much more experienced and capable than any existing internal candidates, and b) that you sell the benefits of the external hire to the internal team. If you hire a strong external leader, it not only makes the company stronger, but they can provide invaluable mentorship and developmental growth for the team. Don’t let good people feel demotivated by ‘missing out on a promotion’. In reality, it can more often be a catalyst for their growth.
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