Start-Up to Scale-Ups: The Changing Hiring Landscape
ISL has worked with over 50 high-tech, high-growth start-ups and scale-up companies, who have on average gone on to grow in headcount by 490% in the last 3 years, both on a national and global basis.
Scale-ups require a different type of support to start-ups, a type of knowledge and guidance that is often very difficult to source. This is because taking a business from 20 to 80 people requires a different, niche set of skills and knowledge to that required of a business looking to grow from 60 to 100 for example. This support can be difficult to source at a reasonable cost to start-ups, both in terms of money and time and most often, the support offered to scale-ups is too generic or resource intensive.
What is a scale-up company?
Scale-up metrics have become a major area of focus in the entrepreneurial journey, particularly since the Scale-Up Institute published their 2014 Scale-Up Report which highlighted the profound impact these companies have on the economy. For those who aren’t familiar with the term scale-up, this is a company with more than 10 employees, a 20% average employee growth and annual turnover of 20% over a 3 year period.
Out of the start-ups we have worked with over the years, 50% e.g. have gone on to xyz. As we have continued to work with start-ups and scale-up companies over the years, we have developed a rich understanding of how the challenges they face differ as they grow. Here’s what we’ve learned:
How businesses must adapt as they grow from start-up to scale-up:
From adopter clients to mass market
According to businesses screened by SETSquared in their 2017 ‘What do scale-up businesses need?’ report, scale-ups found it easy to find initial adopter clients when they were starting up, but the challenge started when they tried to appeal to the mass market in the scale-up phase. Businesses explained that they felt they needed to appear larger than they were and behave like a –‘grown up company’ with processes and larger clients. Transitioning to this from the previously informal style they adopted with smaller clients was one of their first challenges as they sought to scale-up.
Perfecting product market-fit
The main operational difference between startups and the scale-up process is that, whilst startups are often still experimenting with customer acquisition, product features and customer segmentation, scale-ups on the other hand have the experience and knowledge of the return they will receive from putting X amount into the business. This means tech scale-ups are often far more confident in diverting funds into areas of their business on a larger scale. Startups are generally still looking to discover ‘what works’ – a process that can take around a year for most tech startups.
The art of ‘big company culture’
Of course, the scale-up process means your team has to grow. Ultimately this means the culture of the ‘founding few’ can be difficult to maintain and so your business has to prepare to adopt a different type of management style. Crossing this ‘chasm’ requires companies to become more structured, formalise processes, put hierarchies in place and become consistent in its delivery.
Moving to specific roles
It can be hard to introduce specialists in a small company where the founding few are used to being flexible across all of the company functions. Firms explained they needed an expanded skill-set and existing staff needed to be allocated to specific roles. According to SET Squared, a big learning curve for companies was delegating, hiring and re-allocating responsibilities within their company.
Growth vs staff vs cash flow
During this scale-up process the team needs to grow in order to address supply and demand. In the meantime, the company may struggle to have sufficient cash flow to cover the new salaries. Tech scale-ups screened by SET Squared reported this as a vicious cycle because, without more employees to support growth, businesses risk failure. Whilst without cash to hire, companies aren’t able to expand. One of the challenges they identified was managing growth and cashflow. As a scale-up, there was an emphasis on the need to estimate growth and hire based on these predictions. If cash flow to hire in line with market salaries was a problem here, they found offering shares a good way to attract candidates.
Global businesses with international staff
Although it still stands that most often a UK based company is likely to have more British employees, today’s world sees a growing percentage of companies having globally distributed teams. Many scaleup companies report that it can be cheaper to hire international staff for certain business areas but that it is hard enough to find the right skills, experience and values-fit in the UK let alone on an international scale. Screening candidates requires businesses to clearly define the requirements and qualifications they’re looking for. Even when candidates are on board, it can be difficult to manage candidates from afar – a challenge rarely faced by startups. Modern video conferencing technology has made this easier in recent years, but nonetheless, the process of getting global candidates to this stage is harder than ever in the current skills climate.
Holding onto those core values
Something we experienced ourselves as ISL grew from its founding few into larger, more structured teams, is that with growth, comes the risk of losing touch with the values you started with. As we set out to hone in on specialist sectors with formalised processes and specialist roles, it became essential that our hiring processes were equally focused on culture and values as they were skills and experience. Without this, our growth could have diluted our values if the people we took on did not mirror our autonomous and mature environment and commitment to investing in long term client relationships, rather than transaction-focused recruitment they may have witnessed in other firms.
We called this ‘The Rule of 40’ as our own personal experience taught us that reaching a headcount of 40 is a critical period in which we believe your cultural values must be clear as day in order to withstand the pressures of scaling up.
Values vs. Skills
Many tech scale-ups may appreciate that ‘maintaining your cultural values’ throughout the hiring expansion can be easier said than done in the current candidate climate. As it becomes increasingly difficult to find skilled engineers, developers and even C-level executives with both the experience and skills they need for highly advanced projects, finding people looking who appreciate their values and working environment can be impossible, without paying the premium for it. This is something that both startups and scale-ups struggle with across the tech industry as the battle for talent continues.
Positive scale up techniques
However, thought leaders SET Squared and ISL Recruitment have initiated a shift in the hiring landscape as they seek to suspend the ‘battle for talent’ and encourage scale-ups and startups alike to invest in training and focus more on hiring based on the skills and values you require most. By hiring for soft skills and values, scale-ups can open up doors to a much wider market of people if they are prepared to contribute more to the training up of particular skills for people who demonstrate the most long-term potential in the business. This in theory should improve employee loyalty and retention as they value the investment you place in them and seek to progress within your business.
In fact, in a talent and skills report produced by Scale Up Institute, social skills were reported as the number one priority by scale up businesses, followed by technical skills and business & management skills. We are not suggesting that in order to find talent in the current climate, businesses must purely focus on soft skills, but rather, companies looking to scale-up rapidly to meet supply and demand needs at a cost that is still manageable form a cash flow perspective, training up less experienced candidates with a great deal of potential could be a far more affordable option. In addition to this, this will open up a plethora of opportunities in the global market. Particularly when it comes to managing remote working and international teams, where overseas employees teams will need people with the softer managerial and client-relationship skill sets to manage processes abroad.
Identifying potential in low level candidates & graduates
According to the Scale Up Institute, 93% of scaleups they interviewed said that recruiting remains the biggest challenge for scale up companies and that access to talent was vital if their business was to continue to grow. Even though many scale ups employ a mix of graduates, post graduates and school leavers whilst offering a range of apprenticeships and schemes, over 48% reported having little luck when it came to finding strong candidates at this level and having poor links to universities and schools.
As explained by the Scale UP Institute, this highlights the needs for better engagement by schools and universities with scale-ups to offer more opportunities like the Young Enterprise scheme. Access to peer to peer networks was reported as the most likely form of vital support by scaleups. At ISL, we believe that our local engagement with these groups and our involvement in higher education mentoring is incredibly useful networking tool for our scale up clients looking to branch out into these candidate markets.
In 2016, Scale Up Institute noted how large corporates, charities, business schools and universities can help scaleups with talent acquisition. In 2017 large corporates continued to promote their agenda with student employability skills, with programmes such as LifeSkills and Freeformers developing young talented people. In the 2017 Scale Up report, ‘a third of scaleups ranked social skills as the most important factor for school leavers and graduates’, with technical and digital skills remaining essential. This is why we are seeing an increase in programmes designed to nurture digital expertise in SME’s, such as Freeformers which is creating a digital competency standard and access to free learning that can be used by any scaleup.
What can ISL bring to the table?
We have seen remarkable results in some of our clients who set out to grow from start-up to scale-up size. On average our start-up clients saw a 490% growth in headcount across a 3 year period, following the support provided by ISL. We ask our technology Team Leader Jon Holland what he believes has been key to this result through our work with our clients:
His answer? A rich understanding of our clients culture and appreciation for the impact every hire will have on a business, our ability to provide short term solutions via temporary staffing to help our clients get their projects off the ground and detailed recruitment strategies, whereby we always look ahead with our clients to help them visualise their pipeline and growth prospects.
In addition to this, we are able to be highly flexible when it comes to finding a financial solution for our clients, particularly at the start-up stage where cash flow can restrict business’ ability to invest in recruitment. As part of this, we have provided various companies with split fee options and payment plans to make hiring a recruitment agency more accessible to them. Our goal is to find a solution that works for our client; we appreciate that seniors in smaller businesses are incredibly busy, so we do our best to work around you and bring you solutions whilst you focus on your business.
If you are a start-up or scale up looking to grow your business and both attract and retain top talent in the technology and engineering industry, please do give us a call on 0117 428 0600 and we’ll put you in touch with a consultant who specialises in your market and location.