This Is Why Blitzscaling Threatens Talent Acquisition And Company Culture
25th March 2020
- Christopher Abbass, Founder & Co-CEO, Talentful.
How can we rethink how companies use technology, people and processes to create sustainable, profitable businesses and instill company culture in the long run?
No matter the size of a company or startup today, many would argue that creating a profitable business should be a critical driver. But, there seems to be more talk about fast growth and valuation and less talk about prioritizing profit, talent and creating a culture that becomes the galvanizing force in a company’s success.
McKinsey researchers address the talent and human capital component when they talk about winning transformations for companies and the importance of investing in digital talent. But, in the world of high-growth venture capital (VC), sometimes the talent and culture component is neglected.
When the Silicon Valley mentality became more prominent in Europe a decade ago, we saw two things happen: a shift from business owner to entrepreneur, from building a company to a valuation-centric mindset. This tectonic shift in the thinking evolved into “blitzscaling,” or prioritizing speed over efficiency — the term was coined by Reid Hoffman.
That approach has created some great companies, but the blitzscaling approach also isn’t for everyone. If you look at the number of companies exiting at a billion dollars globally, it’s minute compared to those that received VC funding.
Startups have a 1% chance of becoming unicorns. Even Wall Street knows that most unicorns aren’t profitable. So, it’s not scale at all costs; it’s about how you’re going to scale. You can’t ignore the fundamental building blocks that will make your company succeed in the long run: talent.
A False Talent Market
VC rounds are getting more significant. Funds are supersized, and investors are pushing to scale fast. On average, the road to unicorn has shortened from seven and a half years to just under six years. Salaries surpass those even for the same positions in established tech companies.
Many billion-dollar unicorns have no clear path to profitability and instead rely on the “wow” factor to push forward to inspire employees to go with them on world-changing missions. But, at the same time that they’re scaling, they’re also leveraging their talent as a means to an end, treating them more as a commodity.
Everyone wants to be an entrepreneur or Elon Musk. But, it’s incredibly hard to scale like Uber or WeWork. This is why you see so many broken cultures at startups — burnout, high rates of attrition, overinflated salaries with companies having to overpay in a hyped-up market to attract the best people.
Being focused on scaling at the expense of creating a valuable company culture rarely creates a long-term business. You can’t short-change talent.
The Talent Phenomena
The good news is that out of this blitzscaling decade we’re seeing a new approach emerging, driven by a new generation of startup founders and investors, where the value of talent is parallel to the company’s success.
In his book, What You Do is Who You Are, Ben Horowitz, co-founder of Andreessen Horowitz, looked at the importance of company culture. This is what we’re beginning to see in this next generation of startups: the value of talent coming to the forefront. Where recruitment used to be an afterthought, we are beginning to see the best companies in the world have high-performance talent teams.
Recruitment has the power to change how companies create culture internally. In the past five years, companies have become more strategic about how they acquire talent by bringing talent experts to the executive table.
A 2019 First Round Capital report found that when employees lack faith in their CEO, they’re three times less confident their company will see a $1 billion-plus exit. And, they’re five times more likely to leave within a year and two times more likely to think the company will fail due to culture or team.
Talent is the No. 1 challenge for companies today; it’s also the highest cost. Recruitment conversations must be strategic decisions. Elevating recruitment to the C-level is how we change the talent narrative.
With talent as the key to the future, we are seeing a more significant emphasis on culture, diversity, mental health — things that founders would not have talked about a decade ago. Founders have started to bring teams together faster by bringing in talent experts earlier in the process. They also know they need the right talent to build their company at inception.
Elevating the talent agenda at a startup company is the epicenter of what makes a lasting company culture. This is sustainable hiring.
Here are three ways you can ensure your company attracts the best talent.
1. Talent should be on your agenda from day one. Think about how you’re going to scale your teams from the beginning to 20 years down the road. If you’re going to be a billion-dollar company, you’ll need the right talent along the way. You already invest in your product and brand, but if you aren’t making people the epicenter of your investment, you won’t get very far.
2. Take your talent on your journey. Founders should be clear on the mission of the company. Everyone at every level should be on board with that plan. Sharing where the company is going and how everyone can help reach that goal is how you create a winning culture.
3. Keep your bar high. Your first dozen hires set the tone for the rest of your business and will encourage more A-players to join your company. People want to work with the best people, so you’ll need to be agile and vigilant. Implement data to spot trends and make changes quickly when you have to. Remove your opinion and bias, and let go of people who don’t work out.
Growing a company at a rapid scale has challenges, but there are a lot of things you can do to make it successful. Having a focus on people and culture from day one will make your company successful today and tomorrow.