some funny HR math

sounds VERY familiar....... ahhhrrrrrrr

via Found + Read - read here

 

I have noticed some funny math in my startups over the years.

This funny math doesn't start until after VC funding — so to better explain it, I must first rewind the clock to our pre-institutional investor stage.

See, I do funding a bit different than other entrepreneurs. I launch the company myself. I form (some of) the team. We build the product. We get to revenues … and we even go profitable. In short: we get our ship lean, mean, and pumping efficacy from every valve.

Then we go get VC funding (less dilution, more control, etc.)

It's so predictable what happens next. Ya gotz some green in the bank and a newly formed HR department, replete with a salivating recruiter, brimming with job reqs to be filled. Go! Go Go!

Staffing at warp speed always scares the crap out of me.

I approve each new req. — queasy — because this new person will now solely be focused on what used to be 1/20th of my job. As I sign the req, I hope they will be better at "it" than me, care more about "it", and get more of "it" done.

But, in my heart, I feel the funny math coming on.

Each new person that gets added to a startup, instead of adding an integer worth of value actually temporarily subtracts value. The old person, instead of doing their old job, is now training the new person. Add a body and get less for your pleasure. 1+1= ½

Eventually you end up having more new people than you do old – I call this being "upside down". That is when the ownership problem starts to compound. Nobody has really been here long enough to know, or care, and once the "new job excitement" has worn off, accountability starts to dwindle. In my old company, this problem was pervasive. The more people we had, the longer it took for anyone to pick up the phone when it rang.

It won't always be this way. If you survive your terrible twos, you will eventually get more efficient with each new body. Slowly 1 + 1 = 1.25, then 1.50 and it probably never gets much higher than 1.75. With the exception of specialized industries like wholesale and investment banking, the most efficient companies in the world can achieve $1M of revenue, per employee, per year. Google is $1M, Dell is at $900K, Cisco $570K. The average of non-financial Fortune 500 is about $290K.

In my current company, I made a firm decision to combat the chaos of these mathematics from the outset – wielding the best weapon I have in business: honesty. I started warning people about it from day one. During "all-hands" company meetings, whilst folks munch pizza and hear about our financial numbers, I remind them " 1+1= ½". When I see five people in a meeting that only requires two, "1+1= ½" is all I have to say.