Hiring the right people may be the most important thing you do when you start a new company. But how much time should founders spend on hiring when there are so many other competing demands?
Last week, we discussed team-building and several other issues during a panel on the Extra Crunch stage at Disrupt Berlin with Cloudflare CEO Matthew Prince and Red Points Partner and CEO Laura Urquizu.
“I was looking through early emails the other day,” said Prince. “I had forgotten how hard it was to hire people in the very beginning. I think that [Cloudflare co-founder] Michelle [Zatlyn] and I spent probably at least 70% of our time in the first two years just begging people to work for us.”
While it’s a hard job to get right, Prince said he didn’t believe that this was a job he should have outsourced to recruiters. “Fundamentally, as the founder and leader of an organization, your job is to attract and retain the best best possible people,” Prince argued. “And so even to this day, at least a third of my time is spent on recruiting.”
Red Points’ Urquizu agreed, noting that she also spends at least a third of her time on recruiting. But she also argued that as you grow as a company, your needs may change and you may need to let some people go.
“I usually say that what brought us here is not going to bring us to the next stage — and that includes people,” she said. “It’s not pleasant and it is very hard when you have to say ‘bye’ to people that have been with you in the journey for two years, or for one year, or three years, but then you need to find the next people that are gonna come along with you in the next stage.”
Similarly, Prince said the people who join a company when it has less than 100 people are very different from those who come aboard after a company has gone public. “The goal isn’t necessarily to get everyone who starts with you to the other side of the journey,” he said. “But I do think that the fundamental job of really doing the hard work to hire people is is one of the most important and least sexy aspects of starting a starting any business.”
And sometimes, that means you have to acknowledge that you’ve made a bad hire.
Urquizu argues that when that happens, you have to fire fast. “That happens all the time,” she said. “Because in a hyper-growth company, you hire a lot — and we used to have a ratio that 33% of the hiring was a bad fit, bad hiring. Now we got better, but you have to fire fast and let go fast. And as the company grows, you start seeing very different cases — cases that you couldn’t imagine. But then you have to fire fast.”
While firing people is tough “because everybody likes to be loved,” so in the early days, the company tried to make it work, but not anymore, Urquizu said. “Now it’s like: ‘go and fire.'”
Prince agreed but said Cloudflare tends to be “terrible” at firing fast. “We try, we move people around and we try and make it work and, just psychologically, it’s really hard to fire people and you want to be respectful to them. Our solution or hack to that has been just making it really really hard to hire people,” he said.
To get hired at Cloudflare, you have to talk to 15 different people. Until two years ago, Prince himself talked to every single person the company hired and even today, he still personally sends out very single offer letter. He said he does that because, “one, the consequences of making a bad hire are so big and then, second, you hire too fast — the wheels come off to fast.”
Indeed, Cloudflare has a rule that the company as a whole — and every individual team — can’t grow more than 100% year-over-year. The company’s board, of course, would argue it had to grow faster, but Prince countered that you can’t maintain a company’s culture when you grow faster than that.
“Your culture is one of the only things in an organization that’s actually decided by democracy,” he said. “Very few things in a startup are democracies, but culture is. In fact, you define culture as what the majority believes. And the problem is, if you’re hiring faster than doubling, then inherently you’re going to have more new people than old people. And it’s like a blood transfusion. It might be okay to have once in a while but you certainly don’t want to do it every single week, or there’s going to be problems.”
Urquizu, said she probably spends half of her time on hiring, though she tends to focus on key positions now. As a European company, her team faces a few additional challenges, though. “For me, the biggest challenge that a European company has is when you want to go to to U.S., … you’re no one,” she said. “You’re a tiny European company that goes to an incredible big country with very sexy companies. So hiring in the U.S. is one of the biggest challenges that a European startup has.”