In any startup company, EACH employee MUST wear many hats. In a large company, job specialization is the rule. However, job specialization does not make for a successful startup, as it requires too many people and both the costs and risks would greatly increase with the added levels of people and communication.
It is a well-known fact that there are diminishing returns with each layer and additional employees on any project. This is even more pronounced in knowledge-intensive areas and professional services like software engineering and other knowledge and design-intensive areas. (Read The Mythical Man-Month). In early-stage and smaller companies, each employee must provide a range of value-added responsibilities that might encompass several jobs at a large company.
Therefore, employee selection in early-stage companies is not only more critical because there are so few people, but also more fraught with danger because each person's "scope", ability and attitudes must be broad. This means that each employee must ideally be someone who is always improving and pushing the envelope of their own abilities. Intelligence and flexibility are far more critical than they are for an employee at a big company where additional people with specific narrow skill sets could fill a role and employees having trouble can easily bring in additional experts.
Large companies are much less demanding of their employees because the same type of thing is repeated over and over again in any job. And there is more redundancy in the staff. In a startup, there are new surprises every week and one must be ready, willing, and able to accept and tackle new problems that they may have never seen before. These might be considered "someone else's problem" in a larger company but can be life or death, do or die, situations for a startup that cannot draw on other resources.
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The chart below tries to show this concept graphically. The six job function levels (the horizontal rows) and the six disciplines (the vertical columns) are typical in a large company but are, of course, impractical in a smaller company environment where there might be only five or ten people. So how do small companies also accomplish all these necessary functions? There are fewer levels for sure, but also fewer functional jobs as well. This means the scope of any single employee must be several times greater than that in a big company, which, by a wide margin, makes the job harder in terms of expected professional knowledge.
Notes: "IC" stands for individual contributor; a person with a narrow responsibility and/or skill set.
With each management level person having 6 other direct reports (or scope of six = 66), the six levels of management allow for a company with over 46,000 employees. Companies with more layers than this are significantly less effective and competitive today. Older companies have traditionally had as many as 14 levels, but these are being squeezed out by competition with better management and information systems, and other factors that make these levels very wasteful and counterproductive in today’s marketplace.
This scope does not mean that, for instance, an engineer is doing the operations and marketing functions, though that can happen. It means this fictional engineer must accept responsibilities that might belong not only to another person in a larger company, but also to another department. For example, many early-stage companies will not have a "Product Manager" with the specific domain expertise of the target customer and also project management skills. Instead, this function will be done in a virtual way, with several people providing elements of this title's traditional functions. In this example, the engineers are more likely to conduct direct customer research and interaction with customers throughout the development cycle, customer installation, and might even be working much more closely with sales and marketing to help them understand and develop collateral materials. This means you need an engineer, or possibly several, who can also display good communication and people skills and a willingness, and ability, to understand customer workflow problems and processes. This can be a pretty tall order and makes solving the puzzle of a startup staff much more of a challenge than filling a role at larger companies.
So when hiring for an early-stage company, take your time and wait for the right individual. Don't fill the job with the first warm body that meets the minimum requirements. You need exceptional people in every function and cannot afford to succumb to the law of averages. In the long run, repeating the process again will be MUCH more expensive.
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Bob Norton is a long-time Serial Entrepreneur and CEO with four exits that returned over $1 billion to investors. He has trained, coached and advised over 1,000 CEOs since 2002. And is Founder of The CEO Boot Camp™ and Entrepreneurship University™. Mr. Norton works with companies to triple their chances of success in launching new companies and products. And helps established companies scale faster using the six AirTight Management™ systems. And helps companies successfully raise capital.
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