3 before 20: How to NOT have to lay off the very team you invested in

This article explores the concept of “Hire 3 before 20” - a measured and sustainable approach to hiring and team growth, learned from personal experience through my journey of hypergrowth followed by a recession, and through good mentorship from my manager.

I'll start this article with a short personal story of hypergrowth and austerity.

In 2020, the world faced a global pandemic. While some businesses suffered, others like Software-as-a-Service (SaaS) companies thrived. As a relatively new manager at a market research company, I was thrust into navigating the complexities of this rapidly evolving business landscape.

Our SaaS products saw an increase in demand, even while some of our enterprise customers meaningfully shrank their workforces. During the hypergrowth phase from 2020 to 2022, the company transformed from a 75-person startup to a 300-member global remote-first workforce. My team grew from 3 to 15, and my product was the fastest growing among the company's offerings.

graph TD subgraph "Start of Pandemic (2020)" A[Global Pandemic] B[Some Sectors Suffered] C[Others like SaaS Soared] D[75-member Startup\nin San Francisco] E[Relatively New Manager\nFocused on Growth] A --> B A --> C C --> D D --> E end subgraph "Hypergrowth (2020-2022)" F[300-member Global &\nRemote Company] G[Fastest Growing Product\nWithin the Company] H[Team Hypergrowth: 3 --> 15] E --> G F --> H G --> H D --> F end subgraph "Austerity Measures (2022-2023)" I[15% Reduction in Workforce] J[Team Restructured: 15 --> 12\nResearch Org --> Product Org] H --> I I --> J F --> I end

Caught up in the growth momentum, I presented to my manager a detailed hiring plan and projects roadmap with 20 more people. I was optimistic about the market opportunities that lay ahead of us and on my ability to convert that into viable data-driven products. His response was a golden piece of wisdom: "Let's hire 3 before we can hire 20."

After I presented my proposal, my manager's response was a golden piece of wisdom: "Let's hire 3 before we can hire 20."

By summer 2023, the market had taken a downturn, and the company executed a 15% reduction in workforce. Thanks to my manager's advice, I hadn't hired those 20 additional people, avoiding the painful process of laying off a team I had invested in.

That's all there was to it! My manager, having led Data Science teams for much of the previous decade, and having been responsible for the P/L of the team for years, had a much stronger subconcious grasp on our ability to grow sustainably and execute under all situations and in all market conditions.

This experience taught me the value of what I now call the "Hire 3 Before 20" approach – a measured and sustainable strategy for team growth. The trick is to develop a strong metric that answers at every step again and again: Is this truly sustainable?

The trick is to develop a strong metric that answers at every step again and again: Is this truly sustainable?

flowchart TD Decision_to_Expand_Team["Decision to Expand Team"] -->|Is this truly sustainable?| No_Hire3 No_Hire3["Hire 3"] --> Evaluate Evaluate["Evaluate Team Performance\nEvaluate Project Delivery\nIdentify Next Critical Needs"]-->|Is this truly sustainable?| Decision_to_Expand_Team Decision_to_Expand_Team -->|Is this truly sustainable?| Yes_HireMore Yes_HireMore["Hire 3 more"] --> Cont_Evaluate Cont_Evaluate["Continuously Re-evaluate\nPerformance and Market Opportunity"] -->|Is this truly sustainable?| Decision_to_Expand_Team

At its core, this philosophy challenges the notion that rapid headcount growth is a prerequisite for success. Instead, it advocates for a more deliberate strategy, one that prioritizes quality over quantity. It emphasizes the importance of building a strong foundation and growing linearly with a pedestal-like approach.

Why linear hiring works?

The concept of "Hire 3 before 20" is rooted in a deep understanding of the challenges that come with rapid expansion, particularly in the realms of:

Deliver on Team Commitments Repeatedly: Many of us managers undervalue the downstream impact of project plans gone wrong. By capping growth with repeat delivery on commitments, managers can defend their team's output under all market conditions.
Adaptability: Hiring in pedestals makes it easier to adapt and pivot as necessary, based on early feedback and performance, and help integrate new hires through actual wins and documented successes.
Resource Optimization: Hiring in smaller increments allows organizations to allocate resources more effectively, ensuring that the team is consistently productive.

Balancing Growth and Stability

While the allure of rapid growth can be compelling, especially in the face of market pressures and investor expectations, the "Hire 3 before 20" approach serves as a counterbalance, reminding organizations of the importance of finding the right equilibrium between seizing opportunities and maintaining operational efficiency.

Over-hiring can lead to inefficiencies, diluted company culture, and financial strain, as evidenced by Meta's focus on efficiency through 2022 to 2023, which included reducing team sizes and optimizing organizational structures. Conversely, being too conservative in hiring can result in missed opportunities, overburdened existing staff, and an inability to innovate or respond to market demands effectively.

To navigate this delicate balance, organizations can adopt strategies such as:

Strategic Planning: Clearly defining the unique roles, responsibilities, and workload of every nuclear team.
Efficiency Metrics: Utilizing hiring efficiency metrics to evaluate and optimize the recruitment process, including time to fill, time to train, team's throughput before and after the new hires, and turnover rate.
Incremental and Pedestal-like Growth: Adopting an incremental approach to hiring and setting measurable outcomes as a pre-requisite to grow the team again.

The Davos Agenda

The "3 before 20" hiring strategy aligns closely with the broader principles of workforce sustainability discussed at the World Economic Forum (WEF) in Davos[1]. The WEF emphasizes the importance of long-term planning, resilience, and adaptability in the face of market fluctuations and uncertainties.

Workforce sustainability now linked to financial performance

The WEF has highlighted that workforce sustainability is now a critical metric at the board level, directly linked to a company's financial performance and market valuation. This connection underscores the importance of sustainable hiring practices.

Promoting Good Work and Employee Well-being

Additionally, the WEF's Good Work Framework outlines objectives for achieving workforce sustainability, including promoting fair pay, flexibility, health and well-being, diversity, equity, and inclusion, as well as fostering employability and a learning culture. My "3 before 20" hiring strategy catalyzes these outcomes, as it helps achieve them by institutionally catalysing employee performance and linking that to team performance.

The Lean Startup movement's Build-Measure-Learn loop

The Lean Startup movement, popularized by Eric Ries, encourages organizations to operate with a constant feedback loop. The cycle involves building a Minimum Viable Product (MVP), measuring its effectiveness in the market, and learning from the results to make necessary adjustments.[2]

"Pivot or Persevere" and "Incremental Growth"

Based on the learnings from each growth iteration, teams decide whether to pivot (make a substantial change to the strategy) or persevere (continue on the current path with incremental improvements). This growth can be of any kind: product features or team size.

Lessons from the SaaS Industry

The concept of "Hire 3 before 20" transcands across industries and sectors since market correction is commonplace. Companies that had hired aggressively during the boom found themselves struggling in changed market conditions, underscoring the importance of hiring on the heels of sustained growth rather than following temporary market fluctuations.

Conclusion

As we navigate the "Year of Efficiency" and beyond, this mantra serves as a guide for how organizations can scale sustainably, strategically, and ultimately, more efficiently. The key takeaway is that efficiency isn't just about cost-cutting. It's about investing in sustainable growth that prioritizes long-term success over short-term gains. In an era where agility and efficiency are paramount, the "Hire 3 before 20" approach emerges as a beacon of wisdom.

References

[1] Marcil, Sharon. How to Build a Sustainable Workforce and Improve Job Satisfaction. World Economic Forum, 8 Feb. 2022, link

[2] The Lean Startup | Methodology. Accessed 9 Mar. 2024. link.