Capital allocation isn't just about multi-million dollar acquisitions. Hiring a single employee is also a major investment; a $100k salary represents a discounted million-dollar commitment over time. Applying the same rigor to hiring decisions as you would to CapEx ensures you're investing your human capital wisely.
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To avoid the trap of hiring 'good enough' people, make the interview panel explicitly state which current employee the candidate surpasses. This forces a concrete comparison and ensures every new hire actively raises the company's overall talent level, preventing a slow, imperceptible decline in quality.
Challenge the 'hire slow' mantra. Hiring is an intuitive guess, so act quickly. Once a person is in the organization, their performance is a known fact, not a guess. This clarity allows for faster decisions—both in removing underperformers and, crucially, in accelerating the promotion of superstars ahead of standard review cycles.
Treat hiring as a compounding flywheel. A new employee should not only be a great contributor but also make the company more attractive to future A-players, whether through their network, reputation, or interview presence. This focus on recruiting potential ensures talent density increases over time.
The role of a CEO at the empire-building stage shifts from operations to allocation. An effective framework is to spend 40% of their time on attracting and retaining A-player talent, 40% on strategic capital allocation, and the final 20% on painting and reinforcing the long-term company vision.
Most companies have a structured process for budgets and strategy but treat talent management as an afterthought. Implement a "people calendar" that systematically addresses attracting, developing, and engaging talent with the same discipline. This ensures people, your most critical asset, are managed proactively.
To conserve cash, especially in a downturn, founders can pay key employees 10-30% below market rate in salary. The key is to compensate for this deficit by offering double or triple the industry standard in equity. This strategy attracts top talent aligned with long-term success while keeping the company's cash burn rate low.
The primary goal of hiring should be to reclaim the founder's time from low-value tasks. This frees up the business's most valuable asset—the founder—to focus on high-leverage activities that truly drive growth, rather than simply adding capacity.
Don't be paralyzed by the fear of making a bad hire. View hiring as an educated guess. The real knowledge comes after they've started working. Firing isn't a failure, but the confirmation of a mismatched hypothesis. This reframes hiring from a high-stakes decision to an iterative process of finding the right fit.