When building out their teams, fast growth companies should consider a fundamental question: what organisational blueprint best fits their business model?
HR professionals have a challenging role – we all know that. After all, they typically have to develop processes and strategies for the future, when the future is not as clear as they would like. Workforce planning, buying technology and right-sizing their team’s capabilities are all challenging when there isn’t a crystal clear view of the future direction their organisation is taking.
Today, there’s much conversation about HR having a “seat in the boardroom,” which would expose them to this sort of strategic business discussion. However, if that simply isn’t forthcoming, then perhaps they can take some ideas about business infrastructure to the executive team, or in the very least, identify the environment they are currently trying to hire, develop and motivate candidates and employees within, to help them build success.
There’s no question that organisational success in both the short- and long-term requires a solid talent acquisition strategy, but as with most business strategies, one size never fits all. Rather, companies must craft a unique approach, which starts with the founders’ vision and their organisational priorities.
According to a recent study published by James Baron and Michael Hannan through UC Berkeley’s Haas School of Business, CEOs of businesses with technology at their core, build their companies according to five distinct ‘employment blueprints. By understanding these different models, companies can tailor their hiring strategies to build more innovative and productive teams from the ground up.
1. Star Model
What it is: This model prioritises hiring top-talent. Generally, employees are expected to be professionally autonomous and capable of managing challenging work, and are granted large salaries accordingly. The Star model can most commonly be found among medical startups in the business of research and tech development.
Why it matters: While the Star model tends to exhibit the best growth in market capitalisation post initial public offering, it is also among the least likely to reach the milestone of going public. And while Star-based companies can be very successful, they can also be extremely fragile – by hiring top-tier talent, they’re opening themselves up to a high turnover rate, according to CIO.
2. Engineering Model
What it is: In this model, employers tend to recruit results-oriented employees who flourish under pressure and in group settings. Because this collaborative mindset mimics the type of socialisation STEM majors experience in school, it tends to suit the kind of employee attracted to the rapidly growing tech sector.
Why it matters: As the most frequent employment blueprint encountered during the Stanford Project on Emerging Companies, the Engineering model became the standard against which researchers measured the efficacy of other employment blueprints. While the Engineering model didn’t seem to have any particular advantage in regards to going public, once established, it provided a “robust and scalable” HR model that gave these companies an advantage in the form of low rates of employee turnover.
3. Commitment Model
What it is: This model relies on employee retention, creating an environment in which (for emotional, financial and other reasons) employees will remain for the long haul. As far as hiring goes, this means selecting employees that would be a good ‘culture fit’ with the organisation.
Why it matters: While firms founded with Commitment models were among the fastest to go public, they rarely tended to perform well in the long run. In part, this is because the emphasis on organisational fit leads to greater difficulty attracting and retaining a diverse workforce, which often results in an inability to scale. So while firms founded with Commitment models were among the most successful initially, they were much less likely to succeed in the long run.
The next two models are increasingly outdated - but worthy of mention!
4. Bureaucracy Model
What it is: Revolving around a rigidly organised administrative system, the Bureaucracy model maps out clear expectations for every employee, asking new hires to work within the confines of their job descriptions. Employees, then, are selected based on their qualifications for a specific role, rather than their potential to impact the company overall.
Why it matters: Although the Bureaucratic model is not well-loved by many modern entrepreneurs, the organisations that employed it did enjoy moderate success. Despite its scaleable HR blueprint, however, Baron and Hannan warn that this model might be perceived as anachronistic, making it less attractive to potential new hires.
5. Autocracy or Direct Control Model
What it is: In this model, employers motivate employees with monetary incentives, coordinating staff projects through upper management rather than expecting employees to take their own initiative. Companies using the Autocracy model will generally hire employees for a pre-specified task, making payment the incentive for progress.
Why it matters: If you’re considering whether to utilise an Autocracy model, the results of the study might make you think twice. Firms founded based on this model were the least likely succeed, posting the lowest performance scores for nearly every possible metric.
What’s The Takeaway?
What can entrepreneurs eager to start a business learn from this study? For starters, according to Baron and Hannan, it is never too early to start thinking about your organisational structure and its impact on your HR practices. “We have yet to meet an entrepreneur,” the authors wrote, “who told us that, on reflection, he or she believes they spent too much time worrying about people issues in the early days of their venture.” By choosing the right model and formulating a forward-thinking HR blueprint, new companies can build a high-performing, tightly-knit workforce from the get-go, increasing employee retention, dedication and ultimately, the bottom line.