By Michael Solomon, 10x Management & 10x Ascend Co-Founder
They used to say “hire slow, fire fast.”
Then it was “hire fast, fire fast.”
Mantras like these are born in reaction to the workplace realities of a given time. They reflect our approaches to management, operational strategy, and the job market in general. In a lot of ways, they are a sign of the times.
But workplace norms change faster now than ever. And as we head into a new year, we’re in need of a new mantra – one that reflects a glaring paradigm shift. One that reflects an entirely new work landscape…
Hire slow, rent fast.
In this post, we’ll explain how “renting” is the key to making smarter hires, and why VCs are increasingly encouraging portfolio companies to deploy this solution, especially in a hot job market. We’ll look at how freelance talent is the missing piece to your hiring puzzle, and what you’re ultimately losing by failing to deploy a “hire slow, rent fast” recruiting strategy.
But first, some background. Let’s look at a bit of gig economy history to better understand how we got to now.
Freelancers for Lean Startups and Beyond
The perks of freelancing are widely understood today, but for much of the past decade, smaller organizations were the ones taking advantage of temporarily “renting” talent.
With the emergence of new business and development strategies in the early 2000s came new perspectives on work efficiency. Think agile product development and lean startup principles. The tech world in particular began rethinking many of the bureaucratic, outdated systems of the past, causing a shift in the way we viewed operational frameworks.
One method increasingly used by startups to stay “lean,” was (and still is) to work with independent contractors to cut overhead costs and increase efficiency. Why pay for a full-time employee when you can outsource one-off projects for a fraction of the cost?
The explosion of the gig economy has received lots of attention in recent years, but it’s interesting to see how and when it was really born. In 2011, Eric Reiss penned his New York Times bestseller, The Lean Startup. Although not directly correlated, around that same time we saw a spike in popularity of countless online platforms geared towards freelancers, like Fiverr and Upwork.
Armed with new platforms and a shifting perspective on how companies could get work done efficiently, freelancers were suddenly empowered. Companies wanted to hire talent when they wanted and for how long they wanted. Freelancers were ready to meet the demand.
Obviously, the renting-freelancers-to-stay-lean paradigm shift is still in effect today. But in the wake of a hot job market, a new one is emerging – one that extends far beyond the startup world, to the largest of enterprises: Renting freelancers to buy time.
Why VCs Are Encouraging Portfolio Companies To Hire Slow and Rent Fast
No matter the job market, quality talent is difficult to find. With quality tech talent in particular, we live in a time where demand drastically outstrips supply. To land the best in the business takes time, and by cutting corners, you’ll only be cheating yourself.
To deal with these realities, renting freelance talent is a highly attractive solution. With independent contractors, companies can rent fast without the same kind of pressure and risk that comes with hiring. The ultimate key to a quality hire is patience. And by renting freelance talent to fill a temporary void, you’re buying time to let the stars align for that perfect-fit candidate, without sacrificing work that needs to get done in the short term.
Venture capital firms in particular are to gain from the “hire slow, rent fast” concept, as it’s an easily executable strategy that can be deployed by companies throughout an entire portfolio. By educating their companies on the utility of this strategy, ahead-of-the-curve firms set up their portfolios, and in turn themselves, for success.
The Cost of a Bad Hire
To illustrate the weight and importance of the “hire slow, rent fast” concept, let’s look at the most common alternative: settling for a less-than-optimal hire. Lots of research has been done on the immense cost of making a poor hire, both from culture and financial perspectives (for more on this and how to manage 10x-level talent, check out our upcoming book, Game Changer).
It’s been well documented the crippling effects a bad hire can have on company culture and team morale. As startup advisor Jonathan Lowenhar puts it, “Your team is under siege. All of your progress can vanish. There is danger lurking often just outside of view. It’s not the competition. It’s not new technology. It’s not dwindling resources. The danger is from within.”
This danger, of course, is a toxic employee. The chances you find yourself dealing with this situation skyrocket when your recruitment efforts are rushed. Companies often hyperfocus on hard skills when feeling pressured to make a hire. The leading question becomes, “Can this candidate get the job done?”
In order to find that perfect fit, a much more holistic hiring process is needed. The more appropriate question: “Can this candidate get the job done AND do they fit in with our company culture, plans, mission, and values?”
Until this question can be answered with a resounding “YES,” no hires should be made. In the interim, if it’s imperative that work gets done that would fall under the responsibility of the new hire, well… that’s what freelancers are for.
It can be difficult to calculate, but research suggests the cost of a bad hire can be even more devastating to your pocketbook than to team culture.
When talking about the costs of a bad hire, the ripple effects extend farther than you might realize. As this infographic from Undercover Recruiter explains, your company will feel the financial burn in a handful of ways, from hiring and on-boarding, to compensation, to disruption costs, to employee mistakes, to missed business opportunities and more.
With all of these factors accounted for, Undercover Recruiter estimates that the total cost of a bad hire is north of $800k! And that’s just one bad hire who is making an assumed $62k/year and leaves after 2.5 years. The costs are sure to be much larger for a more senior role.
Now take that cost and consider how massive of a liability poor hires are at large enterprises. Zappos CEO Tony Hsieh has publicly stated that bad hires have cost his company more than $100M. Just to think how freelance talent might have brought this figure down substantially…
Facing Realities and Trends
As we’ve touched on throughout this article, the reality is that it takes a while to find the perfect-fit for your job opening, especially in the tech industry.
Today, the typical hiring process takes longer than ever before. In LinkedIn’s 2017 Global Recruiting Trends Report, only 30% of companies reported time-to-hire windows shorter than 30 days. Almost 20% of survey participants reported time-to-hire windows of 3-4 months – a whole quarter!
These numbers reflect hiring windows for a wide scope of employees, ranging from entry level positions to higher-level management roles. When it comes to top tech talent, the window is sure to be even larger, again considering the supply-demand imbalance.
It’s not just your company. It’s not just your recruiting efforts. Hiring takes time, and we have little reason to believe this trend will reverse any time soon.
Final Thoughts on Hire Slow, Rent Fast
So making a bad hire is a terrible idea, quality hiring takes time, and you (or your portfolio companies) need help immediately. Fortunately, through the advent of freelancing, this increasingly common predicament doesn’t have to be so painful.
Freelancers can be found quickly, require minimal overhead cost, and ultimately give you the necessary time needed to find the right full time person for the job. Welcome to the era of hire slow, rent fast.