What got you here won’t get you there

🔗 Links

• Naval Ravikant on the Future of Work - Naval is the founder of AngelList and he perfectly captures (way more eloquently than me…) a lot of the same thoughts I’ve had on the future of work and the tradeoffs between time and money.

Over the past two decades, high-growth companies have followed a familiar pattern: a big cash infusion leads to a hiring frenzy, with every team scrambling to staff up as quickly as possible in anticipation of future growth. This trend went into overdrive during the pandemic, as companies tried to keep up with the demand for online products and services while everyone was stuck at home and cash was still free-flowing.

However, in the last 12 months, that trend swiftly and brutally reversed itself, with companies laying off massive chunks of their workforces. Stripe CEO Patrick Collision declared that the company was going to be “building differently for leaner times” in his November letter to employees where he announced layoffs affecting 14% of his staff. Last week, in his Update on Meta’s Year of Efficiency, Mark Zuckerberg announced: “A leaner org will execute its highest priorities faster. People will be more productive, and their work will be more fun and fulfilling.”

With the ripple effects of the SVB bank collapse, it has become increasingly clear that the way startups were built in a zero-interest-rate environment won’t hold in this economic environment, forcing companies big and small to rethink how they build. Enter the era of lean, scrappy teams.

These days, even companies with a recent influx of cash aren’t rushing to hire. After raising a $67 million Series B in October ‘22, CEO Eitan Bensoussan of fintech company NorthOne told TechCrunch that there would be no hiring spree, but that the company would be staffing up programmatically against new business lines and software products at the appropriate time.

At the same time, talented engineers and operators are ever more cautious about placing all their bets with a single company. An increasing number of highly educated, experienced professionals are choosing to work independently, with Upwork's annual freelancer survey reporting that 26% of contractors hold advanced degrees, up 6% from the prior year. Even in these scarce times, top performers continue to insist on flexibility and autonomy in how, when and where they work.

The collision of macroeconomic conditions with the changing workforce demands that companies think more strategically about how they attract, retain and deploy their workforces. Incorporating flexible, part-time and fractional talent is one way that lean teams can continue to drive growth and innovation while controlling overheard and maintaining agility.

How do companies adapt to lean times and where do flex workers fit into this reality?

1/ Fewer managers; more independent contributors

In reflecting on Stripe’s layoffs, Collision blamed both “coordination costs” and “operational inefficiencies” while Zuckerberg lamented that “every layer of a hierarchy adds latency and risk aversion in information flow and decision-making.” Large teams of permanent employees create bureaucracy that doesn’t serve the needs of fast moving organizations.

In making the organization flatter, Meta will have independent contributors reporting into every level of the organization, not just the bottom. Many managers will become independent contributors too. Meta is aiming for more people doing work and fewer people managing other people who do work.

Many of those who venture off independently have the seniority and experience of managers and yet choose to be individual contributors. They know that in a contractor capacity, they have to show up and deliver consistently. They tend to be low-ego, self-starters who bring clearly measurable value only for as long as they are needed and then move on to their next mission.

2/ Outcomes-based teams that blend employees and contractors

Meta isn’t the only company flattening its organizational structure and experimenting with new management modeals. Telstra, a $16 billion Australian telecommunications company with over 32,000 employees transitioned from hierarchical management structures to more thoughtful outcomes-based teams. Splitting their management model between “leaders of people” versus “leaders of work” allows the company to create teams around business results while also supporting the growth of its full-time employees. It’s agile project teams source from both internal and external pools of talent.

Instead of looking at the personnel the organization has and then deciding what it can achieve, bringing on flexible contractors allows companies to first decide what they need to achieve and then balance existing internal resources with additional external capacity and expertise to reach the desired results.

3/ Lightweight teams that deliver more and pivot quickly

In a recent newsletter, Jason Fried, the CEO of 37signals (makers of Basecamp), observed that work expands to fill both the time and the team available, referencing Parkinson's Law. He noted that small, short projects can become bigger and longer projects simply because more people are involved and need something to do. This creates a situation where teams fill their time with work and their mere existence generates more work, as evidenced by Meta's need to hire "even more IT, HR, and recruiting people," according to Zuckerberg. It’s easy to see how left unchecked, that cycle created some of the layoffs we’re experiencing now.

In contrast, flex talent onboards quickly with clear goals with less wasted time and energy than full time employees. They come ready to roll up their sleeves and execute on defined outputs. What’s more, external contractors bring fresh perspectives and diverse skill sets to projects, which can lead to new ideas and approaches that might not have been considered otherwise.

4/ External contributors to level up internal talent

Matt Hoffman, partner and head of talent at M13 suggests that one of the smartest things companies can do after downsizing is increase their investment in existing team members. Expecting everyone to perform at their highest potential with fewer resources can lead to burnout and attrition, and asking junior team members to punch above their weight might not lead to the intended results.

There’s an increasing number of subject-matter coaches in sales, product and engineering who offer services specifically aimed at leveling up more junior employees or directing founders who lack experience in a particular domain. In flatter organizations, part-time coaching resources can bridge the gap between hiring a senior executive and optimizing the workforce a company already has.

Building leanly means ruthlessly prioritizing the most important initiatives and staying responsive to market conditions. With a wealth of high-caliber talent entering the flex workforce, companies now have an additional resource to help them reach their most important goals efficiently and with lower overhead. One thing is clear, the next generation of enduring tech companies will be built differently by those willing to experiment, adapt and change.