We cut our teeth at Palantir, where we joined as early finance hires in 2012. During our time there, the company grew from a few hundred folks in Palo Alto to several thousand employees across the globe.
Since then, we have gone on to lead strategic finance for several high-growth venture-backed companies before eventually building Mosaic. The lessons below have helped ensure our organizations, along with our customers are growing efficiently in both bull and bear markets.
Employees are a SaaS companies’ single largest expense, comprising around 70% of total spend. Understanding the roles and responsibilities of the brilliant people building, selling and supporting the software is critical to identifying efficient growth trajectories.
Schooling did not prepare us to deeply understand how different parts of the engineering department work together to execute on the product roadmap, nor did it teach us the nuances of the company’s sales team.
Proactivity and curiosity go a long way toward building the trust and understanding needed for collaboration.
Once you have established a first class understanding around how different teams and departments work together, you can begin to assess headcount driven dependencies. Here are a few examples.
Once you have determined the interplay between different departments across the org, establish baselines around what efficient teams look like at scale.
Carry those baselines forward using the hiring plans you receive from your business partners. Push back when ratios start breaking the mold. Be proactive by recommending solutions that scale non-linearly with headcount.
Here are a few examples:
Salary and benefits are not the only costs to consider when adding new folks to the team. There are several other direct and indirect costs that need to be factored into your model.
These costs contribute to the fully loaded cost per employee, the metric you should track as you scale.
Here are additional costs contributing to the fully loaded cost per employee:
Your headcount model should reflect goals that are challenging, but attainable. Make sure hiring plans are realistic with what your company has been able to do historically. Setting goals that are not realistic will leave you with a bloated model that is not reflective of what is happening across the business.
If you have an applicant tracking system, leverage the data from this tool to understand the number of resumes in the queue, historical pass through rates and time to hire. Fact check these metrics against hiring assumptions and timelines to ensure they make sense.
If meeting your top-line goal is dependent on new sales reps, make sure rep ramp times are factored into your model. To calculate rep ramp, you will need data from your CRM as well as data from your HR system. Figure out how long it has taken for your reps to contribute meaningfully to pipeline from their start date. Bake these timelines into your projections.
You’ll find that you should often hire sooner than you thought to meet your near-term goals.
Its important to constantly re-assess hiring plans against business performance, especially during challenging markets and economic conditions. At the end of each quarter, gauge hiring performance against your plan. If you fell behind in your goals, be sure to push existing hires into future quarters and extend future hires into later periods.
Smart, sustainable headcount planning will help you avoid, or at least minimize, worst-case scenarios.
Implementing these practices will give you a more data-driven approach to headcount planning, ensuring that you hire the right people, at the right time, for the right business reasons.