Enrique Esclusa, Co-Founder of Assemble — A Complete Guide to Headcount Planning
Enrique Esclusa, a co-founder at Assemble, discusses headcount planning and compensation strategies, the disadvantages of using spreadsheets, and the key pain points of workforce planning.
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Enrique Esclusa, Co-Founder of Assemble — A Complete Guide to Headcount Planning
For SaaS companies, headcount amounts to 70% of operating expenses. If finance dives straight into the numbers without keeping the company’s short- and long-term goals in mind when headcount planning, it spells imminent disaster with misforecasts and errors that can take months, if not years, to resolve.
In this episode of The Role Forward, our host Joe Michalowski welcomes Enrique Esclusa, co-founder of Assemble. Enrique and Joe get into examples of workforce planning and compensation strategies, diving deep into the disadvantages of using spreadsheets and key pain points of workforce planning.
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Enrique was born in Venezuela, raised in Miami, Florida, and has been living between NYC and SF for the past 12+ years. After a 10-year career in finance, spanning investment banking and private equity, Enrique delved into his passion of making pay equity a reality by co-founding Assemble.
- Spreadsheets are not suitable for collaboration. While spreadsheets are flexible, their strong suit is not in tracking changes over time and integrating with other systems. The most valuable businesses are tech-forward and driven by knowledge workers, which will continue to trend and impact finance functions.
- In headcount planning, start at the end. Headcount planning best practices ensure that your organization has the right number of people with the right skills to meet organizational needs in the short and long term. You need to think about the company’s goals for the end of the year and in a three-year timeframe, then work backward to understand your constraints and fill any gaps.
- Price times volume over time. A straightforward formula like “price times volume over time” allows you to think about specific jobs over specific people to focus on the human capital required to implement critical growth strategies within a company’s budget. Volume then becomes the amount of heads, time is specific start and end dates, and price is compensation.
Episode Highlights from Enrique Esclusa
06:56 — Pain Points of Workforce Planning
“The biggest one is the misalignment and lack of collaboration. And I think a big reason for this is that when you’re living in a spreadsheet, there’s one owner and not everybody can access the real-time version; not everybody wants to. […]
The second one is what I like to call entropy, which is that headcount plans, just by definition, change all the time, and if you’re not tending to them, they just dissolve into pure chaos. And so this idea of having one plan and that’s the panacea; that’s just not how it works. […]
The third one is that, a lot of times, people can ignore things like ratios or time to hire or racism promotions — these things that do add up and change the shape of a headcount plan. […]
The last two are what I think make headcount planning really tough, and that is tracking changes is so hard, especially if you’re doing it on spreadsheets. People often want to go back to a previous plan and say, ‘Wait, where were you a month ago? What changed?’ And if you can’t answer that, then all of a sudden, people lose trust in the headcount plan. And if this wasn’t all super difficult and painful, most companies have, or should have, multiple scenarios. So you’re keeping track of a universe of chaos with parallel universes at the same time.”
29:52 — Planning Cannot Be an Annual Affair
“There’s always a big annual lift, and generally, it’s towards the end of your fiscal year. So for us (at Expanse), it was at the end of a calendar year; at Assemble, it’s actually at the end of January. And so that’s always a big lift, and it’ll take multiple weeks, and in some cases, it can take more than a month to do all the work that you need. However, boards want at least quarterly updates, and so you’re presenting to the board, at least four times a year, on how the plan is going and how you’re tracking against the plan, and if you need to revisit the plan. But operators and executives can’t rely on the same information the board sees; they need something much more current and much more consistent. And so, we actually find ourselves revisiting the plans monthly. […]
You can’t skip the annual process, and you must always expect that you’re going to have quarterly plans, but if you’re keeping track of things on a monthly basis, it does allow you to iterate and change the plan as needed so that you maximize the chances of hitting your goals.”
32:23 — Three Types of New Hires
“There are velocity heads, which are those heads that are helping with sales. So, literally, I can tie productivity on the sales side to those heads, namely, AEs, SDRs, et cetera.
Then there are productivity or metrics driven heads — recruiting, managers, et cetera.
And then there are what they call infrastructure heads or step-up heads. Finance is a good example. Like, there’s no metric to tell me when I need a finance analyst for the first time.
But this is more of a department leader or somebody knowing like, ‘Hey, we’ve reached the point where the work is enough for us to staff ahead. Otherwise, things will break.”
41:46 — Software vs. Spreadsheets
“There are three things that come to mind. The first one is consistency. If you’re building things in spreadsheets, that’s definitely going to create a lot of issues. And so, by having consistency in its format and providing a place that everyone goes to as this single source of truth, technology is a huge component in a headcount planning process.
The second one is going to be collaboration. You can just collaborate on a system much more effectively if it’s designed for collaboration than you ever could on a spreadsheet. If you’ve tried commenting on a Google Sheet and kind of keeping track of that, you know how painful that process is, or worse, you’re passing around different versions of the document, and you can’t find information, or somebody deleted a sheet.
The third one is just interconnectivity. A spreadsheet is not good at connecting with other systems, but technology can do so.”
[00:00:00] Enrique Esclusa: Put yourself in uncomfortable situations, surround yourself with smart people in totally different disciplines and optimize for how much you can learn.
[00:00:08] That learning compounds upon itself. And next thing you know, a few years out, you’re a totally transformed person and so much more valuable than anything that you do. If that’s what we optimized for.
Joe Michalowski: Hello and welcome to another episode of The Role Forward podcast. My name is Joe Michalowski. And this episode is brought to you by Mosaic, a strategic finance platform that transforms the way business gets done. And today, my guest is Enrique Esclusa, Co-Founder of Assemble, a compensation platform that helps attract, retain and motivate top talent with fair and equitable pay. Enrique,
[00:00:59] thanks so much for joining me today.
[00:01:01] Enrique Esclusa: Thank you for calling me, Joe.
[00:01:03] Joe Michalowski: Awesome. So before we get started, do you mind giving a quick background on who you are, how you got to Assemble, kind of the role that you’ve had before?
Enrique Esclusa Introduction
[00:01:11] Enrique Esclusa: Yeah, absolutely. So as you said, my name is Enrique. I was born to a family of entrepreneurs in Venezuela. So, moved to Miami when I was 11. And then, I took this traditional finance path. So, moved to New York, studied finance, and did investment banking and private equity in TPG in San Francisco. And I always knew that I wanted to be a founder one day and operate a business, but found myself not having any operating experience.
[00:01:36] So, I decided to join a small cybersecurity startup in San Francisco called Expanse. And I joined the strategic finance and business operations teams there. That was there for four years, and it was there where I learned that business operations and finance are really, really messy, especially when you don’t have the right systems or clean data.
[00:01:57] And that’s what gave birth to the idea behind Assemble, a compensation management platform for teams that want to pay people fairly and equitably, and I want to do that without the headaches that people go through today.
[00:02:08] Joe Michalowski: Amazing. I really love, I could never be a founder. It is not in my nature. I love that you kind of always knew that that was what you wanted to do and actively like took a path through like, “I need to get this experience before I go do that.” So, really cool and excited to dig into that. And you kind of teed me up for my next question, which is really like, you know, our main topic today is gonna be headcount planning.
[00:02:29] It’s gonna be things around what Assemble is doing, which is comp structures and things like that. But I, I’d love for you to dig a little bit more into the reasoning behind, like how you started Assemble. So, you know, you must have noticed some sort of pain points or some sort of challenges you were dealing with, as you said, it’s a messy process.
[00:02:45] So, can you talk a little bit more about the impetus for starting, a solu, or a product that was meant to improve comp structure and planning?
[00:02:54] Enrique Esclusa: Yeah, absolutely. So, I think during my time it Expanse, we were still on this early build-out phase, right? We were 25 people, and I joined, everything was being done in spreadsheets. And at first, it was fine. We were a very small team, right? You can remember everybody’s name in your head. You don’t need a system.
[00:03:11] But we then entered hypergrowth and all of a sudden things started to break and the solution was more and more spreadsheets. And to be totally honest with you, Joe, I grew up in investment banking and private equity. I felt so comfortable in spreadsheets left and right. But, the moment that you realize you have to start to collaborate with spreadsheets, it gets really, really messy.
[00:03:31] And so, that was just always a general pain point, not necessarily tied to just financial planning, but just spreadsheets are great, ’cause they’re flexible, but they’re notoriously bad for collaboration for tracking changes over time, for integrating with other systems. It’s just highly manual at the end of the day.
[00:03:48] And so, during my four years at Expanse, there were kind of two key insights that led me and Lisa, my co-founder, to start Assemble. The first one was knowledge workers are now driving today’s economy. And when you look at the most valuable businesses in the world, they’re tech-forward driven by knowledge workers.
[00:04:05] And we think that this trend will continue. The second one is that workforce-related operations are a total mess because they live in spreadsheets. And spreadsheets are great for the person who builds it, but break down the moment you share them. And what I found was that in my role within the finance,
[00:04:23] effectively, what we were trying to do is make sure that we had accurate forecasting and planning and that all of our department leaders that we supported had the resources they needed to execute on, you know, their individual missions, so the company could succeed. But the problem became that it was nearly impossible to do headcount planning properly,
[00:04:42] if we didn’t have compensation solved. And we didn’t really have an HR team at the time that was handling this. You know, as a problem solver just said, “Hey, give it to us. We’ll solve it, me and my team.” So, ended up owning compensation, which is traditionally an HR people function. And that’s when I realized how complicated it is.
[00:05:00] But as we started to resolve it, we realized how much value it unlocked for all of the downstream impacts, which included headcount planning. And so the idea behind starting Assemble, was kind of a result of trying to solve our own problems. But we didn’t at first think, “Hey, there’s a company to be built here,” ’cause I just assumed, “Hey, compensation’s been solved everywhere else.
[00:05:20] It’s just that it expands for building things from zero.” But then we started talking to companies and after speaking to a hundred different types of companies, anywhere from small startups to large organizations, we realized, “No. This is just how it works at almost every company we talk to. There’s a huge company to be built here.”
[00:05:38] ‘Cause if we think about compensation, it’s ubiquitous. Every company pays employees, or at least they should. And every company cares about it, ’cause it’s the biggest line item, and every employee cares about it. So, we thought there’s really this interesting opportunity to pursue. And we’ve been thinking about this and obsessing about it for more than four years, “Who better to solve this than us?”
[00:05:59] Joe Michalowski: That’s amazing. I mean, it really resonates with the work that, that we do here. It’s not like, “Hey, we need to replace spreadsheets altogether.” Spreadsheets are great. They can do pretty much anything you need them to, but there are obviously just so many situations where, you know, you put it in place and to your point, they just break down, or there’s not collaborative tools.
[00:06:18] And so, I think there are plenty of use cases and industries popping up where it’s like, “Let’s, let’s help spreadsheets out a little bit and use them with for what they’re really made for.” And so really resonates with me. I’m excited to kind of dig into more about your experience around using them.
[00:06:33] So, I want to, like I said, we’re gonna talk about headcount planning and, you know, to your point, comp structure is a huge part of that. So, aside from comp structure, before we get into steps and processes, what are some of the other areas where you noticed like this same problem? So you had comp structure. It’s like, “Okay, we have to figure this out.”
[00:06:51] Were there any other major pain points for the overall workforce planning, headcount planning processes?
The Pain Points of the Headcount Planning Process
[00:06:56] Enrique Esclusa: Yeah. I kind of think about it as like five key pain points. Some are gonna be a little bit high level. Others are gonna be very granular. First and foremost, the biggest one is misalignment and lack of collaboration. And I think a big reason for this is that when you’re living in a spreadsheet, there’s one owner, and not everybody can access the real-time version.
[00:07:18] Not everybody wants to. Right? When I was working with our head of marketing, head of product, head of engineering, they were like, “I don’t want to see a spreadsheet. I want you to show me an org chart, or I want you to show me something different.” And so, there isn’t a single source of truth that everyone can go to.
[00:07:33] And that creates a lot of issues and a lot of thrash and misconceptions around, “What open heads do I have? Oh, I thought I had these three heads.” It’s like, “No, no, you only have one. We need to unlock the next two with this target.” Right? And so that was always a big source of pain. And that’s certainly at the high level, but can be solved with some tactical moves.
[00:07:52] The second one is what I like to call as entropy, which is that headcount plans just by definition change all the time. And if you’re not tending to them, they just dissolve into pure chaos. And so this idea of having one plan and that’s the panacea, like that’s just not how it works. I kind of refer back to the Mike Tyson quote,
[00:08:09] Enrique Esclusa: “Everyone has a plan until you get punched in the face.” That’s what happens with the headcount plan. You develop it, but you got to maintain it over time as things change. And that can be super painful. The third one is I think a lot of times people can ignore things like ratios or time to hire or racism promotions, these things that do add up and change the shape of a headcount plan.
[00:08:32] Right? Oftentimes you’ll say,” Oh, we need to hire 20 people.” You say, “Well, no. You need to hire 30 because you should expect that you’re gonna lose 10 people. And by the way, you only have one recruiter. That’s gonna be pretty hard for that recruiter to hire 30 people. By the way, the average time to hire right now for you, has been three months.
[00:08:49] You actually need to front-load a lot of your recruiters. So you can hire all those people on time, and by the way, people ramp. And so all of a sudden, if you wanna hit those goals that you’re setting out, you need to start now, and you might already be too late. And then kind of the last two are, what I think make headcount planning really, really tough,
[00:09:06] and that is that tracking changes is so hard, especially if you’re doing it on spreadsheets and people often wanna go back to a previous plan and say like, “Wait, wait. Where were you a month ago? What changed?” And if you can’t answer that, then all of a sudden people lose trust in the headcount plan. And if this wasn’t all super difficult and painful, most companies have or should have multiple scenarios.
[00:09:29] So, you’re kind of keeping tracking of a universe of chaos with parallel universes at the same time. So, you’ll have your downside case, your base case, your upside case. And sometimes you’ll even say like, “Kill that case, but create a totally new one with some different assumptions.” And as you can imagine, you know, if you’re one person or a small team maintaining this, it can be pretty painful.
[00:09:48] Joe Michalowski: That is a very succinct way. Before we started chatting, I told you that I run content here and I, I know that headcount planning is a huge source of pain for our target audience and our customers. And I was like, “Oh, let’s make content about headcount planning.” And there was a very succinct way of explaining why when I asked somebody internally to help me out, who’s done before, I just got a 45-minute rant about how difficult this process is.
[00:10:13] And I was like, “Okay, I can’t write a guide to how to do this based on that.” And man, it just sounds like a, it sounds like total chaos. And I don’t envy the people in the behind-the-scenes that are doing this, but I’m really excited that you’re here to kind of, you know, give people tips to get through it because that’s kind of where I want to go next.
[00:10:32] It’s like, “Okay, we have all these pain points.” There’s so much you have to do, but I kind of wanna just get out of your way for a minute and have you walk through, kind of the end-to-end process of headcount planning, like, “Okay, like, I know this is continuous, but you know, we sit down on, you know, a quarterly basis and we reassess the entire picture.” And, you know, where do you start and how do you get through all these challenges?
[00:10:56] I’ll step out of the way and let you go.
The End-to-End Process of Headcount Planning
[00:10:58] Enrique Esclusa: So, this one will be, I think, a longer answer. So definitely, prompt me or stop me with any questions along the way.
[00:11:03] Joe Michalowski: Yeah. I’ll jump in if anything comes up, but, uh, for sure.
[00:11:06] Enrique Esclusa: Yeah. So, I love to do what’s called backcasting, which is kind of start with the end and then work backwards. And I think a lot of times, especially the first time I was doing a headcount planning, we totally skipped this part, and we just went straight into the numbers. And that resulted in a lot of mistakes and a lot of misforecast and errors.
[00:11:23] So, what I mean by starting with the end is what are the company’s goals and what are you trying to achieve, say by the end of this year or three-year timeframe, if you’re doing long-term planning and then work backwards from where you want to be, understanding your constraints and what you have today and kind of fill those gaps, right?
[00:11:41] At a very high level, when I start to think about headcount planning, I use a very simple formula, which is price times volume over time. And what I mean by that is, “Okay. Volume is just what heads do you have in the organization. Time is started and end dates for each of those heads. And then price is compensation, which is again, why kind of, we ended up solving compensation with Assemble.”
[00:12:03] And when you think about price times volume over time, the kind of may be one little tip I, I picked up along the way is that, you shouldn’t think about volume as specific people, but you should think about volume as specific jobs. And what I mean by that is, if I hired Joe as an analyst, and I wanna promote him into a senior analyst from a headcount planning perspective, you should try to remove the notion that it’s Joe.
[00:12:26] And instead, you should think of, “I have an analyst, but then I later need a senior analyst.” So, it’s almost like you’re removing or firing that analyst and promoting or hiring a new senior analyst. That’ll give you a more accurate forecast, and you’ll also see those kind of increases in price over time if you will.
[00:12:44] But starting at a high level is not enough, right? That’s kind of like the top-down approach. And so you also need to then start breaking down more granularly into the different departments. So great. If we’re an enterprise sales company with sales capacity, now let’s look at sales. How many salespeople do we need to hit our sales goals?
[00:13:03] Enrique Esclusa: And if you have some assumptions around what somebody’s quota is and what quota attainment has been historically, et cetera, you can now start to figure out, “Okay, what are the numbers of actual heads we need in order to hit those goals? And then how does that compare against my constraints?” If my budget was 1 million, but it’s gonna take me three to hit those goals,
[00:13:20] well, now you need to give in one place or the other either, we need to raise our budget, or we need to lower our sales forecast or do something different to kind of make it work within the realm of reality. And so, after starting to kind of break it down into those departments, this is where you really start to monitor and leverage a lot of ratios, and really early on it’s so hard, right?
[00:13:44] When we hired our first salespeople at Expanse, we had no idea what the sales capacity should be for one person. Whatever their quota was, it was so easy for us to say, “Oh, sure. They’ll hit 75%, 80% year one. We had no idea.” The first year, our fair salesperson totally beat quota. And we’re like, “Oh, we just set quotas too low.”
[00:14:04] Well, or maybe you…
[00:14:05] Joe Michalowski: It’s the norm. Everybody’s gonna do this.
[00:14:07] Enrique Esclusa: Right, exactly. Or maybe you just have an amazing salesperson and that person blew quota because they’re amazing. Right? But hire five, and they’re not all gonna be the same way or hey, guess what? You’re now entering a recession. And the same performance is not gonna be expected.
[00:14:22] So, this is really hard, but of course, you have to start to monitor these ratios and these kind of productivity metrics, and then start to leverage them. So, some of the key ones that for me always came to mind were, time to hire, right? And by the way, not every hire takes the same amount of time. So it might be really easy to find some roles.
[00:14:43] I don’t know, I’ll make something up, but say for somebody in finance, we actually were able to hire some really amazing talent really quickly. And then, all of a sudden, executives take nine months. Right? And it’s just the nature of the reality of, you know, the different roles and how, how difficult it is to compete some of them.
[00:14:58] So that’s one, I think metric or ratio that’s really, really important for recruiting. Another really important one is, “Hey, how many heads do we have to hire factoring in attrition? ‘Cause we’re gonna have to hire more than just a net number. And how many people does an average recruiter hire in a year?”
[00:15:16] Now, it varies by company, right? What is your, your bar for talent? Where are you recruiting? How strong is your brand earlier on much harder to hire than if you are, say, Facebook or Google and can pay top market, you can hire pretty quickly probably. And then the other three that I think were really important that were driven by productivity me, metrics,
[00:15:37] so at least in my personal experience, were sales customer success and then management. So for sales, we kind of talked about it a little bit earlier, where you have certain goals, quota, entertainment, and you’re kind of working backwards or customer success. When we first started at Expanse, we looked at it based on dollars and we said, “Hey, every customer success person should be able to support,
[00:16:00] let’s say whatever, a million dollars of ARR or something higher than that.” What we learned, however, is that wasn’t the way that it works. It’s actually more based on the number of accounts, right? Because I can have $1 million account or a million, $1 accounts. Guess what? Like I could probably do the former, but definitely could not do the latter.
[00:16:17] And so there’s just this kind of lesson for us. And so I would advise to look at it as number of accounts. And then for manager co-ratios, depending on the org, you should be looking into how many direct reports does somebody have. If the answer is like 20, you have way too many direct reports, and you’re gonna now be in this weird position where you either have to hire more managers that you didn’t expect, and you should have foreseen, or you find yourself promoting people who aren’t managers into these roles,
[00:16:46] which is not necessarily tied to headcount planning but can result in some business challenges down the line. So, high level, certainly monitor and leverage those metrics and ratios.
[00:16:57] Joe Michalowski: So, I mean, this is gonna, this conversation’s gonna spiral for sure. ‘Cause we haven’t even gotten into like steps or anything. This is like the first thing that you mentioned, and I already have a follow-up question, which is like, it sounds like, early on in Expanse, it was kind of like almost like trial and error.
[00:17:13] It’s like, “Okay, like we have to put something in as an assumption to this model, and we’ll see how it goes. We learn this and we change the assumption.” Like that’s great. But when you don’t have the historical data to work off of, is there anywhere, these things are so personal to, or unique to a company.
[00:17:30] So I, do you look at industry benchmarks? Do you have anything to start with or is it entirely like, “We just make an assumption based on what we know about our business and try to ignore what’s going on out there because they’re not like us?”
[00:17:44] Enrique Esclusa: It’s really hard because it is really nuanced, not just by industry, but also by stage. And so I don’t think, unfortunately, that there’s this like, “Hey, this is the formula. Just put in your numbers.” I wish there was, frankly, but I can give you at least what I’ve seen at both Expanse and my current role at Assemble,
[00:18:00] and then what I saw when I was an investor at TPG. I think the most important part is always starting with, what do you have today? Like that is a known fact, and that’s a helpful fact and understanding what can this team do. Where is the gap? So, for example, if you have one salesperson and you’ve somehow managed to get
[00:18:17] a million dollars in ARR, but your target next year is three. Well, that one person is not gonna take you there. How much has that person closed? Can you rely on history and use that as an assumption? If you can’t do that, then I think it starts to become certainly more challenging, right? Like for us at Assemble hiring our first salesperson, we have no history of this salesperson and what quota could be.
[00:18:42] It was really just, Lisa and I are selling our first few hundred thousands of dollars of ARR. So it’s like, “Okay, well, we’re gonna try to figure this out and have our kind of best assumption.” Now I think one helpful mindset is you get better over time ’cause you can optimize things. And so any industry standards that you find, if you’re a seat stage company, assume you’re gonna do way less than that.
[00:19:04] Right? And assume that you’re gonna get a lot better over time. So when people tell you like, “Oh average close rate 20 to 25% would be great for a salesperson.” I’m like, “Right.” Except that if you’re a seat stage company I’ve never sold before, you’re going to be rejected a lot. You’re still building up a product.
[00:19:22] Maybe you’re a founder who can’t sell. And so any kind of metrics that you find, I would always encourage companies to understand, like, “Where are you in your journey?” And the earlier you are, the more conservative that you should be, because you’re gonna be well below it. And if you’re above it, it may not be that this is sustainable, and it may just be, you got lucky, or you’re very good in one particular area, or you found your first 10 customers quickly, but your next 90 are gonna be really hard to find.
[00:19:49] Joe Michalowski: Yeah. I think it goes back to your point, like maybe you kind of luck out and you just nail that first hire, and everything is amazing, but you can’t assume that’s gonna be the norm forever. And so just, you know, I, I think I’ve heard it internally here with our finance leaders, like, operating conservatively, like having aggressive goals, but like seeing that the industry benchmark is 20, 25% and being like, “Okay, what if I just build this model based on like 10 or 15% and see where we land at the very least?”
[00:20:18] Enrique Esclusa: Yeah, exactly. And I would say like everything reverts so, I mean, right, if the average is that 20 to 25% first, just record and monitor where are you today. And from there, you can learn how to optimize it. Right? I, I think it was, I can’t remember who said this, maybe it’s Peter Drucker, but it’s like, “You can’t do for what you don’t monitor,” or something along those lines.
[00:20:38] You kind of wanna pursue that too. Right? You wanna know, “Okay, what are we about today?” And then, you can start to figure out a plan on how to improve that.
[00:20:47] Joe Michalowski: So, we’ve talked, what I assume is the very basic of first steps of headcount planning, which is like that backcasting that you were talking about and kind of getting the high level. So, I will get out of the way again and let you continue. I apologize for derailing with the, the question, but I think, you know, the ratios are always really interesting to me just because, you know, in startup world, it just doesn’t work as easily as you would like it to.
[00:21:09] So, appreciate it. And, I will let you keep going.
[00:21:12] Enrique Esclusa: So, the final thing I’ll say, which is on level, and then we can start getting pretty, pretty granular is, prioritizing things is really important because not only does it allow you to focus on, “Okay, which are the heads I, or, you know, jobs that have to hire for first,” but it also in the that your plans change because you hit a recession or whatever the case may be.
[00:21:31] It becomes very clear, “Okay. Which are the heads we are no longer hiring?” If you don’t have this stacked, ranked, you know, list of open heads or you hire in a different order, you could find yourself saying, “Oh wow. I hired priority number 17, and we didn’t hire the first five. And now we got to cut five heads out to the plan.”
[00:21:48] And now, all of a sudden you’ve put your kind of objectives for the company at risk. Now getting a little bit more granular, everything I’m gonna say the whole to the end, this by saying that it was all based in Excel. At the time, there was no Mosaic, tech, tech that I could have used. Would have been really helpful.
[00:22:03] And so, you know, for all listeners out there, this is gonna be maybe an antiquated way of doing things, but what we found to be really useful is first understanding, where is the source of truth data that you’re gonna be pulling from? So actual existing employees, well, generally, that’s gonna be your HRS.
[00:22:19] Enrique Esclusa: That’s great. However, that only asks their existing compensation and maybe historical, if you can get it in their exports. But it doesn’t have anything associated with SaaS tools that you spend per person per department. It doesn’t have anything around sales productivity, right? So, it tells me it’s salesperson account executive in whatever region getting paid X, Y, Z dollars.
[00:22:38] But it doesn’t tell me anything about sales. That’s in your CRM. Oh, okay. Well, now I have to also incorporate my CRM expert. Now, you also wanna look at recruiting stats, and maybe that’s gonna come from some ATS report or maybe it’s literally manually tracked, which is what happened to us at Expanse. We were tracking, “Hey, time to hire in a spreadsheet where people would say like, ‘Today I’m starting to, you know, to, to hire it for this role.
[00:23:01] It took me 37 days, and then we just kind of average all that out.'” And so I think it’s really important to start thinking of what are the building blocks that we’re gonna have. And at a very high level, especially if you’re an enterprise sales company, you’re gonna want on the sales side pipeline. You’re gonna want actual customers and sales of those customers.
[00:23:19] And you’re gonna want, for sure, obviously, your existing HR information, right? So, “How many people do I have, or they get paid, when do they start,” and such. And right now, I’m just focusing, focusing on cash. There’s equity compensation, which is important too, but we’re gonna kind of put that on a, side room for a…
[00:23:35] Joe Michalowski: That’s like a part two of the conversation. We’re gonna get into like a three-hour podcast, uh, range, if we start getting into that.
[00:23:41] Enrique Esclusa: Uh, I think we’ll spare people the details on that. And then, of course, like a big missing piece of this is, “Okay, what’s the information that doesn’t live in any system?” So, SaaS tools, rent, all these other things. I do generally like to try to think about each of those is individual tables, and I’ll explain why in the moment.
[00:23:59] And the last part is like, “Okay, what are the heads we have to hire?” And so what we ended up doing at Expanse, that was really helpful, is in our kind of financial model, we always strive to rely on what is the structure of the export and what does it look like?” And so, if we’re talking about that CRM report, “Great. We’re gonna use that CRM report exactly as it comes, and that’s gonna be the feeder,” if you will.
[00:24:22] Enrique Esclusa: All of our formulas and the way that we pull data should always be pulling from the exact same format and the exact way in which the data comes from that CRM. And so, you know, there are specific formulas you can use, but really the idea here is that you should be able to just drop in a new report from Salesforce, for example, and it should update the rest of your forecast.
[00:24:40] Similarly, for pipeline information, we could do that too. And specifically for when we were doing, kind of like sales productivity metrics to back into how many number of sales reps we needed. What we always looked at was, for the next three months, we’re gonna base everything off of pipeline ’cause we have high certainty.
[00:24:57] And months for and beyond, it’s gonna be based on some number of salespeople, times, quota, times, quota, attainment percentage, and then working backwards.
[00:25:07] Joe Michalowski: Yep.
[00:25:08] Now, when it came to people, something that I learned that was really, really helpful, and this is why I think about it in, in tables, really like a database, is that we had a list of every single employee.
[00:25:18] Enrique Esclusa: Right? And we thought about them as employments, not as actual people. And then we effectively had people being quote-unquote fired and rehired into their new jobs for raises and promotions. That allowed us to then start a forecast, “Okay. We expect Joe is going to be promoted later this year. Let’s factor that in.”
[00:25:36] And then we had…
[00:25:37] Joe Michalowski: Appreciate it.
[00:25:38] Enrique Esclusa: Of course. You deserve. And then we had a second table, that was what we called to be hired. So TBH, this is, I think, really common that you see across companies. And it was, “Okay, one of the heads that we’re looking to hire prioritized from top to bottom,” right? Starting with literally number one and even assigning a specific ID to them.
[00:25:56] And then that ID was something that we, help used to track how racks were changing. So, for example, we could have say, you know, “We’re trying to hire a marketer,” and that was some sort of ID. But all of a sudden we decided, “Actually, we’re gonna change that marketer to an engineer.” Great. But that ID remains the same.
[00:26:14] And it used changed the kind of timestamp, and all of a sudden you see that ID 1, 2, 3 used to be a marketer. For some reason, we decided to change it. Now it’s a software engineer. And that way, you can help track changes over time. Otherwise, it becomes nearly impossible. So you end up having is this table of actual employees and have their comp could change,
[00:26:34] and then this table of heads we might wanna hire. And the sum of those two is effectively your volume, going back to my first principles, formula of price, times volume over time.
[00:26:44] Joe Michalowski: Yep. Wow, man, this is, again, not envying this process at all. This is a ton and I, I don’t want to, I don’t wanna take away from, you know, where you’re heading with steps, but I wanna be respectful of time. And so we have a lot of like questions that I want to get to about like collaboration and things like that.
[00:27:02] So, I know that that is part of the steps. So we’ll just like roll those questions in. So my, my question would really be like, this is a lot of numbers. This is a lot of like modeling. And the reality is like, you can’t do this alone as a finance person. Like you, you don’t have all the context, like sure.
[00:27:17] You grab all the system data, and like everything you build your model. But you have to go talk to people in the org. And so I would love to know kind of like what those steps are. Like at what point do you say like, “Okay, like I’m ready to go have these conversations.” What information are you looking for out of each department?
[00:27:35] And how do you roll that back into the model? Like, where does all that fit into what you’re talking about here?
[00:27:40] Enrique Esclusa: You’re probably right. Finance cannot do it long. And finance is, you know, at least in my perspective, it partnered to other department leaders in this process, and finance should be very collaborative, not combative here. Finance is not the owner. You’re almost like the enabler for the process. And so what we found was, yes, you may hold the pen on the, you know, the model and the formulas, if you will, making sure all the data is coming in the right way, but you don’t have the context.
[00:28:05] Enrique Esclusa: And now it’s your job to work with your partners, whether it’s HR department leaders or recruiting, to understand the context behind the numbers and what we found to be really helpful is, uh, to be continuous and to be consistent. And what I mean by that is both consistent touch points that you are continually talking to people, right?
[00:28:24] This is not like a do it once a year, and then you come back next year. I was talking to my department leaders every single week, right, on, on how things were changing. And then when I say consistent, it’s also about you’ve seen the same format every time. This is, a kind of a hard-learned lesson, which was every time I thought of improvements, I just implemented them.
[00:28:43] And so every month I was talking to my department leaders showing them a different format and they were like, “I don’t know what’s going on.” And that uncertainty create, or unpredictability creates mistrust in the process and a lot of thrash. And so what we learned was okay, instead of trying to change the end output, I might be changing how the inner workings actually function, but I’m always showing my department leaders the same charts, the same time every week or every month.
[00:29:10] And then we can kind of iterate and tweak the underlying assumptions, but the export always looks the same.
[00:29:16] Joe Michalowski: Makes a ton of sense. You’ve mentioned, sorry, I had a question here about like, cadence and timing. Obviously, startups change constantly. You’d mentioned this before, like, you know, you hit a recession. You hit, you know, market conditions like we have now, and you have to change your runway plans and things like that.
[00:29:31] So, what is like the proper ca, you like, you’re talking about a process that I assume takes an incredibly long time. So, how often do you do that, like end to end process? Is that just like an annual planning thing? And then what does the cadence look like to keep it updated continuously? ‘Cause I’m sure there’s like a difference there of like the big effort versus the iterative efforts.
The Cadence for Headcount Planning
[00:29:52] Enrique Esclusa: We founded in experience that doing it once a year was not enough, but that’s where you can do the bulk of the work because that’s the plan you’re gonna submit to the board. What are we going to do next year? Right? So, there’s always a big annual lift, and generally, it was towards the end of your fiscal year.
[00:30:08] Right? So for us, it was end of calendar year. At Assemble, it’s actually end of January. And so that’s always a big lift, and it’ll take multiple weeks, right? In some cases, it can take more than a month to do all the work that you need. However, boards want at least quarterly updates. And so you’re continually presenting to the board, you know, at least four times a year,
[00:30:28] how the plan is going and how you’re tracking against plan, and if you need to revisit the plan. But operators and executives, they can’t rely on the same information. The board sees they need something much more current and much more consistent. And so, we actually find ourselves revisiting the mon, the plans monthly.
[00:30:45] And so every single month we had a kind of, all executives session, where we showed the financial plan, headcount plan, where are we, where are we behind? Where are we ahead of plan? Which could be good or could be bad depending on how you look at it. And then tweaking every single month and tracking very, very diligently, how we were going up against those plans.
[00:31:05] So I would certainly advise, like, definitely you can’t skip the annual process and you always must expect that you’re gonna have quarterly plans, but if you’re keeping track of things on a monthly basis, it does allow you to iterate and change the plan as needed so that you maximize the chances of hitting your.
[00:31:21] Makes a ton of sense. Obviously, like planning can never, especially a startup, can’t just be like a, an annual thing. It’s what I’ve heard everyone else say, not just for headcount planning, but for any business plan. Like you, you need to be looking at this on a much more frequent basis. So, it totally makes sense.
[00:31:37] Wanted to get that in for sure. But I also want to ask a question about this collaborate, collaborative aspect. So, I guess the, from the outside looking in, it seems like the sales team and like your AEs, like that is the most like structured way that you can look at a hiring plan ’cause you know, what your revenue goals are and you know, kind of like how that capacity model is structured. My guess is that departments like, like marketing, like I work in are much harder to benchmark, like how many people we need, like what makes sense. So, can you talk about some of the harder departments, like even engineering? Like how do you approach that collaborative process to make sure that when you’re saying we need these heads, like, how do you know you need those heads?
[00:32:19] Joe Michalowski: Other than like someone saying, “Hey, I’d like to hire these people.”
[00:32:23] Enrique Esclusa: Who works, I think, still in his finance team, in the finance team there. And he taught me something that I found really helpful. And it’s like, “Look at, there are three different types of heads.” There’s kind of velocity heads, which is those heads that are helping with sales. Right? So like literally I can tie productivity on the sales side to those heads, namely say AEs or SDRs, et cetera, then there’s a,
[00:32:44] kind of like productivity or metrics-driven heads. And we kind of talked about it a little bit, but recruiting, right, or managers, et cetera. And then there’s what they call, I believe, like infrastructure heads or kind of like step-up heads. Finance is a good example, right? Like there’s no metric to tell me when I need a finance analyst for the first time.
[00:33:03] But this is more of a department leader or somebody knowing like, “Hey, we’ve reached the point where the work is enough for us to staff ahead. Otherwise like things will break.” I feel like marketing was one of those examples too, where it’s incumbent on the leader to say to the organization, “This is what I’m trying to accomplish.
[00:33:22] Enrique Esclusa: There’s enough work here that I need somebody to do this, and I don’t have that person in house today.” Right? And there’s always a question coming from the finest side, which is like, do you need a person, or do you need an agency or, you know, external third party to do this? If the work is enough to justify ahead, then we’ll go ahead and do that.
[00:33:40] And so generally, this is a very collaborative effort, right? I cannot tell the CMO whether they need a product marketer or they need, you know, a brand marketer or whatever the case may be. It’s incumbent on them to explain to me and to help me understand why that’s the case, and then on my side to help find a way to fund it,
[00:33:58] if we have the budget for it.
[00:34:00] Makes a ton of sense. It goes back to this collaborative effort. It’s not a finance as gatekeeper, it’s finance as enabler. And it’s why, you know, we talk about strategic finance a lot. I love that that was like your actual title and like the team that you are on, because just aligns with a lot of the things that we think about.
[00:34:18] Joe Michalowski: So love this. I, I have derailed you completely from the question that was like, what are the end-to-end, like steps of the process. I feel like we’ve covered a great deal of it, but I do want to, I want to give you the floor, if there’s anything, if there are any major steps that we have not discussed yet.
[00:34:36] And so, like, I don’t have a very specific question, but I will turn it to you. And, let you kind of wrap up the steps, if you will.
[00:34:42] Enrique Esclusa: Yeah. So I think we talked a lot about internally how you develop the plans. But I think the, the part that we haven’t really talked about is like getting those plans approved. Right? And so, yes, you need the CEO or the executive team to ultimately say, “Yes, we sign up for this plan. This is all we want to do.”
[00:34:57] And then, on top of that, you need the board to say the same, right? So you can’t actually go to the board and say, “We’re gonna hire 200 people.” And they’re like, “Absolutely not. You’re not going to.” Right? And so that part becomes a, a real exercise of collaborating with the generally founders or the CEO of the company and making sure like, “Hey, are you willing to sponsor this in front of the board and get approval for it?
[00:35:15] Because if not, it’s going to create a very sticky situation.” Right? We don’t want the CEO to present something from the board that will get rejected. And so there are often these kind of one-on-one conversations with investors where you almost like preemptively, show them, “Hey, this is directionally where we’re going to end up.
[00:35:31] What do you think?” And so in terms of the approval chain, that was something we didn’t talk about, but it’s very important, and the challenge here is that it’s very nuanced, right? If a business is profitable and they have a lot of money, you know, and they have a majority of the board, maybe the board is just a formality.
[00:35:47] Whereas if it’s another business that’s still reliant on venture capital to grow and the board has the majority, well, guess what? It’s gonna be a very different dynamic. So, something that I can’t give, like a perfect answer for all places, but the approval of the executive team and the board are gonna be pretty integral to a headcount planning process.
[00:36:05] Makes a ton of sense. Obviously, like our pretty much entire audience is like that Series A to D or D plus like venture-backed startup. So, you know, the board is always gonna be a heavy part of it, you know? That’s, it’s just part of the game. So it’s, it makes a lot of sense. I appreciate you kind of rounding that out.
[00:36:22] Joe Michalowski: I realize that, and this is what somebody internally told me, there is not one meeting or a conversation to have that will encompass all of the headcount planning process. But I think you’ve done a pretty amazing job of like giving me the rundown, even getting like, granular about it. So, I appreciate you really diving into some of these topics.
[00:36:41] I wanna, I want to bring it back to where we started, which is what Assemble does and kind of that aspect of it. And so as, you know, where a Series B startup ourselves, and the reality is like, you don’t have any sort of comp structure or like really like leveling structure from the start. So there’s always gonna be a point where you are starting from zero, and you need to put in that formality.
[00:37:07] And so I’m curious if you have any tips for implementing that first job architecture or like comp bands. I know fair and equitable pay is, is really important to you at Assemble. I’m curious how that process goes when you’re an early-stage startup, and you’re like, “Okay, I have to put this into our headcount plan.
[00:37:25] This is the first time we’re doing it.”
[00:37:27] Enrique Esclusa: I’m sorry. So the first thing is kinda like one minute, start with headcount planning. You wanna start with the business objectives? Similarly, I would actually advise companies to start with a compensated philosophy, which is just even before you build a comp structure or leveling framework of confidence, understand how do we want to pay? What is our approach to it?
[00:37:44] Right? And if you ever have any questions on our website is assemble.inc. INC. We have some content on, you know, how to build a compensation philosophy. And the thing that’s really important is to understand how do you want to pay employees both philosophically but also with which compensation types and which factors matter.
[00:38:01] So some companies, for example, pay differently based on locations, others don’t. Well, that’s gonna have a huge impact on your compensation and a huge impact on your headcount plan, right? ‘Cause if you’re hiring in Thailand paying the same as you’re paying in San Francisco, it’s gonna look very different than companies who pay differently.
[00:38:18] So, if you start there and it can be very simple, right? It’s just the general kind of principles, then you can move on to your job architecture. And generally, what I advise is like start simple and add complexity as you need it, but always forecast, “What am I gonna need for the next 12 months?” Because if you’re putting in the effort now, maximize the leverage you get out of that effort in building those levels and bands.
[00:38:40] Enrique Esclusa: So, for example, when we started the company, we did put together, as you might imagine, a, uh, set of levels and bands. We were only hiring design and engineering, but we also put it together for sales and customer success. ‘Cause we knew within those 12 months, we were gonna hire people at some point. So we did, made the effort.
[00:39:00] We didn’t go and create 10 levels and define every single one of them. But we had a simple structure that we knew would support at least the next 12 months. And we made it an effort to revisit it every six months. And so, you can even start with something very simple on the engineering side when you start a company and say,
[00:39:14] you know, “Junior, mid, senior, and maybe staff or something like that.” And over time, you can start to add granularity to it. And to start, you can start with really broad bands to know and understand, “Okay, if I’m somewhere within this ballpark, that’ll be a helpful starting point. Over time, as you add more levels, maybe you tighten those bands and you become much more systematic about how you use them.”
[00:39:36] But as a general framing, I would certainly start simple and get more complex as you… Now the other thing that I’ll say here is that if you’re not using a solution like Assemble and you’re relying on spreadsheets, which early on is fine, think of using a structure that you can drop into your headcount plan, just like you would with a CRM export or an HRIS export because that would allow you to just update numbers, but keep your headcount plan, still pulling from that same structure.
[00:40:06] And that for us at Expanse was immensely valuable in one of the lessons that we learned, which is why with Assemble today, we do help finance teams with their headcount planning by just giving them a well-structured export every single time that they can now rely upon for bands, for different jobs, different locations and currencies,
[00:40:24] you name it.
[00:40:26] Joe Michalowski: Makes perfect sense to me. I think, uh, you know, we talk a lot about a lot of the same things. It’s like structured data is so important. Like clean data is the start at all. It’s garbage and garbage out. And so, if you don’t have that in place, like it’s, you you’re gonna have bad time. So, it makes a lot of sense to me.
[00:40:42] And honestly, like, it just sounds like another case, which honestly is kind of always the case for startups. It seems like where the earlier you put these things in place, the better. Like you guys are the comp structure people. And so getting that structure in place, like from the get-go, I’m sure we’ll pay dividends as you guys grown.
[00:40:59] And so, I don’t know, just think really great advice for anyone that’s in those earlier stages. Like the sooner you can put this in place, the better don’t wait, ’cause it gets messier and more complex, as you, as you go along.
[00:41:09] Enrique Esclusa: You nailed it.
Joe Michalowski: I have two more questions for you. They are gonna be a little bit broader.
[00:41:13] The first one is, and we’ve talked about it with the, with Assemble. You mentioned Mosaic, but there’s plenty of software in the world now to help overcome some of the spreadsheet challenges that you had before. So just broadly, like, I want to know what role technology plays in headcount planning, not just for finance, but like for anyone in the org? Like what are some ways that you can supplement the headcount planning process with an Assemble, with a Mosaic, or anything else?
[00:41:42] Joe Michalowski: So there are other examples of how technology can help this process.
How Technology Helps with Headcount Planning
[00:41:46] Enrique Esclusa: Absolutely. I wanna say there’s kind of three things, I think that come to mind. The first one is consistency, right? If you’re building things in spreadsheets and you’re doing it, definitely every time, that’s gonna create a lot of issues. And so by having consistency in its format and the place that everyone goes to has this single source of truth, technology has a huge, kind of component into a headcount planning process.
[00:42:09] The second one is gonna be collaboration. You can just collaborate on a system much more effectively if it’s designed for collaboration than you ever could on a spreadsheet. If you’ve tried commenting on a Google Sheet and like kind of keeping track of that, you know how painful that process is or worse…
[00:42:24] Joe Michalowski: You can’t even see the
[00:42:25] comments. They’re just like, it’s like, “Where are these?” Like…
[00:42:27] Enrique Esclusa: Or worse, you’re like passing around different versions of the document and I, you can’t find information. Somebody deleted a sheet. I mean, it’s, it’s a mess. And I think the third one is just interconnectivity, right? A spreadsheet is not good at connecting with other systems, but technology can’t. So Mosaic, you guys have so many integrations that make managing strategic finance so much easier.
[00:42:47] We do as well, whether it’s HRIS or your ATS, and it just removes this manual effort of manually updating information. And the combination of those three, I think, increases the operational efficiency of the organization and also the trust that people have in the process. And to me, that’s a hu, I think a huge unlock in the friction that currently exists in headcount planning and other business processes for that matter.
[00:43:13] Makes a ton of sense. You know, we’re so aligned on, on how we think about. Obviously, we’re solving for different problems here, but it all comes down to the same idea. It’s like, you need to trust the numbers and you want to make your business partners trust those numbers and trust that information as well.
[00:43:27] Joe Michalowski: And so, I don’t know. It’s a great way to break it down just by those three kind of core pillars. I wanna roll into to the last question, ’cause honestly, I could probably just keep picking your brain about all things, headcount planning, comp structure, but we do, we do need to start wrapping it up. But this is question
[00:43:42] we ask everyone that comes on. It’s super broad. It’s not about headcount planning, unless you want it to be. But just curious if there’s one thing you’ve learned that you know now that you wish you knew when you started your crew.
[00:43:52] Enrique Esclusa: I have listened to a few episodes. And this was the hardest question that I had, you know, in mind. I was thinking like, “Okay, well, what is the thing I would teach a young me?” And I actually came up with an answer to this. Optimize for learning. I think early in my career, I put myself in jobs where there was steep learning,
[00:44:09] I fought investment banking and private equity. And then, the moment I exposed myself to a startup where I was doing jobs I had never done before, I realized how much more learning there was. And so, put yourself in uncomfortable situations, surround yourself with smart people in totally different disciplines and optimize for how much you can learn.
[00:44:28] That learning compounds upon itself. And next thing you know, a few years out, you’re a totally transformed person and so much more valuable than anything that you do. If that’s what we optimized for.
[00:44:39] It’s a fantastic answer. You sounded, I appreciate you listening and hearing that I was gonna ask it because honestly, I love this question. It’s, it just applies to everybody that’s outside of finance too. I, I felt the same way. I worked in agencies for a long time, and I was just a writer.
[00:44:52] Joe Michalowski: Like I, I just, I wrote blog posts and like, I just wrote blog posts over and over and over again. And now I’m here, chatting with you on a podcast and like host our webinars and stuff. So I, I completely agree just putting yourself in those uncomfortable situations, and you just learn through practice.
[00:45:06] You learn through people that are around you that are really amazing at their jobs too. So, I think it is a perfect answer and it’s a good way to, to wrap up our chat. I want to turn it over to you. I’ll let you take the stage. Is there somewhere or where should people go to learn more about Assemble?
[00:45:22] Where can they connect with you? The stage is yours. Whatever you’ve got to tell people, go for it.
[00:45:26] Enrique Esclusa: Yep, absolutely. So, if anyone ever has any questions about compensation, you can visit our website at assemble.inc. INC. And you can find me on LinkedIn, Enrique J Esclusa. I try to be as responsive as possible. So, I think I pretty much get through all LinkedIn your requests and messages, and I learned something early on in my career, which is take it forward.
[00:45:46] So, a lot of people have helped me get to where I am today. I’m sure it took a lot of hard work, but people were very generous with their time and advice. And so I, I try to do the same. So, whether it’s compensation related or else, feel free to reach out.
[00:45:59] Joe Michalowski: Amazing. Well, Enrique, thank you so much. Thank you for the really deep dive in headcount planning. Honestly, I feel like we do like a four-part series or something and still not cover it all, but you did an amazing job kind of giving everyone the rundown. So, just want to say thank you for taking the time, and it was great having you on The Role Forward.
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