Scaling Your Operational Org

The early stages are about doing whatever you need to do to find product-market fit, often with little thought to whether a particular way of working will scale. You’re fighting for whatever traction you can get, but once you have it and start to grow headcount, you’re no longer a few dozen employees who can get together in a single room to hash things out. Now you have to build processes to work as you scale, and address what breaks down as you do. As this happens, companies often become more inwardly focused: their attention is pulled away from their customers and toward building processes and systems. 

Your operational teams help you shift from an early-stage mindset, where employees often wear multiple hats depending on what most needs to be done, to a growth-stage mentality that balances high-priority tasks with defined roles, processes, and tools that allow employees to execute repeatedly at scale—and with the governance, security, and compliance to mitigate risks to the company. When scaled well, your operational organization frees up the company to train their focus back on their customers. 

The more complex your business and organizational needs, the more experienced executives you’ll need to hire to address the challenges that pop up when you scale. For instance, if you’re operating a later-stage B2B SaaS company in one geographic location, with a single product, and have fairly simple deal contracts, you might bring on a general counsel much later than a consumer crypto CEO whose company just found product-market fit and operates in more than one location with multiple products. 

There’s no hard-and-fast rule that prescribes when you should bring on a particular operational executive. Instead, it’s helpful to prioritize the questions you’re trying to answer and what outcomes you’re hoping for. Some questions to consider when scaling your operational org include:

• Are you operating in-office or remotely? 
• Do you have ambitious plans to increase your headcount? 
• Are you expanding your product offerings?
• Are you building your product in a highly regulated industry? 
• Do you need a second-in-command to run day-to-day operations while you focus on other elements of the company?
• Are mergers and acquisitions (M&A) a significant part of your business strategy?
• Is a liquidity event—like a sale or an IPO—on the horizon?
• Is your company’s infrastructure compliant with security regulations and robust enough to combat ransomware attacks?

TABLE OF CONTENTS

Broader operational talent trends to consider

There are three broader trends that are creating a challenging and competitive hiring market for operational executives, particularly chief operating officers (COOs), chief financial officers (CFOs), chief human resources officers (CHROs), chief information security officers (CISOs), and general counsels (GCs). If you do find a candidate you’re excited about, we’d recommend marshaling your entire executive team and board to help win them over with your company mission and compensation package.

More burnout, fewer operational executives looking for full-time positions

• CFO: A stricter regulatory environment, together with environmental, social, and governance pressures, and the rise of activist investors, has made it much more difficult to serve as a public company CFO right now. We’ve seen an increase in burnout among CFOs, with some preferring to take a board seat or serve as an audit chair rather than assume a CFO role at a new company that’s on the path to an IPO. The silver lining here is that a $30–50M company might be able to get an experienced CFO to serve as their board member, adviser, or audit chair and revisit the idea of bringing them on as CFO down the road. 
• CHRO: HR leaders bore the brunt of navigating the operational complexities that the pandemic presented—from return-to-office and remote work policies to responding to government regulations and building sustainable, scalable company cultures amid significant societal upheaval. There’s always been a shortage of great business-minded HR executives, and many of these leaders are burned out and would rather consult than accept an in-house role, which can make hiring for this position very difficult.
• General counsel: There’s a moderate amount of burnout among general counsels in the wake of the Covid-19 pandemic, though not to the same extent as with finance or HR executives. Many general counsels spent a significant amount of time ensuring that their companies followed local, state, and federal statutes about the pandemic, and now they would rather consult or advise late-stage companies than take on another full-time role.

Demand for downturn experience

• CFO: Experience and seniority have always been important in CFO searches, but many first- or even second-time CEOs today haven’t been through a downturn and need help adjusting to this type of business cycle. Now, more than in the last decade or so, CEOs are seeking CFOs with deep operational and public company experience to help guide their companies through the current market shift. 
• CHRO: Many companies had to conduct reductions in force for the first time during 2022, and companies with less-experienced HR leaders generally struggled to execute them well. HR leaders also needed to navigate visa and immigration issues for laid-off employees who weren’t US citizens. We’ve seen CEOs start looking for more experienced operators to help navigate market fluctuations.

High demand and smaller talent pools lead to increased compensation 

• CHRO: Many companies needed to upgrade their HR functions to respond to the Covid-19 pandemic. To do so, they needed to bring on sophisticated, experienced leaders who had navigated large-scale crises—the pandemic wasn’t a problem you could ask your director of recruiting to handle. This increased demand, combined with a small talent pool, has ratcheted up compensation requirements. Many CEOs have been surprised by how much CHROs are asking for in compensation discussions.
• CISO: The CISO is one of the highest-paying roles in many big public companies, partially because the talent pool of experienced CISOs is so small. Though the tech industry widely accepts that security needs to be an integral part of their business, CEOs are continuously shocked at how much they have to pay for a great CISO and often struggle to secure that talent for their company. CISOs typically stay at companies for 2–3 years and need to maximize their earnings, so many don’t want to wait 4 years to vest at a company and then wait another 4 years until an IPO. 
• CFO: The shortage of experienced CFOs means they also have the advantage when it comes to negotiating compensation. Early- stage companies have historically offered 1% equity to incoming CFOs, while late-stage companies typically have their equity valued more on the absolute dollar value of the grant. Over the past year, however, that 1% equity grant has filtered into late-stage companies as well. We’re seeing a lot of offers for experienced late-stage CFOs that amount to tens of millions of dollars, as companies try to incentivize many of the CFOs who took a company public in the last decade to jump back into the scaling machine. 

Next, let’s look at how to approach Hiring a Chief Operating Officer, Hiring a Chief Financial Officer, Hiring a General Counsel, Hiring a Chief Human Resources Officer, and Hiring a Chief Information Security Officer.