What I’ve learnt about hiring to scale

A sustainable business must consider and evaluate its hiring and remuneration strategy from day one. While I focus on food these principles are true for any scale-up.

In the early stages, founders often focus on product and fail to truly consider future hiring needs. Assumptions are made that workers will be found.

In most instances, scaling will be driven by the ability to continually hire good people, at a sustainable cost, quickly. Obvious advice would be to build a company that will be attractive to future employees and, if possible, focused on an industry that enjoys excess labour supply.

Hiring when done well can generate exponential growth. The return on good quality human capital is manifold. The largest cost in many food businesses is labour and even with scale that doesn’t change a whole lot. In ways, an investment in a food business is really a bet that the human capital will generate a strong return. It’s vital to look beyond the management team and understand the nature of the workers on the ground. Is this workforce scaleable? — will the company be able to find and attract people of similar quality as it looks to expand, and what do these people have to be paid?

Short-term fixes can have long-term consequences

At the outset, with little or no brand equity, it can be challenging to generate good quality hiring leads and desperation leads to short-term fixes which can have long-term consequences.

By way of example, in its early years Deliveroo attracted couriers by paying over the odds. Deliveroo couriers today can earn as much as double the UK minimum wage. These couriers have been over fed for years, with a VC subsidised rate of pay, and won’t easily stomach the concept of earning less for the same work. Deliveroo isn’t a sustainable business until it can figure out how to pay couriers less as its margin levers are limited (the customer delivery fee isn’t price inelastic, while restaurants can’t afford to give up any more margin). The Deliveroo example serves to highlight the importance of adopting a long-term view to hiring and remuneration, to ensure a business model that financially makes sense.

Domino’s Pizza figured out food delivery decades ago — it knew what it could afford to pay couriers and built accordingly, becoming a successful operation in the process. It treats delivery as a cost of doing business - subsidised by a healthy margin on its food sales (rather than VC capital). It is this advantage, enabled by being full stack, that gives Domino’s a critical edge over food delivery marketplaces — and explains why Deliveroo has explored creating its own food concepts.

Design a model around your hiring needs

If hiring for scale proves overly challenging it may be necessary to re-think the operational processes or worse the business model.

Scaling in hospitality is tough mainly because consistency is notoriously difficult — either through varying food quality or decreased service quality.

Hospitality runs on slim margins which means it’s economically hard to rationalise paying industry staff significantly more than minimum wage. Equally, if a role has been carefully designed, such that almost anyone can do it, then the hiring pool is large and so supply/demand dictates a lower wage.

However, if a hospitality business is well designed it not only requires less skilled staff but less staff on shift. This saving could mean a redistribution of profit, to staff, via a higher base wage which in turn attracts best-in-class people and drives lower staff turnover. For the most part, talented people, paid well, deliver a good product. This approach enables a hospitality business to sustainably scale as it can now offer a consistently good product through both its kitchen (food) and customer teams (service).

This way of thinking presents a great opportunity. Create a solid concept which produces a consistently good product at a fair price. Keep the concept as simple as possible and refine all processes such that your team is lean and your hiring pool large. Then, offer above market rate pay. Your eligible pool of applicants will not only be bigger but also of better quality and your business will now be able to successfully scale.