The time comes for every growing SaaS company when you need to hire your first managers.  Not VPs, but Directors and managers under them.  Some rough rules:

  • You need one Sales Director for each 8 sales reps.  Your VP can’t directly manage more than 8.
  • You need one SDR Director for each 10 SDRs.  Each 10 SDRs, even 8 ideally, need a manager.
  • You need one Director of Eng or team leader for each 8 engineers.  The rule of 8s, again.

As you scale past $5m-$10m, you as a founder and/or VP need to make sure you are putting this layer of management in place.  If you don’t, you won’t scale.  It may take a quarter or two to show up, but no one should be managing more than 8 reports.  More on that here.

OK, now the time comes to hire those managers.  Let me suggest one simple rule:  find half outside the company.  And half right inside the company.

You might not be sure, for example, that your top AE is ready to be a Director.  Or that the engineer everyone already looks up to is ready to be a Director, either.  They might not quite be ready.

But I’ve found 8 times out of 10, if they want the management role, hiring the best internal candidate as a stretch hire works out.

Then, force yourself to hire 50% of them from outside the company.  They won’t know the product and culture, but they probably will have more on-point experience, and a bit more seniority in many cases.

This has several big advantages:

  • The 50/50 rule makes the number of slots clear to everyone.  As you scale, a lot of folks may want promotions.  It helps take some of the drama and issues out of things when everyone knows it’s 1 from outside, 1 from inside, etc.  It won’t seem subjective that way, and folks won’t feel like they were passed over (as much).
  • The 50/50 rule forces you to nurture your top ICs even better.  You’ll focus more on mentoring your top break-out individual contributors when you know you’re always hunting for that next manager 3-12 months down the road.
  • The 50/50 rule helps you scale faster.  It’s easier to promote someone already on the team.  Once you have a framework for it, you’ll scale faster knowing where to source half your managers.  And it will also help you backfill where existing folks on the team may need help.

Look, it’s pretty basic.  But think about the 50/50 rule in hiring your first managers.  Half from the team you already have, half from outside the company.  Keep that a rough rule for each department, and you’ll have a strong org, that scales faster.

A related post here:

Who Ya Gonna Promote? Don’t Wait Too Long.

(Note: an updated SaaStr Classic post)

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