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This CEO Will Keep Hiring, Even As Others Freeze Hiring or Lay People Off. Here's Why.

Hint: It's because of a decision he made when times were booming.

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In February, a cryptocurrency exchange called FTX announced that it would slow down hiring. That was cause for confusion.

After all, that kind of announcement usually comes when companies need to cut costs. But FTX was doing great at the time. Crypto prices were soaring, the company was strongly profitable, and a few days after making the announcement, it even ran that funny Super Bowl ad featuring Larry David.

So, why the hiring slowdown? CEO Sam Bankman-Fried explained it this way on Twitter:

"Sometimes, the more you hire, the less you get done.”

That seems to defy basic math. If one person can get X done, then can’t ten people can get 10X done? But according to Bankman-Fried, that equation is missing one big, critical factor.

It's human nature.

Because Bankman-Fried thinks differently, he slowed down hiring when growth was strong. That’s now allowing him to continue hiring in a very different economy — despite crypto prices dropping, and talk of a recession.

It's worth digging into how Bankman-Fried thinks, because this isn't just relevant to hiring. It's a good way to think about playing the long game — something we all need to do, as we navigate our own ups and downs.

Why more hiring isn’t necessarily better

In a fascinating Twitter thread, Bankman-Fried explained that he’s studied what happens when high-growth companies start hiring really fast:

This CEO Will Keep Hiring, Even As Others Freeze Hiring or Lay People Off. Here's Why.

Why’s that? He offers four reasons.

  • It becomes more difficult to coordinate all those people.

  • If you throw a ton of people at a project, nobody feels like they actually own the project — so it might not get done.

  • Companies start hiring less-impressive people, because they need to put butts in seats. That hurts employee morale.

  • “Incentives become harder to align,” he writes, because people no longer know what their colleagues are up to.

In summary, his argument is this: When companies get too big and ask too little of their employees, each individual’s value gets watered down. And that does not add up to a greater whole.

If he's right, this could help explain something that shows up in employee surveys, where people complain about feeling underutilized at work. For example, a recent survey run by a hiring platform called Gloat found that over a third of workers say their company isn’t giving them enough opportunity to perform. Almost half of respondents also said they wish their employer had a better understanding of their skills, and 43% expressed interest in branching out from their current responsibilities.

Those undervalued feelings make people more likely to think about leaving — which is why 64% of employees said they were thinking about taking their talents elsewhere. Two of the top reasons they said they’re ready to quit: There’s a lack of opportunity for growth, and they feel pigeonholed or stuck in their position.

That’s a waste for everyone involved.

So what's the right move?

Bankman-Fried has simple advice: "Make sure your team can mentor employees as fast as you hire them.”

FTX slowed down hiring when it hit 250 people. That means its team is much smaller than its competitors’ — but, Bankman-Fried thinks, his company's output is just as good. The other benefit? FTX can keep hiring now, even as crypto prices recede and the industry feels unstable.

“Because we hired carefully, we can keep growing regardless of market conditions,” he wrote. “Because we exponentially scaled our revenue and productivity, not our expenses. But more importantly, because each person we add takes on a huge opportunity, and a huge responsibility.”

Opportunity and responsibility go hand in hand

I've experienced this myself as an employee at different companies. When I worked at smaller magazines, I had more opportunities — to grow, to explore, to show my worth. At larger places, where I was siloed into specific roles, I never felt like the company got the most out of me, and I certainly never got the most out of the company.

Entrepreneur, where I work now, shares FTX's mindset: We hire slowly and only when necessary. That’s good for keeping costs under control, but the real benefit is enabling each new employee to grow into their maximum potential.

On our small team, people aren’t slotted into a space where they handle some designated 3% of a particular project, the way they might at a bigger company. Instead, they tend to come in with a particular role, and then use it as a starting point for growth.

As they meet more people and work on more projects, the company discovers what else they're capable of, and each new team member discovers what else they really love to do. Each person develops an ever-evolving arena of personal responsibilities, and those end up anchoring them to the mission of the company. That alignment helps the company get the full value out of each person. And wouldn’t you know it, people at Entrepreneur tend to stick around.

Bankman-Fried is right when he talks about diffusion of responsibility: “If 5 people could theoretically do something, maybe no one will feel like they actually have to do it, and so it won’t get done," he writes.

But the opposite is also true. If one person is given the ability to do five things (within reason and time permitting), they will expand outward. That’s better for everyone. And as we enter another time of uncertainty, that approach feels a lot more sustainable too.

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Cover credit: Getty Images / erhui1979