Anyone who’s ever made hiring decisions knows the real danger of hiring the wrong person. By some estimates, an unsuitable employee can cost a company as much as $240,000, not to mention the collateral damage inflicted on company morale and reduced productivity and achievement.
In a world where every decision impacts the bottom line and the meeting of key milestones to unlock further funding, the execution risk of hiring mistakes can be a death blow for a growing startup or new corporate division.
In the climate tech sector, a wrong hire not only slows down a company’s sales but also wastes valuable financial resources towards the cause of slowing down the climate crisis and ensuring all of us a liveable planet. You can’t #deploydeploydeploy, as Jigar Shah says when you are constantly hiring and training new replacements because you’re basing your hiring decisions on a hunch. This industry needs risk management data to inform hiring decisions specifically.
It’s common to hear investors, startup CEOs, and corporate leaders analyze and strategize around their competitive landscape, technology weaknesses, ability to scale, market timing and other factors that could hinder their success. Yet, the concept that the people behind all of these activities could be the thing that makes or breaks a company’s trajectory is often overlooked or undervalued.
Yet a significant amount of funding entering the climate tech and mobility space, even as broader markets soften, creates enormous competition for the best talent to move the industry forward. Because the stakes are much higher, we are now witnessing a more intense focus on talent risk management. Indeed, McKinsey notes that a leadership track record and the ability to attract talent is one of four dealmakers or deal breakers in climate investing.
The Data Gap
While the HR sector offers multiple management tools, current programs only focus on reducing risk on the “buy side” post-hire. For example, existing enterprise software solutions can track diversity, equity and inclusion (DEI) metrics to meet new requirements to disclose “human capital resources.” The solutions can also be used alongside staff surveys to gather employee feedback and score their moods, a top indicator of workforce retention that can help reduce attrition risk.
While these tools can certainly help organizations identify and remedy potential problems before they impact a company’s reputation or financial performance, businesses still face massive risks on the “supply side” regarding talent acquisition and its impact on company growth. The data that does exist is rare or locked up in the minds of experts.
Not only are current enterprise HR tools built for large, established corporations—rather than climate tech companies, which tend to be smaller or emerging businesses—but they also lack data that can provide transparency into the candidate marketplace. While some companies have explored AI or options developed in-house, real-time information on supply-side aspects such as talent pool competition and candidate psychology, availability, and compensation rates do not exist.
When hiring for new sustainability or renewable energy divisions, even larger companies often have no idea who they need to hire, how the new hire will fit into their existing organizational chart and reporting structure, or even what the job description should say.
When understanding the talent market for climate tech, C-suite leaders and their investors are often walking in the dark with a flashlight that’s losing its battery. Additional tools are needed to fill the gap and reduce talent acquisition risk in order for the organization to grow and meet stakeholder and climate change targets.
As with all things concerning supply and demand, without data, you can’t properly “price your product,” or in this case, create competitive offers to win the A-Players you want. Companies lack the information needed to make talent maps based on appropriate market timing for company growth that align with investor or executive expectations. Such talent maps will help you build into your forecasts how long it will take to get a person in and up to speed. Additionally, such mapping will help you create timelines for company milestones you may have promised your investors.
Take the real estate market, for example. Suppose you’re thinking about selling your house. In that case, you’d likely turn to your realtor to give you the market data on the number of homes for sale in your area, how long your house is likely to stay on the market, and the selling prices of similar homes. Known as “comps,” this data informs sellers of whether there is a market scarcity or oversupply.
You can think of the market for talent in the same way. Investors, executives, and managers need data to provide visibility as part of their risk assessment, and companies must understand the market dynamics to make smart hires. Without this information, both investors and businesses are open to significant execution risk.
Hiring without supply-side data or a proper strategy can result in wasted time, money and lost business opportunities. Risks begin with employees and roll downstream to significantly impact the company overall.
While companies often try to triage hiring issues, the cost of today’s capital has decreased investor tolerances for hiring contractors or other quick fixes. That’s why a flying-blind approach could potentially make your next funding round more expensive—or you may lose it altogether.
Reducing Talent Acquisition Risk in Climate Tech
While capital for the energy transition and carbon reduction isn’t completely drying up, investors are far savvier and senior leadership teams are vetting candidates more closely. It’s become a seller’s market.
With talent likely to become one of the most critical factors in organizational success, leaders must do everything they can to understand their company’s needs and then compete for that critical talent. In the vacuum of accessible data, there are a few things companies can do to better inform their hiring decisions.
Look for Patterns in Your Best Hires: With each new successful hire, take the time to look back on what worked and on poor hiring decisions for what didn’t. Evaluate the sourcing of applicants, how they were interviewed, and what the salary negotiation process was to reveal some best practices you can use for future hiring.
Chat Up Your Peers: In the absence of available data, it’s critical for C-Suite leaders and HR managers to network with their peers at other companies and discuss their hiring experiences. Whether over a cup of coffee (virtually or in person) or at a conference, people are often happy to offer advice to those they see as non-competitive. If you notice a particular company succeeding on the hiring front, take the opportunity to ask them for their advice. You might be surprised at the nuggets of knowledge you receive.
Leverage an Expert: Some teams do nothing else but talk to candidates and evaluate market dynamics. These recruiting teams speak with candidates daily on the front lines of hiring decisions within their industry domains. These teams often have real-time information on which professionals are restless for a change, current trends in compensation packages, and other market dynamics.
As the climate tech market continues to grow and mature, we can expect the development of supply-side tools to help with talent acquisition. Such software could deliver instantaneous market data on potential candidates, including availability and compensation for more strategic hiring. This improved market transparency could also provide value for additional executive functions, including legal, finance and operations. Over time, using such tools could reduce the talent risk and, by extension, execution risk for startups and corporate divisions.
Technology alone isn’t going to prevent climate change; it’s the people building, commercializing and deploying that technology who will.
—Paige Carratturo is the co-founder and CEO of Sea Change, a talent venture firm that provides advisory, business intelligence and retained search services to climate tech investors and their portfolio companies, as well as some of the largest global corporations that are transforming their executive teams in order to meet the complex demands of moving to a more sustainable and climate-focused operating model. At Sea Change Advisors, she drives thought leadership and leads advisory services and C-level recruiting. Paige co-founded Sea Change as an evolution of the Enertech Search Partners brand, which was founded in 2009. Paige is a thought leader and frequent speaker about topics related to talent strategy, leadership development, acquisition, and retention.