00:04:46 · Paul Todgham, CJ Gustafson
[00:04:46] S0: And so, mean, it's a challenging and interesting dynamic to basically have to tell people you did the right thing by delaying the heads. You don't have budget for it. You gotta basically fight for it again. And knowing it's a repeated game, how to make sure that's not too punishing of the people who do the right thing versus those who just fill every role they can just so they've got annualization and whatnot. But yeah, I've had to work through that many years. I empathize with anyone nodding their head in the car. And thankfully we haven't had too much of that to worry about in the last last couple years of Greenhouse, but it's but it's certainly something I'm used to. [00:05:16] S1: We always talk about salary and benefits. You said it's probably 70% of the cost. Right? 70% of the cost walks on two legs. But now every person might also come with a growing stack of software and AI tools. Do you think that fundamentally changes the hurdle rate for adding headcount?
00:05:33 · Paul Todgham
[00:05:33] S0: The jury's still out on whether AI, you know, will lead to growth in employment or contraction in employment. Right? I mean, most breakthrough technologies have brought similar fears, as I think we're facing now, that jobs are going away but have actually expanded employment. Now, AI may be different. Right? And and... But, you know, we'll see. No doubt, though, there's a tremendous amount of disruption, obviously, in employment driven by AI, and we're seeing that, you know, at Greenhouse. Greenhouse. On the hurdle rate part, I think there's a couple considerations. I mean, first, you do need to weigh the higher costs, but weigh them against higher productivity of a given employee as well. So the productivity might actually be rising faster than costs. The higher is more important, but not necessarily harder to fund or change your hurdle rate. On the downside, a lot of us, pretty much all of us in finance are feeling pressure to demonstrate a return on our AI investment. And again, that can be hard to do, particularly when you're in experimentation phase or when everybody's getting 10% more productive, but you aren't losing bodies or whatnot. So I know one way folks are doing that is just by putting pressure on backfills. Right? Instead of saying, hey, is there a chance we don't need to you know, fill this role? Flip flip the script. You gotta justify that this role gets filled and and can't be done by AI and org changes that allow us to be more, you know, more productive.
00:06:44 · CJ Gustafson
[00:06:44] S1: You're totally right. A ton of the CFOs I talked to on this podcast, Paul, they're saying they're really pausing when it comes to backfills, and it's either to take that budget and reallocate it into something. It could it could be tokens. It could be a tool. But also just to rethink, is this the same role that we need before? The environment that that person, maybe they worked there for three years, came into, has changed so much. We should take a beat and not just immediately backfill for the the role we had.
00:07:11 · Paul Todgham
[00:07:11] S0: Yeah. And I think often by the time you're at the backfill, you're kind of a little late. I mean, it's still the right thing to ask all those questions and take action. But when it comes to a back fill, it's a binary thing. It's a yes or a no. Right? And the hiring manager is 90% of the time they're a yes. And if you get two levels up in the org, or VP, or your ELT member, a lot more likely to question whether this person needs that role, and we can make do elsewhere. An exercise I found very helpful, rather than wait till you have the backfill, is ask folks to stack rank their sub functions within their team. And, like, here are the ones that are... You know, I most need investment and are least impacted by, you know, productivity gains that are going on. And you don't wanna question those backfills. That might take you a while. Right? Like, spending two months to justify an AE is two months of lost new business. Right? Versus the ones that are on that list near the bottom or in the bottom half that, hey. When these roles free up, I'm gonna, you know, I am gonna reorg, and I'm not gonna backfill. And then then it's more about holding people accountable to what they've already done, and it's less of a binary issue of one backfill and more of a 200 person sales organization. Show me the, you know, the 50 most critical and and the 100 that are in the middle and the 50 that are, you know, least critical, for instance.
00:08:15 · CJ Gustafson, Paul Todgham
[00:08:15] S1: I've never heard of that method. That's brilliant, Paul. Can you say more about that? So you're asking the department leader to take that assessment of their team? [00:08:21] S0: You could do it as part of a budget planning cycle. You could do it as a a talent strategy. Often, do kind of talent planning just before kicking off a budget. That's what we did at my last company. I thought that was very effective. You could do this before AI. You could always just say, where are the parts of your org that you're looking to potentially, you know, optimize, drive efficiency, you know, dynamic resource allocate away from, and where are the ones that you think you need to allocate, you know, towards? [00:08:45] S1: Paul, what are you thinking in terms of retention these days? Retention of employees. Because a lot of those employees have context. Right? That context is so key to the tools they're using now. But you also have to look at it like a give and a take of, do we have the right people on board today? Just how how are you framing up the importance of retention?
00:09:03 · Paul Todgham
[00:09:03] S0: I think a certain amount of attrition is always sort of healthy. Right? I mean, I think if you're not doing some form of weeding out your weaker performers and helping them find, you know, roles or companies that may be better suited to their skills and so on, I think, you're doing your company, and you're doing, often, those employees a disservice, and almost certainly the people who are working with them who might see someone underperform. How's AI changing the game on retention? It's an interesting one. I try to resist the notion that everything is more important or everything is harder narratives that maybe make for good sound bites. But I think employee retention has always been critical. I've been at this for a little over twenty five years. I've always wanted to keep my best people. I've always had people who had great outside opportunities. And sometimes I'm able to keep them, and sometimes they move on, you know, to do something great elsewhere. So how... Think about how AI changes that game. First, the average headcount is more expensive as we've kinda talked about going along with, you know, higher tooling costs and other factors. How productive someone can be has probably gone up on average. But I would say, like, the more interesting thing about AI is I feel like the variability of performance has widened significantly. The time to create content has gone gone down. You know, the ability to kinda fake your way through things has gone up. You know, there's this whole new area of answers as people are working with AI that maybe sound good and are either meaningless or sound good and are just plain wrong. Right? So the benefit of having someone who you know has good judgment and you know is sort of effective at tools versus, you know, rolling the dice, I think that's clearly gone up. On the flip side, I do think AI tools can help somebody get up to speed faster and more quickly in a new industry, get more quickly up to speed in solving a new problem. So that would be a somewhat of a mitigating factor.