Why Finance leaders at scaling startups need modern tools for headcount planning

About Keith Masuda

Keith is a finance veteran. He has over 15 years of experience working with venture-backed B2B startups, such as Host Analytics, Palo Alto Networks, Segment, Sqreen and Modern Treasury.

We interviewed Keith to learn more about the challenges and opportunities for finance leaders in rapidly growing startups. His responses have been lightly edited for clarity.

Q: Why is headcount planning  important?

Keith: In my experience, headcount planning is critical for early-stage startup success. 

Headcount spend can easily be the largest item on the P&L, so we have to be diligent about managing that spend. However, it’s also something we can control, unlike revenue or revenue growth. The key is striking a balance.

For many startup leaders, our instincts are to match headcount growth to revenue growth.

But we also know that businesses generally need more headcount to increase revenue growth, through building products, generating leads, closing deals, or serving customers. 

Striking the right balance can be difficult in an environment that is often chaotic and uncertain. But at the end of the day, effective headcount management can mean the difference between raising the next up-round or running out of cash.

Q: Why is headcount planning so hard?

Keith: Despite the high stakes, we still use legacy processes and systems that are not responsive to the challenges of headcount planning. 

Therefore, we end up with multiple spreadsheets that need to be updated manually, data silos across multiple systems and teams, and many unnecessary meetings to try to realign with HR, Talent, and department leaders.

Even when we try to create processes for the many approvals and inevitable changes that need to happen, they’re messy and scattered across multiple communication channels. 

Q: What’s wrong with spreadsheets for headcount planning?

Keith: Obviously as a finance person I spend most of my time in spreadsheets. But things get tricky when we’re managing headcount plans this way. Let me give you an example. 

Once a year, we create a headcount plan as part of our overall financial planning for the next year; that’s one sheet. Then, once a month we update our actual headcount numbers in a different spreadsheet.

We also meet with business leaders and recruiting teams to update our forecast (different spreadsheet), but a lot of times, by the time the forecast is published, it has become outdated.

We have additional spreadsheets for headcount reporting, recruiting metrics, candidate pipeline, and job req status, respectively. Anytime there’s a change, it affects a lot of different documents. 

And let me take it a step further: even if folks out there aren’t buried in headcount spreadsheets, they likely have an alphabet soup of systems in their tech stack. There’s typically HRIS, LMS, performance management system, ATS, financial planning, and payroll systems, plus all the communication channels like email, Slack, and Notion.

Combining all the resulting data is difficult, let alone converting it into something usable, and may take just as much time, effort, and resources as doing everything in a spreadsheet.

Q: What would be an ideal solution for finance leaders? 

Keith: The ideal headcount management solution would provide three main benefits. 

1. Real-time visibility

We want to be able to track headcount as we would our sales. We need real-time insights into candidate volumes, conversion rates, cycle times, and turnover rates and the ability to share that information across teams.

We also want to know well in advance where headcount will land at the end of a month, quarter, or year so we can take corrective action.

2. Access to actionable metrics

We want everyone to know how the headcount process is going. In my experience, our team cares about certain questions:

• Is hiring for roles properly sequenced? 
• Are staffing ratios tracking to plans?
• Have we properly balanced span-of-control? i.e. organizational and manager to IC headcount
• Are top strategic initiatives sufficiently resourced?

3. Automated workflows

We want to shift manual processes to advanced, automated workflows that capture changes to reqs, headcount, salaries, offers, and other information in real-time and push that data downstream to other systems.

Then, we could spend more time with business leaders, HR, and recruiting on more strategic headcount topics.

Q: Why did you choose to work with TeamOhana?

Keith: Modern Treasury works with TeamOhana to help us meet the needs I shared above, and more.

With TeamOhana, we get:

• A single source of truth for headcount planning that breaks data silos
• Dashboards designed around relevant KPIs that can enable informed and effective decision-making
• Real-time signals to dynamically adapt to business changes and shift capital allocation sooner
• Predictions and recommendations about allocation of resources
• Collaboration capabilities that minimize unnecessary meetings and keep functional teams aligned and strategically focused

Watch Keith's full interview here.