Discussing Headcount with Tushar Makhija, CEO of TeamOhana (Part 1)
Our discussion series focuses on in-depth interviews with the movers and shakers in the TA/HR tech space and how what they are developing will impact RecOps. In this two-part series, we caught up with Tushar Makhija of TeamOhana to discuss headcount and different ways to think about it.
Tushar Makhija from TeamOhana
Why did you choose to focus on the Headcount Management process?
TUSHAR MAKHIJA: There are three layers to how we came up with this idea and why we wanted to dedicate over a decade of our lives to building and solving this problem.
First, headcount, or people, are the most expensive resource in any company. This means that all companies need to hire people to do specialized work. Companies that find the right talent at the right time can grow much faster than others. So, people are extremely important. They are both the most expensive and the most essential resource. Good people, the right people, are crucial to the success of your company. That's where we realized that managing people is vital. Whether you call it headcount or people, managing their spend is important. I approached it from a CFO's perspective. I asked myself, "Why would a CFO buy this?" That was my first layer. We recognized the importance of this aspect.
The second layer involved considering the existing tools. Sure, you have an applicant tracking system that provides information about future headcount within a three to six-month period, depending on the time to hire. You also have the HRIS, which tells you who is currently in the company and might provide attrition metrics to help with backfilling. Additionally, there is a financial model that includes the headcount budget, determining the maximum spending within a specific timeframe. However, when you think about what the single source of truth for a company's headcount is, there is none. Is it the HRIS? It doesn't have all the information. Is it the ATS? It doesn't have all the information either. Is it the financial budget? It also lacks complete information. So, where should it be? There was a clear lack of suitable tools in the marketplace, so the default tool became a spreadsheet.
The third aspect we considered was what makes headcount management or the headcount process successful. You need people to collaborate, real-time data, and access control because not everyone should have access to everyone else's salaries. You also need compensation benchmarks because things are constantly changing. As I said, spreadsheets are the most common tool for headcount management. However, if you want to be successful, you must have collaboration, access control, and real-time data, which is where spreadsheets fall totally flat. So we made it our mission to replace headcount spreadsheets.
How do you build an ideal headcount management process?
You can't ever build a perfect process. And this is contrarian thinking, right? But anybody trying to build a perfect process will most likely fail in my opinion.
Our goal is to build guardrails and templates with software. It's less process, more procedures and constraints. How much money you can spend is a constraint; how many recruiters you have is another constraint. There are many in the headcount process. With software, you can do multiple calculations, and join and manipulate multiple data sets to create a procedure that can make you successful. There is no magical process. But there are procedures and workflows that, if you follow them, it turns out to build something that you can adapt and make successful in your company.
The easiest comparison is expense reports. Everybody has their own constraints. Some people will say give me a receipt at $25; some people will say give me a receipt at $100, or $1,000. But at the end of the day, it's all expense reports. Expensify created a procedure, a template with guardrails. Any company can go and fill in their constraints and boom, you have expense reporting that can work across a ten-person organization and a 10,000 person organization. That's how we built TeamOhana.
Flexibility and guardrails are very big in the RecOps community. One of the big things we think about is not so much procedure but how we create the guardrails that will still give us that reliable data output. But thinking about it from the rec op standpoint, too, given that this tool touches a whole bunch of different teams, you have to go, and you have to pitch this to get everybody involved. What arguments would you make for why you need a tool like TeamOhana over spreadsheets?
Let's talk about what makes RecOps successful. What is a success statement? We are we able to hire the right people at the right time and at the right budget. Agreed?
RecOps folks are brokering across different people and data points, and they can be successful if they can look ahead in time. Spreadsheets don't have time filters. If you want to look ahead, you can't do it in a spreadsheet because it's just far too many variables. Time to hire is a variable, compensation is a variable, and budget is a variable.
It's a three-dimensional problem and spreadsheets are two-dimensional. That's why you need a system.
Why do you think there is such complexity in the headcount management process?
I believe there are two key complexities involved in this matter. The first is systems complexity. At least three systems, technically four, need to communicate with each other—the compensation system, financial budgeting system, HRIS, and ATS. This creates the initial level of technical complexity. Normalizing data across these systems can be challenging since data entry in each system is done manually. For example, the way an employee is recorded in one system may not match how they are recorded in another system, considering the manual nature of these systems of record, such as Workday or BambooHR.
So, the first step is tackling the complexity of normalizing data across three or four different systems. However, this is a challenge that can be overcome with good engineering and dedicated time. For TeamOhana, we spent an entire year building the employee data layer just to normalize data. I approach it in three phases: the employee data layer, the workflow layer, and the analytics layer. These three components form the puzzle pieces.
The other element that contributes to the complexity of headcount management is the involvement of four different individuals with distinct motivations. Talent and People primarily consider compensation, while recruiters are focused on hiring a large number of candidates. HR is concerned with retention and responsible growth, while the VPs of sales, product, and engineering are driven by achieving their OKRs. Finance, on the other hand, is primarily concerned with budgeting. With four different human motivations and varying evaluation methods for each group, a new set of complexities emerges. However, the good news is that this can be resolved. By implementing a headcount management platform, you establish procedures and guardrails. Essentially, it sets a headcount management manifesto that aligns everyone on the same page.
Without a headcount management platform, there is no manifesto in place, resulting in four different systems and eight to 20 different opinions. It becomes a chaotic mess where fingers are pointed, blaming one another. Finance might be seen as unwilling to approve something, hiring managers may not provide enough information to open headcount, there may be a shortage of recruiters, or team structure issues arise. It becomes a state of chaos. In this scenario, wastage is often overlooked. However, considering the current interest rates, inflation, and macroeconomic situation, we cannot afford to operate in such a manner. We need a manifesto, alignment, and agility.
You touch on something brilliant there, and I think that leads perfectly into the next question, which is for RecOps folks. What are some key questions they should ask when they're evaluating a headcount management tool?
We should start with the basics. Does this integrate to your ATS? That's where manual work comes in. People can say that spreadsheets are great, but if you're copy-pasting from your Ashby report or Greenhouse report, then uploading it into a spreadsheet, while simultaneously downloading who has terminated, gotten promoted, etc. from your HRIS, it's just a recipe for confusion and wasted effort.
Does it have advanced access controls? The platform should understand organizational hierarchy, and roles, and levels, and location. Headcount is tricky, especially when you start looking at global companies. Think about this, a product leader in Spain hiring a level two engineer versus a hiring manager in New York City hiring a level two engineer. Very different compensations, very different budgets, very different motivations. Not to mention, the laws around hiring and termination are completely different. So you need people to have the right information and access control right out of the box.
What do the workflows look like? In headcount management, it’s all about the lifecycle of a headcount. For someone new, or incremental, it has to be requested and approved. I can hire from within; that is an internal transfer. If someone leaves, I need to create a backfill. These are all workflows which today result in having multiple rows in a spreadsheet.
Let's say you hired a BDR on January 1 and on July 1 you promoted them to an AE. Our budget says that your previous salary was only utilized 50%, so that gets returned. But now, you are promoted to an AE, so you're going to draw down on a new budget bucket for the remainder of the year. How do you do this in a spreadsheet and how do you make sense of it… color coding and comments and notes? No new people were added, but three headcount were affected. It’s a complex, gnarly process and it happens all the time.
So start with integrations, then go on to access control because that's all user experience, which is important. And third is workflows. If you get all of this, everything else is gravy.
