Episode #103 Shannon Swift

This week we chat with Shannon Swift, the CEO and Founder of Swift HR Solutions. Swift HR offers outsourced HR solutions for early stage companies. Shannon has been a long-time supporter and participant in the Seattle startup scene. Thank you for being on the show Shannon!

Transcript:

Mike Schneider:  Welcome to Law of Startups podcast, I’m Mike Schneider.

 

Joe Wallin:  And I’m Joe Wallin, thank you for being with us today.  Today, we’re lucky to have in the studio, Shannon Swift, Shannon is the founder and CEO Swift Hr Solutions.  Shannon, welcome to the show.

 

Shannon Swift:  Thank you Joe and Mike, glad to be here.

 

Joe Wallin:  Pretty sure.  Now, Shannon, so, for those of the audience who haven’t heard, I mean, there might be a couple of people in the Seattle community who haven’t heard of your company but tell us about it.

 

Shannon Swift:  So, Swift HR Solutions was started in March of 2004 and the whole purpose of our starting the company was to support Seattle’s early stage clients and really it’s some super exciting startups and typically two employees to 150 is where we focused.  We’ve worked with about 300 super exciting Seattle startups in the time that we’ve been around.  So, we provide an outsource HR service, it’s very unique.  We actually look and feel like our clients have hired a full time HR professional.

 

Our team is all seasoned professional so, all 15 to 30 years experience.  VP level have been in the board room.  And so, our clients that are starting out would never be able to financially justify having that kind of talent on board.  But we come on a dedicated day a week basis and provide full time access to phone and email.  We are on the org chart.  We look and feel like a part of the member, a member of the management team and so and when we do what we do well, our clients forget that we have other clients.  They think that we are completely working just with them.

 

Joe Wallin:  Yeah, that’s great.  And that comes with – so the – tell us what this HR in a box thing.  Tell us about that?

 

Shannon Swift:  Yeah, so we have a couple of different.  I mean I have to say I married Wells.  My maiden name was Smith and so we’ve definitely maximized on this whole Swift name.  And so Swift HR in a box, we developed on our first year of business.  And it had been in my head for about 10 years at that point.  So, when I would start working with the early stage company, around 15 to 20 employees, they already had had some issues that had distracted from the business.  And so, I thought well, there must be a way to help them not make mistakes right out of the gate.  And so over the course of our first year of business, I actually was fortunate enough to work with an ignition backed company, the two founders and they helped me to create the product.

 

So, essentially it’s every form process checklist and template that our startup needs to self managed HR.  It comes with hand holding and they actually helped me developed the pricing model which is a six month practice period and they also provided the support model.  They said you can’t just get to us and walk away.  You got to stick around and hold their hand.  So, through the HR in a box model, we have supported some very early stage companies here in Seattle.  Ontella was one of our early wends, zombobie, so, we’ve got a lot of folks that have the box on their windows or book case is still today.  But that was kind of the purpose of that.

 

Joe Wallin:  Yeah, that’s a great idea, that’s a great idea because I know that a lot people struggle to find the right document for the right situation.  In fact, I have a, I tell people all the time and like, hey look, if you’re afraid of lawyers or afraid of professionals, at least call one of them to get the checklist, so, you got to try to do it yourself.  At least start with the complete list of everything least we done.  What’s really painful is when like client goes off and does something that you do like three of the nine things or something.

 

Shannon Swift:  Exactly, exactly.  And really for us, it’s also about being very stage appropriate and culturally fitting.  So, we have a lot of times where we’re coming to a company with 10 people and they said, oh, but we have a handbook and it’s 36 pages long and d I’ll say, okay, throw it away.  And here’s a appropriate size and stage for you, it’s three or four pages, we called it employee guide.  So, it covers everything legally we need to cover but is also just very practical.  Here’s how we get paid, here’s how time off works.  We addressed things in a very proactive fashion.  Often times, a founder doesn’t think about, what are we going to do?  We have a bereavement leave request or a jury duty, how are we going to handle those?  And so, we just proactively helped our client right out of the gate.  Figured out what those decisions are what the right decision for them are, lay them out and they don’t have to be reactive mode when the situations comes up.

 

Joe Wallin:  Yeah, that’s a pretty funny Mike and I have the same thing.  We have a lot of early stage clients and then you’re always trying to calibrate your approach to the situation.

 

Shannon Swift:  Exactly, yeah.

 

Joe Wallin:   So the monster employee had looked for the 5 percent startup.  One of the examples are sort of, ah, I don’t really need that, yeah.

 

Shannon Swift:  Yeah, exactly, you know, a lot of our founders come out of some really exciting successful companies here in town.  And so, when they start out, they’re used to having a lot of very robust processes and programs and they think that that’s what they have to have.  And so, it’s really fun to be able to say, you know what, you don’t really need that, you just need this and keep it very simple, very practical and again stage appropriate for them.

 

Joe Wallin:  Right.  Mike does this sound familiar?

 

Mike Schneider:  Yeah.  I’m curious to know in the time that I’ve worked with the startups especially at the small stage.  There is this kind of this period of time when you start hiring your first couple of employees and you don’t exactly know what the process looks like.  What do you normally tell people when they’re transitioning from a group of founders to hiring their first outside non founder employees?  What are the things they need to be thinking about?  What are the things on that checklist?

 

Joe Wallin:  Actually, my favorite stage is right then.  And, so one of the things, so, first of all, right out of the gate; I like to have founders think about their philosophies around a few things.  So, one is compensation.  What’s our philosophy around compensation?  What’s our philosophy around benefits?  What’s our philosophy around hiring?  And then really scoping out an early set of values.  So, what’s our culture? Who are the people that we want to be surrounding ourselves with and what are the kinds of attributes that we want to keep out of this environment?  And then, really articulate in those from the very beginning.  Then, we lay out a hiring process so that here are all the stages of a hiring process, how do we want to accomplish each one who’s going to own it?  Just to make sure they know exactly what we need to do in terms of getting from identifying and opening to getting the right person on board.  And making sure that culture screen is in place because I think one of my favorite quotes from early client was, “people hired for what know and they are fired for who they are”.  And so, the most important thing to focus on really that early stage is the right person, the right fit for the culture.  And so that’s really getting that right is just going to save so much pain and misery down the road.

 

Joe Wallin:  Yeah, I have a feeling, most companies at that stage are just kind of flying by the seats of their pants.

 

Shannon Swift:  Exactly.

 

Joe Wallin:  And they’re looking to make that first hire.  They’re probably not thinking much about culture.  They’re just thinking about, oh, we found somebody that can do this job.

 

Shannon Swift:  Exactly, yeah and I think even around that making that first outside hire and I had a client that was his first hire, he was going to hire somebody out of Google and it was a $300,000 engineer and I said, okay, wow, wow, wow, that’s crazy to have that kind of salary for your first hiring.  He said, well, that’s what is going to take to get him.  And I said, okay let’s just back up here.  Is she going to be your VP down the road?  No, no, I’m going have to hire above him.  And I said, well what’s that guy going to make?  And he said, oh, and so, really, what we’re able to do is kind of structure some hiring ranges that make sense for the role and then built in some incentives based on milestones for him to accomplish his first year to hit that number that he needed to get to attract the guy.

 

And then we also used equity and kind of solved the potential of how the employee should look at that from that early stage equity.  But putting together a whole package instead of just like, oh, okay, I have to do a $300,000 salary.  So, I think, founders have so many things on their minds, they’ve got so many balls in the air and it’s really fun for us to be able to come in and take this one off of their shoulders and just helped them, lay a foundation that is going to carry them forward in a very smooth fashion.  And our goal is that our clients are not disrupted or distracted by HR, they’re just completely, it’s quietly working and supporting them in the background.  And so, a few these early decisions can really impact the outcome for them.

 

Joe Wallin:  Does your HR service like does include things like managing payroll or is that something that a different type of service would cover like my company uses paychecks for that sort of that things.  It’s kind of just I don’t know, it’s like they don’t do a whole lot but they kind of process up the documents when somebody brings in like an outsource HR.  Is that the kind of thing it’s brought kind of in house or do you still outsource it to some other company to--

 

Shannon Swift:  We usually outsource payroll to another company.  Payroll Solutions is a local company here that we do a lot of work with their very service and take great care of our early stage clients.  We have a lot of clients using Gusto which used to present payroll.  So, we, from the HR standpoint, typically we’ll conduct, we put together an orientation framework so, that the employees have everything they need right out of the gate when they start to be successful.  And then we’ll communicate what’s needed to the payroll provider or the benefits broker when we, you know when we work with benefits broker to put a benefits plan together.  So, we just make sure that all the information gets to the right place for processing.

 

Joe Wallin:  How common is the, sort of, co-employee in approach in Washington?  I know some talking about companies like TriNet and there’s other I’m sure, I think I get the sense that they’re so much popular in California than they are here?

 

Shannon Swift:  Yeah, that’s a great question, Joe.  I actually opened a TriNet office here back in the late 90s.  And F5 network is my first client with 10 people and so, the reason that I left, so, I had their first successful branch office.  We had about 28 companies and what I found for Washington is we have state industrial workers competent employment.  In other states, you actually have to purchase those--

 

Joe Wallin:  Oh I see.

 

Shannon Swift:  Insurances.  So, that right out of the gate is one of the reasons that PEOS are used in other states.  And then, Washington has always had just an incredible amount of benefit options here.  So, through health trust that we’ve had, the WBTIA has a great health trust.  There have been a variety of those over the years that even with just five employees, you can get amazing benefits options.  Where in other states like California, where TriNet started, they really didn’t have those options for small companies.  And so, what I find is Washington is not a great place to have a co-employment relationship.  It’s a very convenient situation when you turned the key hiring your employees but it quickly gets very cost prohibitive and it’s very difficult to get out of the relationship because of that co-employer relationship.  And so you basically want to wait until the end of tax year to do it.  You have to then start all over with I-9 forms and setting up a new health plan and setting up a payroll provider.

 

So, I think if a company is going to maybe stay 5 employees forever it might make sense for them to go without route but if a company is planning to grow, it’s really going to be a huge disruption down the road.  And the way that one of my client, I’ve been brought in several times so get companies out of that relationship and because I know all the things that have to be undone and one of my clients the way that he described it was, you’re building your plane out on the runway and you’re just get ready to take off and then you have to rip the engine out and start over again.  And, our service what we do is, we’re just month to month, we get our clients in the air and just dropped off and off they go.  So--

 

Joe Wallin:  Right.  Because it’s really – and once you’ve got the processes in place, hiring is really not incredibly difficult.  I mean, you got it.  There is things you need to do but--

 

Shannon Swift:  Yeah.  And that’s where it actually gets fun for us.  So, when a company really starts to ramp and grow is we get into really some of those strategic issues and how do we differentiate ourselves from everybody else and tell they’re trying to hire the same resources that we are and how do we differentiate ourselves as an employer where our team wants to stay when they get calls from recruiters, they’re not getting pulled out.  And so, for us, that’s where it gets really fun is when we’re able to really impact those longer terms strategies and create efficiencies and effectiveness.

 

And then we also have – so we have two other business lines, swift leadership is another box product that is a set of modules.  So, as our clients started to grow, typically around 50 to 60 employees, they start to promote their first employees and that’s another kind of those milestone that early stage companies had.  So, now, all of a sudden, you got a bunch of young rock star, engineers or other parts of the company that are now managing and have no clue what they’re doing.  And so, and they’re managing their friends that they were peers with the day before.  So, we have a set of 30-60 minute modules that we just rolled out on a monthly basis so it’s kind of a drip system.  Gets the team around the table, we learned a topic like conflict resolution or decision making, effective communication.  And then we have leadership activities that we’ve sent them out of the room with and then come back the next month and dive into the next one.  So, increasing leadership capacity is another way that we really helped our clients be very efficient and effective.  And then we have Swift Talent which is the same model as our Swift HR on sites.  We have a dedicated onsite recruiters that’s doing full scale recreating.  So, yeah, so, those are all of our swift.  Swift Talent, Swift leadership in a box, Swift HR in a box and swift HR onsite.

 

Joe Wallin:  Will you do just miscellaneous or random consulting or does it always have to be sort of, are you busy, not that it’s always like, now we do that, we do this.  It’s sort of a minimalist.  Or were you coming and do, we do random consulting project?

 

Shannon Swift:  So, there are thousands of HR consultants out there doing projects and from the very beginning, we kind of differentiate ourselves and said we are not a project company.  Everything and HR touches everything else.  And you can have this amazing competition program that completely doesn’t match with the performer’s management system that you had that was working well and so, everything really needs to fit together.  So, we take a 10,000 foot view, that said, we do scale up or down.  So, we have clients that are literally just on phone and email with us, they know that were always there if they would need to reach out to us.  We have others that scale up to two or even three days a week.  And so as they’re growing, we grow with them.  And so, we super flexible model but definitely have our arms around the entire function.

 

Joe Wallin:   Right, so you’re not going to just drive by and give a few hours and then leave because [Overlapping] [00:13:59]

 

Shannon Swift:  No, that’s not our, that’s not us.

 

Joe Wallin:  Okay.

 

Shannon Swift:  Yup.

 

Joe Wallin:  Okay.  How do you – How do you – so, imagine, I see this some, maybe you probably see it more employees asking questions about their stock options, trying to understand, how do you feel clients feel those types of questions?

 

Shannon Swift:  Yeah.  And that’s again, you’re really trying to anticipate every single thing that’s going to come up and kind of systematically addressed it.  So, that’s when that in an orientation program that we put together, we’re going to cover pretty much all of the benefits, the options, facilities, the company, the business and then when I handout stock option grants, I also asked the employee, okay now, have you had stock options before?  And if they say no, which is surprisingly common in our world.  Then I’ll kind of explain to them.  Okay, well let’s just step back and talked now.  Here’s a difference between a Non qual and an ISO, here’s what this means as an early stage for a private company, these are not available on the markets.  So, it’s kind of a special thing that only you get to get as an employee.  And here’s a strike price.  Here’s what it means in terms of the expiration date and here’s some potential scenarios of what this can look like going forward.  You don’t have to do anything with it now but just make sure that they understand exactly what it is that they’ve got.  I’m able to generate some excitements about the potential and let them see if you’re adding value to the company and the value of the company is going up in a long term, this is going to benefit everybody.

 

Joe Wallin:  Yeah, that’s great, that’s great.  Mike?

 

Mike Schneider:  What, yeah, I was wandering you’ve seen a lot of things right?  So, with much different companies, what are some mistakes you see people make early on, startups as they’re transitioning between these various phases, what are something they should watch out for, thing that you’ve seen go wrong and you might be able to give some warnings about?

 

Shannon Swift:  Yeah, I think a couple of different areas in.  Again, back to kind of laying out those early philosophies that you can avoid these things but one is really not focusing at all on cultural fit when hiring.  And when you have a small team that’s working together 12-14 hour a days and you get somebody that is really focused in a different way.  So, for example, okay, collaboration is, it described us.  We worked completely as a team and if somebody needs help, somebody just jumps in and helps them out.  And then you get on e person that’s kind of like well, that’s not my job and this is what I do and I’m more of a individual and I want to go into my office and shut the door.  That’s really painful and it’s usually a pretty painful line drawn out process before the damage is really recognized and rectified and the person is helped on to their next career.

 

So, I think really focusing on cultural fit and involving the team and hire especially those first one that are non friend and family kind of a family.  When I say family, it’s kind of like the people that you’ve worked with in the past and you’ve started this adventure together.  So when you start to bring in people from outside, it’s focusing on cultural fit and also on cultural fit from a perspective of hey, we’re a start up and we need people that can be resourceful and adaptable and if you have somebody coming out of a very structured environment, focusing on that fit as well, it’s just really going to be the environment that this person going to drive in.  And I think another one is not using some initial boundaries with regard to hiring ranges for salaries and stock options.  And, so, you might have a situation where somebody comes in and they’re like, I make a bunch of money in the past with equity and I don’t really care about salary, I just want equity.  So, you give them this huge completely out of band grant.  But then, later, salary starts to come in line and the company – the team grows and now this person is getting his salary and they’re getting increases but their stock is just so completely out of whack.

 

And so, I like to always just have some initial hiring ranges just some light ranges to say okay, if we have somebody that cares not at all about salary, here’s the minimum amount that they’re going to get for this job, its still is going to make sense.  And then, here is the most equity that will do that still makes sense for this role.  So, I think avoiding some of those early compensation mistakes which are very difficult to change.  If you’re overpaying somebody or if you’ve given them too larger grant, that’s not something that’s easily fixed.  And so, really giving some thought maybe building a pro forma ahead of time.  And then not being too sweet by where somebody’s coming from, I think there’s kind of a sometimes, people will say, oh, this person we’re getting from Amazon, oh, my gosh, they’re going to come to our startup bit, is that person really a fit and kind of overlooking, kind of not getting intimated by backgrounds of certain degrees or certain jobs that they’d had but really focusing on is this a right fit.?  So, those are some of the most common I would say.

 

Joe Wallin:  Yeah – oh, go ahead.

 

Mike Schneider:  And where did you, oh, go ahead.

 

Joe Wallin:  No, please go ahead, Mike.

 

Mike Schneider:  I was going to ask about so typically like in the business that I have worked on, my inclination is to go with independent contractors kind of early in the business to keep things arms distance and easy to maneuver and keep the business  flexible.  What are some of the kind of advantages and disadvantages to hiring employees or just contractors.  I mean, I assumed when the company gets to be a certain size, you just kind of have to start bringing people in and making them part of the team but I mean, what are some of the reasons that people might want employees over contractors vice versa, what’s the thought process there?

 

Shannon Swift:  Yeah, and that’s actually something’s that comes up a lot.  So, I’m really glad that you brought that one up.  So, I think, the earlier stage before you have solid funding is a good time to use contractors.  So, you don’t really want to commit to that long term relationship and you don’t know if you’re even going to be around for more than like three or six months.  But I think that if you see this role as an ongoing one that the company is going to need; you definitely should make that an employee.  The way that I kind of looked at independent contractor is, is it a project?  Is it a project that they’re going to come in and do a specific thing and then we don’t need that thing anymore.  And so, if you need to ramp for a specific period of time, maybe you have a big project that you’ve got to get through or you’re just trying to hit a deadline.  Then, maybe like in one month or three month, maybe six month contract, but, if it’s really a genuine need that the company has an ongoing basis, I’d always recommend just going through an effective hiring process but in the right amount of time to make sure you’re getting the right person and then bringing them on as an employee.

 

Mike Schneider:  Yeah, I always think of employee as hopefully being a bit less expensive maybe because you’re committing to a longer term project but there’s a lot of cost involved that people probably, if you hadn’t employed people, you don’t realize all those sort of additional cost that go into having an employee beyond just the salary.  Could you give us a thumbnail view of what that’s look like?  So, let’s say you’re hiring out an employee and you want to pay them a $100,000 salary.  What should you be looking at in terms of the other cost that go along with that including things like payroll taxes and the employer side of the tax situation, I don’t know, cost of insurance and office pays may be not office pays just sort of something that varies a lot, I mean, I guess that when you’re helping people budget from employees, what kind of a markup do you usually add on top of the salary to help them understand what it’ll cost?

 

Shannon Swift:  Yeah.  I usually – and this kind of comes to the philosophy that’s really philosophy.  So, how do we position ourselves relative to the market?  And so for a benefits perspective, I’ll say, okay of we’re going to be at market for benefits, I usually say 20 percent.  So, that $100,000 employee we’re going to have another nine, nine and half percent for payroll taxes.  So, you’ve got FIT and then you’ve FICA – FICA O and FICA M, so, you’ve got workers comp and employment.  So, usually, we’ll just work with the finance department to say, okay, what did you want me to budget for payroll taxes but it’s usually nine or nine and half percent.  And then your health insurance benefits, if we’re going to have just a solid health plan in place and maybe a small amount contributing toward dependent premiums, we got time off, you might have a 401K plan and those are going in place much earlier than they ever have before.  There are just so many options that are available; the WTIA actually has a multi employer plan that is so cost effective that even a startup can afford to get that in place.

 

And so, I just kind of like factoring all those things looking at transportation, are we going to provide an ORCA card.  And then I built that a spreadsheet that’s benefits as a percentage of payroll typically 20 percent is what I recommend budgeting.  If we want to be highly competitive, maybe 21 and half, 22 percent but back to the contractor comment, I’m not sure that that I really see at least in our world that contractors are really saving money.  That’s just a re-distributions So, instead of that 20 percent going toward those cost, they’re paying half of their social security as an employee we’re paying the other half as a contractor they pay the whole amount.  And so, really that 20 percent I think it kind of works out to be the same regardless whether it’s a contractor or an employee.  But one of the other mistakes that I’ll mention there is hiring a contractor without thinking about the next step and so paying a contractor a really high hourly rate and then when you want to convert them to a full time employee when it make sense to do that, they’re like oh, no, I don’t want to be converted now because I’m going to be – it’s going to be a big take away.

 

So, I usually, when I bring in a contractor, if there is a potential that were going to turn that into a full time roll, I always anticipate what the next step is going to be and so, we’re going to make sure that the contractor is not making so much that it’s going to be unattractive to them when we want to make them a full time offer.  And that’s something I think also is early stage founders.  We’re really thinking about next step for a lot of things, setting up our initial healthcare plan.  We’re going to start with basics but then next year, if things were going really great, then we’re going to add this and then the next year after that, if the team cares more about this, then we’re going to add that.  So, kind of knowing you know what, what is our stage this year versus next year versus the year after and that’s something that can really avoid some big problems as well.  But definitely on the hiring front, when you’re working with contractors that you want to bring on board full time.

 

Joe Wallin:  Wow, so how many people are on your team now?

 

Shannon Swift:  Oh, my gosh, so, across are I’m having trouble keeping track.  And it’s so funny because I didn’t really set up to built a business, I just started doing this because this is what I love.  I’m a start up junkie.  I love working with early stage companies.  So, we have 21 folks now and four of those are on the Talent team.  And so, we’ve got 16 that are working across the leadership in the onsite and HR on the box site.  So, yeah, amazing group of HR Talent from all over some amazing companies in Seattle and it’s really a lot of fun for our team to be able to work with a variety of different companies and industries.  Primarily technology, but we have some non profits as well and we have some gaming companies, we’ve got kind of a big variety of industries now.

 

Joe Wallin:  Well, okay.  So, if people want to find you, what’s the easiest way for them to find you?

 

Shannon Swift:  Yeah our website is swifthrsolutions.com and that list all of its user pictures of all of us and contacts for us and information about all of our services.

 

Joe Wallin:  So, for a long time you’re in the NWIN board, and then NWIN sort of got full it in I guess in parts to WTIA.  Are you one of the WTIA board now?

 

Shannon Swift:  I am, yeah.

 

Joe Wallin:  You were before?  Weren’t you?  I can’t remember [Overlapping] 00:25:37].

 

Shannon Swift:  No, I wasn’t.  I actually wasn’t on the WTIA board before and I’ve actually gotten really involved with the Health Insurance Trust with the WTIA as well and then also on the Entrepreneur Organizations Seattle Chapter Board.

 

Joe Wallin:  Okay, the EO board.

 

Shannon Swift:  Yeah.

 

Joe Wallin:  Yeah, yeah, yeah.  Well, it sounds like the WTIA got some great--

 

Shannon Swift:  Benefits, yeah.

 

Joe Wallin:  Small company, handful employees.  It sounds like that’s the place to go to try to find some health insurance.

 

Joe Wallin:  Yeah, and I think it’s pretty exciting actually to see the product offering that Mike and Michael are building over there.  So, not only the health insurance plan that we have with lot s of different options for companies even with just two employees.  But the multi employer 401K plan is super exciting as well.

 

Joe Wallin:  Yeah, I mean that sounds like a great service to the Seattle.

 

Shannon Swift:  Definitely, definitely.

 

Joe Wallin:  They do it state wise, they will do anyone state, right.  They’re probably down by the state but they probably don’t do anyone outside.

 

Shannon Swift:  You know that’s a really good question.  I believe that all of our – the health insurance just is just for Washington.

 

Joe Wallin:  Yeah.

 

Shannon Swift:  That I know, I mean other employees in another states were definitely covered.  And so--

 

Joe Wallin:  Yeah, because companies with multiple--

 

Shannon Swift:  Exactly and more and more we have our clients just right out of the gate have multi-state employees and so, yeah, the plan definitely covers employees across the country.

 

Joe Wallin:  Right.  Super fun.  Mike, any parting thoughts questions Mike?

 

Mike Schneider:  No, it’s just great stuffs.  I mean, it’s always interesting to hear about these different aspect.  I kind of – I don’t think people to stop often and think about this phase of things and have a plan for it.  So, I appreciate your insight.  It’s just great.  Thanks for sharing it with us-

 

Shannon Swift:  Absolutely.

 

Joe Wallin:  Yeah, and thanks everyone else for listening.  We’ll see on next week.