This is the first part of my series on hiring for startups. Stay tuned for the next two parts (Evaluation and Onboarding) in the following weeks.
Hiring is hard.
Even Batman, with all his powers, struggled to put together Justice League and get them to work as a team – so it is understandable if startups with limited resources find it a challenge too. Once a startup has achieved product-market fit, hiring is likely the most significant blocker to further growth. It’s also hard because, unlike your product, the nature of hiring flips altogether as you grow.
The Importance of Hiring Well
When you start a company, the people you start with must be multi-faceted and wear many hats like Swiss knives. But as you grow, you need specialists who understand their domain (sometimes even better than the founding team) and will likely build teams of their own. This transference of ownership without losing the mission and culture you started with is a tight rope to be navigated carefully. The average hiring mistake costs 15 times an employee’s base salary in hard costs and productivity loss – something a startup can hardly afford. (Ref: ‘‘Who’’ by Geoff Smart and Randy Street, 2008)
Unlike well-established companies, startups cannot carry passengers. If there is no output, there is no place to hide, which puts a lot of pressure on hiring right the first time. There is a much larger talent pool available to startups in India today than even a decade ago which makes it easier to cover execution gaps and grow faster. However, hiring at startups (and in general) continues to be hit and miss, with many management gurus suggesting a ~50% success rate at manager levels and above.
Finding the right people to join your startup is not only a catalyst for growth but is also critical to your success. A lot of early-stage growth is about creative problem-solving – after all, you are trying to bring something new to the world. The best people are not marginally better than their peers in creative and decision-making roles. They are multiple times better in terms of their impact on the business. Thus, finding the right talent is not about getting a little better – it can make the difference between success and failure.
Set the bar high enough, and recruiting the right people becomes a virtuous cycle – the best want to work with the best. As you grow, getting this talent density right is essential. This is often why the most successful startups (Netflix is a notable champion) prefer to be understaffed but talent dense. While it is common to hire indiscriminately as you grow, performance is contagious. Have enough free riders onboard, and the intensity of the entire team drops.
Hiring is often the most critical part of a founder’s or CEO’s job – adding people who are better than you at what you do is the only way to grow the company from an idea to an organisation. Putting a method to the madness can significantly accelerate the process while keeping standards high.
Through a lot of research and experimentation across startups at different scales and across various industries, I have settled on a hiring process that involves four distinct stages:
- Identification and Sourcing
- Evaluation
- Selling (including compensation)
- Integration
Each of these is critical to creating an organisation that is talent dense. But a word of caution: the best talent is not always available on tap – you need to plan ahead. It requires you to know what kind of people you need for the next evolution of the organisation, and start identifying and nurturing them, sometimes even a year or more in advance. Sometimes, it makes sense to hire people that are good not just for today but will also fit larger roles tomorrow. The biggest hindrance to getting the best people is not your ability to pay but their availability to join.
Identifying and Sourcing
When adding to the team, it helps to be clear about what you are looking for and what great looks like. It’s easier to hit the bull’s eye when you know the target.
The process starts with establishing a scorecard defining what you are looking for in the role and what success means for the person in it. Most job descriptions are bland and general when what you need is to target a specific set of outcomes that define a job well done. Being specific also means that these outcomes are relevant for a particular point in time – as you grow, the requirements from the role may change. Here is an example of a scorecard from Bonito Designs, one of our early-stage portfolio companies looking to hire a VP-Ops.
You also want to understand what a good candidate means for the role you are filling. One of the easiest ways to do this is to meet the three to five most qualified people for the role, even if you can’t hire them. This will help you understand the combination of skills and experience you should be targeting and, just as importantly, what you should be avoiding. This may seem daunting, but you will be pleasantly surprised at how people are open to discussions if you can be specific about what you need. And they are also a great source of referrals – top performers are the best people to help you identify other top performers.
Akshay, the founder at Leverage Edu, is a great proponent of this. He frequently speaks to people who have done similar roles in companies he looks up to when looking to hire. For example, when looking to hire for his sales and marketing teams, he talked to companies a little higher on the curve with a similarly long selling process and selling lifestyle products with a higher ticket size. This similarity in the business model not only gave him inputs on hiring but to his business processes as well.
One of the critical things you are trying to identify as you look at the role you are hiring for is whether it is a value creation or a value protection role. You want an ambitious risk-taker for value creation – hence, you will look for initiative and ‘hustle’ in previous roles rather than exact skills. In the early stages, almost all your early hires are likely to be value-creators. But as you grow, you will find the need for people who can protect value – who are calculated and conservative, with extensive experience doing exactly what you are asking them to do. In such cases, you are trying to assess whether they already have the necessary expertise needed for the role.
Hiring Channels for Sourcing
Once you have defined what you need for the role, you can start looking for the ideal candidate. Before you go out to the market, ask yourself if there is anyone internally you can groom into the role. Specific expertise can be taught, and you would not only have someone who understands the organisation’s culture but is also tied into its long-term success. After all, you are looking not only at a collection of skills individually but also at how they all fit together once they are on the same team.
But this may not always be possible, especially in small early-stage teams. When you go out to the market, it is crucial to have a clear strategy and systematic process to get high-quality candidates when you need them. Available talent pools rarely feature the best people; hence it is even more important to tap as many channels as possible:
- Referrals: In the early days, your most productive source of hiring is likely to be referrals from your personal and professional networks – employees, friends, investors, mentors and even suppliers and other business partners. Discuss open roles with them as much as possible, make it easy for them to share references with you and thank them profusely even if you don’t end up hiring.
- Executive Search Firms: Consider hiring an executive search firm for domain experts and leadership positions (on a piecemeal or retainer basis depending on your requirements). They have access to a much larger pool of candidates, and they can also cover some of the trust gaps that may exist for early-stage companies where the brand pull may not be powerful yet. However, (a) the responsibility for recruitments should always lie within the company and cannot be outsourced, and (b) make sure your partners are clear about what you are looking for. Nowadays, it’s even possible to find recruitment firms that specialise in whole teams for early-stage startups. Getting referrals to firms with a good track record helps too.
- Hiring Agencies: Much in the same way, if you are looking to hire sizeable front end teams (feet on street, delivery boys, warehouse personnel, etc.), there are agencies that specialise in mass hiring drives.
- Job portals: They are an economical way of recruitment if you have a team to either hunt for profiles or follow up on the incoming leads from ad placements. There are usually two tiers: (1) Portals that specialise in senior recruitments (IIMjobs is an example that several of my portfolio companies have used) and (2) Portals that are more suited to mass hiring and as a database of resumes (Naukri comes to mind). There are even portals such as AngelList that specialise in recruitment for startups. It is important to tap the right portal for your requirements and then make sure that you are reasonably tight with your filtering.
- Campus hiring: Another tool to use when you are looking to hire for specific skills (designers, coders, etc.) or front line roles that require minimal training (delivery boys, sales, etc.) or when you are large enough to start creating talent pathways (and you head to engineering colleges or B-schools to hire a pool of talent). In fact, some colleges help you hire not only from their current batches but also help you spread the word amongst their alumni network.
- Specialist background: You can also look to tap specific sources of talent for some types of roles. For example, many startups hire people who have had short service stints in the armed forces for supply chain, logistics, admin, and infra maintenance positions.
- Events: Another specialised means of hiring for tech roles in startups is hackathons, coding camps or tech seminars. If you are large enough, you can try to run one independently (I have seen examples of multiple startups such as Uber, Ola, SuprDaily try this). Or you can participate in one organised by an industry forum or a group of startups working together.
- Social Media: If you have an active social media presence and wide reach, you can also leverage that to share roles you are hiring for. I am sure many of us would have received emailers from Uber to sign up as a driver on their platform! It helps you connect with younger audiences, and you can amplify your reach by using the right hashtags, making your content topical and boosting your posts.
Some fundamental tenets help you make yourself more attractive to potential candidates as you build a team. As a young company that may not be able to offer the perks and pay that larger companies can often offer, you need to brand yourself and become great at storytelling. Here is a great Twitter thread by Adithya Venkatesan on the GoJek branding playbook, but essentially you are trying to let people know why your company is a great place to work.
Money is just one part of the equation for the most talented people – who they work with, the impact they can create, the independence and flexibility on offer, and the organisation’s culture can help them make their decision. If you can bring these out clearly, they may well be more compelling than a BMW bike!
Hope you liked the article. Look out for Part 2 and Part 3 of the series over the next couple of weeks.
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