Newsletter #46: on recruitment in early-stage startups
16 minutes reading time. Thoughts on startups, growth, and technology 🚀
Welcome to another edition of the Struggle.
The Struggle is a weekly newsletter where I share my thoughts and learnings from running a fast-growing startup in Southeast Asia.
In every company I have ever worked for, top talent recruitment has always been a never-ending battle. Most founders believe they are doing a good job of hiring great people. Yet, the reality is that we all can become better, and most startup teams are not as good as the founders tend to believe.
I have been thinking a lot about improving at attracting top talent and wanted to share some of my lessons. This is definitely a work in progress, and your feedback will be appreciated.
“One of the biggest problems we see companies do post demo day is not establishing best practices around hiring.”
Michael Seibel is CEO and a partner at Y Combinator
People often say how your first 10 people are the most important hires you will ever make, as they will replicate themselves and set the quality bar for any new employee you will ever hire.
Yet, when you are a young startup and don’t have the resources and brand of companies like Stripe or Airbnb, it’s hard to attract Ivy League talent.
In fact, talking to people who are obviously great will put you in direct competition with all successful and popular brands. Then it will be hard for you to match compensation packages and perks, resulting in wasting time and energy.
Perhaps, a better approach focuses on people who are great but struggle at selling themselves offline and online. I have met many superstars with certain skills but do not know how to articulate their strengths.
Another common mistake I am guilty of making is hiring too many people too quickly. It does not really matter how many people are working for you; in the early days of all companies, all that matters is product-market-fit.
How to source good talent?
Personal network
As mentioned before, going directly for the best people out there may not be the most effective approach. But if you focus on building trust and delivering value to everyone you consider exceptional, you will have opportunities to work with them sooner or later.
Never miss an occasion to introduce people to one another and offer advice if they ask for your help. Such small gestures will compound, and it will be easier to build trust.
Referrals
People hang out with like-minded people. If you manage to establish a small core group of ideal culture fit employees, make sure they are incentivized and appreciated when making good talent referrals. Celebrate employees who make referrals as that will take you one step closer to building a tight-knit team.
Outbound
Outsourcing recruitment can be quite expensive, and many recruiters will not personalize outreaches or sell candidates the same way the founding team can.
If your team is small, I would advise the founders to take the lead and manage all the recruitment. In the process of recruiting your first key employees, you will be able to build a framework that can later scale beyond you.
When you are outreaching to people on LinkedIn, A/B test every step of the process until you optimize your messaging and calls to action (CTA), I typically develop two templates which are A/B tested over the first week, and always add a few messages to make it sound like I am not just copy-pasting a carefully crafted templated.
Once the messaging works, I focus on optimizing the CTAs and the links I am sharing.
How to screen for great people?
If you are interested in finding out how we communicate those values check out this landing page 👇
Once it’s clear what are the qualities you are looking for, the next important step is to set up an intelligent interview process that good candidates would enjoy going through.
Make sure the process is transparent, fast, and easy to follow. Then train anyone on your team that will ever recruit people.
Our interview process consists of three to four steps depending on the seniority of the person we are hiring:
Phone interview - quick culture fit
Here you dive into what interests candidates about Greenhouse specifically while getting a sense of how much research they’ve done.
Next, we discuss motivations. Candidates often bring up how they are looking for a more challenging opportunity, a generic answer that does not tell us much about their culture fit. So we counter it with probing on how they want to make an impact or the types of problems they would love to work on.
The objective in this phase is to quickly eliminate the poor culture fit candidates from the great ones.
I have created templates via Calendly that help me schedule phone calls for each role in an automated manner while sharing information with the candidate about our expectations and next steps.
Face to face interview - deep dive into culture fit
All questions here are designed to get to know the candidate while testing how they fit our culture. Here you go a few examples:
For the last few companies you've been at, take me through: (i) When you left, why did you leave? (ii) When you joined the next one, why did you choose it?
I love this question because it helps me understand how they think through big decisions. What were they optimizing for that the career move maximized? Are they looking for safety, or are they eager to take risks? Are they trying to develop new skills or perfect existing ones? Has their goal been to scale their management experience or dive back into execution to get their hands dirty?
What are you really good at, but never want to do anymore?
Some incredible candidates excel at exactly what you’re hiring for. The trouble is that they don’t want to do it anymore.
What's one part of your previous company's culture that you hope to bring to your next one? What one part do you hope to not find?
Do they immaturely rant about the failings of past teammates? Do they thoughtfully consider why certain problems existed, maturely discussing the tradeoffs their previous company had to make? Can they reason through why one company or industry's problems or culture might not apply to another's?
What should our team be doing differently that could yield 10x improvement?
Be mindful that oftentimes we hear ideas that are a 10% improvement, not 10X. The temptation can be to offer non-controversial, minor tweaks to a process. We are looking for folks who have a bias for action and can think like an owner. Can they think at the CEO level, beyond just the job they’re applying for?
What are you better at than most anyone else? What’s your superpower, and how will you leverage that to make an impact at this company?
By asking about their superpower and how that will specifically help them in this role, you can learn a lot about candidates’ self-awareness and how prepared they are. If they can tailor their response to what your team is focused on and how they can add value, we know they’ve done the homework — both on your company and on themselves. As a manager, it’s important to help people flex what they’re really good at instead of just trying to improve on their struggling areas.
Case study - competence assessment
This step is designed to test the ability to execute under a tight deadline. In my experience, many people are good storytellers but not great when it comes down to execution.
Early on, you do not need smart people who give advice only. It would be best if you had people who can roll their sleeves up and show what they are capable of.
We typically give 3 to 5 days for preparation and pick a closely related challenge to the role we are discussing. If you are busy and cannot figure out a specific challenge, you can ask the candidate to prepare a plan of what they will focus on during the first month, first quarter, and first six months once hired. After all, presidential candidates are often asked what they plan to accomplish in their first 100 days in office, and hiring managers tend to evaluate candidates for leadership positions similarly.
Then the candidate pitches the leadership team their findings and suggestions.
During this phase, we pay attention to the following:
Clarity of communication
Problem-solving approach
Understanding of our business
How the candidate makes assumptions
How the candidate answers hard questions
Ability to solve problems fast when you lack sufficient information
Culture fit
The presentation takes 20 to 30 minutes, followed by 15 minutes of Q&A.
Typically, we involve C-level employees and at least one technical person representing the hiring department. In my experience, two to three people are more than enough as otherwise, it’s hard for everyone to ask their questions given the 45 to 60 minutes allocated for the case study interview.
Culture fit
Every step of the process is designed to test for culture fit but has competence, business acumen, and motivation probing.
In this final phase, we involve a few more people from the leadership team to understand better whether the candidate fits the group or not.
Examples of discussion points include:
Tell me about the last time that you encountered a rule in an organization that you thought made no sense. What was the rule? What did you do, and what was the result?
This is a tricky one, as you dont want people who just let it go, but you also don’t want people who overreact and are unreasonable. The ideal candidate would lay their arguments in the following order 1) discovered the rule, 2) conducted research, 3) spoke to a few people who have been longer in the company to understand better the context, 4) sought advice from influential people, 5) prepared suggestions and addressed them with the management, 6) led a project that ultimately changed the rule, 7) here you go the impact.
It’s your first few months on the job. What questions would you first ask and to whom?
The first few months must be as much about learning as doing. Good candidates will distinguish themselves by asking open-ended, intelligent questions and sourcing the answers through various people within the organization.
What makes you happiest and most effective when working with others?
It will give you insights into the candidate's working style and how to make the best out of the relationship.
Red flags 🚩
Throughout the entire process, be mindful of the following red flags:
The candidate avoids talking about past failures.
The candidate exaggerates answers.
The candidate takes credit for the work and inflates claims of accomplishment not commensurated with role/title/team size of past roles.
The candidate speaks poorly of past supervisors.
The candidate cannot explain job moves.
The candidate is more interested in compensation and title than in the job itself and the company.
For managerial hires — the candidate has never had to hire or fire anybody.
No upward career progression at a single firm.
Jog-hopping.
Closing thoughts
At the end of the day, finding and closing the right candidate for your role is your number one priority. That would require many iterations on the way you attract, screen, recruit, and retain talent. Every startup eco-system is different, and every founder has different unique strengths, so make sure you leverage all that.
Some people suggest that a 70% closing rate is a good benchmark, but the higher, the better. Think of it as:
Like marriage proposals, you want to only make an offer when you're sure they'll accept.
Erik Torenberg Co-founder @Villageglobal and @beondeck.
Consider seasonality as well, in many countries employees receive bonuses at the end of the year, consequently the Christmas holidays a great time to reflect on new opportunities. In other countries like Indonesia, people get their bonus before Lebaran in May or June. Thus that’s a good time to think about making offers.
If you are interested in finding out more about our interview process, drop me a message, and I will be happy to share more learnings with you.
This newsletter references lessons from Erik Torenberg, Julian Weisser, and First Round Review.