Strategic Recruiting For Next Stage Growth Companies
In this post, we share thoughts regarding measures rapidly growing startups should take as they receive funding and need to grow their employee base significantly beyond the founders’ network to hire people.
Early stage startups typically find talent by relying on the personal networks of the founders and referrals from the core, trusted team of people they initially hire. Running lean and mean, they rarely invest in building a formal recruitment process or dedicate anyone to singularly focus on hiring the BEST fit talent. However, once organic revenues reach a certain milestone, or investors step in to fund the next stage of growth, what happens next, in my experience, is typically one of two potentially disastrous recruiting scenarios:
- A mixed bag of good and bad hires are made fast and cheap as the firm relies exclusively on the “post and pray” method of advertising on job boards and then hiring the best available and most qualified from among those who apply.
- A number of good quality hires are made at a premium cost, but without a sustainable recruiting approach, by relying exclusively on third party contingency or retained recruiting firms that charge a fee of 20-33% of first year compensation for each hire.
In order to become more strategic, scalable and sustainable consider these tips as you embark on the next level of growth, particularly if investor funding means hiring a lot of people within a specific timeframe into revenue-impacting roles:
- Realistically anticipate workforce needs and hiring timelines by first assessing your talent mix, by role and by market competitive recruiting difficulty. Top performers who are currently employed at a competitor aren’t going to leave their current job to come to your organization at the drop of a hat just because you’re on an urgent timeline to fill seats. In most cases, they won’t even be applying to posted jobs online. That makes it imperative to have a proactive and targeted sourcing strategy that includes identifying where your desired talent currently works, and how you plan to approach and engage them to consider joining you. This can add weeks to hiring cycle time which needs to be included in your sourcing plan and hiring timeline estimates. Typically, a top performer who is currently happily employed may require multiple points of contact over several weeks before they even engage in an initial conversation about your opportunity.
- Develop and communicate a clearly articulated and differentiated employer brand and employment value proposition (EVP). If you’re the new kid on the block and no one knows your company’s name (or what you do) how are you going to engage top performers working at your well-branded and more established competitors? First, you need to highlight what is truly unique and compelling about your company. Perhaps it’s a flat management structure and the ability to have contributions visible and recognized faster by leadership. Or, it could be an entrepreneurial culture where ideas are valued and actually implemented. In many cases, your differentiators can be low cost, simple things that break from traditional benefits packages, whether you offer unlimited vacation days and/or a “flex work from anywhere” policy.
- Start thinking like a big company. Mitigate HR non-compliance risks stemming from an organically grown, less formal approach to managing people. Once your business begins scaling for growth, standardized HR and recruiting practices are critically important to support accelerated hiring volume. A common major roadblock to high growth recruiting is when the CEO/Founder believes he/she is the ultimate arbiter of whether a future employee is a good fit, and therefore insists on interviewing ALL candidates, right down to the lowest level of the organization. Rather than bottleneck hiring, create a consistent interview and selection process with supporting training and tools to enable hiring managers to make decisions consistent with the founder/CEO’s own vision for top talent.
Likewise, investing in a recruiting technology platform will help manage performance and provide the required reporting for compliance. Finally, be aware of hiring laws. For more on six HR compliance laws that every growth business needs to be aware of, click here.
- Establish strategic recruiting “partnerships” with external recruitment service providers in advance of actual need. Outsourcing the front end of the recruiting process provides, by far, the greatest opportunity to scale recruitment. Activities related to sourcing/identifying “passive / employed” candidates, doing preliminary phone screen interviews, and interview scheduling / coordination are not core competencies for most entrepreneurs, nor should they be. At this stage of growth, founders, hiring managers and in-house HR or dedicated recruiting staff should be running the company, driving the interview-to-hire decision and onboarding processes, not sourcing and screening prospective talent. In other words, when a hiring spike hits, you need reliable partners who can quickly scale your candidate sourcing engine with top quality “pre-qualified” talent to be interviewed by management.
So, what viable recruiting partnership options deserve advance consideration?
Hiring dedicated HR Generalists or recruiting staff to manage recruiting in-house: Once your business consistently has ten or more uniquely different positions open at once, it may make sense to hire an HR Generalist. That person can also handle some baseline level of ad hoc recruiting for some of your needs in addition to setting up and managing HR related matters for the company. However, when the hiring needs exceed 15-20 open and uniquely different positions – or if you have 10 or more senior level or highly specialized positions – you ought to consider hiring a dedicated in-house recruiter or contract temporary independent recruiter or sourcer. The WORST time to hire full time or contract recruiter is when you have a time sensitive hiring spike as you will lose time in finding capable recruiters while managing through your hiring/decision process. Plus, building a function from scratch also means investing in an applicant management database technology and sourcing tools, as well as providing the new hire with computers and management oversight.
Hiring one or more contract temporary independent recruiters or a contingency search firm: There is a definite role for these types of vendors to help you fill one-off, industry or specialized roles or critical, management and executive level roles when you aren’t anticipating future similar openings. The downside of contract recruiters is finding them and managing them and there isn’t enough ROI to justify their cost unless you have five or more jobs for them to recruit for. Relying on one or more contingency search firm vendors during a growth-related hiring spike to help you source potential qualified candidates to fill multiple individual contributor or first level core business individual contributor or management roles will be very costly at 20-33% of first year compensation recruited. Since you have to pay an additional fee for each hire made from the vendor’s candidate pipeline in the future, this is not a multi-hire strategy we’d recommend UNLESS the vendors have deep expertise and contacts in the industry and your timeline is such that you need the talent hired yesterday. Retained search is typically engaged only for positions above a specific compensation or position level – generally $150K and above.
If you already have a dedicated in-house recruiter or HR person, consider partnering with a recruitment research firm or RPO (recruitment process outsourcing) provider. A research firm is capable of generating lists of potential candidate names and contact info for your in-house team to chase down and engage in the recruiting process. This can be a valuable sourcing partnership provided you have internal dedicated recruiters who are skilled in chasing down and engaging highly passive, employed talent. These firms typically provide basic “name generation only” support, but most will also conduct initial outreach and preliminary phone screens to assess candidate interest so that your staff only needs to follow up and do a deeper level screen for experience and fit.
Similarly, RPO – Recruitment Process Outsourcing vendors, can provide a sourcing/screening capability, but their real value is in how they can wrap around your in-house team to address bandwidth scalability and sourcing expertise challenges. Additionally, RPO providers bring much more long term value add to the table; especially for start-ups that lack sourcing tools, formal systems and processes to manage the end to end recruiting process. In a manner similar to a research firm, an RPO partner can operate as a natural (and seamless) extension of your company and brand – often working within your systems (or providing one if needed) and by utilizing your company’s email address. Their work is focused on delivering a high-touch candidate experience and their performance is managed against hiring goals and mutually agreed upon performance metrics (SLA’s – Service Level Agreements) contractually built into each engagement. Terms typically range from 3 to 36 months depending upon your needs and scope can range from (a) providing sourcing/screening support to an in-house team to (b) full life cycle (end-to-end) recruitment support for a group of positions, department or vertical mix of roles. For most start-ups, flexibility is paramount and, in contrast to the behemoth RPO outsourcers, smaller boutique RPO firms now offer more flexible terms that are very attractive to growth companies requiring smaller hiring volume commitments and shorter minimum contract terms.
There’s little argument that a company is only as good as its people. That’s why getting your talent right is so critical, particularly in the early years. Unfortunately, young companies on growth trajectories are particularly vulnerable to a multitude of hiring mistakes, from paying too much for talent to filling seats too quickly or too slowly…or filling those jobs with the wrong people. While there aren’t any guaranteed ways to succeed in recruiting top talent, strategically, you do need to anticipate your needs, focus on your brand, think like a big company and make the appropriate decisions on how to utilize in-house versus external resources. That can make all the difference between failure and success.