This is part three of my series on hiring. The first part covered finding great candidates. The second part covered interviewing. So once you've found someone you'd like to recruit, how do you pull them in?
Recruiting
This is where you switch from "we're hiring" to "we're recruiting" mode. There's no longer any doubt about whether you want the person or not. Your goal is to get them on your team and make sure the relationship is set up for success.
And you better really decide if you want the person or not. The only acceptable result of interviewing for a hiring manager is PASS or RECRUIT. If you're unsure then do more interviewing, do reference checks, whatever you need to do. If you're still unsure then it's probably a PASS.
If you're uncertain then you'll fail at recruiting. They will sense your ambivalence.
One mode
There's only one mode of recruiting, and it's called 11. If you were 51% on the side of hiring a person, and you decide to hire them, you better go after them like they're Michael Jordan.
There are a couple of reasons for this. Most of it has to do with psychology, which I'll discuss more below, but the net result is you'll lose if you pursue your recruits with an effort that's proportional to their skill level.
And if you don't personally have the time or energy to recruit with vigor then you should find someone else to be the hiring manager.
Wooing and momentum
Once you know that you really want this person on your team, you can fully dedicate yourself to closing the deal.
Momentum is the name of the game. If you wait a week between the onsite interview and your follow up phone call your success rate will fall 5x. Either someone else will close them or they will reject you in their mind because they think you're going to reject them.
It's kind of like dating. There are the same "Will you like me? I like you" dynamics. It's a little less personal for you because you're just "the company" but it's more personal for them because they themselves are on trial.
This is why the best, happiest, most successful hiring deals you hear about happen in very small time frames.
So call them the day after the interview, and tell them that you'd like to work with them, and would they like to work with you? And you're willing to do anything you can to help them decide.
And it really is in your best interests to help them make the right decision for them. The only stable employer-employee relationship is a win-win relationship. If they won't be happy and fulfilled working for you then it'll become a net loss for you, too.
They might be worried about a number of things: how much responsibility will they have? How hard do you expect them to work? Will they be able to move up in the organization? Will they fit in with their coworkers? Etc.
These are all legitimate concerns. You should help them answer these questions as much as humanly possible.
They might also be worried about more career focused things like what their title will be, how much exposure to investors they will get, will they be reporting to someone high in the organization, etc.
Those are also legitimate concerns. They're just a little more charged and negotiating here probably has a lower real impact on the candidate's happiness than he or she thinks. The truth is that seniority is earned not taken. If someone negotiates ahead here they will rarely accrue real long term value as a result.
For example, someone out of college may negotiate to be the "CMO" of a startup, but the people whose opinions really matter (not Aunt Mae) know that titles mean nothing and real capabilities mean everything.
So these conversations are mostly misdirection. [1]
Permitting these conversations in your culture will also create added politics. Avoid it!
They might also ask about compensation at this point. Of course they need to know this before signing an offer letter, but it's worth working through the question of "If compensation were not an issue, or let's just assume 'market' salary, would you want to work with us?" first and foremost. That's the real meat of the question. (More on compensation below.)
Overpromising
Be careful about overpromising. You're most likely to overpromise on small or fuzzy things.
One of our early employees asked if he could get biannual reviews instead of annual reviews. Heck we had never done a "review" before; why not? It was a verbal thing that lasted thirty seconds. I found out a year later he was upset that we were just now doing his first review. Ouch.
We told one of our first employees that he would be like a cofounder or a VP. He later resented it when he wasn't included in various high level discussions. Triple ouch.
The truth is when a junior hiring manager is working with a junior recruit, BOTH of them want to be on the overpromising side. "Yes, I will work my ass off and I have a 200 IQ," says the junior candidate. "Yes, I will make you rich and happy every morning you come into the office," says the junior hiring manager.
Senior hiring managers frankly know better. Not only do they have a better sense of reality, they will also err on the side of under promising.
The next step
Once you and the recruit decide you want to work together, you've got to figure out the right compensation package. Then you'll have a verbal acceptance. Send over an offer letter that codifies the compensation and other terms you guys have been discussing. It will usually be two or three pages. Try not to make it sound lawyerific. Express your enthusiasm and make it upbeat!
It should include the start date you guys have agreed to.
Once it's signed you've got a non-binding agreement. (Work relationships are never binding.) You can expect the recruit to show up on the agreed date.
Now send them a nice care package with schwag. :)
How to woo
In the spirit of momentum and Andy Grove ("only the paranoid survive"), from the minute you meet them until 30 days after they start working for you, you want to be woo'ing.
Try to minimize the maximum amount of time that goes by without contact from you or your team.
Invent reasons to have touch points. A week before they start ask what keyboard and mouse they want. If you find the right moment and feel inspired, send off an email letting them know what's going on inside the company.
Have one of your board members call or email to help you recruit.
You want them to be excited and pumped!!!
Regular contact is most important while they're trying to decide if they want to join. An object at rest tends to stay at rest. If they have a burning question they might be too shy to give you a call. It's your responsibility to provide the regular contact. (Or, for the techies among us, the carrier signal.)
Also, have fun! New beginnings should always be fun!
Momentum, momentum. One speed only. Touch points, and have fun!
Compensation
I skipped over compensation earlier because I wanted to cover the high level arc first.
Now for a level of detail on compensation.
After you've decided you want to work together you have a good foundation to start the conversation about salary, equity, signing bonuses, etc.
Negotiation is something that every founder should read and learn about. If you have someone nearby (a friend, or investor) who has experience negotiating compensation, you might ask them to help you at first so you can learn from them.
Some top tier VC firms even have partners who are dedicated to helping their startups plan and execute their compensation plans. This can be helpful for both learning how to negotiate and to make sure your head is screwed on straight about the market rate for various positions.
Startups also go through different stages. My cofounder and I took an almost zero salary the first year, a $70k salary the next year, and up from there.
That's what founders do. Employees are rightfully less willing to take below market salaries.
If you ever find a startup where everyone is below market that means it's filled with people who are really hungry (good) and/or just out of college (comes with good and bad).
At the end of the day though, most startups just have to pay market salaries.
That's what you want to shoot for. Are you paying what's below market, at market, or above market? You want to be at market, for a variety of reasons.
So does the employee, in most cases, even if they don't know it.
Here's why. Compensation is just one of the many factors that people should think about when they're choosing where to work. Their team and their projects should be equally forceful, not to mention a million other smaller things like the commute, expected hours, job security, etc.
If you pay above market salaries you might be drowning all of the other factors out of the equation. That might work for finance or other job roles that are easily measurable or short term, but you want to build the team that will create the next great software product, and that takes creativity, teamwork, and dedication.
You also want someone who would want to work with you even if money didn't exist. Paying above market salaries is not a way to find such people.
There are ten other reasons why it's bad to pay above market compensation, other than just spending more money and equity than you need to. We'll stop here.
I'll also leave it as an exercise to the reader for why BELOW market salaries might create adverse selection.
So my whole strategy is to try to zero out the compensation piece of the puzzle and engage on all of the other levels that I think are more important. That's why I try to frame the initial question around "If compensation weren't an issue, would we want to work together?"
Note the market comp for managers or executives might be more than you want to pay if you're a first time entrepreneur. Especially if you are young. You are going to have sticker shock.
That's just because you have different life and risk equations. Those people are definitely worth their weight in gold if they are good. Without them you can't scale. And because they represent scale they get to capture some of that scale in their compensation.
They will still be a big win. Or a big loss. Managers and executives rarely have an ambiguous return on investment, so twenty or thirty thousand here or there won't swing the sign on that equation. Be willing to pay up.
Avoid Pressured Hires
Try to avoid getting in situations where you needed a hire yesterday. Urgency creates triage situations that will make you less scrupulous.
And god help you if you didn't have good hiring standards to begin with. They will fall even further.
If you think about it this has widespread implications.
It means a VC can kill a company by pressuring them to grow too fast.
It means the board and its CEO should be looking around corners to anticipate upcoming organizational stresses.
It means you should hire generalists early on so there is no need to hire fresh blood to tackle that new important problem. (You can always hire outsiders; you just don't want to NEED to.)
In general this comes down to "Be Happy." Of course you want to recruit in new rockstars whenever you have the chance. Of course there are roles you'd love to fill with the right person. But if it's the wrong person or the wrong terms you always want to be able to say "No thanks" without losing sleep.
A good clip
We were able to hire one high quality person per month at Xobni once we started hiring.
But it happened in bursts, so don't be worried if you don't hit your hiring goals for any single quarter. For example, we would buckle down for two or three months to push out a new release, followed by a lucky month of two or three new employees.
Be kicking ass
So now that you've come to essentially the end of this blog post series on hiring, I'll tell you the secret to recruiting.
Be doing very well.
For some reason nobody talks about this.
You can talk all you want about how to hire, how to find great people, and you can pound the pavement all day long, but you might be better off working on getting product traction instead.
The same secret applies to raising money as well. You can talk yourself blue about how to raise money, but the most significant bit will always be how much traction you're getting.
This is why Google was able to hire so many rockstars during their IPO days. And it's why facebook will be proving this rule again in the coming years.
I realize this creates a chicken and egg problem.
That's why technical skills are so important for founding teams. :)
And that's just the brutal truth of the situation.
Up next
Part four will be a bonus round. Much shorter. I promise.
Notes
[1] The truth is that perception does matter in some cases, but those betting on seeming impressive, rather than being impressive, will lose out on average. Thanks to Paul Graham for the distinction!
great article Adam! Very good detail on this complicated topic
When it comes to 'doing well' though, I agree it's more important than any one trick for fundraising or hiring - but at the same time , I find there's a lot of important legwork that needs to be done for finding the right investors or employees.
For example if you're doing well, yes you'll get a lot of employees interested in joining you, but perhaps the best will be mostly indifferent since they have many great places to work at anyways. So you'll still need to build those relationships from the beginning and talent-scout as often as possible.
Don't take it from me - Steve Jobs said this in his 2007 panel discussion with Bill Gates
Posted by: Rajat Suri | 12/14/2009 at 01:28 PM
Having always been on the "need to get hired" side of the fence, I am glad you brought up the point about avoiding needing to hire yesterday. I have come across this way too many times, where an offer has come by today and they want the answer yesterday. Those answers are ALWAYS defaulted to a simple "No".
Posted by: Sami | 12/14/2009 at 01:39 PM
Great points Rajat. I really enjoy the Steve Jobs / Bill Gates interview you mentioned. For everyone else it's available at http://www.youtube.com/watch?v=_5Z7eal4uXI . Those guys are amazing.
Posted by: Adam Smith | 12/14/2009 at 02:03 PM
Netflix has an interesting comp model: pay above market, and pay them enough so that there is little to no chance that another company could put together a higher offer
http://www.slideshare.net/reed2001/culture-1798664
(slide ~95)
Posted by: Johngannonblog | 12/19/2009 at 07:20 PM