Recruiting — The 3rd Crucial Startup Skill

Somedays you run across something written well on a topic you care about so you want to share it– This is one of those post.

Recruiting is hard work and getting harder all the time because right now while everyone is excited about the low unemployment rate, the low rate means less people in the market looking for a job. Plus, a lower rate gives good candidates a leg up because they are now in even more demand compared to when the labor market is in flux.

On some days recruiting can be compared to being lost in a forest full of trees so you can’t see the sun.

Oziel Gómez from

So what can CEO’s and executives to do to improve their recruiting programs?

Here are some good ideas.

But don’t put off implementing some of these because it is going to take a while for you to get the ball rolling.

Part 1: Top of the Funnel — Sourcing
Recruiting — The 3rd Crucial Startup Skill

By David Skok

I used to believe that there were two critical startup skills:
1. Building a great product that has clear product/market fit.
2. Building a sales and marketing machine.

I would argue with Antonio Rodriguez, my partner at Matrix Partners, about whether you could get away with just having a great product. Or whether you could take an organization that was spectacular at sales and marketing and sell anything. Ultimately, for most companies, I personally concluded that you’d need both of these skills to be really successful in the B2B world.

But in the last few years, I’ve witnessed something new: a hiring crisis so severe that it is crippling startups’ ability to get products built on time and starving them of the talent they need to market and sell those products. There is an intense skills shortage created by the explosion in startups over the past few years. Demand has drastically outstripped supply. I’m pretty sure I don’t need to describe this phenomenon as most of my readers are living with this problem day to day.

When I talk with the founders of my portfolio companies, much of the discussion is about hiring and how hard it is. It’s no longer surprising to hear that as much as 70% of their time is spent on hiring. There are plenty of candidates out there, but finding the right candidates is a huge challenge.

Something important has changed in the recruiting process: the best people are almost never on the market and startups have to develop recruiting processes to find and sell passive candidates. In many cases, it will take months or years of relationship building with these candidates to find the right moment when they are open to considering a change. And, closing them takes greater selling efforts than in the past due to the intense competition for the best candidates.

This leads me to believe that there is now a third crucial startup skill that needs to be developed: Recruiting. In the past, it was usually sufficient to work with outside firms for most recruiting needs until the company became fairly large. In the key tech centers this strategy no longer works and the successful startups are those that are building in-house recruiting muscles early in their lifecycle.

Unfortunately, recruiting is not a skill that is typically taught in college, even at the best business schools. Some VC firms have tried providing their portfolio companies with in-house recruiting. Having a senior person from your VC advising and working on a few key exec hires makes a lot of sense. Beyond that, I believe companies are better served developing this muscle internally. At Matrix Partners, we host intensive recruiting seminars for portfolio executives to equip them with the skills to build their own highly effective recruiting funnel. We’ve had strong feedback that these sessions have been very valuable, so I wanted to write this post and share the insights.
The Recruiting Funnel

Much like sales and marketing, recruiting is a funnel process that needs attention at the top of the funnel (ToFU), middle of the funnel (MoFU), and at the bottom of the funnel (Selling), as well as in a fourth phase, On-Boarding, after you have successfully hired someone.

In this series of three posts, we’ll break it down and cover each portion of the funnel separately. First up: The Top of the Funnel.

Top of the Funnel — Sourcing
The primary bottleneck
The hardest part of recruiting is the top of the funnel — Sourcing: finding candidates that possess the right skills and talent. This used to be a lot easier using job postings and external recruiters. Today, the chances of finding great developers, marketers and executives that aren’t already working for another company is extremely low. Now, startups have to target passive candidates and go through a sales process to first convince them to have a conversation and then ultimately to leave their current jobs.

Hiring a full time recruiter in-house
Sourcing is the starting point for building the recruiting muscle. The work needed to build a pipeline has grown dramatically, and as a result most startups are better served bringing on a full-time recruiter at a much earlier stage than ever before. In today’s environment, contingent recruiters aren’t working well for anything beyond one or two hires, as demand has way outstripped supply. Using part-time contract recruiters can work, but it’s very hard to find good people and get their undivided attention.

By bringing on your own full-time recruiter early in your growth, you get total focus on this function.

A full-time recruiter can spend the time needed on research and sourcing and they become great at selling your company, knowing which companies and websites work best for sourcing and identifying which candidate attributes lead to successful outcomes. In many ways it’s like the difference between using a rented sales person and a full time, trained salesperson employee who stays on the job and builds a long term understanding of how best to build a pipeline and sell in your particular environment. For top-notch recruiters you may need to start working on a full-time contract basis, then bring them in-house after you’ve both proven yourselves to each other.

The advantage of an in-house recruiter is they are better positioned to also take on the work of creating a great candidate experience: managing the process including scheduling, gathering feedback, getting back to candidates, etc. This frees up founders and executives to focus their recruiting energies on networking to find new candidates and qualifying, vetting and selling the best candidates.

CEO involvement is critical

Hiring expert Jordan Burton says it well:
“I have seen some companies get into trouble when team members think that having an in-house recruiter means they can now “pitch this problem over the fence.” I’m really big on telling clients (from CEO on down) that they are all part-time recruiters, and ensuring the CEO in particular visibly embodies this behavior.”

The recruiter’s job: sourcing and managing candidate flow through the funnel
Without a doubt the richest source of new candidates are referrals from existing employees. Great talent hangs out with other great talent, and assuming your initial hires are outstanding, they will know others who are similarly talented and likely good cultural fits.
A good recruiter will spend time with existing employees and work through their networks from all their past jobs, supplying lists of people to help jog their memories.

Bounties are another way to incentivize your employees. However, I’ve found a proactive recruiter and a culture where employees are aligned with the mission and strategy, and are happy — more so than bounties — are your best tools for driving referrals. You never exhaust your internal network, you just have to keep working it.

In addition to the internal network, sourcing will need to look elsewhere. Fortunately, we have new tools to help with this search. LinkedIn is one of the most important, but if you’re looking for developers, GitHub, StackOverflow, blogs, Open Source contributions, conference speaker lists, and other similar tools can be even more useful. LinkedIn has shared that only 25% of the workforce is actively looking at any given time, but 85% is willing to talk about a potential new opportunity. This is good news for recruiters looking to reach out and start a conversation.

Building a brand
To aid all of your sourcing efforts and out-compete the market, one of the most overlooked but important aspects of recruiting is building a brand that attracts the best talent. I recommend you spend time thinking about what your brand is, as experienced by your employees. Why is it a great experience to come and work at your startup? Is it the nature of the work they will do? Is it the importance of your mission to change the world? Is it the wonderful way in which you treat employees through open communication, meritocracy, equal opportunity, great perks, etc.? Is it the highly talented people they will have a chance to work with?

Then, think of ways to publicize your brand. Consider publishing a presentation that details your culture (see HubSpot’s culture deck here and Netflix’s deck here.) or a video that describes what it is like to work at your company (an example from Inflection here, and another more interesting HubSpot example here). Other techniques I have seen include YouTube videos that show your employees having fun in a way that is worth posting on-line: another HubSpot example. (Apologies for all the HubSpot examples, but this is one company that knows how to do a great job of marketing its brand.)

If this seems like a lot of work, remember this is a funnel that is very similar to your marketing and sales funnel, and the better tools you build the more successful you will be at attracting people into the funnel, and converting them.

Companies with a strong talent brand (as measured by LinkedIn’s Talent Brand Index) see a 43% decrease in cost per hire, and 20% faster rate of hire.

Candidate experience
A key part of building an strong brand is the candidate experience. A great candidate experience means that anybody who walks through the door of your company will become a promoter, even if they are rejected for a role. To get this right, most companies need to make changes to their process. This takes effort, but it pays off, as word of mouth will spread about your company being a great place to work.
The importance of a good candidate specification

It is imperative to start the hiring process with a clear idea of what you are looking for. As a CEO you should not allow a position to be posted unless there is a real job description in place. Without this, you may find your team wasting a lot of time in the hiring process trying to figure this out. In the Matrix seminars on recruiting, which loosely follow the recommendations you will find in the book: Who, The A Method for Hiring and the

TopGrading methodology, we suggest you start by building a Scorecard. A scorecard is the internal version of an outward job description that includes:
The mission statement–a short summary of the role.
Specific outcomes the person in the role should accomplish.
Competencies the individual must possess to be a fit.

Here is an example Scorecard. It can also be helpful to add the names of companies where you’d expect to find such a person. You probably have a good idea of of which companies have done a good job hiring the kind of people you are looking for. But, watch out for listing companies like Google, who offer high compensation you can’t compete with.
The top of the funnel, sourcing, is often the primary bottleneck in the hiring process and represents the hardest part of recruiting today. With the vast majority of top talent already working at another company, developing a process to target passive candidates and begin a conversation is imperative if you want to ultimately convince them to leave their current jobs to join your team.

Stay tuned — The Middle of the Funnel: Selling and Evaluating will be published next. The post will cover how to develop a process to nurture and sell passive candidates to the point where they are willing to talk, who on your team should be doing the selling and how to manage the flow of recruiting tasks and communication.
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