A Recruiting Guide for Startups

Today’s entrepreneur is finding that it’s harder than ever to attract top talent. In the early days of the dot-com bubble of the 1990s, big employers were rightfully scared of startups hiring their people away with promises of unimagined riches, half-day ping-pong tournaments, and lavish parties. It was like summer camp with stock options.

Yet one day the bubble popped, and now startups are feeling the pain. To many employees, working for an established bigger company just makes a lot more sense. And this isn’t just a stability issue anymore. Big companies pay better, on average, and the potential jackpots of an IPO or merger/acquisition now rarely exceed the typical pay disparity.

IPOs have been weak and except for big bets like YouTube, MySpace, and a few select others, acquisitions aren’t making too many people independently wealthy either. In other words, the risk is very often not worth the return, which makes some of the best performers shy away from new ventures.

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What can a startup do to level the playing field for top-performing talent? Here are some of the ways you can win the war for talent.

  1. Recognize the importance of great talent. This sounds relatively obvious, but I talk to dozens of would-be and ex-entrepreneurs who tell me that not only is getting the right people on the bus quickly the most important thing they can do, it usually ends up making or breaking the business. Case in point: most of the failed startups I’ve spoken with blame their failure on not getting the right people on board fast enough. Jim Collins’ Good to Great should be bedside reading for every startup. It’s no accident that the lessons on hiring the best people come up in almost every chapter. Not long ago, I analyzed the implications for recruiting in a Good to Great Staffing article. And almost every business success story over the last several years has started with a human capital success story. Just take a quick look here for some examples and inspiration.
  2. Build a differentiated employee value proposition for key roles. Most of the people you want to hire will already have a job. But a differentiated employee value proposition can make the job materially better than the one they currently have. This means that you have to understand their interests and what they’re not getting in their current roles and create a unique value proposition that sets you apart. For a new way of thinking on this topic, read Dr. John Sullivan’s recent piece on treating this process like a product management discipline. Just like in product management, connecting with your audience of potential “customers” to understand what motivates them, where they don’t feel they’re getting value out of their relationship with their current employers, and what would push them to consider another employer is an important first step in this process. Once you’ve determined what you can do to woo them (usually some combination of options that include pay structure, work/life balance, benefits, culture, and equity) you may realize that getting the best people on board actually doesn’t fit into your business plan. Which is why I suggest going through the talent-planning process as part of your original business plan, and something that I advise VC firms to insist on as part of their due-diligence process. If there’s nothing you can do to get the right people on board at the right price, the odds of success are miniscule.
  3. Get involved in every hiring decision and recruiting initiative. As the CEO or founder of a startup, you have another, almost equally important job: director of recruiting. Steve Ballmer has famously said he was Microsoft’s first head of recruiting. To an extent, he still thinks this way. In almost every presentation he gives, he talks about the value of talent and innovation at Microsoft. At a recent IT conference hosted by Gartner, he said, “You innovate or you go away,” and dedicated much of his speech to discussing the recruiting successes they’ve had over the past year as evidence that Microsoft is positioned to beat their competition. If you talk to staffing professionals at Microsoft, they’ll tell you that Steve still gets very involved in and pays a lot of attention to what’s happening in staffing. In the beginning stages of your company, no one will be better at selling top talent on the vision your company has in store than you, the founder of the company. Don’t delegate too much of this process: interview every potential hire and reach out to people who you might want to bring on board. As the CEO, you’re much more likely to get more return phone calls than anyone else in the company. People are not only flattered by you approaching them, but they get more out of the conversation. In addition, referrals are one of the primary ways that startups grow; encouraging and measuring/optimizing the number and quality of employee referrals can help you bring high-quality talent on board much more quickly. If you want to see a CEO who gets this, look no further than the unbelievable recruiting tactics that they’re using at Red5Studios. Their CEO really pushed the envelope and made an investment in their most valuable asset by thinking about recruiting like a marketer would and attempting to wow their target audience of game developers. Not everything has to be this elaborate or expensive (a simple phone call will usually do the trick), but it’s further proof that a little personal attention goes a long way.
  4. Build a strong talent pipeline. Hiring game-changing talent usually takes more time than hiring average talent. Which means that you’ll need to approach recruiting almost like a sales function, with a decision pipeline built out that lines up with what it takes to get a top performer on board at your company. Don’t do the knee-jerk thing and go out and buy an applicant tracking system to manage your hiring process. For a startup, CRM is actually much more important than applicant tracking. Unless you’re a government contractor, your compliance needs will be miniscule, and a CRM like Salesforce.com, Sugar, or Entellium will allow you to more easily customize how you manage your sales funnel while keeping notes on the people you do end up interviewing. Some of the traditional ATS vendors like VirtualEdge are also experimenting with CRM offerings, and you can expect to see more in the future. Taking a pipeline building approach also means reaching out to people before you need them and having a process for continually building relationships and engaging them. This is critical for several reasons beyond just the time investment required to bring top people on board. For instance:
  • If your revenue suddenly spikes and you need people, the immediate reaction for a startup is very often to hire anyone who can do the job and take the load off of your current staff. This is where you run a real risk of triggering a negative chain of events or even a death spiral that can be tough to escape. I’ve seen many companies hire sub-standard performers at this stage that cause incredible, often irreparable disruptions to the culture, the quality of work, customer satisfaction, retention of key players (top performers hate working with below average ones), and ultimately, revenue.
  • If your company hits some hard times, you’ll inevitably lose some of your best talent. Having a group of people who you’ve engaged with about career opportunities before you needed them will be a valuable asset that can help you weather the storm, and could in fact end up saving your company.
  1. Be nimble in your recruiting. The hiring process at most big companies takes a minimum of 45 days. Your hiring process should take five days. Big companies often take weeks to get back to even the best candidates. You should make a habit of immediately responding to candidates. These large organizations are also tied to requisitions and job descriptions, whereas you can work with a great person with a non-traditional background or without the exact qualifications you originally required to make a fit happen.

Bringing top talent on board is the most critical, and often the most difficult, task for a startup. Startups aren’t the destination employers for top talent anymore, and it’s a candidate’s market right now. But the good news is that you don’t have to be a big company to win the war for talent if you can play to your strengths and invest the time necessary to hire top performers.

Dave Lefkow is currently the CEO of talentspark (www.talentsparkconsulting.com), a consulting firm that helps companies use technology to gain a competitive advantage for talent, and a regular contributor to ERE on human capital, technology, and branding related subjects. He is also an international speaker on human capital trends and best practices, having spoken in countries as close as Canada and as far away as Malaysia and Australia. His consulting work has spanned a wide variety of industries and recruiting challenges with companies like Starbucks, Boeing, HP, Microsoft, Expedia, Washington Mutual, Nike and Swedish Medical Center.