70% of startups fail after about 20 months and one of the biggest reasons for shutting down is not having the right team. So how do you build a great team to help your startup get through its pivotal initial years and beyond?
In my experience, most organizations don’t really know what they are looking for, and they recruit and hire in an ad hoc way. Many founders say “yes” to candidates who are not a good fit, because they are trying to hire too fast. When my cofounder and I began building our own company, Pyrofex, we spent significant time on our hiring process, deliberately creating an approach that has resulted in tremendous hiring success for us. I’ve put together four key tips to hiring that will set your company up for success in the short and long-term.
1. Know what you’re looking for
Every company has its own unique DNA, and founders need to determine what that genetic code is so they can hire candidates to match. At Pyrofex, our mission from the very beginning was to apply research from the field of mathematics to industrial computer science problems, and so we selected for people who understand and appreciate our mission. Every startup will have unique elements of its business plan, culture, and worldview. Founders should make sure they understand this and can identify candidates who truly fit the company’s needs.
This doesn’t mean candidates should look or act like the founders either. Northwestern researcher Lauren Rivera found that without well understood qualifications to guide their search, founders and hiring managers tend to hire in “their own image.” Organizations need to identify the qualifications that make for great candidates ahead of time. That way, each candidate can be evaluated objectively in those terms, rather than evaluating them based on whether leaders have good impressions during interviews.
Personally, I’ve found the capability to learn to be much more valuable than possessing an esteemed background. At Pyrofex, we do not automatically sort resumes based on ivy league education or prestigious internships. Rather, we often focus on identifying candidates with unique perspectives and enough grit to learn new things on the fly. For us that meant that one of our first hires was a woman trained as a classical oboist with no experience in our field. To this day, I count this among our best hiring decisions ever, because she had the talent and flexibility to learn whatever job needed to be done.
Tech entrepreneur Ben Horowitz wrote that startups should “hire for strength and not for lack of weakness.” This is some of the best hiring advice I’ve ever heard. To follow Ben’s advice, founders and hiring managers need to determine their company DNA, so they can hire candidates who are strong in the areas the startup really needs.
2. Create a system and stick to it
Once you’ve determined your company’s DNA, create a hiring system that enables the discovery of candidates exhibiting those values and do not waver from that system. Just as you have a roadmap for product development or a process for onboarding new clients, you should have a structure for hiring. A weak procedure introduces unnecessary inefficiency and subjectivity. Implement an applicant tracking system so that the same process is applied to every candidate. You don’t need a complex or sophisticated software system—at Pyrofex we still use a Google spreadsheet to track our candidates.
However, your process must be rigorous and objective. You and your hiring team should write down your decision criteria. At Pyrofex we start by reviewing resumes, then screen for technical background, followed by phone interviews, and we culminate the process with an entire day of on-site interviews. We think of these four stages as the “hiring pipeline” and we have very well understood criteria for moving candidates through the pipeline. Most candidates don’t make it. During our peak growth year, our hiring manager reviewed over a thousand resumes to hire just 30 people.
Because we have such a thorough system, it’s easy for our hiring team to operate efficiently. Our recruiters participate in our hiring meetings and they come to learn what we are looking for in great candidates. When the hiring process is inconsistent, the non-technical hiring staff can often struggle to understand how decisions will be made. And, as a result, they often recommend weak or inappropriate candidates.
Creating a system and sticking to it helps to avoid this inefficiency, helps you treat every candidate the same, and helps to ensure that your decisions are objective, and that your team can improve at their jobs.
3. Learn to say “no” to candidates that aren’t great
One of the most common mistakes I’ve witnessed in hiring is a tendency to say yes to candidates who are on the borderline between “hire” and “no hire.” At Pyrofex, we often think of hiring in the statistical terms of false positives and false negatives. A false positive is when we hire someone who turns out to be a bad fit. A false negative is when we turn someone away who would have been great. It’s impossible to avoid both of these potential outcomes, because we can’t perfectly predict the future. However, it is possible to commit both kinds of mistakes and this is often what happens when we agree to hire borderline candidates. The borderline candidate is less likely to work out, but they also consume an open headcount that someone great can no longer fill.
In our view, it’s not so detrimental to turn someone away who may have worked out. Far worse is to hire an imperfect candidate. Not only may you have to let that individual go, but your business will incur costs to train and manage someone that may not be productive. As a result, we focus on trying to only ever make the “false negative” error. We know we are going to pass on some great people and this can’t be helped.
I’ve seen many hiring managers hire candidates perceived to be “good enough” out of fear of leaving the position open too long. Such decisions tend to create set-backs later on, so it’s better to maintain an uncompromisingly strict process and say no to lots of people, even some who could have worked out well.
4. Don’t over-plan or hire too fast
In order to limit those false positives, accept that hiring may take longer than you’d like. In the software industry, a great manager with a dedicated recruiter can hire about one to two people per month. This number may surprise many first time founders, as it’s common to underestimate how long it takes to hire the right people. Global human resources consultant Heidi Lynne told Fast Company, “ ‘The most common mistake I see small business owners make when hiring is making a hire out of desperation.’ ” As fast as you may want to scale, fight the urge to make quick hiring decisions. Your startup does not achieve scale based on how fast it hires, but upon how well it hires.
Take time to craft a hiring plan outlining all positions you want to hire for the next one to two years. The plan should fit within your budget. Try not to assume you will hire in any particular order, because you can’t anticipate which candidates you will discover first. Hiring expectations vary based on industry, job market, and resources at your disposal, but you can generally assume your recruiter can find one or two great-fit candidate per month.
Congrats! You’ve Hired All Great People!
If you’ve hired all great-fit people you will have a cohesive and talented team to elevate your company’s capacity for creative problem-solving and increase your startup’s chances of success in the long term. Remember that hiring is a process and not a goal in itself. Every business will experience turnover, growth, and other demands that require you to be able to hire effectively well into the future. Make sure your system is setup to help you ensure that your team remains great for years to come.