This post originally appeared on OpenView Venture Partners Labs.
Startups are only as good as the teams that drive them. Building a team and scaling the people process is one of the biggest challenges a founding team will face as it grows. It’s time consuming, and founders are not often always natural HR pros.
One of the most important things a founding team must do is create a people process that immediately filters out those that aren’t a fit. There is no bigger waste of time and money than hiring the wrong person. While the foundation for this process takes some effort upfront, the payoffs are huge. Below are key guidelines every young startup should follow to ensure that only the best and brightest are extended offers to join the team.
Determine your startup’s values and expectations
A founder is responsible for dictating exactly who the company is, and equally important, who it is not. Creating values & expectations that serve as the company’s ‘true north’ is critical, and should be pinned down from the get go. Depending on the startup, the depth of these will vary and should evolve over time, but articulate what you value as the founder of the company and what is expected of employees. For a good example, see Zappos’ values here.
Determine your startup’s one key activity
Every founder should identify a key operational activity that drives the company’s success, and make sure that everyone at the company spends some time conducting this activity at the beginning of their employment and sometimes throughout their employment. Whether it is customer service or an element of making your product, putting everyone through that shared experience is a great exercise for developing camaraderie and teaching key components of your business. My favorite example is Island Creek Oysters, which has all employees spend time farming their oysters out on the bay.
Determine key hires and hunt for them
Without a recruiting operation to lean on for sourcing talent, founders must become recruiters. Start by determining the most important hires that you’re proactively going to recruit, and determine the sources through which you will find candidates. Poach from companies that you know are killer at the function you are hiring for (i.e. design, sales, etc.), prospecting through Linkedin, AngelList or their website. You’ll need to block off serious time each week to hustle and do anything you can to get an introduction so you can ultimately add these key hires to your team. Do not post job opportunities and hope for great people. Talent isn’t easy to come by, you have to hunt for it.
Develop the top of your talent funnel
Once your initial key hires for scale are on board, it is imperative to lay the foundation of your people process, enabling you and your team to focus on the job at hand while maintaining a pipeline of talent for future needs. This way, you won’t have to start from scratch as employment needs arise. Start by developing your “employment brand” – a narrative that evolves from your values and what it is like to work at your company, to showcase what you stand for as an employer. Companies like Google and HubSpot mastered this early on. Broadcast your employment brand through weekly blog posts, regular social media updates, PR about your workplace, etc., to garner inbound employment candidates, and save you time in the people process.
Develop your interview and tryout process
To be time efficient, work backwards on determining certain positions and skills you need, and design your process to identify candidates with the needed critical skills, quickly vetting out people that don’t meet your requirements. Interviews are more effective at eliminating bad candidates than surfacing good candidates — being a good interviewer does not always mean you can do the job well. Tryout environments are more strenuous, but much more effective at highlighting skill and ability. Here are tips for both:
- Be transparent with the full details of your hiring process on your website. This is a great filter for lazy applicants, and is respectful of their time & expectations for the process.
- Publish a set of questions and tasks on your jobs page that the candidate must find and complete before they can begin the interview process. This will enable you to get information up front on the candidate that could eliminate them before you commit time to an interview. It also proves they know how to find a job page and take initiative on completing tasks.
- Conduct a phone interview reviewing those candidates who did well on the initial tasks you set forth. See if they can add more substance to their responses and carry a normal conversation.
- Schedule in-person interviews and engagement with the team once you have determined a candidate is worthy. If social/culture fit is important, block off Thursday or Friday afternoons so good candidates can join the team for some sort of social interaction. In addition to watching candidates in a setting that is important (i.e. creative session, socializing, etc.), have a set of questions for all members of your company to ask, and corresponding metrics to assess candidates.
- Whether you are hiring a sales rep, a developer, or a content marketer, it is critical to put them into some simulation of the job they will be conducting on a daily basis. Working live with their potential future team members in a tryout will let you see them in action & if they will fit in, and will allow you to get multiple perspectives from other team members without dragging them away from their desks. Check with your lawyer on whether to make tryouts paid and how best to structure them, but your transparency at the beginning of this process should warn candidates.
Determine employee compensation and equity allocations
Figuring out employee compensation is often looked at as an art rather than a science in a startup environment. But, it should be the opposite given the specific finances a venture-backed company has available under a certain timeline. Fred Wilson argues a disciplined approach to compensation, providing the founder a stronger ability to make smart financial and personnel decisions. I couldn’t agree more.
A startup should be able to create tiered compensation packages that guide their financial and hiring decisions. Start by valuing the importance of the different job categories, assigning a percentage range out of 100 points as to the amount of capital and the option pool dedicated to the different job categories. Go a step further by assigning values to people who can execute at different levels and their ability to execute different tasks – not necessarily years of experience, who they worked for before, etc. Then, assign cash/equity compensation ranges to each tier and the overall cash/equity allocation for particular hires. It’s also important to assign dollar amounts to the stock option packages for each position — do this based on your company’s best value so that your hires understand the potential of reward for their hard work. Wilson does a great job of outlining this process from a high level in his post above.
Develop an offer and negotiation process
Most startups have loosely defined hiring processes — in part because they have other priorities and responsibilities that demand it remain casual. But, lack of structure can lead to complications during and after a new hire. A simple but effective offer & negotiation process is critical to stay organized and ensure you don’t have to clean up your own mess a few months down the road. Start by:
- Outlining job responsibilities and being very upfront. When scaling a team, startups often hire someone that is very senior to help lead the company in a specific role and oversee a future department. Often times, the person they hire comes from a larger more established company where a lot of the machine was already in place. Player-coaches are often what is needed when scaling and if you need people who can both build a team while rolling up their sleeves and completing the job at hand, it is best to be very upfront about this. The job description must be very clear i.e. how many prospects or conversions is a sales executive expected to close weekly, instead of just saying they are responsible for revenue growth. This level of detail gives the candidate a clear idea of what the job entails, and vets out those that aren’t a fit.
- Laying out two compensation packages and giving them the option to choose. Determine a range on the cash and stock compensation you are willing to provide for certain positions based on the value of executing the position responsibilities that is inline with market rates. From here, I like to make two offers, one with higher cash and less stock, one with higher stock and less cash. Allowing prospects to negotiate within these parameters ensures that you do not over-extend and it also shows the prospect’s motivations when it comes to how they view the value of cash and stock.
- Sending an offer letter with an expiration date. Most startups offer at-will employment, so the offer letter can be lightweight — in fact, your counsel should be able to provide a reusable template — but make sure you include an expiration date. Provide enough time so that they can do their homework and ask questions, but not too much time where they can shop around for different offers. I typically make offers expire in 48-72 hours depending on the situation.
Develop your on-boarding and training program
On-boarding and ongoing training programs can separate a good team from a great team. Most solid companies are implementing high-level training strategies as part of their people process. But, it’s not as simple as just implementing job-focused training. It needs to be intrinsic in the organization, holistically educating everyone about most aspects of the overall business.
Culture training should be anchored by your own values & expectations, setting clear guidelines for those just joining the ranks and ensuring they ramp up quickly with little questions going into their role about how and where they fit in, and what is expected of them. Also, benchmarks help with culture onboarding by delineating specific timelines, such as 7, 30 or 60 days, to guide how fast new hires are expected to ramp up & what they need to do to get there. Finally, all employees should have access to a manager who can also act as a mentor of sorts – someone who has also been ramped up internally is ideal. Mentors are critical ways to infiltrate your cultural expectations throughout the organization.
Develop regular feedback sessions and reviews
Reviews are nothing new — most companies employ some sort of annual or bi-annual reviews as part of an employee career plan. However, review programs should NOT catch them by surprise. To impact ongoing performance, managers should structure feedback and management into their daily interactions with the employee, including clear cut reactions to daily responsibility reporting and how it falls under larger strategic priorities for the employee.
Position the review instead as a means for communicating their marked improvements since the last review, and an action plan to help them improve in other areas. Managers need to focus more on being clear on where an employee stands vs. on how they feel in order to truly help them.
Develop a leadership program.
If you get to this stage – congrats, you’ve done a great job with your people process. But you can’t rest on your laurels just yet. And, you can’t just hope that leadership will happen. You should still have to teach people, recognizing their different leadership skills along the way. For instance, some managers lead by example. Some are very vocal and structured.
Great leadership programs are flexible based on the actual leaders enrolling in the program, considering their strengths and weaknesses. McKinsey & Company wrote an excellent piece on why leadership programs fail, providing a great path to work backwards in determining the tenets of your own program. Above all, find a common trait to measure the results of your program based on changes in leadership behavior, career development, etc.
As a reminder, all companies, managers and organizational structures are different. You can’t replicate a people process for every business scenario, but you need to put the work in up front to understand what your specific people process entails. Spending the time and effort upfront will answer questions that you will have to answer down the road, and will quicken the time spent overall if you follow and scale a streamlined approach to scouting, making offers, hiring, training, managing and growing a team.