Frameworks for Hiring

Over the past couple months On Deck has scaled its team significantly, so I’ve been thinking a lot about recruiting and wanted to share some lessons learned. To be sure, it’s very much still a work in progress, so I welcome any feedback.

I think I heard this first point from Stripe: Your first 10 employees will replicate themselves 10 times over, so it’s especially important to get the first hires right.

Since you obviously can't compete with Google on attracting Ivy League talent at scale, you want to find people that Google isn't chasing after, but who have even more talent & grit — like drafting Tom Brady in the 6th round (h/t Keith Rabois).

You want to find opportunities for talent arbitrage: for example, find people who are excellent at their craft but struggle at self-presentation or public speaking. Others will write them off before seeing what they have to offer — and you get to harness them for their skill while either hiding or improving their weaknesses.

One of the biggest mistakes I see founders make is that they hire too quickly. Once their startup raises $1M+, they immediately want to recruit 8-10 people to look "official," when in reality they should be focused on the mechanics of finding product market fit.

One trick is to not mention headcount when telling other people how your startup is going — you want to measure your worth by your customer traction, not the size of your team.

To hire well, you need to lay the groundwork for a systematic process of sourcing, acquiring, retaining, and cultivating talent.

Before hiring anyone, map out how information and responsibilities flow through your team (i.e. make an Org Chart). Even if you are a two person team, define exactly who does what so you understand your company’s strengths and weaknesses. Figure out where the gaps are to drive your company forward.

Once you understand what your organization needs today, understand the career path of someone in that organization. What does that role look like today, in three months, a year from now, two years from now, etc. In large organizations like Google, Facebook, and Netflix, for example, there are clearly defined levels for each step in a person’s career — similar to raising a seed, series A, series B, series C for a startup. You want to really understand each role’s levels so you can speak a common language and help your recruits along their careers.

If you truly understand the career development of the roles you are hiring for you will be able to scope the roles so there is alignment between you and the hiring managers on skill level, work scope, and comp before you even start recruiting. As it relates to compensation, bring this up early in the process — no one likes discussing it, so call it out early to ensure you’re in the same ballpark. Then, leave it alone. I like Zack Kanter’s framework:

Once you have scoped a role, treat recruiting like a funnel. Have an applicant tracking system (ATS) setup that serves as your central source of truth. Diagram the entire experience and identify potential leakage. For example, if you interview lots of people but don't make offers, you probably have a sourcing problem or a poor evaluation process. Or maybe you’re making offers that don't convert; then perhaps something's wrong with your close. The key is to be very systematic about the process, and clearly articulating what success looks like for each new employee is an integral part of building a successfully aligned team.

If we’re thinking of recruiting as a funnel — if you don't have a good enough top of funnel (a broad enough applicant/candidate pool), then you end up compromising at the bottom of the funnel (the person you actually end up hiring). You want to have a top of funnel that’s wide enough that you can capture all the quality people who may fit the role while being curated enough such that you don’t spend exorbitant amounts of time reviewing applications — remember recruiting is only one part of building a business!

To build a top of funnel, make a list of people you want to work with some day, and then systematically hang around the hoop until the stars align. As everyone knows, the best candidates are passive, and it will take years to recruit them. You want to be the first person they go to when they’re looking for career advice. Earn their trust by giving them disinterested advice, and offer to introduce them to other companies even if they’re not ready to join yours.

One trick is to build a structure such that you can catch up with these people regularly and introduce them to each other. I did this accidentally by having a bi-annual retreat over a few years for friends and people I wanted to get to know better. Nearly half the On Deck team came from that retreat. The powerful thing about introducing people to one another is that, when you hire a few of them, they already know each other well. This is invaluable: A high-trust, high-communication culture can significantly increase organizational output.

To be sure, you don’t have to be close friends with your team to be effective, but if you are, it's an advantage because then work can also serve people’s need for community, which has only increased in importance because of COVID.

The other benefit of a structure like this is time. Having a special algorithm for evaluating people is very hard. So if you can systematically have more time to evaluate, you can pick better talent.

Of course, you’ll have to do cold-sourcing too. Have each hiring manager block 30min/day on their cal for 2 weeks, go on LinkedIn to identify 10 candidates to send outbound messages to. If you have great messaging you can expect 20% to be interested in a first call. Roughly 50% of the people you interview will convert into the pipeline, so you should plan to have ~40-50 total candidates in your pipeline for any role you hire for. Cold outbound, like flossing, this is easy to do daily, but not everyone does it.

Also make sure the team is aware of all open roles so you can be actively soliciting referrals from existing teammates, put out bat signal, etc. Throw sourcing parties internally and celebrate people who make referrals.

One way to make sourcing easier is to sell managers on the benefits of knowing how to do their own sourcing. The best leaders build communities and organizations with a common vision, and if you can incentivize your own team to source new candidates, you’re one step closer to building a tight knit team. Throw referral sourcing parties, or otherwise incentivize bringing on new teammates when your company goes into hiring mode.

I’d also advise hiring an in-house recruiter as soon as you’re planning to scale. CEOs think they have to build, but after they raise money their job becomes hiring people who can build. But don’t make the mistake of hiring a recruiter from FB/Google and expecting the same output. You want to find someone who can sell a company with no brand and less pay — it’s easy to sell ice cream, but hard to sell a cold hot dog.

In the beginning though, the CEO has to recruit. No one cares like founders care: No one’s going to personalize emails or sell candidates in person like the founders will. And surely no one’s going to have as much credibility as the founder in selling. So if you’re the CEO, own the function initially, while building out a process so it can eventually scale beyond you. Having someone dedicated strictly to building the team in the CEO’s vision can be a huge plus.

The easiest way to select good candidates is to know exactly what you’re looking for. The Keith Rabois framework for evaluating roles is to ask whether the role is value creating or value preserving? Value creating roles are exactly what they sound like; you create and capture value with the products/services you build. A value preserving role is less creative and more tactical; you’re already doing well, and you want to make sure nothing gets screwed up.

Your rule of thumb should be as follows:

Next, consider what attributes fall in line with the role you’re looking to hire for. Perhaps you’re looking to hire a product manager, in which case you’d likely want a clear communicator with creative product taste who is metrics & data driven with the ability to ruthlessly prioritize and tactically execute. Or perhaps you’re bringing on your first executive, in which case you should look for people who can build organizations (often from scratch), be primary individual contributors, and act like an owner while being a team player. Creating a scorecard for each role will ensure you’re all rowing in the same direction. Generally speaking, here are some attributes I look for in the people I work with:

A great interview process separates great recruiting organizations from mediocre ones.

Whatever your hiring process is, codify it, and make sure everyone has access to it.

You don’t want to make quick gut-driven decisions, so a clear process is important because you still want to move fast. Elad Gil says it best:

“Every company I have ever worked for, or with, has realized that one of the biggest determinants of candidate conversion is how quickly you interview them and how quickly you can make an offer. Beyond conversion, a key metric to track is how long candidates spend in each step of the interview process. You should optimize for shorter times between each step and for rapidly getting offers out.”

Treat the interview process like a scientific experiment with a control group and the same criteria for all. Make sure that all candidates are asked the same questions in the same order, evaluating each on the same metric so they’re easy to compare. Go back to your scorecard that has the attributes you're looking for in the candidate per position, and identify how much each one matters — you can split up the time spent on each interview question accordingly. Other exercises that might be helpful:

As it relates to the questions themselves, optimize for open ended questions that allow the candidate to explain their thoughts and experiences in depth as it relates to the role they’re applying for. Learn to be comfortable with silence when candidates finish an answer — people often talk to fill the silence, and perhaps they might add a unique insight you may not have heard. I’ve recently liked asking these questions in interviews:

Of course, past performance is indicative of future performance, so dig in by asking questions about their previous jobs. Let them know that you will be conducting references, and then ask your questions. Comparing their answers with those of their references will tell you their level of honesty and self-awareness. One framework from the book “Who” is to use the three Ps (performance, plan, and peers) to clarify how valuable an accomplishment was in context.

Other questions include:

For each job change, determine if it was “push” or “pull” — people who perform well are generally pulled to greater opportunities, while people who don’t are usually pushed out.

Also from “Who”: Here are some red flags to watch out for during the interview process that signal problems:

According to Rabois, if you aim for zero-defect hiring, it’s a little bit like zero-defect

decision-making: you’re probably being too conservative. You want to pull the trigger when “you’re about 70 percent confident that it’s the right decision. Below 50 percent is kind of reckless. But if you go for 100 percent, you’re waiting too long and you’re probably losing candidates.”

When you interview the candidate, the candidate is selling you, but you should also be selling them. Not only does that help you close the people you want to hire, but actually creates a word of mouth effect for others as well! I think there are a few key things to make for a great candidate experience:

The best interviews are a mix of buying and selling. As a buyer, you’re asking questions and digging in to find the best person for the job. As a seller, you’re painting a vision and expressing interest in a specific candidate for a specific core part of that vision.

The best way to win over the best people is to sell them "asymmetric upside" — ie. if their role doesn't work out long term, here's everything they'll learn, and if it does work out, here's what they'll earn. At On Deck, we sell them on how fast the company is moving, that it will double in the next three months and triple within the next nine, so they’ll see what hyper growth looks like. We also show how fast their rise can be with the company, using the example of Brandon Taleisnik who effectively started as an intern and rose up to VP of Ops. We publicly emphasize that we see their time at On Deck as a series of learning curves – the faster you can run up a curve, the harder we'll work to make sure there's another one waiting for you to jump to.

Regardless of the outcome, you want your candidates (your soon to be teammates) to know how they'll be set up for long-term success, and you can do this by showing how you'll support them way after they're gone. We also tell them that while we hope to make On Deck a place they want to stay for a decade, if they want to start their next company in a year or two, we’ll want to support—if they stay for 3 years, we’ll be first their check in sight unseen. We sell them that there’s no other company that will give them as much access to potential co-founders, hires, and investors; it’s a great launchpad for any future founder.

Your instinct may be to have them customize their role, but what great recruiters do is paint a picture of the role that person can play, the impact they’ll have, and how it'll set them up for long-term success — better than the candidate could imagine themselves.

One thing I like is when companies try to “anti-sell”, or have strong principles that self-select out the wrong candidates, but self-select in the right ones. The way this works is after you finish selling the candidate on why your company will be a unicorn, you then reveal the aspects of the role that are not a perfect fit for the candidate — if they still want to join your company, great; if not, you’ve saved a ton of time evaluating someone who is clearly not a fit. An example could be role specific. If you know an engineer is looking for a well developed engineering team you can state, “currently our infrastructure is fragile not agile”, and see how they react. If it’s a marketing hire who wants to create a large team you can say, “we see this role as an individual contributor role for 18 months and then we will revisit the idea of hiring a team.” No matter how amazing they are, if you tell them the truth about the role and they want to leave, it’s better for everyone involved. On the other hand, they may sell themselves on the role stronger than you did originally — take the risk, and you may be rewarded with one of your best new teammates.

References are an integral part of the recruiting process, as they give you the unbiased look into a candidate’s work life. A reference isn’t a true reference without at least one negative, so don’t stop referencing until you get one.

It’s especially tough to get negative references because people inherently don’t like being the person who talks negatively about others. This might leave you in a position where you have to ascertain for yourself whether or not a reference is negative. One way to combat this is to imply to the reference giver that the call is just a cross check, and ask them how you can make sure the candidate is successful when they join — you can then gauge the relative positivity/negativity of the response.

To get better answers to your questions, ask them in such a way that you decrease the defensiveness of the person on the other side. I often start by saying, "We really like X and we'd be excited to work with them. I want to ask you some questions to help set them up for success." I then move on to ask some of these:

One of the things you should always ask is: “If this person joined my company, would you?”

What you’re trying to find out with that last question is if this person has a pool of amazing people that will want to join the company. Can they immediately upgrade the entire talent of the organization because they’re so talented that other smart people really want to work with them?

Shrav Mehta gave me this one that I like: "If we were going to hire someone, who should we pair them with as a good complement to their skills?” If they say "someone really organized," for example, it likely shows you they're not very organized. It allows the reference giver to share the candidate’s weaknesses while still giving a positive reference.

If you can, try to do video calls so you can also take into account their body language as they answer each question — oftentimes you’ll glean even more insight.

And just like the candidate, you want to sell the reference giver on why your role is such an amazing opportunity! Use this as a means of building an even broader top of funnel — ask them for referrals for other great people, and maybe even consider recruiting them if they are a fit & seem interested. Then close the loop with this person when you do make an offer, and make them an ally in closing them.

If you're unable to close candidates, then all else is meaningless. It can also be demoralizing to existing employees who interview the candidates — ie. "If they don't want to work here, why am I?" You must sell the mission, the team, and the opportunity for growth that’s unmatched anywhere else — and make it compelling.

In my opinion, you should aim for as high of a close rate as possible — I typically aim for ~70% or above. Like marriage proposals, you want to only make an offer when you're sure they'll accept. I’ll often ask questions about what it would take to make my role the best possible for the candidate ("If this were a fit across X,Y, Z, would you accept?"). If they’re still hesitant, then maybe it wasn’t a good fit to begin with.

One way to sway their decision is to identify who influences their decision and take them out to dinner with the candidate. Perhaps this is their spouse, or a close friend, or maybe that reference you once talked to.

Another trick is to time your recruiting cycle to align with the holidays. Q4 is often the best time to recruit; not only are holidays reflective, but it’s after people get their Q4 bonus, and some people may be ready to make a transition. Funny enough, another great time to poach people is when they come back from vacation, as they tend to be open to alternatives.

There are many reasons that someone would choose to work at an early stage company, so narrow in on what makes your business special and attractive to new teammates — similar to how a VC would invest in a company, think about your core competitive advantage in getting, keeping, and growing talent. Only hire when you need to, and build the most unified team possible by aligning on what each role entails and how it fits with others in the org. Then give each teammate the responsibility and autonomy to bring in new teammates, and let the flywheel spin.

This piece references lessons I’ve learned from Jenny Kaehms (On Deck’s Head of Talent), Keith Rabois, Elad Gil, Matt Mochary, Alex MacCaw, Andy Chen, Jose Guardado, the book “Who”, and others I’m forgetting.

Thanks to Jenny Kaehms and Brandon Taleisnik for reviewing and contributing to this piece.

Listen of the week: Rod Dreher on the Thinking in Public podcast. Glenn Loury on free speech.

Watch of the week: Kobe Bryant on the mindset of a winner (RIP). Year of The Ox

Cosign of the week: KP who just launched the No-Code On Deck fellowship this week. Learn more here and here

Until next week,

Erik