This is part 3 of a 3 part series on how to build a recruiting machine. If you haven’t read part one, it’s here and covers the motivations for why it’s important to get really good at hiring plus writing your first job description. Part 2 is here and addresses specific tactics on sourcing and designing interview loops. This last part will wrap up the series with how to think through compensation and negotiations to close candidates as well as onboard them effectively.
Overview
Founders who haven’t had a lot of experience with hiring oftentimes forget that after the offer, you’ll likely have to do the negotiation and comp dance with the candidates as well as onboard them smoothly into the organization. It’s part of human nature to want to make sure the organization is fairly compensating and values you. You should treat this process as a way to show your candidates that you care by being thoughtful and systematic about how comp is structured. You’ll have much happier employees as a result.
Compensation and Negotiations
Congrats - you’re ready to give an offer. Companies have different opinions about how to approach negotiations (how much flex and what are the rules) as well as get to increasingly complex comp schemes depending on execs versus not, remote vs in-house, sales on commission vs fixed salaries, hourly pays, contractors vs not, etc. Entire articles can be written up on comp strategy, but in the early stages, I’ve learned the best way to approach it is to not overthink and learn to make adjustments as the company grows.
There’s a couple things to remember here:
- Comp Grids - Employees should be paid fairly. Usually the way to create this is to find surveys done by 3rd parties that help gauge pay grades based on role, seniority, geography, etc. In the absence of that, the best way to get to comp to is to triangulate your own data points from friends. Your employees want to know that you’ve been thoughtful about why you compensate the way you do. Having a “compensation philosophy” will help get across that you’ve put serious thought into this and will continue to throughout the life of the company.
- Salary vs equity - Most startups give equity. Hopefully you’ve developed an equity/hiring plan and have given a good guess at what are the types of people you wanted to hire and how much you’ll give before actually starting to hire. We use a flexible all-in comp system that allows employees to adjust for more salary/less equity or less salary/more equity and have found that to work well if you’d like to consider using the same thing. I tend to like being generous with equity and slightly above market with salary.
- Close them! - You’ve invested a lot of time already to find someone you want, if you can’t close ~95% of your offers, something is very wrong. Figure out what the issue was and experiment with the process. Get senior leaders to talk to them, help them understand why the vision/mission/role is exciting, revisit how competitive your comp is, etc. Sometimes candidates will slip through, but you need to make it the exception, not the norm.
- Explaining equity - A lot of startup employees (even in SF) are fuzzy about how stock options work. Even if they understand that, oftentimes it’s hard to understand dilution, liquidity, common vs preferred prices, etc. I’ve found giving candidates a FAQ, plus a talk track over the phone and allowing them to ask any questions helps a lot here with transparency. Typically this looks like talking about outcomes (ie what would an employee make if we exited at 0m, 10m, 100m, 1bn, etc.) to make it concrete for them as well as helping them compare your equity comp to a higher salary/less equity comp plan at larger companies.
- Benefits - If you have commuter benefits, healthcare, retirement plans, PTO, etc. Make sure these are cleanly laid out and docs are available with any questions a prospective candidate might have.
- Employment Passes - For Singapore specifically, make a decision on whether or not you’ll provide EP. (here’s the site) This means having to wait ~3 weeks after a signed offer to get an answer and potentially losing other candidates. The rules are changing because of COVID on what it takes to qualify for an EP, but generally the worker needs to be a ‘skilled worker’ getting paid $5k+/month. You should have an expert work with you on this. If you end up providing EPs, make sure to mention that you offer it. If you have a choice, employing someone on an EP (vs. a local) has its challenges but it decreases the chances of attrition in the future. Be prepared to have foreigners start oversees first as a backup.
There’s probably much more room to go in-depth on comp, but again don’t overdo it in the beginning. Commit to making reasonable re-evaluations (across the whole company) at least once a year as the company grows. The goal is to make sure everyone feels like they’re being compensated fairly.
Onboarding
This is oftentimes missed by founders, but really makes a big difference. The first 2-3 weeks, your new hire will likely be overwhelmed by the sheer about of institutional knowledge that needs to be learned. You might be able to wing it with your first 8 hires, but after that, the process will break down. If you haven’t given much thought to onboarding people at scale, this is a high value task that’ll make your life much better over the long run. We spent a lot of time on this as the company developed, but it’s ok to do just the minimum at the very beginning. Some quick tips here:
- Make sure there’s an onboarding doc - Checklist of all tools, knowledge bases, doc repos, code repos, company directory, etc and what’s important and not for a new hire to know their way around the company.
- Make sure there’s a onboarding mentor - This is usually someone who does a similar role that the new hire can go to with any questions, any time during their first 30 days. Onboarding new hires is also a great way to help individual contributors practice skills needed to eventually be managers.
- Have weekly objective by department - What should the new hire be able to do by week 1, week 2, week 3, week 4? Engineers at our company are required to ship something by W1, PMs will shadow meetings, but already be writing feature specs by W2 and project specs by W4. Being specific about what successful onboarding looks like will help everyone align on expectations. We also have a meet X people per week metric which gives permission to everyone to take time to help and build relationships with new hires.
- Have quarterly goals - With new hires, we have 30-60-90 day objectives outlined. After the first quarter, have the new hire develop their own goals for the year now that they’ve started to settle into the role.
- Run new hire onboarding sessions - As the number of new people starting per week increased, we batched people into specialized onboarding sessions and ran a curriculum. This usually looks like the CEO/execs doing a vision session (running through the pitch deck), then a representative from various departments doing deep dives on what the departments did and how to work with them (eng, product, design, sales, ops, finance, etc). It was a lot of work, but new hires really appreciated it and it dramatically increased the speed to ramping folks up.
Hiring and building HR systems is an iterative process. Just know that it’ll evolve rapidly as your company grows. Don’t feel bad about making mistakes because we all will - keep working on it as you grow your company because people matter. You’ll be glad you spent the time.
What’s Next?
Hiring people is just one part of the equation, as your team builds, different challenges will present themselves quicker than you can imagine. A definitely not-exhaustive list:
- Firing people - yes you’ll make mistakes
- Managing performance - how to re-align if expectations aren’t met. Performance review cycles.
- Defining and changing roles and responsibilities - startups are not static and neither are people
- Training managers - being a manager is very different than being an IC
- Hiring and convincing executives - folks much more senior (and likely smarter) than you that you need on your team
- Organizing teams - how to reorg to design for achieving your objectives, functional vs business units vs hybrid schemes
- Defining culture - weird behaviors will start emerging with no right or wrong answers that you need to decide whether you want as part or not as part of your company
Hopefully that was a decent overview of hiring that gave some framework for how to think about hiring, while still being tactically useful. Every company is different and there are no obvious right answers. If you have a specific scenario or situation that you could use some advice on, feel free to email hello@iterative.vc with blog topic suggestions. We’ll try to write as many practical founder advice articles as we can to share best practices.
