Download - Startup Recruiting Trends
STARTUP RECRUITING TRENDS2016-2017
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Introduction
Insights Key takeaways including metrics, headcount planning, compensation, people programs, and diversity.
Report Data Results are organized by our recommended recruitment process: Plan, Execute, Measure. Recruiting Team Makeup Reporting Structure Hiring Goals Pipeline Metrics
Why Analyze Recruiting Trends?Few startups have adopted a strategic and consistent approach to planning, executing, and measuring their talent and people programs. As a result, startups are making recruiting decisions with little to no data.
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Insights Involving the Head of Recruiting in headcount planning is the top predictor of achieving annual hiring goalsFewer than two-thirds of startups actively involved their Head of Recruiting in annual headcount plans. This can lead to misalignment between business objectives and recruiter hiring capacity.
Recommendation:100% of startups should include their Head ofRecruiting in all headcount planning discussions.
Compensation beats cultureThe top two reasons for offer rejections – compensation and counter offer – were agnostic to stage. This contradicts common wisdom that startup culture is the deciding factor for candidates.
Recommendation:Train your hiring managers and recruiters to clearly explain your compensation packages and position against competing offers.
INSIGHTS | PLAN | EXECUTE | MEASURE
The rule of “Happy Thirds” for hiring is 1/3 sourced, 1/3 applied, 1/3 employee referralData confirms the common hiring recommendation of “Happy Thirds.” Startups across all stages maintained similar ratios, confirming the importance of investing in multiple hiring sources. Surprisingly, inbound applicants remained a significant hiring channel even in Early Stage startups (22%).
Recommendation:Invest in building a careers page, engaging job descriptions, and a compelling talent brand to encourage inbound applications.
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Insights
It costs more to replace an existing employee than to invest in People ProgramsFindings show a significant underinvestment in People Programs. The 3 critical programs lacking sufficient investment included Manager Training, Performance Management, and Internal Mobility. These programs directly support employee development and retention.
Recommendation:Building People Programs takes considerable time; dedicate an internal resource or hire a specialized consultant.
Less than 50% of startups have a diversity hiring goalInvestment in diversity does not reflect its importance- less than half of startups have a diversity hiring goal. Most diversity hires are proactively sourced (outbound outreach), yet only 4% of Early Stage and 6% of Expansion Stage startups have a recruiter with diversity hiring goals.
Recommendation:If diversity is important to your startup, set a goal and have a recruiterresponsible for attaining it.
INSIGHTS | PLAN | EXECUTE | MEASURE
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Insights More than 20% of startups do not track recruiting pipeline metricsRecruiting needs to be more data driven. Metrics are necessary to allocate recruiter and interviewer time, identify areas of weakness in the interview process, and invest in the most effective hiring channels.
Recommendation:Every startup should track conversion ratios of 3 key recruiting metrics: Phone Interview pass through rate, Onsite Interview pass through rate, and Offer Acceptance rate.
Under-resourcing your recruiting team can lead to a greater cost per hireRecruiter output is generally low volume, with technical recruiters making between 5-6 hires per quarter. The size of your recruiting team should reflect both realistic recruiter output and headcount plan. With an under-resourced recruiting team, additional hiring channels (agency, candidate marketplace, contractors) will be needed. These channels can have variable cost, quality, and speed.
Recommendation:Don’t under-resource your recruiting team; you will end up paying for it in missed hiring goals or agency fees.
INSIGHTS | PLAN | EXECUTE | MEASURE
Recruiting strategy should be tied to Annual Operating Plan, clearly communicated
across teams, and reassessed quarterly.
Plan
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Reporting StructureRegardless of reporting structure, recruiting organizations should have a direct line of communication with executive teams to ensure calibration and alignment with operating plans and startup goals.
RECRUITING ORGANIZATION REPORTING STRUCTURE
60%13%
24%CEO
4%19%
5%CFO
13%26%
5%COO
1%2%
9%
CPO (PRODUCT)
1%0%
5%CTO
19%34%
43%HR
1%4%
9%LEGAL
1%2%
0%OTHER
INSIGHTS | PLAN | EXECUTE | MEASURE
KEY: EARLY EXPANSION LATE
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Not enough startups involve their Head of Recruiting in headcount planning. Our analysis showed that startups which reached or exceeded hiring goals were significantly more likely to involve the Head of Recruiting in headcount planning.
Headcount Planning
ANNUAL STARTUP HEADCOUNT PLAN
HEAD OF RECRUITING ACTIVELY PARTICIPATES IN HEADCOUNT PLANNING
Early
57%Expansion
56%
Early
25Expansion
80Late
210
Late
71%
= 5 people
INSIGHTS | PLAN | EXECUTE | MEASURE
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A surprising number of startups do not have a recruiting budget. This will impede their usage of the proper tools and systems.
Recruiting tools, systems, and programs are not cheap. All startups should expect to pay for an Applicant Tracking System, sourcing platforms, and talent marketing.
Recruiting Budget
STARTUPS WITH AN APPROVED ANNUAL RECRUITING BUDGET
AVERAGE RECRUITING BUDGET*Annual budget excluding team salaries
INSIGHTS | PLAN | EXECUTE | MEASURE
Early
30%
Early
$75,000
Expansion
58%
Expansion
$267,000
Late
77%
Late
$400,000
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While startups find product market fit between Early and Expansion stages, non-tech attrition increases significantly.
Incorporate projected employee attrition in headcount planning.
Attrition ANNUAL ATTRITION
12.6% 12%
16.5%
23%
14.2%
18.2%
Tech Non-Tech
Early EarlyExpansion ExpansionLate Late
INSIGHTS | PLAN | EXECUTE | MEASURE
Investment in recruiting programs tends to concentrate around employee sourcing and onboarding, while programs related to
employee retention receive little attention. Account for recruiter capacity and invest in supporting People Programs.
Execute
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There is a significant underinvestment in critical People Programs, such as Manager Training, Performance Management, and Internal Mobility.
People Programs
MOST COMMON PEOPLE PROGRAMSAverage Across Stages
INSIGHTS | PLAN | EXECUTE | MEASURE
Career Laddering 31%
38%
46%
55%
58%
59%
64%
79%
82%
Internal Mobility
Manager Training
Compensation Reviews
Interview Training
Intern Program
Performance Management/Reviews
New Hire Onboarding
Employee Referral Program
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Early Stage startups should build New Hire Onboarding, Employee Referral Programs, and Performance Management first.
People Programs
INSIGHTS | PLAN | EXECUTE | MEASURE
KEY: EARLY EXPANSION LATE
MOST COMMON PEOPLE PROGRAMSBy Stage
CAREER LADDERING
INTERNAL MOBILITY
MANAGER TRAINING
COMPENSATION REVIEWS
INTERVIEW TRAINING
INTERN PROGRAM
PERFORMANCE MANAGEMENT
EMPLOYEE REFERRAL PROGRAM
NEW HIRE ONBOARDING
21%
22%
29%
40%
43%
37%
44%
62%
65%
CAREER LADDERING
INTERNAL MOBILITY
MANAGER TRAINING
COMPENSATION REVIEWS
INTERVIEW TRAINING
INTERN PROGRAM
PERFORMANCE MANAGEMENT
EMPLOYEE REFERRAL PROGRAM
NEW HIRE ONBOARDING
28%
41%
53%
63%
66%
75%
75%
81%
94%
CAREER LADDERING
INTERNAL MOBILITY
MANAGER TRAINING
COMPENSATION REVIEWS
INTERVIEW TRAINING
INTERN PROGRAM
PERFORMANCE MANAGEMENT
EMPLOYEE REFERRAL PROGRAM
NEW HIRE ONBOARDING
43%
50%
57%
64%
64%
64%
71%
93%
86%
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Every startup should set individual hiring goals for recruiters, although a surprising amount do not. Similar to the way sales targets operate, recruiter hiring goals drive measurement and performance.
Recruiter output is generally low volume, with 5–6 technical hires per quarter. The size of your recruiting team should reflect both realistic recruiter output and headcount plan. Don’t under-resource your recruiting team; you will end up paying for it in missed hiring goals or agency fees.
Recruiter Goals
STARTUPS THAT TRACK INDIVIDUAL RECRUITER HIRING GOALS (QUARTERLY)
INDIVIDUAL RECRUITER HIRING GOALS BY FOCUS AREA (QUARTERLY)
TECH RECRUITER
6 65
NON-TECH RECRUITER
6
108
SOURCER
444
INSIGHTS | PLAN | EXECUTE | MEASURE
Early
41%Expansion
47%Late
57%
KEY: EARLY EXPANSION LATE
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Data confirms the common hiring recommendation of “Happy Thirds: 1/3 Sourced, 1/3 Applied, 1/3 Employee Referral”. Surprisingly, inbound applicants remained a significant hiring channel, even for Early Stage startups.
Hiring Sources
SOURCE OF HIRE
KEY: SOURCED APPLIED EMPLOYEE REFERRAL AGENCY OTHER
Early Expansion Late
35%31%
22% 27%
27%30%
13% 8%3% 4%
33%
23%
34%
6% 4%
INSIGHTS | PLAN | EXECUTE | MEASURE
While recruiting metrics are critical to sustained success, not enough startups track them. These metrics allow teams to identify strengths and weakness in the hiring process, and can minimize the cost of recruiting.
Measure
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Early Expansion Late
Recruiting metrics are necessary to allocate recruiter and interviewer time, identify areas of weakness in the interview process, and invest in the most effective hiring channels.
Every startup should track the three fundamental conversion ratios: Phone Interview to Onsite, Onsite to Offer Extend, Offer Extend to Offer Accept.
Pipeline Metrics
STARTUPS THAT TRACK PIPELINE METRICS
MOST TRACKED RECRUITING PIPELINE METRICS
TAKE-HOME ASSIGNMENTS
PHONE INTERVIEW
ONSITE INTERVIEW
OFFER
HIRED
46%
30%
78%
45%
41%
75%
50%
21%
81%
OUR ANALYSIS SHOWED NO CORRELATION
BETWEEN TAKE-HOME ASSIGNMENTS DURING THE INTERVIEW PROCESS AND BETTER INTERVIEW OUTCOMES – AS DEFINED BY HIGHER RATIOS OF INTERVIEWS TO OFFERS EXTENDED.
INSIGHTS | PLAN | EXECUTE | MEASURE
Early
76%Expansion
65%Late
92%
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The top two reasons for offer rejections — compensation and counter offer—were agnostic to stage. This contradicts common wisdom that startup culture is the deciding factor for candidates. Train your hiring managers and recruiters to clearly explain your compensation packages and position against competing offers.
Offer Declines
TOP REASONS FOR OFFER DECLINESAcross All Stages
1 COMPENSATION
2 COUNTER OFFER
3 SCOPE OF ROLE
4 LOCATION
5 JOB TITLE
INSIGHTS | PLAN | EXECUTE | MEASURE
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Few startups have diversity hiring goals or a recruiter dedicated to achieving them. As most diversity hires are proactively sourced, a dedicated resource is necessary.
If diversity is important to your team, set a goal and have a recruiter responsible for attaining it.
Diversity STARTUPS WITH DIVERSITY HIRING GOALS
STARTUPS THAT HAVE A DIVERSITY RECRUITER
TOP DIVERSITY HIRING SOURCES
Across All Stages
Early Expansion Late
4% 6%
44%1
SOURCED
2
APPLIED
3
4UNIVERSITY PROGRAMS
INSIGHTS | PLAN | EXECUTE | MEASURE
Early
36%Expansion
50%Late
60%
EMPLOYEE REFERRALS
Demographics
About Lightspeed
Appendix
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Demographics
Survey results were calculated based on self-reported 2016 hiring metrics provided by participants
SURVEY SIZE
STAGE
RESPONDENT TYPE
LOCATION
STARTUP SIZE
Respondents
83% San Francisco Bay Area
8% Greater New York
3% Los Angeles
6% Other
FUNDING 3% $0-$3 million
7% $3-$10 million
19% $10-$25 million
27% $25-$50 million
9% $50-$75 million
8% $75-$100 million
27% $100+ million
0-50 People
28%
50-200 People
42%
200-500 People
19%
500+ People
11%
STARTUP INDUSTRY36%
50%
14%
Consumer
Enterprise
Other
Recruiting 78%
HR 18%
Founder/Other 4%
Early: Seed– Series B
53%Expansion: Series C–D
33%Late: Series E+
14%
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Lightspeed Venture Partners is an early stage venture capital firm focused on accelerating disruptive innovations and trends in the Enterprise and Consumer sectors. Over the past two decades, the Lightspeed team has backed and helped build more than 300 startups globally, many of which have become market leaders, including Nutanix, AppDynamics, MuleSoft, Snapchat and The Honest Company. The Firm currently manages over $4 billion of committed capital and is currently investing out of Lightspeed XI, a $715 million fund and Lightspeed Select II, a $500 million fund.
About Lightspeed
SURVEY DIRECTORS
Luke [email protected]
Alexandra [email protected]