The unemployment rate in America is at 4.1% according to data from the U.S. Department of Labor as of December 2017 and falling. But if you are a successful CEO, CTO, VP of Engineering, VP of Sales, CMO, or VP of Professional Services in Silicon Valley, NYC, Boston, Philadelphia or any other start-up hotspots, the unemployment rate is 0%.
There is a war for talent being fought by companies everyday despite some being unaware of it. Senior executives have never been harder to secure. Many companies struggle with committing the resources required to effectively engage and recruit talent. With years of experience running talent acquisition teams for technology companies in house, I was constantly amazed at how little senior management failed to see beyond the proverbial cost per hire. While there is a price to hire an executive search firm to secure senior level talent, many fail to weigh out the cost of not hiring a “game changing A-player” who will lead their company to the next level of growth and a profitable outcome.
Many young companies begin to hire when they receive financing. Most seek to leverage the network of the founding team and their investors. This network provides some valuable leads and perhaps a few hires. Leveraging existing networks has greater benefits than simply cost savings and convenience. Most will agree that teams that have worked together in the past are well-positioned to out-execute those that have not. There is also a certain level of trust that comes from relying on a network that cannot be dismissed. Typically, people that have worked through a successful exit before are far more likely to repeat their success.
However, I have seen first-hand how the networking mentality has led to major setbacks in the growth strategy of younger venture-backed companies. While hoping to find an executive through a network to “save” money, I witnessed a company fail to make a key C-level hire for well over a year. The consequences were staggering and included: loss of leadership and morale, lack of accountability, failure to meet product roadmap deadlines, missed quotas, team turnover, loss of productivity, and revenue! Most will agree that these negatives must be avoided as you build and scale your business. Besides relying heavily on informal networks, I have seen what happens when companies try the post and pray method. They wind up reacting to inbound applicant flow that can cost massive amounts of time. The key here is that applicants are not candidates and time is money. Also, inbound candidate flow generates an adverse selection bias – the best people are not looking, so they will never contact you and respond to your posting.
Most entrepreneurs and early stage leaders are very skeptical of executive search firms. Some reluctantly agree to hire a firm after a board member makes a “recommended” introduction. I watched some founders and early stage business leaders even believe that by hiring a search firm, it represented a personal failure on their part as an entrepreneur. After all, many leaders believe it is their job to secure the best and brightest talent through their own efforts and their own networks. But my years of recruiting have taught me that startup CEOs and founders are at a distinct competitive disadvantage if they don’t get outside help for recruiting. Here are the top four reasons why:
1) You Never Have Enough Proactive Time. Recruiting is a proactive exercise. It requires effort and energy from the company to generate candidate flow, meet the candidates, vet them, and check references. It is therefore important to have an outside force push you to react to candidates and help you prioritize the recruiting effort, just as your VP Sales is pushing you to prioritize sales and your VP Marketing is pushing you to prioritize marketing.
2) Hiring Inexperience. Most entrepreneurs are first time CEOs or even second time CEOs who simply do not have a lot of experience hiring. Some founders don’t know how to interview well. Most will never admit this. Like anything else, hiring is part science, part art but becoming great at it requires experience. Further, some leaders have little understanding of the talent market in general. The best founders and leaders I have worked with know their weaknesses and strive to fix them. Good executive search firm partners are invaluable in providing early stage companies with a sound assessment of their talent requirements as it relates to the current state of the market.
3) Running the selling process start to finish. Many hiring managers don’t realize that the due diligence process for a candidate is as thorough, if not more so, than your due diligence on them. The best candidates have choices and are sought after. Even though you are deciding whether to “buy” over the course of a series of interviews, you need to be able to sell every step of the way. Recruiters can be very helpful in quarterbacking the selling process by proactively surfacing objections and handling them with data and follow-up conversations, linking candidates to the right people at the right time in the process.
4) Closing Candidates. Closing candidates in this competitive market is very hard. Counter-offers, compressed timeframes and personal considerations all get in the way of smooth closes. Again, if you don’t have a lot of proactive time available to you (and who does?), there is a great benefit to having a focused closer. Further, I have found having an intermediary helps tremendously with the negotiations. A candidate will be unafraid to tell a recruiter what it takes to get the deal done, and a tough back and forth with the help of an intermediary can avoid bad feelings afterwards between two principals that will need to work together as a team when the dust settles.
Too often I hear entrepreneurs say, “I’ll work my network for a few weeks and then we’ll hire a recruiter.” Some leaders are over-confident about their own recruiting prowess and will wait until they talk to their partners and surface a few great candidates from their network. The problem, of course, is that everyone gets busy and distracted. A few weeks turns into a few months, a few candidates get turned up and interviewed but then discarded, and finally when the network comes up dry, the group reconvenes and decides to hire a search firm. Search firms then need to be selected, interviewed, and ramped up – causing more delay. By the time you get around to getting the recruiter ramped up, the board and CEO feel frustrated that they are already behind.
There are some leaders who are exceptional at recruiting. Many people have written about Paul English the founder of Kayak and his ability to recruit top talent in record time. If you can be that exceptional, perhaps you don’t need a recruiter. However, if you, like many founders and entrepreneurs, don’t have enough proactive time or the expertise, my advice is to find a reputable and experienced recruiter and hire them now. Everyone knows hiring an “A” player has a massive positive impact on the bottom line of a business and that impact is compounded if it can be achieved 3-6 months sooner.