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.


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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.


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


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


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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


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


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


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



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


INTERVIEW TRAINING

INTERN PROGRAM



NEW HIRE ONBOARDING

28%

41%

53%

63%

66%

75%

75%

81%

94%

CAREER LADDERING

INTERNAL MOBILITY

MANAGER TRAINING


INTERVIEW TRAINING

INTERN 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


Early

41%Expansion

47%Late

57%


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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%


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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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.


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


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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


4% 6%

44%1

SOURCED

2

APPLIED

3

4UNIVERSITY PROGRAMS


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]

Cat [email protected]

Alexandra [email protected]

startup recruiting trends

Recruiting & HR