Editor’s note: Bryan Schreier is a partner at Sequoia focusing on consumer and enterprise companies. He represents Sequoia on the boards of Dropbox, Hearsay Social, Inkling, Qualtrics, Thumbtack and TuneIn among others. Follow him on Twitter @schreier.
Got 990 free hours?
Not likely. Yet that’s how long it takes the typical startup to hire 12 engineers. Even if you spread your hiring over the course of a year, you’ll need to spend more than 19 hours a week recruiting candidates to hit that target.
A shortage of engineers is the biggest challenge facing Silicon Valley startups today. Hiring is what enables you to execute your product roadmap. So, falling behind on recruiting is a competitive issue.
Yet many fast-growing startups resist hiring a recruiter. It makes sense to rely on your network of contacts for the first handful of developers. But at Sequoia, we think that once you have product-market fit, the risk to your business is too great not to have someone dedicated to staffing.
Recruiting Calculator
Bret Reckard, who heads up technical recruiting for Sequoia, put together this calculator to help you plan your recruiting efforts. In particular, it highlights two variables that have the biggest impact on the time it takes to build a team: your referral percentage and your ability to close candidates.
Start by entering the number of engineers you’re looking to hire and how many months you have to meet this goal. Then enter the percentage of your hires that typically come from referrals and the percentage of candidates who typically accept your offers. If you don’t know these, start tracking. The tool will calculate how many hours you’ll spend recruiting and shepherding candidates through the hiring process.
Finally, the calculator will suggest how many full-time recruiters it will take to meet your hiring goal. A seasoned recruiter at a company with a lot of resources can directly source and hire about 30 engineers a year. For reasons we’ll outline below, the number climbs to 70 if candidates come from referrals.
The Value of Referrals
Recruiting is hard work, especially for a company that doesn’t have a lot of name recognition. To find one new engineer, you need to scour LinkedIn, GitHub and your employees’ networks to identify 100 people who appear to have the right skills. Of those, maybe 10 people will be interested and open to a job change. After hours on the phone and countless cups of coffee, you’ll have a small pool of candidates.
Referrals allow you to skip these early stages of recruiting—the candidate’s contact at your company did that for you.
A company with a 20 percent referral percentage will spend more than 1,200 hours adding 12 engineers. The same company with an 80 percent referral percentage will spend about 750 hours.
Between 40 percent and 60 percent of hires should come from referrals. If your percentage is less than that you likely aren’t doing enough to encourage referrals, or worse, your employees can’t recommend your company to their friends. It’s also possible you’ve exhausted your networks, but in most cases companies don’t push enough to find this limit.
Companies with high referral rates tend to make a big effort to get them. They tend to make hiring a top company goal, providing regular updates at all-hands meetings.
Some companies go further. Dropbox, for instance, built an app to manage referrals. Employees enter a candidate into the system and can track the hiring process. When you refer someone, being able to follow the process makes a big difference. Also, a fast hiring process is always important, but especially with referrals. Nothing kills referrals faster than letting people languish in the interview queue.
Don’t just sit around and wait for employees to recommend friends. A referral program should be a systemized way to get leads. Sit with employees and make lists of the best people from their previous jobs, colleges and peer networks. These leads are just as valuable as the name of a friend who is looking for a job.
Take time to court and get to know the people on your referral list. Even if they don’t join, they can and will be advocates in the community.
There’s a lot more to recruiting than referrals. There are things you can do to improve the other big variable, your ability to close candidates. We think a company should be able to close around 75 percent of the candidates it makes offers to. Your close starts as soon as you meet a candidate with no upper limit to the lengths you can go. I often talk to prospective engineering hires on behalf of the companies I work with and I’d encourage you to ask the same of your board members.
You can read more about building a referral program, closing candidates and what to expect from recruiters here.