Laying Down the tracks for effective recruiting: A Guide for CXOs
Build now for speed, scale, quality and cost.
Neil Davies
Founder IC2 Talent Solutions
Neil Davies trained as an economist before starting his career in HR. Initially starting as an HR generalist in the UK, he moved to the US and got the opportunity to specialize in Talent Acquisition for Enron, where he led global recruiting. After Enron's demise, he launched his first company, Inventia Consulting, offering advisory and search services to energy and healthcare clients.
Next, he joined Microsoft, the perfect opportunity to grow his skills as an HR leader and a perfect backdrop to start a family.
Since Microsoft, he has led Global Talent Acquisition for established companies like Visa, Motorola/Lenovo, PayPal, Activision Blizzard, and, most recently, Roku. He has also led TA for two series D unicorns - Flexport and Qualia.
Neil is currently building another talent advisory firm IC2 Talent Acquisiton Solutions, with colleagues he has worked with over the last 20+ years. He is also an Executive Director for Executive Networks, where he leads their Global Recruiting Network.
Table of Contents
Hiring as a source of competitive advantage
Hiring and retaining more hyper-performers than your competitors is one of the most impactful and sustaining sources of competitive advantage. Products come and go, but the quality of a company's talent sustains it even through fundamental product or even secular/industry transformations.
It is beyond the scope of this eBook to explore human performance, but here is an interesting visual from an article by Josh Bersin on performance in the workplace. It illustrates the difference in impact between a hyper performer and an average performer. We see this delta all the time in sports; at a recent swim meet with my daughter, I got to experience this firsthand when a 13-year-old competitor qualified for Olympic trials in the girl's 50 freestyle, 11% faster than the 2nd place competitor and 30% faster than the average competitor (average age 16!)
The implications from a talent perspective are:
The first 25 hires you make are “easy.” They are going to be friends and friends of friends. They will likely have values similar to yours, be mission-motivated, scrappy learners and thinkers, and, most importantly, believe in you and your mission.
However, to take advantage of the opportunity you have created and to scale, you need to branch into unfamiliar areas your network will not reach.
Seems obvious? This goes beyond your head of talent, but it is shocking how many CXOs overule subject matter experts who have built successful careers around doing those things. This is especially true in areas like human resources, where decisions are driven by judgment and are less definitive.
If you have hired the right person and they are producing the right data, you should focus on helping them refine and tailor their playbooks to your business, values, and operating principles.
Every VC is different, but most have a talent team of some shape or size looking for ways to add value. Be that outlet for them; whether it's executive search, interviewer training, reference checking, or vendor selection, they have a lot to offer that can supplement your team and provide healthy validation.
If you have successfully pitched a VC, you have “something,” but your pitch was likely built around solving customer problems and creating economic value. When hiring for your team, economic value/ wealth creation is important, but think about the 3 P’s:
Once you have developed and fine-tuned your pitch, teach it to everyone at every opportunity. Great founders never tire of pitching, tailoring the 3Ps to the audience, and refining them often as they hear others run with and develop their version of the pitch.
While you must lay the tracks for effective recruiting at scale, tight processes, and rapid and responsive candidate review, you also want to engage your workforce in hiring. If you have 250 employees, imagine the power of 250 “recruiters.”
If you are going to grow, you will need to hire talent with experience, but you need also to make sure that they are not maxed out. A manager you hire today may need to be a Director or a VP in a few years. You need to hire talent with experience and potential - hiring someone who could, in the future, be your boss is a good barometer. If you don't see that level of potential, you are likely under-hiring - if you feel threatened by that idea, you will regret it later when you need to switch out leaders who have not kept up with role growth. Churn is inevitable, but excessive churn is destructive and can become a "vicious cycle."
Once you start to scale, think about college hiring early; as part of a well-rounded "experience pyramid," don't exclusively hire for experience - most teams need a blend of experience. Early career talent, when added to a high-performing team tend to stay longer and be strong performers.
It turns out a whole lot. From recruiting to compensation titles matter, and getting them out of sync with the market is something that does not usually have advantages. As you start to hire externally, you will need to make sure that your titling makes sense for your industry; if you don't agree with the industry then ask yourself if this is a battle you want/need to fight. If you have to fight it on principle then pick titling that is completely different to your industry.
Reward loyalty with equity or cash; don't reward it with titles - you should be really clear on what a VP is at your organization, and it should not become the default for your direct reports, or for someone who runs a department. Titles are a currency that, once devalued, are really hard to revalue and this can result in title inflation. So pick a titling structure, pick a comp/grading structure, make it as granular as you like, but manage movement within it tightly.
At Microsoft, you usually join as a level 58/59 out of college, become a manager at 64, and partner/GM at 68. Theoritcally. you can be promoted every year for 10 years and be a Partner by age 33 or 34. The retentive power of this kind of career conveyor belt should not be underestimated, especially as you differentiate reward to those developing the fastest; merit plus promo helps keep compensation in line with the market for those you want to retain.
Do not hire for the role you have today; hire for the role you will need in 12 months or 2 years. When it comes to talent, you need to skate to where the puck will be, not where it is today. If you are hiring for product and engineering today, will you also need to hire for sales and marketing in 12 months? If you are hiring domestically today, will your margins dictate that you must move some of your engineering and support roles offshore? You do not want your HOT to be “learning by landmine.” You want them to help you avoid your landmines.
Ideally, you should hire for both, but choose breadth over scale if you must choose. Large employers allow recruiting leaders to put up really big numbers, but they may have only hired L61-64 software engineers in North America to post those numbers.
Recruiting leaders at large companies can make 500 hires and manage a team of 50 but have never thought about branding and reputation management; they have never been exposed to reporting and analytics, ATS management, early career recruiting, interviewing and selection, event management, D&I recruiting, etc. Companies like Google have entire teams that think about these issues. They are the Ford Motor Company of Talent, a talent production line with super-specialized roles.
You need someone with a decent playbook – you don’t want someone who leads every problem-solving situation with “at Meta we……..” You do want someone who has a decent range of companies and experience.
Your HOT must also be smart enough to apply the right playbook to the right situation and create new playbooks where the circumstances require. But don’t over-index on smarts – I interviewed for a role with the hedge fund Bridgewater, who declined me as they “weren’t sure I had the intellectual horsepower to succeed at the firm.” As I told them then, I’m one of the smartest HOTs I’ve “met,” and my rocket scientist friends are off building rockets, not running Talent. It was interesting when they came back six months later and offered me the role.
You need someone who is as data-driven as your CMO or CFO. If they don’t use data to run their TA Operation, measure the “voice of the candidate,” track funnel metrics and hire sources, and can’t talk about talent supply metrics, walk away.
If you have an inexperienced Leadership team, don’t hire an up-and-coming HOT. If you have “difficult” leaders, don’t hire someone who will “cave” to them. Your HOT should make you better at recruiting – you should hear them pitch your company and find yourself incorporating elements of their pitch into your pitch!
If your HOT cannot articulate a strategy and a plan for achieving that strategy, get them help or replace them.
Many founders hire a great first recruiter, someone they know and trust from a previous company, maybe a headhunter who helped with some early hires. They get you; they get the company, and they demonstrate the company’s values.
When a company is experiencing hyper-growth, roles will outgrow incumbents. It is almost inevitable that your job will outgrow you, so you must hire a great leadership team - you cannot have a leadership team struggling to keep up with their roles.
Your HOT should report to the CEO, COO, or CFO. If you have a CPO that can drive the entire people agenda for the company, that is a possibility. If your HOT is someone that you do not want to report to you or the COO, then you have or are about to hire the wrong person! If you don’t think that Talent should report to you or your COO, then maybe YOU are the wrong person for your role.
You can hire a coach (IC2 can help with this!) to help your homegrown head of talent ramp, but at some point, you will have to decide if they will be able to get you where you need to go. Suppose you decide to hire a new head of talent. In that case, it's great to retain your current leader in a role that aligns with their capabilities but make the decision quickly before credibility and confidence get destroyed. Your new HOT should be someone who will not struggle; they should confidently lead the talent agenda – they should not be incrementally better but two levels ahead of the incumbent.
A great Founder/CEO spends at least 10 hours a week interviewing and doing “informationals”. If you are not, then it's unlikely that you won't be building the succession plans and creating the talent optionality you will need. If you need to kick off a search every time you have a leadership hire to make, you are not spending enough time “scouting.” You should have an external succession bench with at least 5 external prospects for every critical role you have identified. This is especially true for roles where you assess low current and/or future confidence in that leader.
When a company is experiencing hyper-growth, roles are going to outgrow incumbents. It is almost inevitable that your job is going to outgrow you. Hire leaders who will help you grow and keep pace – keep your head above water and do not worry about drowning themselves.
Overhiring is especially important for members of your executive team. You cannot have a leadership team “learning by landmine”; instead, hire people who have learned and made their mistakes at another company’s expense. If you have an executive team all making mistakes simultaneously, focusing on trying to keep their heads above water, and some of them failing, then the company will experience this dysfunction. Now add some leadership churn from those failing leaders, and you very quickly will get something that looks like this:
Chapter 4: Build Talent Plans for the future scale that you need
Based on this assessment, you can take various actions, such as replacement, coaching, organizational design changes, strategic partnerships, etc.
You don’t need an elaborate performance review process; ask yourself: Is my confidence in this person today high, medium, or low? Knowing how the company is growing in scale and complexity, how confident are you in their ability to deliver in their expanding role in 12 months?
Chapter 5: Build Succession Planning & Talent Optionality
Succession planning may sound like something “grown-up” companies do. But you’re a scrappy start-up and don’t have time for succession planning! What’s the point in spending days planning for something that may never happen? Besides, things move too quickly.
Anyone with large corporate experience will roll their eyes when you talk about succession planning
Effective succession planning is about giving you options. If you implement a light, future-proofed, “confidence” based assessment for critical roles, then this should guide you where to invest your time and energy talking to prospects.
Whether it's an internal resource, a trusted external resource (to create arms-length/confidentiality in sensitive situations), or a combination, your succession plans and confidence assessments should create a platform for your talent scouts to send you prospects for informational conversations. Whether you need those options or not, the discussions will inform you and give you insights into how other companies run those same aspects of their business.
Individuals who have experienced exclusion and bias are more likely to factor this risk into any decision about changing roles. They are likely to do more due diligence, value the inclusion they have found in their current employer, and take fewer role-changing risks (they know not to take inclusion for granted) than those who are part of the majority.
Succession planning or creating talent optionality allows you to slow down the pace of the hiring process to accommodate a broader set of candidates compared to a regular search. A regular search, at 90 days, feels like an eternity when you have an empty role to fill, but when you are doing speculative informationals, the time pressures are reduced, and a broader set of prospects can be brought to the table.
Chapter 6: Think about your Leadership team
Every executive hire that you make allows you to think about organizational redesign. Re-orgs are often a lever that leaders overuse. New hires create an opportunity to bring new skills and perspectives to the team; whether this results in a change in the organization structure is not automatic. Just because you hired an SVP of sales who is great at product marketing doesn’t mean you need to reorg that team into their organization. Still, clarify to the SVP of sales and the VP of marketing that you expect them to work on product marketing together - and set some shared goals.
If you hire experienced leaders, they will come to your company with their ideas and practices for selection and interviewing. This is especially true for leaders with formative experiences at big tech companies. I’ve been shocked to go into start-ups that operate a Google-like hiring process, even with a hiring committee. Having checks and balances is great (hiring committee, bar raiser, etc.), but taking a candidate through a process and telling them what team they are going to join after the offer or offer acceptance works if you’re a massive tech company (opportunities are endless if you don’t like the team) but not if you’re a 250-person start-up. Remember the 3 P’s – People; have the team sell themselves, sell the work, sell the culture. Don’t build a process that throws away your “intimacy advantage.”
I worked at a company that hired female and underrepresented talent at a higher rate than their industry and their existing population. They generally promoted female and underrepresented talent at a higher rate than overrepresented employees. Yet women and underrepresented minorities, when asked in engagement surveys, felt less likely that they were going to be able to meet their career goals at the company and resigned at a significantly higher rate than overrepresented employees. This company’s executive team saw lots of change during my tenure, but it was consistently male-dominated. It also did not have any underrepresented talent for any length of time. Employees don’t just look up to find people who look like them; they look to the top of the house to set their expectations for career growth.
So, have interviewer training—teach the pitch, talk about the hiring bar, and tell stories that set the tone for the culture. Have a similar process for all teams so that you can have cross-functional interviews. Make interview debriefs mandatory, and sit in on some interviews where you are not even an interviewer.
Chapter 7: Understand Talent Supply & the economics of your business
You started your business in San Jose; it gives you almost unparalleled access to engineering talent. It's expensive and competitive, but you are well-funded and can attract and retain the talent you need to take your product to market.
Fast forward two years. Your product has been successful, and you have scaled aggressively to keep pace with customer and sales growth. Other players have entered the market, so you have had to invest more in R&D to stay ahead. Competitors have also been coming after your talent, and your labor costs have increased. Increased competition has also impacted your margins and net revenue, and your burn rate keeps increasing. Your board tells you that you need to bring down your labor costs, so you should start exploring hiring in lower-cost locations. So now you have a small team of engineers and customer success employees in Bangalore, and all new Eng and CS hiring must be made there. This gives you some cost savings, but your teams complain about the time difference; the team in India complains that the work sent to them is maintenance, QA, and legacy products.
Your HOT of talent at the time also did not have global experience, having led Eng hiring for a division of a FAANG company, and had steered you back towards hiring in the US, where you had good momentum.
You wish you had decided to pivot headcount to India when your CFO first suggested it, but your VP of Engineering had convinced you it would slow down product development. You suspect they had no experience offshoring or managing remote teams.
You realize that you need to double down on Bangalore, but the only way to fund that is to cut headcount in the US and reinvest those headcount dollars in India. You do your first set of RIFs, which, combined with increased attrition, gives you funding for more headcount, but morale is down. Burn is still up as you need to hire in India ahead of effective RIF dates. You have had to start paying retention bonuses to those identified for RIF, as hiring in India is slower than anticipated.
You start to experience attrition in Bangalore as employees feel like they are out on a limb. The site leader that you hired is not respected by their US peers and complains that the team could do much more if they were more trusted and more integrated.
Build a realistic 3-year financial plan that anticipates likely margin pressure, increased labor costs, etc. If it is feasible to move roles to a lower-cost location that still provides high-quality talent, then do it early and at scale. Waiting until you need to do it may be too late.
Even though a low-cost location will need to drive down your unit costs, invest in it – send a great leader on assignment who is a culture carrier and managers who can build even though it will be costly if done well. Treat hiring the first 50 employees in your low-cost site with the same care and attention you provided to your first 50 employees.
Do the work to understand which locations provide you with the needed talent. Don’t use some generic analysis for software engineers or, worse, government data; instead, do an in-depth skills-based analysis. If you only hire those with 10 years of experience, then make this a criteria, need experience with a particular tech stack, then make this a requirement.
Understand the talent competitors in the locations that you are considering. Understand your brand awareness and strength. Conduct a few initial searches, maybe confidentially through a third party, before you commit to that location.
Consider remote working to give yourself as much talent supply advantage as possible—it fundamentally changes the talent supply landscape math!
Chapter 8: Build and Nurture Your Employment Brand and Reputation
Your company’s reputation matters, and so does its brand; what’s the difference?
Your employment brand is the promise of what working at your company could mean for a prospect. Employment brand starts with awareness and builds from there to interest and intent. It’s tied closely with your corporate brand, which can have a halo effect. Companies with a corporate or product brand that demonstrates innovation will be attractive to candidates who value innovation as they will believe that working at the company will allow them to be innovative. Your employment brand is based on your values and culture – it's your promise of what it will be like working here. Employment brands can be a little aspirational but should be grounded in reality. If the promise and the reality are too far apart, you will see high new hire attrition and other engagement metrics will suffer.
Your employer reputation is what employees and former employees say it was/is actually like working for you. Sites like Glassdoor, Comparably, and Blind provide an easy venue for current and former employees to rate what it is like to work for you. Much like reading restaurant reviews, you can ignore the review that is just a disgruntled employee who was a bad hire, but as the reviews add up. Patterns start to emerge, and your employer reputation will either help your recruiting efforts or hurt them. An employer's reputation effects leakage at every stage in your recruiting funnel.
A bad reputation will effect:
One of the 56 markers in IC2's TA DiagnosticTM is our employer reputation index. It uses publicly available data and a proprietary methodology to quantify the strength of your reputation relative to your talent competitors.
Understanding your reputation in the context of your competitors is really important not just for recruiting but also for starting to understand the entire employee experience. Delivering an employee experience that is viewed as inferior compared to your competitors means that you will have to work much harder to hire hyper-performers, if you cannot compete on reputation you may find yourself losing or competing on compensation!
The example below is actual data for a real company. 61% of the candidates submitted by the recruiting team for review were reviewed and accepted by the engineering team as meeting the role's requirements on paper. 27% of the candidates who went through one of the 4 available 1-hour standardized tech screens passed or chose to continue. Only 4.4% of those who attended a virtual onsite passed the onsite (3 case studies and behavioral assessment), and finally, there was only a 50% offer acceptance rate.
Chapter 9: Understand Your Funnel
In this example, hiring 20 SWE2s burned at least 3.4 FTEs of engineering time for the best engineers and leaders in the company. Imagine the resourcing of the recruiting team required to generate 3,320 tech screens!
This is an extreme example; this organization was trying to remove rather than manage risk. Like skiing or horse-riding, recruiting is an inherently risky activity – there will be a failure rate (which you should measure and track), and the speed at which you need to grow should drive the level of risk you are prepared to take.
This does not mean dropping the hiring bar—you should still try to hire hyper-performers; it's about managing your confidence that the hire will be a hyper-performer. The funnel above is for a leader trying to achieve 99%+ confidence at the expense of missed product deadlines.
Your HOT should drive your hiring funnel, just like your CRO should drive the sales funnel. However, in recruiting, decision rights are not always clear, and you may need to get involved. Have regular recruiting QBRs with each department leader and your HOT, look at the data and the partnership, and assess the health of both.
Always focus on the hiring bar and ensure that all those involved in hiring do the same. If you are not growing fast enough, decide whether you want to take more risk but never drop the hiring bar. To scale faster, take more risk - that you will increase the ratio of B to A players hired. Don't let the organization consciously hire B players or C players to make their numbers.
You cannot solely be responsible for the hiring bar; neither can you HOT. The organization needs challenges and challengers who are removed from the pressure to hire; who do not feel the immediate pain of that open role; who can dispassionately say no to a team who are about to take too much risk, or settle for an asessed B or C player.
There are multiple ways to do this - a hiring committee, an "as appropriate", a "bar raiser". All offer challenges to the hiring team to ensure a good hiring process, good assessments and high quality outcomes - irrespective of the pressure to hire. Challengers need to create healthy tension between short term pressure to hire and long term hiring quality.
Chapter 10: Measure, measure, measure
It is important to have a suite of metrics that you review with your HOT regularly. Many outcome metrics are backward-looking, and it will take time to establish a baseline. Ultimately, outcome-based metrics will drive your decision-making and predictive analytics will unlock new decision-making opportunities.
There are four primary categories of talent acquisition metrics:
Each category offers unique insights that contribute to a holistic understanding of the talent acquisition landscape.
Talent supply metrics provide insights into the availability and characteristics of potential candidates in the job market. These metrics help TA leaders understand the talent pool, identify skill gaps, and forecast hiring needs.
Key Talent Supply Metrics
Regularly analyzing talent market trends helps TA leaders adapt their strategies to changing conditions.
The holy grail of outcome-based metrics, a quality-of-hire index, will ideally be impacted by multiple dimensions. Most companies can produce new hire retention data (a hiring decision that results in an employee leaving within 12 months for any reasonis not a high-quality hiring outcome). Adding data around performance and promotion adds powerful dimensions to your quality of hire index. Finally, taking a forward look at anticipated future career growth, in the form of presence on succession plans is another powerful dimension that helps anticipate future contributions and accelerate your understanding of hire quality.
Acknowledgments
Thank you to all the TA leaders and professionals who have shared their insights and experiences, contributing to the knowledge and strategies presented in this book.
I'd particularly like to thank the other founding partners at IC2 Talent Acquisition solutions.
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