Moneyballing for Talent

How recruiting changes over time and how to respond

How to recruit changes over time.

People think that the most important thing in recruiting is to get a superstar to join your company. And that is super important. But most companies need to recruit many superstars. And if your employees were to spend ALL their time recruiting, they would never get any work done. So real recruiting is a function of trade-offs.

The formula is: how do you assemble the best team at the lowest cost?

Now when most people think of this, they think the “lowest cost” means how much you pay people. That would be wrong. You can pay people a LOT more if you can find a way for them to spend most of their time working at what they are best at (and limit the time they spend recruiting).

I know some engineers that spend 50% of their time recruiting. If they were only spending 10% of their time recruiting (and your company was getting the equivalent talent results), you could pay that engineer a lot more (because they would be contributing much more to the company).

The more efficient your company is with the time of your employees, the easier it is to pay them more.

The first rule of recruiting is to spend as little time as possible recruiting.

One way to do that is to increase your win rates. That includes the rate that great people want to interview with you, the rate they stay in the recruiting process, and the rate you close people once you are ready to make an offer.

Tale of 2010

In the go-go days of LiveRamp, we focused, almost exclusively, on recruiting people right out of college. At one point, over 80% of our employees (including most of our execs) joined the company right out of college. LiveRamp was the first full-time job they had.

One of the reasons we recruited out of college is that we had a really hard time doing anything else. We were not a well-known company and the CEO (me) was super inexperienced and did not inspire people wanting to work for us.

Our VP Engineering and cofounder, Jeremy Lizt, was a Harvard alum — so we focused on Harvard and a few other schools. At the time, we were basically the only Bay Area start-up recruiting on the Harvard campus. There was Google and Facebook, of course. And a bunch of start-ups in the Boston area. But we owned the market of people at Harvard that wanted to work at SF start-ups.

We interviewed a ton of people (we also got the resumes of EVERY graduating senior) and were able to quickly give offers to the people we liked. And we had over a 60% acceptance rate of our offers. It was all very efficient.

Of course, the downside of our recruiting strategy is that almost every new employee was very green and needed a lot of help and training. And we were a start-up that offered very little training and support. And all of our managers were new managers so they were growing themselves. So we got some serious superstars but also ended up with people that would have been more successful in an environment with more structure.

Fast forward to 2014 — times changed - move to arbitrage

From 2010 to 2014, we kept the same recruiting strategy at LiveRamp, but the world changed.

Harvard made a big change in 2014. They told all employers that you could not make an offer that expired before Dec 1 (for seniors graduating the following May). The penalty for not adhering to Harvard’s rule was a permanent ban from on-campus recruiting. So the rule had some real teeth.

The new Harvard rule encouraged students to collect as many offers as possible. In 2013, the average person LiveRamp gave an offer to had two other offers. By 2014, the average Harvard student had SEVEN other offers. That took our win rate down from 60% to 25%. All of a sudden, recruiting at Harvard became a lot less efficient and a lot more costly. And remember, this was a time when the CEO (me) was still interviewing everyone. So I had to personally interview more than twice the number of people to get the same number of hires.

In addition to efficiency going down, the average offer size increased dramatically. Those 8 offers gave students a lot of leverage. So their starting salaries went up a lot. Anecdotally, the average compensation of a Harvard graduate went up ~20% in 2014 and then another ~20% in 2015.

Since most graduates get about a 10% raise per year, it meant that in 2015, it was cheaper to get a Harvard 2013 graduate (with two years of experience) than it was to get a 2015 graduate (with no experience). So by 2015, it made almost no sense to hire people directly out of college anymore.

2018 - win candidates going remote first

When we started SafeGraph in 2016, we decided to not hire anyone directly out of college. We wanted people who at least had some work experience — someone 2 years out of school is usually at least 50% better than someone right out of school (and they take a lot less time to manage and onboard).

The strategy allowed us to onboard people quickly. Since the CEO (me) was more of a known quantity, it was also a lot easier to convince talented people to interview with us. The most successful recruiting strategy we had in the first few years was a drip email from me to high-quality candidates.

By 2018, we thought the best way to win the talent war was to become a remote-first company. It is a lot easier to hire more experienced people in a remote environment (by contrast, someone right out of college would really benefit, both career-wise and socially-wise, from in-person). So it worked that we had more experienced people at SafeGraph than we had at LiveRamp.

So we started the transition to a remote-first company. The talent arbitrage was tremendous. One of our execs immediately moved from San Francisco to Denver (for family reasons). And we were able to hire execs in Philadelphia, San Diego, and Seattle.

And then COVID hit and our arbitrage was over. Within a week of COVID, every company was remote-first. Our only competitive advantage is that we did not discriminate on where you live (most Silicon Valley tech companies pay people less if they live in Iowa then if they live in San Francisco).

What should we expect from the talent wars in 2022.

I have no freaking idea.

But that won’t stop me from giving a few thoughts…

The first thing we should all expect is that things will continue to change. Because the world of talent is always changing. The best way to recruit people five years ago will almost certainly not be the best way to recruit people today. The only constant is change.

My anecdotal observation is that the “great resignation” is not true in top start-ups. All start-ups have lots of turnover (most have over 25% turnover and some of the best ones have over 33% turnover). 22 of Facebook’s first 25 employees were gone within four years. But that was the case pre-COVID and I don’t see any evidence that it is getting more pronounced since COVID.

8 of SafeGraph’s 49 employees at the start of 2021 left during the year (not all voluntarily).  That 16% turnover is actually lower than SafeGraph’s historical average, LiveRamp’s historical average, and the average high-growth start-up.

So I don’t yet see evidence that the great resignation is negatively affecting start-ups (and it might actually be helping since thousands of large employers spent the last two years training people to work remotely). So possibly recruiting talent from more established companies is easier.

We were super successful at recruiting people at SafeGraph in 2021. We went from 49 employees to 110. This was the first year in my life that I’ve hit my recruiting goals (we actually exceeded our goals). And we got really talented people. So once you have a recruiting engine, it can scale. Even in a tight labor market.

In 2022, we’re going to be more focused on how we make the folks we’ve recruited more productive, faster. How can we help them grow faster? How do we help them be even happier? How do we up-level our managers so they are growing their teams more?

The more productive each of our teammates are, the fewer people we need.

And there is a LOT of cost of hiring people. Of course there is the cost of their salary. But there is also a coordination and communication cost that affects even the best-run companies. So we are also tracking revenue per employee to understand how we are getting leverage (most SaaS companies have less than $100k ARR per employee — which means they have very little leverage).

Learn more about SafeGraph careers at: https://www.safegraph.com/careers

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