For the first time this decade Silicon Valley startups are scrambling to attract and retain skilled workers in the face of tough competition from larger, more established corporations. The larger companies pay higher salaries to managers and engineers – and offer equity that has value today – something a pre-IPO start-up cannot guarantee.
“Startups aren’t the destination employers for top talent anymore, and it’s a candidate’s market right now,” asserts “Dave Lefkow”:http://sixdegreesfromdave.com/2007/03/07/dave-lefkow-on-%e2%80%9cbloggers-influence-upon-the-recruitment-industry%e2%80%9d/, CEO of talentspark, a Seattle-based talent management consultant. “[Unless] you can…get the right people on board at the right price, the odds of success are miniscule.”
Silicon Valley is ground zero in America’s tech talent wars. Andy Lark, CMO of “LogLogic”:http://www.loglogic.com, a Silicon-Valley based startup with 140 workers and counting concedes that the employment market is “hot and competitive. World-class talent has always been scarce, and it remains so today.” The talent available to start-ups is more expensive and harder to come by than just one year ago. Making matters worse, Lark says LogLogic isn’t primarily competing against large corporations such as EMC or Google. “We’re competing with other start-ups,” he says.
Mahesh Lalwani, an engineer and founder of “CCube”:http://www.ccube.com/usa/index.htm, a phone and web-based social media startup, offers founder stock to attract and retain core members of his team. “Their stock options will one day be worth so much more than the difference in salary [they would receive] by working in a larger company,” predicts Lalwani. The allure of options is especially appealing to younger workers. Mahesh concedes that of his original seven member team, which he augments with a stream of consultants, there’s no one suffering flashbacks from the trauma of dot-com, boom & bust cycle at the outset of this decade.
The biggest talent management challenge CCube faces is finding workers with a combination of critical skills such as Java programming and databases, or speech recognition and Linux servers. He’s willing to train team members on additional skills. But when CCube needs to act quickly, Lalwani says he usually lacks time to interview and hire someone new. Paradoxically, it’s the speed from interview to onboarding that remains the advantage of startups versus larger employers.
Talentspark’s Lefkow, writing in “ERE.net”:http://www.ere.net, a publication for recruiters, suggests five ways for startups to “win the war for talent.” These include:
*1.* Recognize the importance of great talent. One way to do that is to create incentive programs that reward them for individual contributions as well as team goals. Younger talent requires more frequent positive strokes.
*2.* Build a differentiated employee value proposition for key roles ” This means that you have to understand their interests,” writes Lefkow, “and create a unique value proposition that sets you apart.” What do you have to work with? You can choose from among combination of options that include “pay structure, work/life balance, benefits, culture, and equity,” he adds.
*3.* Get involved in every hiring decision and recruiting initiative. Rather than leave this to your HR chief or an outside recruiter, put some skin in the game. This signals to the recruit that they are worthy of your attention. If this prospect is going to be a difference maker for your company, then you need to make a difference to them first. Lefkow suggests that your involvement also promotes referrals – an effective way of leveraging existing talent.
*4.* Build a strong talent pipeline. Unless you’re planning to hire hundreds or thousands of people, this isn’t a problem that requires a deep investment in software for tracking and organizing résumés. However, you do need to stock your cupboards with worthy, interested candidates. “If your company hits some hard times, you’ll inevitably lose some of your best talent,” cautions Lefkow. “Having a group of people who you’ve engaged with about career opportunities before you need them will be a valuable asset that can help you weather the storm, and could in fact end up saving your company.”
*5.* Be nimble in your recruiting. Speed is your friend. When a hot job candidate is ready to move, you have to act quickly. Large companies often have a snail-like hiring process –your company cannot afford that. “The hiring process at most big companies takes a minimum of 45 days,” write Lefkow. “Your hiring process should take five days.”
As the talent crunch deepens worldwide look for startups to find more innovative ways to compensate talented workers without writing larger paychecks. But it’s not going to get easier for them any time soon, explains Mike Orsak, general partner, “Worldview Technology Partners”:http://www.worldview.com, a VC firm in Palo Alto. “Who would want to work for a company when it’s so easy to start one [instead]?”
For more about the talent crunch squeezing startups, read “Are Startups Hard Up for Talent?”:http://www.myglobalcareer.com/?p=94&akst_action=share-this
6 thoughts on “Talent Crunch”
This was noted in the opening, but it is worth repeating that even when recruiting is tough it is still one of the single most important factors in the success of the startup…this is true in any market at any time…in my experience, when in doubt dedicate more (not less) time to recruiting key talent…and in the early stages be incredibly selective…as the saying goes, “one bad apple…”}
My favorite recruiting advice: “Make no small plans for they have no power to stir the soul.”
Good stuff attracts good people.}
Excellent post. We’ve found that its a lot easier to find solid folks if you are open to telecommuting. Not just because we’re located East coast, but because more and more of the best talent we find are in strange places through out the country.
I think decentralized communities (i.e. blogs), lower costs and rising awareness (kids are growing up as coders) are generating larger amounts of talent, but its just spread thin geographically.. It’s an interesting trend.}
I completely agree with Alex. You can find the good people you need, it just depends if you want to try to build the good old boys “Valley Company” where you think it’s cool to brag about hanging out working in your loft or if you want to go one step further and build a great team.
ONE MAJOR POINT THOUGH – this is very important, so often do startups think that recruiting a certain person from a big company will be awesome in “building your team” BUT MAKE SURE THAT YOU HIRE A START-UP PERSON NOT A BIG COMPANY PERSON!!! Too often does this happen when you hire the big VP of Sales or VP of Marketing who then gets frustrated when they don’t have any budget or get stressed with a lower salary. It’s definitely a mindset that you need in addition to skills.}