I’ve talked to various hiring teams over the past several months and after spending 3 years building out an engineering team myself, I was surprised by some of the things I discovered.
The teams I talked to range from very small (1 or 2 founder teams, obscure startups) to very large (thousands of employees, leading startups). I’ve condensed over 50 hours of conversations and thinking on the topic here. I’ve also talked to a few CEOs of ATS platforms who have spent 10+ years working on these problems.
Here’s what I’ll talk about:
- General patterns I’ve noticed
- Managers vs recruiters
- The candidate experience
- Glassdoor reviews
- What the best teams are doing
TLDR: Hiring teams still get a lot of things wrong, and the main theme is a lack of awareness around how important candidate experience is. Ignore at your own risk.
- Referrals work for small teams <10 employees. After 10–15 hires, they tap out their networks and rely on active and passive candidate sourcing. They generally sign up for an ATS after the 10th hire. Greenhouse is widely adopted in the Bay Area. Lever is a relatively newer player and growing in popularity but both are costly for startups (see cost data).
- Today, nearly every company dislikes their ATS, and there are no good solutions for early stage companies unless they’re willing to pay enterprise prices. The ATS market is saturated with hundreds of players. There’s a sense of frustration towards companies who hide pricing information on their websites. This is called sticker shock — the company benefits by delaying pricing information.
- Hiring teams are unaware of how inefficient their processes are. Recruiting coordinators spend an enormous amount of time on repetitive tasks and answering repeat questions from candidates. Candidates don’t care if it’s answered by a coordinator or if it’s written down somewhere on a blog (eg an FAQ format).
- Offer transparency is regional. Companies in Silicon Valley are more transparent because candidates force them to be. Offer transparency also depends on the role seniority. Companies reveal cap table data like fully diluted shares, preferred price, and exercise price when it helps them close candidates. Many candidates won’t consider offers without this data. Companies in New York are less transparent. Carta is based in San Francisco and they’re leading the charge towards transparency in Silicon Valley. I’ve heard a lot of CxOs talk about how they wish their offer letters looked like Carta’s. ¹
- On the candidate side: hands down, across the board, interviewing is a painful, negative experience. Very few companies get it right. Most are bad at it. No surprises there.
- Early startups struggle with top-of-funnel conversion, while unicorns struggle with end-of-funnel conversion. Universally, sourcing high-quality candidates remains difficult. For the unicorn startups (Coinbase, Airbnb, etc), sourcing is less of a problem, but closing candidates becomes the primary challenge. These startups are up against The Big 5 (FAANG). The Big 5 have massive war-chests and can usually offer a better salary, bonus, or equity structure, which carries the strongest weight in a decision.
- It’s best to speak in absolutes, not percentages. So if you’re trying to talk about hiring efficiency with your team and how many people you can hire through more efficient processes, use “butts in seats,” not percentages. In other words, talk about how many new hires can be made, not the “5% gains.” This sounded bizarre to me, but it actually works in practice. (Thanks to Sequoia Capital for this insight)
Managers vs Recruiters
Nearly every recruiter I’ve talked to is treading water.
They’re stretched across too many job reqs. This likely stems from the company not knowing the correct requisition-to-recruiter ratio, or how many recruiters are needed for each role the company is hiring for. The data I’ve heard from talent agencies is that a senior recruiter can bring in 2 or 3 senior engineers per quarter, and that’s considered strong.
One recruiting manager I spoke to — despite her title, she’s not managing a team, she’s the only person on the entire hiring team — is trying to hire 15 people this quarter without any extra resources, and half of those are engineering roles (generally considered the hardest role to hire for). This company has vastly understaffed their HR department. That company will not hit their hiring goals, and any product or revenue plan they’ve made will fail.
This problem becomes painfully clear in meetings with managers where there’s a palpable tension because the company isn’t shipping features quickly enough, or the support department is underwater and a backlog of customer support tickets starts to accumulate.
A difference in priorities.
The goals of management are more strategic, whereas the goals of the recruiters are tactical. Managers want to know how to make their teams more efficient; recruiters want to know how to increase top-of-funnel metrics like candidates sourced and response rates. I don’t think it’s exclusive to hiring, but the management layer is noticeably less stressed than the recruiters and coordinators. For this reason, it’s very difficult to sell recruiters on products that boost efficiency. You’ll have to move higher up the chain.
By the way, if you’re a job applicant who has experienced radio silence somewhere in their process, it’s most likely the recruiters who are overwhelmed by their current pipeline. Most applicants assume malice, but the recruiters are trying to do too much. It’s ultimately the company’s fault for not allocating enough human capital to address their goals. It’s definitely not an acceptable experience, but it’s not malicious in nature.
Most hiring teams cannot recall precise KPIs.
Nearly all of the recruiters I spoke to were not able to recall conversion metrics off the top of their head, but most had a gut feel. This applies to managers too.
Candidate experience is very important
The data overwhelmingly show that candidate experience is important. 83% of talent say a negative interview experience can change their mind about a role or company they once liked.²
This means the margin for error is disappearing. Interviewing becomes a competitive activity where companies compete to offer the best experience and offer to attract the best talent. This is not the 90s or early 2000s where the hiring philosophy looked like college fraternity hazing. You can still have difficult interviews, but the experience is more important than ever.
Preparation is the name of the game
It’s easy to say “candidate experience matters” without offering up examples. What makes for a positive candidate experience? Setting expectations is at the top of that list.
One company I spoke to wanted to build their own iPad app with the onsite schedule and they’d hand it to the candidate when they walked in the door. This sounds like a novel idea when you hear it, but the real value (for both the company and candidate) is helping candidates be more prepared. This is the single highest-leverage activity you can use for candidate experience. Companies always ask: isn’t this giving away the answers to the test? No, it’s giving them a study guide for the final exam. We’re strongly aligned with newer companies like Triplebyte on this point.
I remember one candidate coming in for an onsite. They were self-taught, which I thought was really impressive. But I thought this person had no chance with the onsite, and the first thing I said when I reached out was: “you’re not the typical candidate we look for — we’re seeking more experienced engineers, but I’m willing to try it out if you’re okay knowing the odds are stacked heavily against you.”
The candidate asked me how to prepare for the interview, so I shared the interview structure, the stack we use, and sent suggested readings. This person never used Ruby or Rails before, which was what we used. I sent a YouTube video explaining how to refactor code. This is especially difficult for junior candidates because colleges won’t teach you this, but CTOs and engineering managers will drill it into your head over time using hundreds of git commit comments.
Guess what happened? The candidate crushed the onsite and went on to be a great hire. She eventually went on to work for one of the unicorns, and she’s now out of grasp for most startups. But we were able to step in early enough because we offered prep material.
Fewer than 1% of candidates screened would go on to receive an offer from us. We otherwise would have filtered this candidate out aggressively as a false negative. You’d be surprised who you can find by offering some preparation material. Some companies will claim this is lowering the talent bar (without having tried it first). That’s a false choice fallacy. You can offer both interview preparation and select for top talent. In fact, it should act as a better filter because now candidates know what to expect — if they show up and perform poorly, there’s no excuse.
Whatever you can do with candidate preparation will pay huge dividends, and for most companies this is a blindspot right now so you’ll have an unfair advantage by doing it.
Going back to the iPad app — this would still be far better than what most companies do. In fact, my Interviewing hasn’t moved in decades. Today, 90% of companies send you an e-mail with the date and address of your onsite with zero heads up on how to prepare. This is clearly not ideal. About 5% of companies will have a recruiting coordinator hand you a sheet of paper when you walk in the door which shows you what your day looks like. Slightly better. Only a few companies send prep material or detailed interview schedules in advance. I can only name a few, and one of them is in the top 3 from the list of highest-rated Glassdoor companies below. That’s not a coincidence.⁶
The startup’s role in closing
Salary carries a lot of weight in the candidate’s decision. It’s the single most important factor for candidates across the board, but not the only factor. Most startups can’t compete on salary, or even classes of equity. RSUs are generally more favorable than ISOs because they’re de-risked assets, even if they limit upside and have less favorable tax treatment.
This means it becomes crucial for companies to communicate the true value behind an offer. The startup is responsible for being crystal clear communicating the intangibles to help candidates make fair assessments. Examples: benefits, perks, culture, team, product, vision, impact, speed to offer, and equity. Doing this helps minimize the reductionist thinking around the cash component of an offer from a candidate.
Glassdoor reviews as a leading indicator
The most surprising thing is the lack of awareness of how important candidate experience is. The best companies almost immediately acknowledge it, but the long tail of followers are oblivious. A company’s Glassdoor reviews are a very strong leading indicator of their hiring process.
You generally want to stay under 20% negative. Anything less than 15% negative is considered strong. Having more than 25% negative reviews on Glassdoor is a leading indicator that processes are veering off course.
Here’s a random collection of companies along with their interview ratings on Glassdoor, and CEO approval below.
When we asked what one company with over 60% negative reviews on Glassdoor would pay for a solution to improve their interview process, we got a reply from the founder that looked something like this:
“Currently we send the candidate an email with basic info in it. We’d probably pay nothing for a better solution.”
This is a pretty good tell. When founders don’t care about their candidate experience, it’s reflected accurately in their Glassdoor reviews. Somehow this founder believes their process is good enough, yet their Glassdoor reviews tell a very different story.
What typically comes up in a negative review? Slow response times are the main reason why candidates have a poor experience. Lack of feedback and expectations also rank in the top reasons.
The mistake many hiring teams make is to increase top-of-funnel metrics, like candidates sourced. I saw this pattern when talking to companies with over 50% negative reviews. These companies fall into a trap where they throw more candidates into inefficient processes, which generates more demand on the hiring team, which further negatively impacts the experience, which requires even more top-funnel sourcing, and the vicious cycle continues as the business slowly eats itself alive.
Many times, the actual problem is farther downstream: candidate offer and offer acceptance rates.
Breaking down the hiring funnel, costs, and efficiency
There are many ways to analyze the cost of hiring. We can build a bottom-up analysis based on the hiring funnel metrics. Most ATS platforms provide as part of their product. Hiring can be reduced to a numbers and optimization game — because that’s what it is. Let’s look at San Francisco. The market data in SF reveal the following conversion benchmarks provided by a Lever survey of over 600 companies, looking at 1.5 million candidate considerations:
- New candidate to screen: 17% (basically, anything that happens before any type of screen occurs)
- Screen to onsite: 32% (intro calls + tech phone screens)
- Onsite to offer: 31%
- Offer to acceptance (hired): 69%
Let’s break down the numbers, working backwards from the 1 hire based on those industry standard conversion rates:
You will hire 1 software engineer (assume mid-level).
You will need 1.5 offers. Note: you can derive this by taking the 1 hire and dividing by the conversion rate.
1 / 69% = 1.5 offers
You will need 4.8 onsites.
1.5 / 31% = 4.8 onsites
You will need 15 screens.
4.8 / 32% = 15 screens
You will need 88 candidate considerations.
15 / 17% = 88 candidates
If you assume averaged salaries of $80,000 for a recruiter ($39/hour) and $145,000 for a senior software engineer ($71/hour), it will take on average:
- 5 minutes per candidate at the top of the funnel, or 7.1 hours total. This will cost $280.
- 1 hour per screen, or 14 hours total. That’s $15,112.
- 8 hours per onsite, or 37 hours total. That’s $12,380.
- 2 hours per offer, or 3 hours total. That’s $205.
- Combined: $27,976 per hire. This is about what we’d expect if we look at what recruiters typically receive in contingency fees (15–30% of first year’s salary). This is also how expensive a single false negative can be (someone you passed on but should have hired). We also know how expensive false positives can be. The point is: hiring is a highly-leveraged activity. It’s important to not screw it up. Even minor improvements at the end of the funnel go a disproportionately long way.
If you hire 4 people per quarter, you’ll need to spend $447,616 per year.
There are a lot of assumptions built into this, and while it’s impossible to build an accurate model because there are too many variables, I would say these are very conservative estimates.
This does not include the manual tasks involved in scheduling or back-and-forth communication, context switching, and these salaries are for junior and mid-level roles. These benchmarks are also considered strong as the companies surveyed have relatively efficient processes in place.
A mere 5% improvement on the offer acceptance (up to 74% from 69%) will reduce the cost by $58,000/year on 4 hires per quarter. The smallest improvements at the end-of-funnel metrics have significant cost savings.
Glassdoor reviews significantly undervalued by hiring teams
Some hiring teams I spoke to are content, even if their customers (the interviewees) are telling them otherwise. I’ve spoken to a lot of companies with negative reviews on Glassdoor over 40% who are happy with their existing process. This is like having a NPS score of 5 and not wanting to change anything. This is shockingly bad.
Some hiring teams have the mentality that Glassdoor reviews don’t matter. “If we just ignore them, they’ll go away.” That’s not happening and Glassdoor is not going away — and not just because it’s on track to IPO this year. If startups were restaurants, then Glassdoor would be Yelp. Do you want to be the 2 or 3 star restaurant?
When over half of your candidates — these are candidates that your hiring team qualified and pushed through your funnels because they believed they were a strong fit — report a negative experience, this presents an existential crisis to most companies, especially startups. A poorly optimized recruiting funnel is the single largest expenditure a business can take on, especially as it scales.
The best hiring companies I’ve spoken to are actively trying to improve, despite receiving strong inbound interest. Candidates will use their experience at these companies as a benchmark for what’s considered a good experience at other companies. In other words, it’s easy to fall behind because other companies are constantly improving their candidate experience.
Software is eating the hiring world, and there are a lot of new companies addressing efficiency and experience.
Some of the interesting ideas I’ve seen companies adopt:
- Using scheduling software to bypass the recruiting coordinators and handling onsite interview scheduling directly with each other
- Extending option exercise windows past to 10 years from the standard 90 days (I once lost a candidate to Gusto over this one when I was building out Tophatter’s engineering team) ³
- Assisting employees with their AMT tax treatment
- Providing early liquidity to shareholders through subsequent funding rounds
- Offering family-friendly perks like fertility benefits and parental leave ⁴
- Using newer tools for sourcing that shift the custom messaging to a third party, or automate the follow-ups (the going rate is $3-$5 per custom message)
- Providing fully transparent offer letters
- Sending detailed onsite schedules with varying levels of preparation
The best founders are obsessed with talent. A great quote summarizes all of this from Sam Altman: “The best founders take great pride in the quality of their team and do whatever it takes to get the best people to join them. Everyone says they only want to hire the best people, but the best founders don’t compromise on this point.” ⁵
⁶ What would be super interesting is if that iPad app had a Slack app on it so the candidate could ask someone a question very easily. It’d also be great to display things like show the WiFi password, directions to the bathroom, tips for the current interview, and a way to request coffee or snacks (for the longer full-day on-sites). This is the Envoy.com for onsite interviews, and there’s at least one major tech company already doing this with their own internal tool. These types of ideas are great to run with and sell broadly to other companies.