VC Cliché of the Week

Human capital is top of mind for me right now. We are seeing a return to the late 90s when really good people are the scarcest resource in the company creation process.

Jerry Colonna taught me a lot about developing people and one of his mantras was "hire from within".  His view is that if you have a worthy candidate inside the company that you know and trust, why would you go outside to fill the position.  And after thinking about it a lot over the years, I tend to agree with him.

But hiring from within isn't really possible when you have eight employees and need to grow to twenty by year end.  And that is where many of our portfolio companies are in their development cycles.

But you can take the "hire from within" mantra to heart in this situation as well.  Your current employees are the best path to new hires you've got.  Way better than Craigslist, Careerbuilder, or any other job board.

I suggest three things that every CEO should do to take advantage of your existing human capital in the hiring process:

1 - Get everyone on LinkedIn and encourage them to actively use it "map" their personal networks.  Then when you want to hire someone new, ask everyone in the company to search their personal networks on LinkedIn for candidates.  There are other tools that can be used to do this, but I think that LinkedIn is a great place to start.

2 - Incent your employees to help you fill positions.  I think a "spiff" of $500 to $1000 per hire is a great way to get everyone focused on the hiring issue.  You should circulate every open job spec to the entire company (subject to the occasional hire that you can't broadcast around the company).  And talk about hiring in the company meetings.  When your employees have an economic incentive plus are well versed in the specifics of the search, they can and do deliver great candidates.

3 - Always be recruiting "world class candidates".  Never stop asking your employees for ideas.  Every employee has former colleagues that they have tremendous respect for.  Do you know who those people are?  You should.

You can't always hire from within but you can start the hiring process from within.  It's the best thing you can do.

Comments

[Rob Deichert]

I couldn’t agree more with your post. The one thing I think startups tend to forget is to invest in developing their people. Of course this is difficult because people usually think of “investing in your people” as being spending scarce cash on training. A good substitute is making sure your performance management systems are well designed as well as making sure that detrimental managers are moved out of management roles.

[Bradley Cooper]

If you've done a good job with your initial selections then you have a "quality attracts quality" situation. Your staff will, by association, be linked to other quality people with similar mindsets and values. Cultivating these relationships is like building a farm team.

[Zoli Erdos]

#2 reminds me a situation we had 10 years ago - not in a startup, but a Big6 (I think that was the correct number than)consultancy.

We hired a manager from one of the other Big6, and this guy happened to be very social, a hyper-networker. Within weeks his name was permanently listed at management meetings as top referrer. 3-4 months later someone added it up, and declared his referral income just exceeded his annual salary (the "blood money" was $3K at the time).

[Dana Sednek]

You have it right: Leverage your social networking collateral from current employee bases. Give employees increased responsibility and opportunities to grow. Plan ahead=Stay ahead- If you have to hire up so you reach 20 by end-of-year 2006, START NOW. You or your employees meet someone with expertise, but not the right fit, right now?- create a "Not Yet" file for safe review later. How to find qualified new hires? Put your finger on the pulse of your industry- dig online to find experts and ask them who they might know. Don't assume your network spans only as far as the people you "know"...

[Jing Lee]

Currently in the middle of the Velocity Conference (IU Kelley with Syracuse Entrepreneurship MBA this year), I heard this cliche for the first time: "turkeys come home before eagles start to soar" in reference to how the VC's see typically see their failed investments far sooner than the ones that prove successful.

[becca]

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