The SaaSy Guide to Hiring

One of the most common categories of questions that we get at Stay SaaSy is the topic of team building, in particular how to recruit strong teams of product builders: engineers, product managers, designers, data scientists, and similar techy, high-skill practitioners.

We’ve spent countless hours discussing topics around building and scaling companies over the years, but the single topic that we’ve probably spent the most on is hiring, and in this post series we’ll discuss some of the most important topics in recruiting.

Your People Are Your Supply Chain

Every company says that their people are the most important part of their business, but this is only really true in software.

This is what your supply chain looks like at a pure software company in the current day:

  • People who build / design / market / sell / support your product. 11/10 times engineers are the rate limiting ingredient
  • Cloud server capacity

AWS is like IHOP – you can get more of whatever you want for cheap, 24/7, 365 days a year. AWS doesn’t stop when it runs out of servers, it stops when you run out of money.

(Also, the menu is weirdly varied and although the UX is terrible, it’s a huge relief to get those extra machines / pancakes when you really need them at 2am)

If you’re a tech company, it’s worth your while to refine your recruiting process as if you were a company like Toyota or Apple refining their supply chain. Recruiting should be a priority for the smartest and most driven people at your company, rather than a backwater activity that gets passed around like a hot potato.

Hiring is How You Win

Hiring is especially important if you’re growing fast, and building a best-in-class recruiting function often separates winners from losers in competitive markets because of how high-quality teams create virtuous cycles.

A great engineering team will build a great product, which will attract great sales and marketing. Selling more will give you more money, allowing you to hire even better engineers. This equation also runs in reverse.

Truly stellar teams can also gain separation in a market and expand moats, particularly when they can build durable product advantages. Alphabet and Meta are two of the best examples of this – they used their raging rivers of free cash flow to hire talent, and used that talent to deepen and widen their moats in high-leverage areas such as product, technology and data (and of course, more recruiting!).

So if you gain an advantage in the market, that’s exactly the time to turn on the jets and hire a better team faster than your competition. This lets you soak up more talent than they can and allows the virtuous cycle of talent to kick into gear.

Recruit Like a CRO

The most important realization to internalize if you’re trying to recruit effectively is that tech recruiting is almost identical to enterprise sales:

  • Most importantly: Selling / hiring any one opportunity isn’t guaranteed to succeed, and as a result is fundamentally a numbers game.
  • Enterprise buying / joining a company is a major commitment of time or money, and as a result you need to build strong relationships to close.
  • Both processes often involve negotiation along multiple dimensions beyond just dollars and cents.
  • The most time-consuming part of the sales/recruiting process is gauging mutual fit – think of product demos and interviews. And given how time consuming these steps are, reducing wasted time often ends up becoming the focus of sales/recruiting leaders. Figuring out how to identify and terminate low probability cycles is critical.
  • Marketing and brand-building are important (and often overlooked) elements of both sales and recruiting.
  • Closing can take a long time, and lowering time to close can have significant value.

Because recruiting is a numbers game, just like in sales you need to instrument metrics throughout your pipeline. A huge part of why Salesforce is a dominant product is because it allows sales teams to run a metrics-driven sales force, and you need to do the same for recruiting.

Set up a robust way of tracking recruiting metrics once you start recruiting a team at scale (ie beyond hiring the first 4-5 people on your team, which is analogous to founder-led sales in the early days of a startup). The most important metrics to track are:

  • Number of candidates who are screened by a hiring manager or recruiter – typically via a phone screen or (for engineers) an automated code screen. Analogous to a Marketing Qualified Lead.
  • Number of screened candidates who move onwards to a full round of interviews (this used to be called an “onsite,” but nowadays many are remote). Analogous to a Sales Qualified Lead.
  • Number of onsite candidates who receive offers. Analogous to the Negotiation stage of a deal.
  • Number of candidates with offers who join your company. Analogous to a Closed Won Opportunity.
  • Time spent in each stage above.

Tuning a funnel of metrics like this can feel impersonal – unlike in enterprise sales, you’re literally making decisions about real people’s careers and livelihoods – but that’s the math of recruiting at scale and the best companies know it.

The cold math above also explains a lot of well-known but seemingly bizarre recruiting behaviors:

  • Why do firms like McKinsey or Goldman Sachs only recruit at a short list of highly-ranked universities? Among other things, they get enough applicants at the top of their funnel that they can afford to only screen a few, and a high proportion of those candidates accept their offers.
  • Why does Google take so long to make offers to candidates? Enough people make it to the offer stage that they can afford to have a bunch drop off before accepting.

Before You Hire

This is a post series about hiring, growing your team comes with risks. Small teams can do incredible things and all else being equal we highly recommend trying to keep your team lean. All else being equal, smaller teams are faster teams.

Many people with limited operating experience underestimate just how much increasing the size of your team adds pressure to your team – processes, culture, communication, and people problems.

The likelihood of personal crises on your team that you’ll need to troubleshoot as a manager grows at O(N). The likelihood of interpersonal drama grows at O(N^2).

If you must grow, one way to control the impulse to over-hire is to have a few rules and requirements before you open up a new job opening. A few that I like to follow:

  • For any new hire, you should make sure that you can describe at least 3 concrete things that they could do within their first few weeks. Don’t start hiring just because you think a role sounds important, or because everyone else is hiring for it.
  • Scrutinize roles that are essentially glorified project managers – chief of staff, program manager of X, internal consultant. These jobs can be important, but often they’re a cover for “this situation seems messy and I’m going to hire someone to fix it.” In many cases you should just fix the mess yourself, and hiring someone just complicates things by adding someone new to the mix. The smaller your team is, the less likely you are to need these roles.
  • Consider whether you can hire contractors or consultants. In some cases, particularly for lower stakes or lower skill needs, hiring a contractor can be simpler since you can part ways once a task is over. Additionally, contractors don’t need to justify their existence in the same way that full-time employees do, and are less likely to create additional work for its own sake. Contractors are usually a better option for commodity work.

We’re going to write more about hiring, and will link to it here. Stay tuned.