Based in London and New York, Octopus Ventures is one of the Europe’s largest Venture Capital firms with £1bn under management. Its portfolio includes a number of exciting online and technology brands such as Zoopla, Graze and Secret Escapes. Venture capital firms are increasingly looking to advice their portfolio companies on how to identify, attract and retain talent. With this in mind, Octopus Ventures hosted a masterclass for its portfolio company CEOs to examine the importance and differences between three different recruitment approaches. The three discussed approaches were – executive search, in-house recruitment, and an embedded 3rd party recruiter.
Former CEO of Whistle Communications and Founder Partner of venture advisory firm Soda Rock Partners, John Hamm, began the discussion by highlighting the importance of hiring. John has coached over 100 of the world’s top tech CEOs in the past decade and revealed: “almost every problem I talk to CEOs about, has its roots in the quality of the team”. “The sober reality is, people are central.”
Alan Cairns, Venture Partner and Chief People Officer for Octopus Ventures, revealed that when it comes to hiring talent, we should be “brave, now”. When we are hiring someone to grow the company, we need to think about the role they will perform in the future and not just today, and also think tabout the calibre of a person you really need. Alan noted that people often say: “I need a junior operations person, a junior HR person, a junior finance person…” Shortly afterwards they say: “that junior hire we made didn’t work out.” Go big, is the message. Hire better and smarter than you. That person will pull you, and the company, up.
Peter Franks – Partner at Neon River, gave an overview of executive search. The raison d’être of executive search, Peter said, “is to convert passive candidates.” Executive search is the most heavy weight approach to recruitment and iusually best used for the most important and senior hires. Most companies won’t hire the majority of their team via executive search as it isn’t usually the best solution for a high volume of junior and mid level hires.
As Peter pointed out, “the best candidates are happy where they are and they don’t respond to job adverts.” The skill of the executive search recruiter is to “persuade them that there’s something better out there for them that they hadn’t considered.” This is best done by telling the story of your company in the most compelling way possible. Can you distil all the complexities of your story into a simple narrative that appeals to the average man or woman on the street?
The process is two stage: first, like a marketer, it’s about segmenting the audience to focus on the priorities. Bottom-up market research might identify 100 or more candidates, very possibly from a range of sectors and geographies. This first stage builds your pipeline of candidates who are then approached by a headhunter who provides them with compelling verbal pitch, and then a written job description, which is there not to just describe the role, but also to describe the company and market opportunity, in order to help enrolling candidates. The second stage of the process is when the client interviews the ‘shortlist’ of candidates, and the headhunter should manage the candidates through the process as well as helping the client to assess candidates doing referencing and providing advice on offer construction.
Generally speaking, sector specialist boutique head hunting firms are a better choice for entrepreneurial companies, than the ‘Big Five’ headhunting firms, because they have a deeper understanding of the types of candidates who thrive in this environment, and also typically offer better value to the customer.
Focus on calibre, not qualifications. ‘A Players’, ‘X Factor’, the magic ingredient – whatever you call it, as founders, you’ll know that it takes more than industry experience to really shift the needle on a business. The person you’re looking for might not – perhaps should not – fit the cookie cutter.
Avoid too many stakeholders. Multiple opinions can spoil a clear process and lead to analysis paralysis.
Having said that, don’t surprise stakeholders either. An 11th hour candidate rejection from an excluded stakeholder isn’t uncommon. Keep them informed from the beginning, factoring in considerations from the start.
Don’t waste time on average candidates. The reality is, only a very small number of candidates are true A players. Double down on quality, then you’ll be able to invest twice as much time going after the right person.
5 Ways to Enhance the Process:
- Build an emotional attachment with candidates. Invest time in getting to know them, take them out to lunch or for a beer. It’s much easier for them to say no to you if that personal connection isn’t there.
- Stock options: explain them clearly. The truth is, most candidates won’t understand VC-backed stock options. Helping them to understand how stock options work builds trust.
- Move quickly. Like a romance, too many steps will kill the interest. Be encouraging but not pressurising.
- Soft reference but tread carefully. Keep the candidate informed if you’re going to take backdoor references. If the candidate hears you’ve been referencing them behind their back, there is a high likelihood that they are going to pull out of your interview process.
- Ask yourself, how entrepreneurial is this person? Growth companies have constrained resources, ambiguous strategic decisions and need scrappy, hands-on leaders. Is your candidate ready to roll up their sleeves? You might test this by asking them to present on a case study.
Kaija Barnes, the Head of Talent Acquisition at MOO, talked about in-house recruiting. Kaija has been part of the internal recruitment team at MOO scaling it from 300 to 500 people in the last 3 years, as well as building her own talent team from 3 to 7. She outlined the case for having in-house recruitment alongside an HR team.
The benefit of internal recruiters is that “they will know your business inside out.” They’ll be more visible and available to you, placing you closer to each search. Recruiters imbued with your culture are more likely to bring in hires that fit and enrich it. Candidate experience is paramount, and “internal recruiters are better placed to give each one an experience that will make them advocates of your company, whether you hire them or not.”
Kaija was open about the limits of internal recruiting too. A small team handling a high volume of hires will be forced to prioritise, so not every part of the business may be served equally. The solution is to complement in-house teams with other sources, such as executive search. In fact, internal recruiting works best as part of a broader mix of recruitment solutions. For specialist roles, external recruitment agencies can add value and reduce costs as they will have sector and functional specialism in certain areas.
Kaija shared that at MOO, “80% of hires are direct, 20% are a mix of agency and embedded.” A clear process is in place from sign off to sourcing, screening, interview, decision, offer and onboarding. She shared some details including a friendly, informal email, in tune with MOO’s culture, sent to candidates before their interview addressing the simple question, “should I dress up?” This is the kind of engagement that enriches the experience and enhanced the company/candidate relationship.
Lastly, representing the embedded recruitment option, was James Peters. James is a Partner at Scede, who provide embedded recruiters to high growth tech companies. Embedded recruitment is a resource that builds and implements a company’s recruitment process within a hybrid delivery model.
A good embedded recruiter can step in when hiring is ‘bulging’ and starting to restrict a company’s growth. It’s essential the recruiter quickly gains a clear view of the ‘who’ and the ‘what’ of the client company, as well as assimilating within its’ culture. James added that “the key benefit here is freeing-up management to get on with the business of building their business.”
James described the kind of scalable recruitment model he would create for a client company, based around Attraction, Activation and Coordination model. Business time required to make a hire is brought down – in one example, from 25 to 15 hours – and hiring timescales are also reduced, down from months to weeks.
To conclude, the three models outlined above each have their strengths – and often best deployed in combination – to make sure you find the very best talent.