Tech Hiring Challenges Faced by Startups & Possible Solutions
Founders of successful startups frequently credit having the right team for their success. This is majorly due to the immense impact that an early hire can have in shaping the growth story of a startup.
A great team is forged by the journey traversed together by its members. The starting point, however, is hiring the right kind of people. Hiring employees who are in alignment with the culture and match the technical skillsets required by the company, can bring about success quicker, especially for startups.
These individuals help in building a great company, where the whole is greater than the sum of its parts! While each startup desires this, it is easier said than done. In achieving this ideal vision, one faces various challenges. Let’s delve into what companies have to say about the hiring challenges they currently face.
Table of Contents
- Hiring Challenges Faced by Startups Today
- Top Tech Hiring Challenges
- Successful Entrepreneurs speak about their Tech Hiring Challenges
- Overcome Hiring Challenges at Your Startup
- Online Freelance Platforms – a Viable Solution
Hiring Challenges Faced by Startups Today
An Inavero report highlights the major obstacles hiring managers face while hiring quality talent. This includes:
Access to skills is the biggest hiring challenge managers face
- It is key to note here that for hiring new talent, more than half (53%) of hiring managers stated “access to candidates with relevant skills” as the biggest challenge. This cements the fact that great talent is rare and hard to come by.
- 31% of hiring managers cited limitations of currently available hiring resources (staffing firms, agencies, etc.) as the major blocker. This clearly highlights the need for better and more innovative recruiting solutions, to make the hiring process easier.
Limited pool of relevant candidates is the #1 tech hiring challenge
According to global data from a 2018 report by DigitalOcean, tech hiring managers face similar challenges while hiring developers.
- Tech hiring managers share the #1 challenge in hiring developers to be a limited pool of candidates with relevant skills.
- There’s also a large chunk of hiring managers who feel that lack of soft skills/ workplace competencies is a major challenge, highlighting the deficiency of essential interpersonal and communication skills in many developers.
- Losing top candidates to other competing offers is #4, followed closely by high salary demands.
Top Tech Hiring Challenges
In the previous section, we saw what hiring managers have to say about the challenges that they face while hiring developers. Now, let’s look into these points in more detail:
1. Intense Competition with Other Companies
Clearly, each company strives to acquire the best talent. With great talent hard to come by, this inevitably results in intense competition between companies. Add tech behemoths to this fight, and it becomes a painstaking scenario for smaller companies to make good hires consistently.
Geography can have a huge impact on this too. The case of InVision, a design software company with a 100% remote workforce, is an interesting one to quote. When they were starting out, the limited supply of talented developers in New York made hiring new developers very hard. To make matters worse, Google had opened its new office in Manhattan at around the same time. This ultimately made it nearly impossible for InVision to viably build a solid team in New York.
2. Unreliable Candidates
In the hiring process, often nothing can be taken for granted. For example, let’s take the interaction with candidates. A candidate might not be “loyal” to the offer you make to them. Typically, many of them attempt to receive multiple offers and keep you waiting.
This behaviour is still understandable. However, some even go as far as using your offer to get a better one from elsewhere. Leaving aside the ethics of such behaviour, it’s unfortunately not something that you can directly prevent.
This leads to a low probability of candidates who actually join the team after receiving an offer. In such a situation it’s hard for startups to continually drain their resources and relentlessly pursue multiple leads for the same position.
3. Possessing Skills to Evaluate
Another frequent and underestimated tech hiring challenge is the lack of requisite tech expertise – the right experience and skills – in the existing members of the team. An understanding of tech is essential when it comes to evaluating developers, and a lack of it often leads to the lowering of standards.
Even HR departments of large companies might lack the required technical proficiency to evaluate developers, often resorting to basic keyword matching. An obvious result is a poor hire that further leads to lost opportunity costs.
4. Limited Bandwidth of Internal Tech Team
In tackling tech hiring challenges like the lack of technical skills within the hiring team, other developers on the company’s payroll might be required to participate in conducting the evaluation process. A direct consequence of this that time is lost from actual product development. Given the importance of a developer’s time in the context of a startup’s growth, this becomes a tough decision to make.
5. High Salaries
Candidates are known to expect a lofty raise in compensation when joining a new company. Many startups find it hard to pay the lucrative salaries demanded by developers.
Even with external funding, they lack the monetary might to compete with larger companies who have deeper pockets. To combat this, some startups might offer generous employee stock ownership plans, or ESOPS, to attract and retain great talent. Whether potential employees value such grants, is still debated.
6. Reputation of the Brand
‘Employer brand’ is another tech hiring challenge that many startups struggle with. While starting out, a majority of companies understandably lack the necessary PR and recognisability. If candidates don’t know who you are or what your company does, they’re more likely to choose a tech giant over you, even if you’re able to offer better terms and more exciting work.
Successful Entrepreneurs speak about their Tech Hiring Challenges
These widely successful entrepreneurs faced problems, like most of us do, while hiring and retaining quality talent. Here’s their advice on overcoming those challenges, and what we can learn from their case:
1. Paul Graham, Founding Partner of Y Combinator
In his ‘18 Mistakes that Kill Startups‘, Graham states how hiring bad programmers can be one of the prime reasons for a startup’s downfall. He says that founders who are coders themselves can get away with hiring the wrong people. This is because, during a crunch situation, the founders can themselves do whatever might be required. The product is not compromised.
He goes on to assert that back in the ’90s, the one thing that killed most of the startups in the e-commerce space, was hiring bad programmers. A lot of those companies were started by business-savvy individuals, who wrongly believed that the ingredients for a successful startup were: having a clever idea, and hiring programmers to implement it.
But according to Graham, this was almost impossibly hard, because people who aren’t experienced in tech cannot identify good programmers. Since so little programmers even want to work for a ‘business guy’, often such founders don’t even get a shot at hiring the best coders.
“So how do you pick good programmers if you’re not a programmer? I don’t think there’s an answer. I was about to say you’d have to find a good programmer to help you hire people. But if you can’t recognize good programmers, how would you even do that?”, Graham says.
Takeaway #1: Hiring the right tech team in the early stages of your startup is potentially going to be one of the cornerstones of your success. If you’re not a founder who is experienced in tech, it can seem almost insurmountable. However, you have to put in the effort into taking the correct hiring decisions because this is one thing you have to get right.
2. Hooi Ling Tan, co-founder of Grab
In the words of Hooi Ling Tan, co-founder of Grab (a multi-billion taxi business), having the right people can make or break a start-up. “It (hiring the right people) is the only reason why we are where we are today,” she says.
Tan also adds that when she and her co-founder, Anthony Tan, continue to interview potential candidates for Grab. While doing so, they often come across people who could add value. However, if they feel that some of these candidates are not a good cultural fit, the co-founders usually turn them down.
It can be argued that start-ups can find it tough to make such decisions. But sometimes it’s important to make such difficult decisions by keeping the company’s long-term interests in mind.
Takeaway #2: The long-term success of a company is contingent upon having a team that believes in what you’re doing. Hire new team members based on not only a technical fit, but also a cultural fit.
3. Clark Valberg, co-founder of InVision
InVision is one of the pioneers of remote working, and now has one of the largest 100% remote workforces. As mentioned briefly earlier, in its early stages, co-founders Clark Valberg and Ben Nadel were finding it very hard to hire quality talent, due to New York’s intensely competitive market.
They were spending just too much time trying to recruit, instead of focusing on establishing product-market fit and speeding product development.
To solve this, Valberg suggested hiring talented remote developers with no geographical restrictions. The idea resonated internally, and they began pitching the concept of a better work-life to developers. They were able to hire 10 developers remotely in lesser time than they would have required to hire two people in New York.
“At the time, this was a big, scary idea. It’s a question about trading complexities. We can handle the complexity of this extremely challenging market and end up overpaying for talent that wasn’t necessarily the quality we needed. That feels like a war you can’t win. Or we could figure out this remote thing, which felt like a design challenge,” Valberg says.
Takeaway #3: Don’t be afraid to try out new and innovative methods while hiring talent. To get out in front, look for ways to ‘hack’ your problem and do what nobody else is doing. Among them, removing geographical boundaries in hiring and going the remote route is a serious contender.
Overcome Hiring Challenges at Your Startup
In her article about how to hire engineering teams, Sonia Parandekar – Head of Engineering for Commerce, Atlassian – came up with an interesting analogy. She compares the process of hiring development teams to an e-commerce conversion funnel.
Using this analogy, she shares how to enhance the hiring process by implementing certain techniques used to improve conversion rates:
1) Manage Quality of Traffic
- Use SEO / SEM to funnel high intent traffic to your site for maximum conversion rates.
- Set up processes to track, manage and balance the traffic (applications) coming in from various channels. This will help you maximise your conversion rates by determining what’s working, what’s not.
Application in Hiring
- Similarly, while sourcing developers and inviting applications, one needs to ensure a high-quality inflow of applicants; i.e. the percentage of quality developers should remain as close to 100% as possible.
- Using a good Applicant tracking system (ATS) to ensure a more streamlined process will optimise the time spent in executing the hiring process.
2) Pay Attention to Micro-Conversions
- Observe and measure customers drop-offs at each step of the conversion funnel
- Form inferences based on the data and deploy solutions to address them
Application in hiring
- In hiring, as well, it’s important to keep a track of the efficiency of each step of the interview funnel.
- Use this data to determine where your candidates are dropping-off/ are most susceptible to rejection, etc.
- This will help you to optimise your conversion rates by improving your hiring process and addressing any bottlenecks.
The other insights she shared in her article are:
1) Teach Developers the Art of Interviewing
Your engineers are undoubtedly an asset when you are looking to grow your engineering team and need to shoulder a part of this responsibility. However, many engineers may consider hiring as not being worth their time. Others might lack the necessary soft (and/or) hard skills to conduct interviews.
In such a situation, it is up to the hiring manager to:
- Convince engineers to invest their time into hiring by underlining the importance of the important task
- Provide them the required training to conduct the process effectively
2) Communicate Your Compensation Offer Smartly
Understand the compensation expectations of a candidate early in the hiring process. This can help you identify candidates with unrealistic demands. Time that would be spent on such candidates can instead be invested into better candidates.
However, this might not be enough. You might still need to interact with the candidates and explain your offer to them. This process can be broken down into:
- Helping a candidate breakdown their expectation and working with them to arrive at a realistic number
- Customising your offer to the candidate’s expectations. This could involve tweaking the variable part of the compensation, base pay, stock options, perks, etc.
- In some instances, unrealistic expectations of candidates are fuelled by companies signaling desperation. When a candidate is unwilling to budge, you need to be confident enough to walk away.
3) Keep Candidates Engaged
Preventing any last-minute drop-outs by selected candidates is critical. A great way to ensure this is through consistent engagement with them until they join the company. Some ways of engaging them are:
- Inviting them to drop by and meet the other company employees
- Suggesting that they participate in any All-Hands meetings, Town Halls or other meet-ups
- Exploring the option of buying out their notice period
- Giving a signing bonus contingent upon joining by a particular date
Online Freelance Platforms – a Viable Solution
In addition to the above solutions, online freelancing platforms are helping companies overcome these tech hiring challenges by offering a reliable channel to hire quality developers. A wide variety of platforms exist today, to address various use-cases that a startup might be trying to address.
Vetted freelance websites are such type of platforms, that have streamlined screening processes to select developers into their networks. They have significant technical expertise to evaluate a candidate comprehensively and as a result have a pool of highly skilled developers.
Lastly, their focus remains on reducing your risk of making a bad hire, thereby aligning to your interests too. This includes: providing responsive support throughout the engagement, giving hand-picked recommendations to suit your requirements, and also carrying out all the ancillary tasks related to hiring.