Structure and Data; solving the headache of hiring

Talent is the foundations of all great companies. Recruiting talented people is the primary concern of most CEOs. Yet most CEOs say their recruiting function is broken. Daniel Chait, CEO of Greenhouse, explains how he is helping CEOs to sleep at night.

Daniel you’re a serial entrepreneur. At what point did you come up with Greenhouse and decide this was the next market you wanted to go after?

Having sold my last company I spent the better part of 2011 together with my co-founder asking questions. We met with lots of people from all different walks of life. What came back from that series of meetings were two unmistakable things. Firstly, almost without exception, great leaders recognised that talent is their most important asset — fundamentally companies are driven by great people coming together and having great ideas. They desperately needed the ability to attract and retain great people. Secondly, at the same time as they were saying this, they were also saying that they felt the recruiting process of the company was incredibly ineffective, a huge source of pain and concern, and they didn’t know what to do about it.

So we had these two ideas coming together at the same time. It was a top priority for almost everyone and also a top concern so we realised there’s a huge opportunity if we could help companies solve some of the fundamental problems of hiring and remove that feeling of frustration and helplessness that so many people expressed.

Greenhouse is widely referred to as recruiting optimisation platform. What are the issues that the platform addresses and is designed to solve?

Most recruiting and hiring processes suffer from a lack of structure and a lack of good data informing decisions, those two themes go hand in hand. It’s hard to have good data if you don’t have a good structure (in your recruiting process). If you don’t have a clearly structured process then it is likely to generate low quality data. And with low quality data it’s hard to know what to do to improve things.

I described it as a sense of frustration and helplessness because if you talk to most teams who struggle, what they say above everything else is that there’s no clear signal coming out of the recruiting function on how to improve. So essentially the basic idea is that Greenhouse provides the structure and data to help companies understand what they should be doing, whilst providing the data to help them understand how to improve things.

A good example is the candidate interview. It’s the basic building block of the recruiting process yet at most companies’ candidate interviews are unplanned and unstructured. You grab an employee, you put them in a room with a candidate and you say ‘spend an hour together and tell me if you should hire this person’. It’s the same the world over. Your average employee; doesn’t spend time to think about recruiting, they’re not given much information about the specific job, they’ve no idea who else has met with the candidate before or why they’ve been chosen for that particular meeting, they’re given no guidance on how to conduct a good interview or what type of feedback the team needs. So they spend the hour hoping not to say something bad, or they make up their own brain teasers and come to snap judgement based on implicit biased in the first 30 seconds. Ultimately, you end up not knowing who to hire and the process takes way too long. At the same time you’re not impressing candidates or selling them on the great experience it is to work in your company.

Greenhouse provides the structure and context to the interviewer during the process and it provides useful data to the company that can be used for a more effective process.

It’s a pretty basic idea; if you’re going to spend an hour with a candidate you should use that hour effectively. Yet before we came along no one had really tackled the problem. By fixing some of these very straight forward behaviours you can enable a whole lot more sophisticated thinking at a higher level because you’re generating useful data and you’re moving quickly.

The HR systems category is an increasingly competitive sector. How do you define your USP versus other solutions and capabilities claimed by companies in the market?

We certainly pioneered this idea of structured hiring. Before now most ATS products (Applicant Tracking Systems) were saying, ‘recruiting is an annoying administrative hassle and you shouldn’t have to bother with it, so use our product it’s a lightweight alternative that lets you stop focussing on hiring and get back to the stuff you really like doing’. Essentially the message before we came along was — it’s prettier, it’s lighter and it’s less annoying. Greenhouse came straight out and said the problem isn’t your old and ugly ATS — the problem is your company is not doing the right stuff to hire people. We created Greenhouse with a strong mission of helping companies navigate this new, talent-driven world of work. Ours is a strong message and if other vendors see that same opportunity we do and try to follow the same way, honestly I’m flattered, it means what we’re doing is working.

Recruiting software should be meaningful, impactful and very valuable to companies. Customers should have ever higher expectations of what the product can deliver and the value they can extract from it. We’re leading a race to the top, rather than the race to the bottom that had gone on before. We’ll keep innovating, it’s a good dynamic and it’s definitely great for customers.

How do you see the relationship between HR and the talent function evolving?

I’ve been talking a lot about this idea of the evolution of the new people team. I talked about it at our customer conference in May, Greenhouse Open. We had about a thousand people attend and we tried to set the context of what we’re trying to do amongst the history that you’re referring to.

It’s fascinating, it goes back to the evolution of the personnel department. We think of ‘HR’ as an outdated term, but the truth is it was actually a modern reaction to the stuff before it. The personnel departments first came up in the early part of the 20th century.

In the 1900s when people moved from the farms into cities and factories, companies now had these personnel assets at the workplace, at the factory, that had to be taken care of to ensure they weren’t losing their hands in the machines etc. It was a new thing in the 1900s or 1910.

After World War II and by the time the sixties came there had been a lot more rights legislation passed and people started to look at the dynamics of the workplace from a legal and compliance standpoint. That’s when Human Resources came out. The first HR departments were in the 70s and 80s and this idea that ‘humans were a resource’ was very new age at the time. It was not where business had been, business had been around machines and production and capacity, but now you’ve got the humans — they were a resource. It’s taken 30 or 40 more years to play out but now were at this point where humans aren’t just a resource, humans are the point. Today it’s a people-centric effort to build a company.

Today it’s not just about collecting résumés and choosing one. 30 years ago people basically just applied to jobs and hoped the company chose them. I was recently talking to someone my age — a middle aged person — who described her early career at IBM. It really stood out to me as it’s so different to what you hear today. She said ‘IBM came to my campus and they chose the people with the top 2 GPAs and gave us jobs’. That was how the world worked, if you did really well, then IBM would show up on campus and give you a job. But nowadays IBM is going to every campus trying desperately to get anyone’s attention in the hope that they can build a relationship with that person, so that person might choose to work with IBM instead of the million other choices that that person has.

We’re in a way more competitive world where the impact of that next hire is so much more important than it used to be. At the same time people have so many more opportunities and more control over their lives than they used to, so you really have to be much more on the front foot about connecting with people and building long term relationships, making sure that your values speak to the things that are going to motivate people to work for your company.

So we are in the midst of a war for talent and it’s only going to intensify. How do you view HR systems being an enabler of businesses when it comes to things like the employer brand?

Well I like to say that the war for talent is over — and the talent has won! That’s the world we’re in. We saw this happening on the revenue side of businesses a few decades ago. Customers used to basically be sold to. Today they learn about you and decide if you’re the product they want. Today’s buyer comes to your website, they read all about your products, they take a demo on their own, they can learn about pricing, they can connect with other customers and talk to them through social media. Then once they’ve done all that, then they go to your sales team and transact. That’s very different to how it used to be.

It’s a similar thing in recruiting. Applicants used to come apply and that’s not really the case anymore. Today you have to convey reasons to work in your company, not just job openings. From a technology standpoint, you need to know where people are and what you’re doing that’s connecting with them. Are they reading your content? What do they think about your company’s values? Today you have Glassdoor and Linkedin that offer ways to expose the inner workings of your company. It’s the product that you’re selling to talent. Your marketing and sales team are trying to sell your widget, but your HR and talent team are trying to sell your organisation to these buyers — these talented people. Today you have to turn your organisation inside out and show it to the world. You need to say ‘here’s what we are, here’s what we stand for, here’s what we have to offer on your career journey — does this resonate with you?’ and they will figure out for themselves what it’s like to work at your company, what your job openings are and how to apply. By the time you interview them, they’ve already spoken to 10 friends who work at the company and they’ve read the reviews about your interview process. They’re very well informed and educated.

Okay, crystal ball at the ready. Technology has been changing the recruitment process in a range of ways that you have touched on. What does the future hold in say 3, 5 and 10 years?

People are more empowered, independent and ownership-minded over their careers. The days of workers sitting at their desk for 30 years are long gone. People move jobs every 4 to 5 years and that frequency is only increasing. They have the ability to do jobs and take their benefits with them. All this stuff is trending towards a world where people come together for short term assignments; they assemble a team, do some productive work or short tour of duty, they then disperse and move on to something else within your company or elsewhere.

I think the old world where you’ve got applicants and you have an organisational chart, you pick a winner to plug into your organisation — both of those are gone. There’s no applicant and there’s no organisational chart. We’re already seeing this happening. So over the next 5 to 10 years, organisations have to figure out how do build and manage a company that is not top down, hierarchical and fixed of nature, but rather very fluid, with people sharing ideas and prototyping stuff on the web then bringing in freelancers to tackle tours of duty. It’s a very different type of organisation and basic questions that used to be asked, like ‘which of my employees is good’, which is already hard to answer, become mind boggling in a world where the value that an employee adds, is changing all the time and will depend on the team they’re on, who they’re working with and what you’re doing to empower that person. There’s a huge amount of change coming into the organisation as the independence and mobility that’s being empowered by technology, IT and communication continue to accelerate as it already has in so many other areas of our lives that have been completely overturned. Whether it’s the idea of owning a car or going to the shoe store or so many things that we take for granted, are now completely up for grabs.

Working practices have changed considerably between generation X and Y. In today’s digitally enabled gig economy how do you see companies being able to maintain any kind of consistent culture with a workforce that they never or rarely meet?

That’s a great question. I like to think of it this way; companies used to be a deep pond but now companies are more like a raging river. What that means is in a given area you’ve still got the same amount of water. In a deep pond all the water sits there for a long time but in a raging river, new water coming in and water keeps going out the other side, but still the river has its shape.

It’s the same idea when I like to talk about Greenhouse being a great place to be and a great place to be from. For example, already as a young company we have an alumni network. We have a small group of people who have worked here, they’ve done a tour of duty but we’re a fast growing company and certain jobs change, people’s careers change. They come, they learn a lot and then they’re eligible for a role with a company down the road. It’s attractive to them and they take it — great! I don’t know how to build a company that’s both a great place to be and not also a great place to be from. If you’re going to build a great company in the world that we’re in today, it means you’re going to have access to smart people who are going to want to come here. I’m going to provide opportunities for those people, learning new skills that have a tremendous impact and there’s no world in which I can do that and keep all the doors closed and windows locked.

There’s LinkedIn and there’s Glassdoor, people have the ability to move around in the world and you just have to adapt and build to that. Some people are going to grow out of their job and some people are going to find other opportunities and move on in their life.

It’s like raising a kid, you invest a couple decades in this person’s life and your fondest hope and dream is that they move out of the house and build a life outside yours. None of us would think of ourselves as good parents if our children all lived in the basement forever. Consider Mckinsey & Co, they talk about this all the time. The Mckinsey alumni network is a tremendous asset for them because some crazy percentage of fortune 500 CEOs are ex-Mckinsey. So they have this staggeringly effective recruiting engine that grabs people from university and they have this amazing alumni network that powers the world and in the middle they run their business.

So we’ve seen the skillset of the CMO fundamentally change over the last 10 years — it’s almost unrecognisable. Has the HR skillset changed? And what do you think it will need to look like going forward?

Absolutely, it’s exactly the same trend that we’ve seen in marketing. You had the old Don Draper model; they’d show up with a bottle of scotch, you’d give them a bunch of money and they would put up a bunch of billboards and the famous saying went that half of the ads didn’t work but you didn’t know which half. Now it’s highly automated, highly data-driven, it’s a whole different set of skills and a different set of people and tools driving that.

In finance as well, the old world was accounting. People made sales on the cash register and at the end of the month the accountants would add it up. Now finance is a strategic function, finance is with the CEO who oversees the modelling and scenarios and predictions and risk assessment.

Talent is exactly the same. In the past HR were informed of things after the fact. The remit was narrow and they were reacting to things like people leaving or a new hiring need. Now the new people team is consulting with executives ahead of time. It’s helping to model the future and predict what’s going to happen and they’re much more holistic in how they think about the organisation. So if we’re going to launch a new product the new people team is at the table thinking ‘do we have the talent to develop and sell this new product? Are we going to be in different geographies? Do we have the culture that’s going to succeed in other areas?’ Now HR plays a critical role at the very core of the business.