Category Archives: Hiring

How to be in the target zone of “fresh opportunity” for new jobs?

Every week I get about 2-3 emails from friends who want to introduce me to good talent that wants to change jobs. They are in a good role; but not quite satisfied. They want to switch. Many because they dont see the growth they desire in their careers, some because their company is not growing as fast, so they are not getting promoted, and still others because they know one or two friends whose career is “taking off” because they are in a hot startup (most likely a Unicorn) and they feel they are just as good as the other person, but in a not so good company.

The surprising aspect of what I learned after talking to about 6-7 of them is something that has made me rethink my previous rule that HR teams drilled into me at larger companies – I was told “Employees dont leave a company, they leave a manager”.

Nope. None of the people I talked to actually disliked their manager. In fact quite the opposite. Most were happy with their manager.

So there is obviously a class of people who dont mind where they work at, like their manager, but still want greener pastures.

My first reaction was “Why”? To which one of the younger and more wiser job seekers said “Why not”?

I started going down the condescending path of “Only the best get into the hot startup”, or “The work-life balance at that hot startup is very poor”. etc.

Turns out none of that matters. Since most of the job seekers have made up their mind to join that startup, nothing I could say or do will change their mind.

I, instead said here are the 3 things you should do to get on the radar of that hot startup. (You can substitute “hot startup” for Google, Microsoft, Facebook, etc.).

First, “Be so good they cant ignore you“. Show off your work on GitHub if you are a developer, Dribble if you are a designer and SlideShare if you are a marketer. The future belongs to “great” talent, not mediocre, average people.

Second, “Make it easy for them to find you“. Participate in forums where your target company employees are – It may be Twitter, or Facebook or LinkedIn or some discussion groups, or offline events. You cannot expect to be an introvert and expect they will find you. You have to make it easy for them to find you.

Third, “Seek to know more about their customers than they do in your area“. If you know their customers well, they believe you must be good. For engineers this does not mean, market research or PowerPoint slides, etc. This might mean, what technologies their customers use, how they use their product, when do they use it, what do they like about it, what they dislike. Keep in mind we dont want opinions, or anecdotes, but facts and data.

Then do your best to network, slowly if you are introvert and dont enjoy networking. Find a way to show that you know more about their customers, and are extremely good at your craft.

The thing that wont help is a general email with your resume to me asking me to introduce you to my friends at a hot company. Not because I am mean or rude.I really want to help. You have to help yourself first.

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What to consider before you start negotiating your stock options package at a startup

After you decide which startup to join if you are considering switching jobs, one of the key questions becomes how to negotiate a package. I get a lot of questions on % of stock ownership, vesting schedule, preferred vs. common stock etc. I am not a qualified lawyer, so take this as pointers and suggestions not as advice.

Depending on the stage of the startup you are considering, the “complete pay package” may be skewed more towards cash or more towards stock. Most startup founders have realized that to hire great talent, there is not just one thing you need any more. There is a need for meaningful work, great pay and benefits and an awesome culture.

I am going to skim over culture, and meaningful work for this post and assume you have figured out a company that offers both, but now need to negotiate your pay package. Most startups are not going to offer great benefits that bigger companies offer, so you are going to work with a fewer set of variables such as pay and stock options.

First, the pay. There are 3 stages that I am going to consider at startups. First, the pre-seed or seed round, second, post some seed round, before the series A and third, post series A.

In almost all of these cases, I have seen that good startups will end up offering a lower base and salary (80% of the chances are it will be much lower than your current pay) but “try to make it up with stock options”.

In many startups, salaries tend to be a fixed range with little room to negotiate. If you are making a lot of money at a larger company, expect to take a cut in pay. If you are working at another startup, expect to be marginally in the same range.

There are exceptions for extremely well funded companies and the post series A stage, but that’s rare. There are fewer than 20 companies in India and about 100 in the Silicon Valley who can offer salaries that match Google or Facebook, Microsoft or Accenture.

There are 3 important elements to the stock option package – The number of shares, the exercise price and the vesting schedule. The secondary negotiable elements are the type of shares – common vs. preferred, change of control provisions for early vesting and early exercise to save on taxes.

Stock Option Negotiations
Stock Option Negotiations

If your startup is at the pre-seed / seed stage, and you are fewer than 20 employees, you can ask for the total outstanding shares of the company, so you can determine the % ownership. A senior executive (VP Engineering, VP Marketing) can expect in the 1-7% range and folks more junior can expect 0.1% to 1%. This is likely the only element you can negotiate in most startups. If you are looking for unreasonable percentage ownership relative to contribution, expect to get some push back.

The earlier you are at the startup, expect a larger % relative to later stages.

The price of your stock is determined either at the previous round or in some cases at the board meeting (exceptional cases) when an inside round has been completed. After the backdating stock option scandal of the 2005’s no CEO will help their new employees get stock at a lower price, so there’s not much to negotiate here, other than to know the price.

Finally the vesting schedule tends to follow a pretty standard pattern – usually 4 years, with a 1 year cliff. Meaning, after one year at the company, your shares will vest monthly. What you want to learn about is the option to buy your shares and if there are “claw-back provisions” if you leave before an exit.

Most employees dont stay until the exit of the company (or rarely do) and if there are claw-back provisions, you want to be aware of those.

The secondary considerations are important as well. If your contract can specify that your shares will fully vest in the event of a change of control (meaning your startup gets bought) you should seek that.

If your company offers early exercise I’d ask for that option. You might not want to exercise early (since you cant tell if your company will do well or go bust), but it is a good option to know about and negotiate.

Finally, most employees are usually given common stock. You want to know if the founders have as well, or have they, like other investors for example, been given preferred stock if that exists and what the benefits associated with preferred stock (in terms of what the liquidation preferences are).

Fired and interviewing again for the same role

Lets say you left the job you did for 2-3 years, i.e.the co-founder of a startup. You were fired, “let go”, decided to leave or “step down”. Either ways, you are doing something different than what you started.

Then time passes and you are asked to step-in again – for the same role, but a different job than before. Same role since you were the founder and CEO, but different job since the company is bigger (or smaller) now, and has a different set of challenges than you left before.

This is not a hypothetical situation – this happens not only at bigger companies – Zynga, Yahoo, Twitter, but at most startups after a significant round of financing as well.

You will now have to “interview” for the role again.

3 C's for getting hired again
3 C’s for getting hired again

For any CEO / founder role, the board will be involved, and probably initiate the search, but also get inputs from the current management team and the “interim CEO”.

The new team will have to determine if you are the right candidate for the role, given many criteria, but we can boil it down to the top 3 that matter.

1. Competence: For any role, not just the CEO, “can the person get it done?”, is the first question most of us ask – skills, expertise, knowledge and capability to execute among other things are a must have. These are what we call table stakes.

2. Communication: A key skill and capability that sits head and shoulder above all others is the ability to communicate – written, spoken, one-one and one-many. We also put ability to motivate people to take action into this bucket.

3. Culture: Unlike in larger, older and more established companies, culture plays a very important role in smaller, younger ones. Building the right team and ensuring they are all working towards common goals and aligned objectives and is important to attract the right people for the role.

So the million dollar question to ask yourself as a founder is:

If I were to interview for my role as an outsider, will I get this job?

I know a founder, who goes through a formal interview process EVERY YEAR with 2 of his board members, 3 of his direct reports (different ones each year) and one outside executive recruiter.

His rationale for this is simple – it keeps him honest and gives him a clear picture on things he needs to do for the next year in 3,6, 12 month time horizons.

It is a great trick in your book to have. Try it.

Tell me if it helps you.

Interviewing for a job you already have. Will you make the cut?

How 3 peace-time founders are laying the foundation to transition to a war-time role

I have been at 3 board meetings this week. It is very apparent to me that we are in an environment where money is easily available to both the best and not so good performers. There are exceptional cases when the awful performer is also getting funded, but I want to avoid judging performance at the earliest stages.

Ben Horowitz popularized the term Peacetime CEO and Wartime CEO’s. We are at a really good peacetime – so the tactics for hiring, fund raising and customer acquisition are different than those when the market will turn – and it will. I cant predict when that will happen, and wont even know when it will start to turn.

I wanted to highlight the change in compensation strategy that’s being used by 3 companies who are preparing for when money gets more constrained, hiring is easier and customers are more cautious about their spending.

Most of the companies I know are moving from 60/20/20 split of base salary, performance bonus (based on individual goals) and stock options to

50/40/10 for marginal performers and

for the superstars, the compensation is 70/10/20.

The superstars have a total compensation that’s greater than the marginal performers.

PeaceTime CEO and WarTime CEO
PeaceTime CEO and WarTime CEO

What is being optimized is the bonus – for the marginal performers a lot more is being paid out on bonus – variable pay based on performance.

The logic behind the thinking is that the key players should not be poached – hence they are given a higher base than they would get outside, and are to be kept for the longer term – hence the incentive on the stock, whereas the marginal performers do not care about options that much.

Who are the marginal employees? Most of them are putting the “6 months, course at a coding academy” folks in the marginal employee pool. Not sure that’s correct, but that’s the approach being taken right now.

Individually proficient, Collectively efficient; why your first hire matters

The first employee outside your founding team is like a founder, but not quite. Many times you luck out and get a great person who steps up to be a founder emeritus, but you will most likely get a very good employee.

From my observation of the 72+ companies I have personally observed at Microsoft Ventures Accelerator over the last 3 years, if you hire your first employee outside your known “network”, it is very likely you will not succeed as a company.

There is a direct correlation between the first hire and the caliber of people your startup attracts.

Let me say that again differently. The first person that joins your startup as an employee, sets the tone for the entire set of next 5-10 people and then the next 11-50 and finally the rest of the people.

I developed a system to figure this out, which I use as a benchmark to evaluate companies who get accepted to our accelerator program – I usually ask to speak to the first hire in most cases, rather than the founders alone.

Many times, founders dont have a first hire. I ask them to name the first person they’d hire if they were to hire in a week and I ask to speak to them.

Why does the first hire matter the most?

Simply because they will be the manifestation of the “company culture”. It is a test, of whether the founders have given enough thought to what kind of company they want to build.

Based on my interview with the first founders over the years, I have developed a pithy – Individually proficient, collectively efficient.

In most large companies, the “team” looks really good because 1 or maybe 2 people carry most of the load and the rest are “bit players”, who come in for cameo roles, but are largely coasting. A large company has the ability to scale since there are so many people, so even in an organization of 1000 people, 10 people’s (1%) collective work is a lot of momentum.

To compete as a startup, you will need to build that momentum, but with fewer than 10 people. Which means, your 10 people are competing against the larger company’s 100’s. In most cases you really are competing with the larger company’s 10 people, but lets say for the sake of argument, you have to compete with a larger team at a large company.

The 10 people you have to go to battle with have to be wedded to your vision and view of the world. The only way that happens is via constant communication and reinforcement.

Which comes back to the first employee. The first employee is the reinforcement of your culture and you need to not only make sure that your first employee is competent and a superstar contributor but also makes your team collectively rise up the scale.

How to be a better manager – providing feedback to your direct reports and employees

There are 3 types of behaviors when it comes to managers giving feedback to the people that work for them.

1. I’ll give you no feedback – little praise, no criticism until the year-end when I have to do reviews.

2. I’ll give you unvarnished feedback immediately when I hear something from others you work with or from my own interactions. As it happens, often and early.

3. I’ll watch the interactions, notice behaviors and patterns and give you feedback every so often – weekly, monthly, quarterly and avoid “the last thing I heard syndrome”.

It is obvious that #3 is the best way you can be a manager. Feedback is very important to employees. They want to know what they are doing well and what they need to improve. As a manager you are at one of the best positions to tell them that. After all most people spend more interaction time with their managers and peers than their spouse (which is unfortunate, but true).

The rule of thumb to follow to give feedback as a manager is to watch for “lines not dots“. I love that phrase from Mark Suster.

Ideally you have the chance to talk to, watch and get feedback about an employee over a good period of time (ideally a month, but I have seen folks do it over a week or even over a quarter) and then make sense of the patterns.

The first kind of manager is absolutely useless, but tragically more folks like those exist in the corporate and startup world that we’d like to admit. This kind of manager is obsessed with “results” alone to provide no developmental feedback to their employees. If numbers are good, they will let employees get away with murder (figuratively) but if they are bad, then everything is suspect.

The second kind is sightly better, but not by much. They give raw, unvarnished, ball-by-ball, running commentary on the employee’s actions – from others, from their own interactions and from random folks as well. The reason it is useless is because they dont help detect patterns – they only remember the “last” thing someone said and repeat that. So, if there was something about an employee not responding to one email, that one person said, on time, this type of manager would rake your coals over that, even if that’s not the usual pattern of that employee.

The third type of manager is the evolved one. They listen, keep notes and keep both anecdotes and feedback for the employee in a file or in email so when the monthly or quarterly review period comes, they can provide both data and concrete examples.

These types of managers will be the most appreciated in your startup. They “invest in the lines and not the dots”. They look for patterns and observe behavior over a period of time, instead of giving conflicting feedback over even a small period, and unwilling to understand the behavior of the employee.

It takes a lot of effort to be that type of manager. They are very valued because they invest in their employees.

The trick I use to keep track is send myself emails with the Subject line having the name of my direct report. I have filters setup for the name as well. Every so often (I do it monthly) I will go and review all the emails I sent to myself about that employee and look to summarize the feedback. Then I also keep not of the anecdotes so I can help them recall behavior and suggest some corrective action if it needs to happen or kudos if that’s in the order.

What is the hack you use to help provide feedback to your employees?

How much should you pay for an engineer / developer in #Bangalore? Winter 2013 edition

Many entrepreneurs from outside Bangalore and larger company VP’s of Engineering from the US, who wish to relocate often ask me this question – How much should I pay developers / engineers in Bangalore?

That is a very tough question to answer overall, but I have noticed some patterns based on working with many startups here and also have the information on the salary bands for several large technology companies here in Bangalore.

The best way to think about how much to pay is by giving salary bands and considering the parameters.

There are 3 primary parameters I have seen used when people hire folks to determine their salary.

1. Experience – usually measured in # of years working on relevant and related technologies. A rule of thumb I have seen is 1.2 to 1.5 times the number of years of experience + starting salary of a fresh graduate at 2L ($3K) per year to 6L ($10K) per year. For example, if you are looking to hire a developer with 5 years of experience, then you will pay 5 years times 1.2 plus 2L per year if you are a startup that’s not funded.

2. Type of technology – The more arcane the technology the more you can expect to pay for it. For example, you can expect to pay much less for a person who knows PHP and more for someone who knows Android app dev or Ruby on Rails. Some common technologies and your base times multiple is below. I am assuming php developer is the base at Rs. 1. All others are multiple of what you’d pay the php developer. I dont mean this to think of php developers as bottom of the pool, but that’s the most prevalent skill, so the supply of engineers is more than the demand, making it a skill that’s easiest to hire and least expensive as well.

a) php developer = 1

b) Javascript + HTML (front end) = 0.9 – 1.2

c) Ruby = 1.2 – 1.5

d) Python = 1.4 – 1.7

e) Android = 1.3 – 1.8

f) iOS = 1.4 – 1.9

3. Stage of company. Generally a company, which is bootstrapped pays less and one that is funded pays more. Larger the company, the more you are likely to pay, If the unfunded company pays INR 1, then I have seen number of upto 2.3 times that being paid by larger technology companies.

So, if you are looking to hire a developer or a team, how do you decide how much to pay?

Step 1: Start with fresh graduates at 2L ($3K) per year if you are a new startup and go up to INR 6L ($10K) if you are a larger established company in the US for the same fresh graduate.

Step 2: For people with experience, expect to pay 1.2 times their # of years of experience added to their salary. So someone with 2 years experience would get 2.4 (1.2 times 2) + 2L to 10K depending on your company size.

Step 3: Finally depending on your technology stack add the multiplier above. So if you are looking to hire a Ruby on Rails developer with 2 years experience for a startup, then:

(2L (fresh grad at an unfunded startup) + 2.4L (for 2 years experience) ) * 1.2 (for Ruby) = ~5 to 6L per year or about $9K to $10K.

Two other points, that are VERY important.

1. To determine if the person is *good* I’d recommend you get them on board for a week to a month before you hire. Don’t use this formula blindly and pay a person who is not good a boatload of money to get disappointed.

2. Most people use salary at the previous job plus a 20-50% uplift (or raise). I think that works for most, but if you have a superstar candidate I’d go back to this formula.

P.S. There’s no good way to determine a good candidate except working with them. I dont take reference checks in India seriously – more on that for another post. I prefer recommended candidates from people I know very well.