How to hire and build a great team
Be in hiring mode or not
Paul Graham famously said in his excellent post, How to Raise Money: “Be in fundraising mode or not”. In the same spirit, you should either be in hiring mode or not.
The problem is not only the amount of time hiring consumes, but that it is a distracting side-quest for you and your team. Having high-priority meetings randomly appear on your schedules on short notice is a sure way to break your flow. Having to think about people that may or may not end up being on the team is also additional mental overload when planning projects.
The only solution is to minimize the blast radius of the hiring process. Decide if you are hiring or not. Don't adopt the “always be hiring” strategy unless absolutely necessary. And when you are hiring, set expectations with yourself and the team clearly that hiring is going to be a priority.
Job spec
The hiring process starts with a job spec. Don't rush into the next steps until you have fully thought through what exactly it is that you are looking for and what you can offer. Your understanding of the job spec may change over time as you interview candidates. That is okay, treat this as a living document and keep it up to date.
First, you need to describe what the job is. Start from the vision of your company. What is the mission and strategy? From there, draw a line to the team's charter or goals. How does the work of this team contribute to the overall success of the company? Finally, describe the role and responsibilities of the job. What specific projects would this person work on? What specific results or outcomes is this person working towards?
Second, you need describe the requirements. Are you looking for specialists or generalists? Are you looking for senior people who have done it before or open to junior people who are learning on the job? What are the hard requirements and what are nice to haves? If you are looking for culture fits, then make sure to define your culture! Ideally, this list of requirements should be used to evaluate the candidate later on during the interview process.
Finally, outline the compensation and benefits. Be upfront and realistic about what you can and can not offer. If you are not the final decision maker on compensation then you need to “pre-negotiate” a salary range. If you are the final decision maker, then you need to figure out your budget. It is critical that you do this work upfront and not let compensation hang the process up come closing time. How to actually set compensation is a deep topic for another post.
Sourcing
There are 3 main sources of candidates: people from your network, applicants, and recruiters.
If your company is young or small, you should focus on people from your network first. Start with the absolute best people you know, people who you find yourself asking advice from, even if you don't think there is any chance they would want to work for you. You might get lucky and hit them up right when they are starting to explore opportunities. But even if they turn you down, they may be able to refer you to some great people.
Once your network is tapped, work through the applicants. In my experience, it is best to post your jobs directly on your own website and not on some job board like AngelList. This will effectively filter for people who are specifically interested in your company rather than applying to all jobs that fit their search criteria. Instead of trying to market your job posting directly, focus your marketing on your company, brand, or product and let those who are interested find your job posting.
Avoid recruiters unless absolutely necessary because of the principal agent problem. While you and the candidate are both incentivized to find the best fit due to self interest, recruiters are incentivized to close deals. Therefore, they will push you to make hires and push candidates to accept offers even if it is not the best fit. There are exceptions though, like in-house recruiters or recruiters from your VC who are incentivized to maximize their equity value. The other exception is if you are looking to hire someone with a very specific set of skills or experiences that is just extremely hard to source otherwise.
Interview process
The primary goal of your interview process is to gather signal and come to a good hiring decision (and not a specific outcome!). If you have written a good job spec, you should already know what signal you are looking for. If not, then go back and write it down now! The worst hiring process is the kind where it is unclear what signal people should be looking for, which usually means the decision boils down to whether the team likes the person or not (which is necessary but not sufficient for a good hiring decision!). If you are getting to the end of your interview process but find yourself unable to make a decision, then your interview process has failed! You either need be more clear about the assessment criteria or you need to get better at gathering signal.
The secondary goal of your interview process is to show the candidate what its like to work at your company so they can decide if they want to join. The work (yes, interview is work) that you ask the candidate to do during the interview should be reflective of the actual work they will do if they join. If your team works mainly works asynchronously, then asking the candidate to do some work asynchronously. If your team is big on pairing, then do some pairing. If your team is big on presentations, ask the candidate to make one. If the candidate is getting to the end of the interview process but finding themselves unsure what the job will actually be like, then the interview process has failed! You need to get better at aligning your interview work with the actual work.
With these two goals in mind, you need to plan out the actual process and loop in the right people. Most likely, you will be assigning different members of your team to evaluate specific skills or areas of knowledge. Ideally these few team members should also be the people this new person will work most closely with or interface with. The key thing to watch out for here is to not make the interview panel too large. Ultimately, you need to be respectful of the candidate's time and you are not trying to make a decision by committee (more on this below). You want to structure the interview process to be as minimal as possible while ensuring that you gather sufficient signal for a good decision.
Deciding
The million dollar question: how do you know if you should hire someone?
The short answer is that it should be obvious. Not sure? Then its a no. Yes but… No. If its not a hell-yes! then its a no. Have a weird feeling in your gut? No. You get the picture. Remember that your job is not to build just any team, but to build a great team. If you don't think this person will be a great addition to your team, don't hire them! Resist the temptation to just settle for the best person in your current pool of candidates. It is much better for you and your team to stretch a bit longer than to make a bad hire. Always.
The long answer is that there is no right answer. And making good hiring decisions is an incredibly difficult skill to master. One of the main problems is that it takes time to figure out if a new hire is working out or not. The important thing recognize is that ultimately you need to make this decision with imperfect information. So when you are evaluating your own decision making you need to distinguish between the information you have now vs the at the time of the decision. The other problem is that it will take you a long time to accumulate enough reps in hiring to actually develop this skill. There is no easy way around this. If you have senior people on your team, lean on their experience where possible.
The general advice for decision making is to make sure its clear who the decision maker is and how the decision is going to be made — in advance! The decision should be made in consideration of the feedback from your team, and by all means you should be looking for buy-in from everyone. But you should not be necessarily aiming for consensus. Ultimately there should only be one decision maker - you - the hiring manager. Not your boss. Not your team. Just you.
Offer & closing
So you decided you want to make an offer. The literal steps of delivering and selling an offer is actually quite straightforward. If you have done all the above steps well, this should probably be the easiest part.
Perhaps what is more important to note here is what NOT to do at this stage. Now is NOT the time to finalize the job requirements or compensation. Now is NOT the time to find out what your candidate is looking for. These should have been done way earlier in the process. Time is of the essence, everything from your decision to your delivery should be prepared in advanced. If your candidate is doing well in the final stages of the interview, it is probably worth preparing the offer before you made your final decision.
Then sell your offer! By this stage your candidate should already be excited to join. But be prepared to go to extraordinary lengths to convince them to work for you. You may be up against other equally if not better offers from other companies. If you need to negotiate, negotiate in good faith and just be clear about what you can and can not do for the candidate. Resist the temptation to promise something in the future that you are not sure if you can deliver.