When you think about why startups fail, what comes to mind? Lack of market value? Unsuccessful funding? If so, you’d be right. But just as important to startup success is having the right people on board to execute a company’s vision and strategy.
In fact, a CBI Insights analysis of 101 startup post-mortems revealed the top three reasons startups fail are no market need (42%), running out of cash (29%), and not having the right team in place (23%). And it makes sense: not every startup has to worry about executing a sales strategy until they go to market, but all startups need to worry about hiring from day one.
Why? Because just like with sales, hiring is a strategic initiative. And the processes you put in place inform your ability to bring on the right talent as you scale. A manual framework built on manual tasks will always fall short when funding comes in and it’s time to grow.
So what’s the cost of not having modern recruiting software? Here are three ways your startup suffers by not choosing the right software early on.
Cost #1: A weak talent pipeline
Anyone who’s been around startups long enough has experience with one failing, either because it didn’t hit revenue targets or product goals. While there are many factors like setting the wrong strategy, all failures share a common denominator — not having the right people.
Even startups who have the right strategy and achieve product-market fit, yet still fail to launch products, suffer from not having a process in place that supports strategic hiring. Common reasons include: “We didn’t have enough engineers,” “We didn’t hire a key engineer fast enough,” or “We didn’t have enough quota carrying reps to deliver on the forecast numbers.”
These problems all drill down to a talent pipeline issue — and you can’t fix your pipeline if your hiring team (whether the CEO or an in-house recruiter) are relying on manual processes that take away time from the important business of sourcing and nurturing talent.
Cost #2: Bad hires
It’s no secret that a bad hire can cost a company thousands, if not hundreds of thousands of dollars. In fact, it can cost up to five times the amount of a bad hire’s salary for the loss of a position, according to study by SHRM.
This effect is amplified in early-stage companies, where a single person’s work capacity represents a larger percentage of overall production. That’s why making the right hire is so important, especially when your startup is in its infancy.
Top three reasons why the wrong people get hired:
- Unconscious bias. These are the social stereotypes about certain groups of individuals from outside a person’s conscious awareness that can impact how hiring teams perceive candidates. Throughout the hiring process, unconscious bias can creep into your job descriptions, candidate sourcing, screening, and interviewing. There’s no universal fix, but like this article outlines, there are many ways you can reduce it at your company.
- Lack of communication between teams. A successful recruiting strategy requires talent acquisition to work in unison with hiring managers and interviewers. But there’s often a disconnect. As a result, a significant amount of time is spent collecting and syncing data, relaying information, and chasing down feedback. The right recruiting software can make all the difference in getting all of your company on-board.
- Relying on job boards instead of sourcing passive talent. Job boards can only get you so far in finding the right candidates, especially if you’re committed to diversity and inclusion early on. To control the diversity of your candidates and ensure you’re building a diverse pipeline, you need to proactively attract and engage passive talent.
Modern recruiting software can help you make more right-fit hires by automating your manual tasks, so your team can focus on sourcing and nurturing quality candidates. And, once they apply, engage them with a stellar candidate experience from application to interview to offer.
Cost #3: Lack of data
Not having the insights you need into your hiring process can be costly for your startup. Just like any other business expense, your CFO wants to know how much you’re spending on your recruiting budget and what your projected needs are as you start to scale your talent acquisition.
Headcount planning is one of the more strategic aspects of recruiting — but you’ll be a fish out of water in those conversations with your CFO if you don’t know metrics like your most valuable sources of hire, cost per hire, and top performer retention.
Spreadsheets aren’t scalable and simply can’t give you the data you need into your hiring process. That’s where an ATS like Lever comes in — which not only surfaces talent metrics for you to pull into reports for your executives, but also makes them accessible for everyone on your team to understand, regardless of their talent analytics experience.
Takeaway: Your gut feelings about what’s working in your hiring process have merit, but the real magic comes in when you can back them up with data. Here’s how to master your HR metrics.
It’s time to get scrappy and strategic
It’s easy for startups to get stuck in the “we’re scrappy, we don’t need something unless it’s mission critical” mindset. But if you want your startup to be staffed with the people who can help you get to that next round of funding, new market, or whatever, you need to rethink the premise that a hiring solution isn’t mission critical — because it is.
Thousands of companies around the world rely on Lever to scale their hiring through effortless collaboration. Curious to learn more about the tools and features beloved by UCSF, Affirm, Netflix, Everlane and many more? Schedule a personalized demo of Lever today.