Recruit's Mary Kate Donovan on Scaling Startup Recruiting

Maren Kate Donovan of Recruit - Podcast Transcript

Scott:	Welcome to Founders and Friends podcast with Scott Orn at Kruze Consulting, and before we get to an excellent podcast with Maren Kate Donovan of Recruit. Want to give a quick shout out to Kruzetax.com. That’s right. We built our own online tax prep for startups. It’s like Turbotax, but for startups, and the best part is, once you fill out all the info and the questions, you have a real CPA doing the taxes. You’re not doing the taxes. The CPA is. We have an awesome group of tax professionals and CPAs that handle everything for you, so check out Kruzetax.com for all your startup tax needs. With that, let’s get to Maren K. Donovan of Recruit. Thanks. Welcome to Founders and Friends podcast with Scott Orn at Kruze Consulting, and my very special guest today is Maren K. Donovan of Recruit. Welcome, Maren.
Maren:	Hi. Thanks so much for having me.
Scott:	My pleasure. We work with Maren. We actually love her service. It’s amazing, but maybe tell the audience about Recruit and how you got to this point.
Maren:	The last 10 years, I’ve always been in and out of the human capital market, and I didn’t even know it was called human capital 10 years ago. I just thought it was finding people to do work that I wasn’t good at when I started my first little business in college. I would find virtual assistants in the Philippines, in different parts of the Middle East who would help me build my blog or edit a podcast like this, or write documents. That eventually led me to start a company called Zirtual, which was virtual dedicated executive assistants, all U.S. Based, and we placed those assistants mostly with entrepreneurs and small businesses in the states and in Europe. That just got me really interested in the idea of hiring, and especially hiring at scale because at the most, I think we had 450 employees, and we were always bringing on new assistants, so we had to create these relatively robust hiring funnels, and I was the one that built a lot of them. I found it was the thing I loved to do the most. I could just crack out on that for like 10 hours at a time. Yeah, so after I left Zirtual and that changed hands, I spent about two years doing some interim COO work, finding myself, quote unquote, traveling. I explored through different business models. Everything from death care, which was super interesting, to Korean beauty, to micro housing, but after two years, I found myself back in the space of just really enjoying helping other companies build out their hiring efforts and think about it really holistically. That kind of was the beginning of Recruit, which I started about 8 or 9 months ago with a few of my original Zirtual people, so people that used to be Zirtual assistants are actually some of our founding team here at Recruit, which is really awesome.
Scott:	That’s awesome, and you get to, as you say, crack out and focus on building those big hiring funnels for lots of different companies now.
Maren:	Yep. Yep. That is my favorite part of the job.
Scott:	So, for us, you do the high level, you kind of manage our pipeline I would say. How do you describe that work?
Maren:	I mean, the way to think about it is, especially when companies like Kruze are hiring pretty aggressively in a year’s time, you think about it in terms of evergreen hiring. You may not need a staff accountant tomorrow, but you will need them in two weeks or four weeks, so you always want to be bringing people in at the top of the funnel, and then you want to be creating a V. You want to be creative different steps to gauge where a potential candidate is a culture fit, whether they have the skills to do the job, whether they have the qualities the job requires, and if they’re actually motivated both for the company’s mission and actually to do the work, and depending on the level of seniority, depending on the type of role of the location, you can create different steps, and different, not hoops to jump through, that always sounds bad, but actually ways for a candidate to prove that not only do they love the work they’re going to be doing, but that they’re good at it, and that’s kind of what we really focus on. So, we like to think of a hiring funnel as we handle about 80 percent of it, getting people from the very top to the point where we’re like hey, this person has gone through tests, they’ve done written screens, they’ve done a phone screen at least once with someone on our team, we’ve checked out their general qualities and skills. This person, we think, is a potential good fit, and then the company, so in your case, Kruze, you guys do your deep vetting internally, and then from there, you’re able to figure out is this person truly a rock star for this position and are they a culture fit, will they work well with us in the office.
Scott:	I love your point about the passion and love for the mission and wanting to … I always find that’s by far the biggest differentiator. There’s so many good, for example, accountants out there, or maybe you’re recruiting for engineers or whatever it is. It’s really that love and passion and fire that sets people apart. That’s one of the main things we hire for.
Maren:	Yeah, absolutely. It’s interesting. We only do non-technical hiring. So, we actually kind of focus one doing non-technical hiring for companies that are really good at a specificity. So, in the financial markets, that’s what you guys focus on. We have several clients in the block chain world, so fintech and/or technical companies that are hiring for HR, operations, executive assistants, and we really focus on making sure the people are quality, filtering the vast amounts of people that will just randomly apply, but will really put in the effort. Then, from there, understanding have these people looked into the company, are they motivated by the space, by what the company does, will they actually really be a fit or are they just looking for a job? That’s a really important part of it.
Scott:	It’s amazing. Because you have scale internally, you can do it at a price point where it really works for us, and we think your service is incredibly valuable. I think that’s something that people may not understand, that they can work with recruits and kind of get the operating efficiencies that you get in your business in the same way that companies outsource their finance, accounting and taxes to us. We’re so good at it and you’re so good at what you do, and you have so many great internal processes, that you make it a very efficient value prop for us.
Maren:	Yeah. I took some of the learnings … I’ve worked with remote teams my whole life, literally since I was in college. My first company, I was working with someone in the Philippines to help me get it started, and what we do at Recruit, traditional recruiting firms, they have employees. These people are recruiters, and the recruiters do all of the work. Instead, I started doing recruiting myself, helping startups a few years ago after Zirtual, and I really quickly realized that there were five disciplines to hiring, and each of those disciplines, I wasn’t great at each one of those disciplines. One of those disciplines is coordination, which is pretty much an admin, and I am not that great at super fine details, at keeping all the trains running. Once I figured out these five disciplines, which is the coordinator, the interviewer, the head hunter; that’s someone who goes out and finds potential people for jobs that are harder to fill, the strategist; that’s the one thing I do do is set strategy; and then domain experts. So, if we’re hiring for an HR person, we’d actually bring in a domain expert who has 10 years HR experience, so they can help us advise on what do the best questions to ask look like, where do these people live online that we can find them, or in real life. So, once I realized there were those five disciplines, I was actually able to find people that are really good at each of those disciplines, and they’re all independent contractors, and they work as much or as little as they want. They make an hourly, but they also make commissions based on the people we’re placing, and it allows us to have this awesome culture of extreme ownership, where people are really well vetted on our side and then they work with one client, maybe they work with two or three, and it allows us to pass those cost savings onto our clients. So, we’re far cheaper than a traditional recruiter, and we’re even equal or less expensive than if you did it in-house, while giving you a much more robust access to various different specialists, and scale up and down as you need more or less people from quarter to quarter.
Scott:	You also get to know the company. You know us. You know exactly what we’re looking for. So, it’s kind of the advantage of having an in-house recruiter who’s picking up the efficiencies of an outsourced provider.
Maren:	Yeah, exactly, and our team really loves to get to know their clients. The team that works on Kruze, they’ve been on your guys’ account since day one, and now, I mean, they can … I feel like they know so much about the company, about the different people, about the culture, they can sniff out a culture fit a lot better, and so you almost get the longer we work with clients, which we really enjoy and works for them, is the more context we have. It makes it really enjoyable for our team when we hire someone. When someone gets brought on as a staff accountant or a senior accountant, or whatever role it is within Kruze, our team gets excited and they feel like yeah, I really like Danielle. She was amazing, and then when Danielle gets hired, everyone kind of virtually high fives, so it’s fun for all of us.
Scott:	That’s awesome. I love it. I love it. That’s really cool. Well, you definitely … we love your service and highly recommend it. Gosh, we’ve been working together for a year, year and a half, I don’t even know. Is it 8 months?
Maren:	It’s been 9 months.
Scott:	Yeah. It’s been huge for us, so thank you so much. Yeah, no seriously, we literally love it. It’s amazing. For those that don’t know, I joined almost three years ago, I was the fourth person.
Maren:	Oh wow.
Scott:	So, now we’re at 35. In three years, for a services company, that’s a lot of growth, and in services companies like us, that’s a lot of hiring, a lot of training, and you’ve really helped us on the hiring part, so thank you so much. Let’s talk about a couple favorite topics of yours. We were talking before we turned the mics on, what are some of the takeaways people can have listening to the podcast, and one of your topics du jure is the pitfalls of hiring. What are some problems you’ve seen people go through, what are some ways they can avoid those problems, how can they become a more efficient hiring team? Obviously, the first step is hiring you to help manage the pipeline, but what other things can they do to be more effective?
Maren:	First of all, it’s kind of realizing that one of the biggest potential pitfalls is cognitive bias, and we all do this. It’s just realizing and accepting that we all have biases when it comes to any kind of interaction we have with other humans, and whether it’s anchoring, seeing that they’re a Harvard MBA, so then assuming they’re going to be better than another candidate just based on that, or if it’s something like their picture on LinkedIn or the fact that you both like the same sports teams. When you understand that there’s multiple different cognitive biases that come into hiring, you’re able to solve for it by creating a really thorough process. That process means that however desperately you need the role or how great an interaction you have over lunch with someone that your VC introduced you to, you’re still going to run them through multiple interviews, you’re going to create a score card for each candidate and that each person that interacts with them is going to fill that score card out religiously, and the score card would be partially do we think they have the skills to do the job, and another part do they have the qualities we’re looking for, character traits, do they have the motivation. When you get more 3-5 different touch points in a candidate versus just one person or two people, and everyone’s filling out the same score card that has the same questions almost to a monotonous point, like you just want to continue to go back, and when you do that, you strip a lot of the bias away. The last part of that, outside of if you can do test tasks and things like that, depending on the seniority, the really big one that most people don’t do is reference checking. That’s not just checking the references that they give you. I kind of say ingest. When people give you references, you can kind of throw them out because no one gives a reference that they think is going to say something bad about them. When you check references, you can do the references they give you, and that’s fine, but more importantly is to do back channel references, and this is especially important as a person gets more senior. When someone’s really junior, you can run them through several tests to see can they do the work that we need them to do. When someone’s really senior, they’re not going to take the time, nor should they because you know they have other offers on the table, to prove to you that they can do the work. They’re 10 or 15 years probably shows it. But, what you do want to do is you want to do the 7 point back channel reference check that we do with all of our clients, and that is three people that a candidate worked for, two people they worked with, so colleagues, and then two people who worked for them. This is absolutely just magic because you have everyone rate them on a scale of 1-10. Great candidates will be 8s, 9s, and 10s. Poor candidates will be 8 and below, and you normally see a very clear indication of the person. Either they’re just as good as you think or better, or there’s some really big red flags that are hidden in their back channel references. So, that’s a huge one I always suggest everyone does.
Scott:	It’s almost like you’re doing an MPS score on that person. 8, 9, 10. I love how you configure that almost as a 360 review, where you’ve got people they’ve reported to, but you also have people who have reported to them. That’s really, really smart.
Maren:	Super important because sometimes, people are kiss asses to their direct reports, but maybe they suck to work with as a colleague, or maybe they’re terrible to work for, and that’s a huge red flag. I’m almost more interested with the people that work for them than the people they work for because you really can sense a person how they treat people that are quote unquote below them.
Scott:	Totally, and also, when there’s a little bit of trouble below, there’s usually a lot of trouble that people aren’t talking to you about.
Maren:	Exactly.
Scott:	In a reference check, you’re probably not going to dig super hard on that, but just knowing there’s trouble in paradise is helpful. If there are people working inside your company and there’s that trouble, there’s probably serious stuff that you really need to dig into and figure out. I love that.
Maren:	Yeah. Another great thing to do with especially more senior hires is if you’re going to have 3-5 people in your company interview them, is not only having the CEO and whoever they work with directly, but also having the most junior person in the office or on the team interview them too, and that’s a great flag of do they have humility, are they … If your EA sits down and does a talk with them, are they going to be just engaged and just as respectful and thoughtful with your EA as they would be with you? That’s a huge way to judge emotional EQ and humility, which to me, is really vital in most roles.
Scott:	Yeah, especially in our world, in client service, that stuff is super important because the Kruze accountants have to be able to interact with CEOs, office managers, VPs.
Maren:	Everyone.
Scott:	So, yeah, the emotional intelligence is super duper important. That’s cool. I didn’t even realize when you run people through all these checks that this is the stuff you’re looking for, but this is really fascinating. I love it. So, what are some things … this is just a dilemma that probably a lot of people face. They really like someone. They have that good lunch with someone that the VC recommended, but they come back as marginal reference checks or there’s something not so great, but you still like the person. What’s your advice? Is it-
Maren:	My advice is to run. I’ll give you an example. So, my last company, we hired a director or VP. It was the highest level we had ever hired externally, and the guy used to be at Netflix and several other companies. He was coming from a big consulting firm, one of the big three, and on paper, he looked phenomenal. He talked a really good game, I had two lunches with him. I think one of my co-founders maybe had a lunch, and the CTO, and our advisor, one of our advisors, I worked on a team with this guy before. He’s amazing. He’s great. Definitely hire him. Don’t let him get away, so we were all super excited. So, we created an offer for the most expensive salary we’ve ever done, we get him in, he signs. Within two weeks, I started noticing some really concerning things. He wasn’t … A big thing we talked about was rolling up your sleeves and digging in. We were only three years old, still a company that everyone did the trenches as well, and instead of that, he would be pulling people in to do his work, and then he also wanted to take more and more control of different departments, and I was like this is very strange. He wanted engineering to report to him, and it was a non-engineering thing. I was like that doesn’t make any sense. So, these are the red flags. A week later, he quits via text message. Sends me a text message, and I was just like … I’m not going to curse since you probably can’t-
Scott:	He did you a favor.
Maren:	Yeah, but I was like you’ve got to be forking kidding was pretty much my response. So, after that happened, I dug around with some of the references, like what should I have done. So, I looked back into it. Only the advisor I had talked to was bullish on this guy, and it was because he had worked with him but not really with him. So, it’s really easy for there to be people that they’re the first 10 or 20 at X co., and X co. Grows from a million and sells for a billion, and they’ve been in the right place at the right time, but either because they’ve gotten spoiled, they’re just not a good fit now, or they never were a good worker and just caught waves and got lucky, but when I started speaking with other people who worked with him, if I had done two hours of work in reaching out to people on LinkedIn who worked with him in those three different categories, for, with and he reported to, I would’ve absolutely never made him an offer. I mean, the average cost, they say, at that level, when someone you hire, they don’t work out, it’s like 250,000 dollars because not only is it salary for him, but it’s the amount of time it took. It’s what we lost in productivity. Literally our executive team was, for three weeks, trying to figure out what to do with this guy. The productivity killer and the money was just massive.
Scott:	And the opportunity costs. You could’ve hired someone good. That’s our biggest problem too is we only have so many slots, so when we make a bad hire, it’s really … We set ourselves back three months.
Maren:	A bad hire is like 10X more disastrous than no hire at all, and I think that’s something people don’t realize. So, no matter how great someone seems on paper, if their references come back shitty, I personally would run. If you’re like no, I have to try this person, then try them out on a contract. Absolutely do not bring them in as an exempt employee and then have to deal with all that stuff.
Scott:	Yeah, that’s amazing. That’s great advice. What do you do when … You brought up a good point there. Try someone out as a contractor. A lot of my friends who are VPs or directors, one of the things … This is more on the getting hired side. A lot of startups are asking them to prepare full on strategy, decks or marketing decks or things like that. It’s a little concerning because it’s almost like hey, this is going to take 40 hours or 80 hours to do the right way.
Maren:	Yeah.
Scott:	What do you coach people on? Should they say yes? Should they do it? Should they not do it? Is there a polite middle ground? How do you handle that?
Maren:	I think it depends on the company, how bad they want it, some different things, but what I’ve noticed, I personally won’t ask someone who’s far along in the process to do more than five hours of work unpaid, and that’s really case by case. Personally, if I was looking for a role, let’s say I was looking for a director or VP, I don’t know, I’ve not really ever worked for other people so I’m not sure even what I would be … I’d probably be like something super junior, but if I was looking for a role and someone asked me to do 10, 20, 40 hours of work, I would be like you know what? If I didn’t have a job right then and had the bandwidth, yeah, I’ll do that, but I will be billing at my consulting rate, and I think that’s perfectly fair.
Scott:	Yeah. That’s a really good-
Maren:	I think there’s a quote, and I think it’s from the Bible, and I say this because I was raised in the south in Nevada, and weirdly Christian, but there’s a quote that always stuck with me about a workman is worthy of his wages, and it’s Old Testament so it’s both Judeo-Christian, but it’s that little thing always stuck with me from when I went to church. I was like yeah, you shouldn’t ask people to do work if you’re not willing to pay for it.
Scott:	Yeah. It’s a good faith thing. I think that’s a really good middle ground. I like it. Kind of continuing on this, we had talked before we got the mics going about part time versus full time. How do you break that down? Are there other certain job functions that need to be full time? Is it more of a getting to know you, go part time and then go full time? How do you break that … This is more for the founder or business owner. How should they be thinking about part time versus full time hires?
Maren:	A lot of it depends on what you’re looking for. What I always say is, first of all, I tell everyone to read the book Principles by Ray Dalio. It’s a beast of a book. It’s like 1000 pages, but it is-
Scott:	I have that in my Kindle.
Maren:	He put that out, he put Principles out, he runs Bridgewater, which is one of the most successful huge funds in the world, and he’s put it out for 20 years internally and just this year made it into a book. It is amazing for entrepreneurs thinking in terms of hiring, in terms of people operations, in terms of systems, but what I would say in terms of ICs versus employees, part time versus full time, is figure out what the goal is. What are you trying to do actually? What’s the result you want? Then, can you get that result if someone is … Can you test before … Try before you buy? Are you able to get that result with part time work or contract work? I think some of the things that are really great to not bring in full house right out the gate or even sometimes for years if ever, for what you guys do with finance, with basic accounting, bookkeeping, CFO duties. If you have someone good … Total side note. Also run back channel reference checks on your vendors. I remember at the company I was doing an interim COO role, we did that with Kruze. We did back channel references, and all of them came back great, and I was like okay, now I’m comfortable, and we did it with some other CFO firms, and they came back questionable. I was like this is very good to know. So, you should always back channel reference your vendors as well. If you can outsource things and you’re confident in the vendor, or if you can bring people on part time, let’s say for HR or recruiting when it comes to outsourcing that or bringing part time or contract, it really gives you flexibility. It’s a big benefit if you’re able to do it. In terms of contractors versus employees, nationwide in the U.S., we’re at a 3 percent unemployment, which is I think a few data points off of … We’re pretty much at full employment, meaning it’s really difficult to hire, especially in the cities like San Francisco, New York, LA. Those are the most competitive. So, if you’re at all able to hire remote talent, it is a super power. If you’re able to hire either part time or full time people in Kansas City, or in Duluth, or in Arlington, Texas, you will have the ability to tap into a pool of candidates that will be cheaper, obviously, than where you’re currently at if you’re in one of these major cities, but also, you’ll get more bang for your buck. So, somebody that would maybe be a director in New York City will actually do a more junior role if they live in Duluth because they care more about their freedom and flexibility and maybe raising a family or pursuing their art than they do about that director title in New York and the pay that would go with it. If you have a company and you’re early on, and you’re like hey, we only have this much money, what’s a point of leverage we can do? A huge point of leverage is remote talent, but if you do remote talent, you have to put in the infrastructure to manage talent remotely. You have to pretty much commit to the idea of extreme ownership. You cannot micromanage, and you have to be okay with building a culture with that remote team. It only works for some companies. It doesn’t work for all companies. Secondly, sometimes you can have specific branches of your company that are just remote, so maybe most of your people need to be in the office in San Francisco, but you can run customer support remote, or you can run HR remote. So, those are huge levers you can pull, especially early on in your business building that if you commit to them, will make a really big difference.
Scott:	I love how you called it a superpower. You’re totally right. It is a superpower, and it can really accelerate your business because you just find … I think the longer I’ve been doing this, the really more I appreciate amazing people.
Maren:	Yeah.
Scott:	And whether you find that amazing person in San Francisco or you find them in San Jose or New York, or Kansas City, or Duluth, or wherever it is, that’s what really pushes and accelerates the business, and they have this halo effect. They teach everyone else, so just finding amazing people is what it’s all about and if they have to be remote, then that’s fine. It works. One of the other things we were talking about would be how do … So this is more of one of the reasons we love working with you is that you have run a business, you’ve built multiple businesses, you’ve kind of seen everything, so when you and I start talking or you and Vanessa start talking, it’s like an instant connection. You know exactly what we’re going through or how to fix what we’re going through. Do you have that component of your business, like almost founder counseling or founder office hours? How do you spread the wealth a little bit, and is that a good lead generation channel for you? How do you share all your knowledge?
Maren:	Thank you for saying all my knowledge. I don’t feel that way at all, but-
Scott:	You have a lot of knowledge. You’re really smart.
Maren:	Thanks.
Scott:	You know what you’re doing.
Maren:	Thank you. I particularly focus on two things right now. I focus on paying it forward to female entrepreneurs. Vanessa and I are actually part of the same group of female founders that have been around maybe the block in one of the 7 years Silicon Valley cycles, Silicon Valley New York cycles. In that group, we focus on inviting newer female entrepreneurs in and helping them level up. I’m always down to talk to any female entrepreneur, or any entrepreneur in general, but especially I like that paying it forward. 17 percent of startup founders or founding teams have at least one woman on them. Only 2 percent of venture funding from last year was given to teams of all women founders, so like 1, 2, 3, all women founders, which is just insane. So, that’s something I really try to spend a disproportionate amount of helping out on.
Scott:	That’s great.
Maren:	Anybody that wants to talk about hiring or distributed work forces, or just anything with human capital, I’m really passionate about thinking about what 5, 15, 30 years from now looks like and how we can make sure that we don’t grow into a dystopia where there’s a few people that are paid incredible well and very high skilled, and then there’s just this ruin in the middle, and there’s tons of super low paid grunt work. I think that that’s something that everyone should be thinking about; companies, founders, and I think a great way to fix that is through entrepreneurship and innovation. Yeah, those are a few of the ways I try to help out with that stuff.
Scott:	That’s amazing. The woman entrepreneur thing is so important. My mother was an entrepreneur.
Maren:	Oh, that’s awesome.
Scott:	Which is probably no coincidence … Yeah, so it’s no coincidence that I married Vanessa probably and liked all those attributes. It really is a lot of mentorship, and there’s so many … I mean, we love working with women entrepreneurs too because honestly, there’s things that are quietly stacked against women or minority entrepreneurs that people don’t even realize, or structural things, or just the way people treat and talk to people. It really does require more mentoring, more coaching to get over those things. They’re just kind of quiet blocks that people don’t talk about.
Maren:	Insidious, yeah. It’s a bias that most people don’t even realize they have. One thing Recruit does is we offer a thousand dollar credit for any of our services to any company, any client, that is female founded or has a female founder that signs up, or just across the board, it doesn’t matter if they do a one off or recurring plan, we just give them that credit because that’s a way we’re able to support female entrepreneurs in our small way. I encourage other female founded companies to offer something, if they can, to other female founders.
Scott:	That’s amazing. I love it.
Maren:	It’s the idea of voting with your dollars, but I would rather spend my time-
Scott:	Voting with your dollars and you money, and your mentorship time.
Maren:	Yeah, exactly. Yep.
Scott:	That’s amazing. Well, this has been awesome. Like I said, you do an amazing job for Kruze.
Maren:	Thank you.
Scott:	We love it. It’s very helpful. It’s really helped power our growth.
Maren:	Thanks.
Scott:	Maybe you can tell everyone where they can find you and how they can work with you.
Maren:	Yeah, so you can find me at Maren@thisisrecruit.com, and Maren is spelled like Karen but with an M, and then I’m at Maren Kate on Twitter and pretty much anywhere else in the internet world, and I’m always super happy to have a conversation about hiring or entrepreneurship, or any of this stuff to startups or founders that are curious, and if we can be helpful, awesome.
Scott:	I love it. Well, I know you can be helpful, so they should be looking you up and using your service. Maren, thank you so much. Check out Recruit @thisisrecruit. Thank you for your time. Appreciate it.
Maren:	Thank you. Bye-bye.

Maren Kate Donovan of Recruit on Scaling Startup Recruiting

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