Wednesday, Feb 23, 2022 • 24min
Recruit, retain, resign, re-skill, repeat
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How has the great resignation changed the way startups hire?
The conversation started with defining the Great Resignation and sharing numbers to back the sentiment that everyone can't stop talking about. As always, the flowed to naturally care more about the employees within startups, and their feelings, than employers and the power they've traditionally sat atop.
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Speakers
(2)
Alex Wilhelm
Natasha Mascarenhas
Transcript
Verified
Break
Natasha Mascarenhas
00:25
Hello and welcome back to
Equity
, a podcast about the business of startups where we unpack the numbers and nuanced behind the headlines. I'm Natasha Mascarenhas and this is our Wednesday show where we niche down into a single topic. Think about a question and unpack the rest this week. We're asking how has the great resignation changed the way startups higher.Share
00:45
Somehow, I don't think we've sat down and dedicated an entire episode to this conversation, but it 's been a talking point in nearly every single call I have with founders. And same with Alex Wilhelm who 's here today to talk it through Alex. Hello and how are you feeling about work these days?
Share
Alex Wilhelm
01:01
Well, apparently I should be quitting given the topic of the conversation, but don't tell my boss that. But apparently it 's the it 's the new jam.
Share
01:07
I've been back at T. C. For more than two years now.
Share
01:09
Maybe I should like, you know, I'm kidding. I'm not going anywhere. There 's nothing else I want to do. But like it is the season for leaving. Uh kind of everywhere. It feels Natasha.
Share
Natasha Mascarenhas
01:17
100% like I feel kind of left out. A lot of my friends left their companies almost a year ago this month. And I feel like they were early and but but they all were like having these conversations about salary negotiation empowerment. And the great resignation does impact all of us. Even the ones that aren't planning on going anywhere.
Share
01:37
And that 's the really the big reason why we wanted to talk about it, it 's pretty unavoidable at this point and today we're going to spend time, I guess going through the numbers on what the great resignation is actually looking like in terms of people who have quit, people who are making more money than they were before and and who 's being left out of that conversation, then we'll go into a lot of ours, so we'll talk about recruitment, retention, rinsing and repeating and as well as kind of like experiments we're seeing in this space and what happens when the great resignation ends.
Share
02:05
So if this is something that you've been thinking about but haven't spent time really getting sharper on it, this is the episode for you, and especially if you care about this question in a startup context, because Natasha 's right, this applies to all workers and it seems like all industries to a degree, but we care most of course about high growth startups and that is one of the epicenters I think of the great resignation and it kind of more broadly Natasha, the talent crunch as it 's kind of bandied about and also, you know, it 's always great when tech is as like meme worthy and absurd and capital Rich as it is because it just gives us really fun anecdotes which we'll get into but let 's start with, I guess how many people have been quitting recently, Alex, you pulled up some data for us, what 's quit rates looking like these days?
Share
Alex Wilhelm
02:50
Yeah, really high turns out much higher than I thought.
Share
02:53
So I was pulling through some data, it appears that the number of quits in
the United States
, but just the actual way to phrase that I believe, and I love it edged a little bit down to about 4.3 million in december of last year, that 's still way up towards the absolute ceiling of those numbers, I think the all time record was 4.5 million in november. Now, what does that mean? How many people?Share
03:12
So in percentage terms to make that a little bit more clear, the quit rate was 3.5% in december, Here 's the thing, it was 3.7% in January and now it 's my understanding, this is 3.7% of people leaving their job in a particular month is a lot, that 's a lot of people, that 's a lot of chard given that most people don't quit their job any particular months to see that many in any 30 day period, shocking, so people are leaving and uh Natasha I've seen help wanted signs and I think every business within walking distance of my house at least.
Share
Natasha Mascarenhas
03:41
Oh my God, totally, it it is not just a tech issue to your point, it is everywhere and I think what we're seeing with the number of quits out there too is that companies as a result are racing to fill in roles, put a lot of money towards it and budgets are changing the big place we get to after we realize that a lot of people are leaving is like the why and is it remote?
Share
04:04
Is that it or is there other kind of non obvious ones? Remote has been two years long. So that 's why I'm always still confused when people are like distributed work is the reason behind the great resignation.
Share
Alex Wilhelm
04:15
Yeah. I think a lot of people just realized that their life had been going a certain way for a long period of time and it didn't have to be that way like if you just are raised in a society in which you have to commute, you have to live near where you work and that 's kind of the main determination of where you live and what culture and what food there is and what people you get to see and all that.
Share
04:32
You have to spend your money and time and stress insanity and you know driving and then suddenly that all just fades away and you're at home just hanging out with yourself, your partner, your family, your pets, whatever, maybe you're some roommates, whatever you got.
Share
04:46
And then I think you just rethink things and you're like what the hell am I doing, what actually matters.
Share
04:49
And so to me the great resignation began with the great shock of sitting at home with your thoughts and so we could talk about Natasha, you know, inflation versus minimum wage and how that 's impacting different bands of employment and compensation expectations or you know, yes, you can be remote, but does that mean you have more options?
Share
Speaker 1
05:07
You know, there 's, there 's many factors, but to me, I think psychologically, I think we all just kind of looked at the way we're doing things, we're like, that 's stupid, I'm not gonna do that anymore. And that is the root of where we are today.
Share
Natasha Mascarenhas
05:17
I couldn't agree more with that, like very well said and it 's kind of a weird place to be in when you are a journalist whose job really depends on meeting people, bonding with people and schmoozing to an extent and doing that all remotely and learning that it 's okay and you can do your job remotely was also, I think another realization within this resignation, like before there was really no counterpoint or proof, it was kind of like Friday, stay at home, enjoy that.
Share
Alex Wilhelm
05:43
But let 's be real ides and friends who had Friday work at home jobs and it wasn't a lot of working at home, going on Friday, but now that we're all remote, I feel like we're all actually very accustomed to it now and then, here 's the thing, people wanted people to come back to the office, people didn't want to go great resignation, People wanted to be paid the same amount of money but live in a lower cost of living area.
Share
06:02
Some employers said no great resignation people decided to change what they do because what they were doing sucked. Like think about the the hospitality industry in
United States
for example, like it 's, it 's hard to hire servers and wait staff and so forth. People decided they didn't want to do that anymore.Share
06:15
Now this all boils down to the startup world, you wear developer talent is now global if you will. Sales talent and high demand operational talent is scarce. Every city is a startup hub, every geography in the
US
, every continent in the whole freaking world is trying to build tech at the same time.Share
06:30
So the great resignation is kind of meeting this moment of of burning demand that I, you know, people are struggling, let 's take the last month out of the equation.
Share
Natasha Mascarenhas
06:41
So many startups are soaring and are needing a lot of people to help them meet the demand that they've found during the pandemic. And I think that 's where we saw kind of a hopping situation happened where they added 1000 employees in a year.
Share
06:56
The great resignation really I mean people were able to find companies like a hoppin, like a high growth startup that 's going to hire you and pay you super well and make you feel like you're joining a rocket ship, which is the promise of startups in a way that we just haven't seen before.
Share
07:10
A lot of my friends got more selfish in the best ways. They were like, I'm going to prioritize money right now, I'm gonna practice mission and money right now because I can and that 's like, also a great thing to see.
Share
Alex Wilhelm
07:20
I just want to point out that there 's someone listening to the show right now who 's like, man back in my day, people stayed at their jobs.
Share
07:26
Yeah, that 's a great way to get paid less. You know, Also Corporations have absolutely precisely and exactly 0% loyalty to their employees when they don't want them anymore. So I think also part of the Natasha is kind of what you said, people just were like, wait a minute if that and I'm trading my labor for money. It 's not an emotional transaction, it 's a business deal. So let 's go out and make a new one.
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Natasha Mascarenhas
07:48
Yeah, I want to spend some time talking about like what founders have been telling us because I think that has come up so naturally during every conversation conversation. Oh my God, I mean, I know money is obviously the big one and capital and new fundraisers have always been used to hire as well as even funding around stories.
Share
08:05
So nothing new there, but I think just like the sheer focus on trying to pitch yourself, not just as one thing. You're not just going to get a lot of money if you join me, you're going to get money. Mission upscaling your your life is going to change if you join my company is the new pitch and that feels different paint your toenails, curtains will come over and groom your dog, please come work for us.
Share
08:30
Exactly. And, and, and it feels frantic. I think we've seen a lot of companies not shy away from the fact that they need to hire a lot of people, but that may change to like, I don't know, like are you hearing people start to get more comfortable addressing the fact that maybe a contractor or part time work could be a reasonable way to grow.
Share
Alex Wilhelm
08:48
It 's hard to get people to admit that on the record because it implies that they're unable to attract the right talent for their startup, which makes them seem slightly less perfect and therefore probably not worth a 100 X. They are multiple.
Share
08:59
So no, but I am hearing a lot of people talking about the issue of hiring and and finding the right people and that 's what kind of like the VC world creeps into this conversation because it does feel like people talk about their VCS as capital sources, but no one ever compliments their VC on the term sheet.
Share
09:15
But I have heard a consistent theme of compliments or notes about people because I asked founders, I'm like, all right, cool. You know, why did you pick Tiger?
Share
09:22
And they know everybody and they helped us hire a CFO and I'm like oh that 's actually value add but not just cfos I mean think about like if you're and reason right to pick a firm with a lot of employees, they have a lot of uh spokes in their hub so they touch a lot of different areas and can probably help you build your own very positive whisper network to bring talent in and if you can hire the right people you can work a lot faster and better and that leads to growth, which is what everyone wants.
Share
Natasha Mascarenhas
09:46
I think VCS are 100% the the new recruiters I think I saw in the show notes that you put in like it feels like their job, the moment the capital is wired is how do we connect you to talent and how do we help you? Message your talent?
Share
09:59
I actually had a similar conversation with the founder about Tiger and they were saying the
Tiger
will always win against every top tier firm. Founders also have options now so if they can choose a VC
who 's not gonna invest in their competitor, who 's gonna help them hire all of their executive talent and is going to give them great deal. Sorry, a great valuation.Share
10:18
Why not go that way?
Share
Break
Alex Wilhelm
11:05
Yeah, actually, well, I mean, let 's talk about kind of the mix between the two things, which is Arlen Hambleton is putting together issues of venture capitalists had on the show, wow, we had on the show long enough ago that was back in the old TC office.
Share
11:16
I just realized we should have our land back on the show. It 's been, it 's time anyways, Natasha, she 's putting together some sort of fractional shared labor pool for early stage companies kind of to alleviate this precise issue that we're talking about.
Share
Natasha Mascarenhas
11:28
Yeah, definitely. So I think she 's taking a lot of what we saw with like the freelance economy as shown by up work and fiber and is applying it to ops roles in tech. So she created runner, it 's raised about 1.5 million in seed funding from Charles of precursor and a few other prominent firms.
Share
11:43
Its whole pitch is we're going to help early stage startup founders hire part time flexible work to build out their ops team, whether that 's an executive assistant, whether that 's a C. 00 all those roles. She wants to kind of help connect to people.
Share
11:56
And so really it 's a recruiting company and I was really interested. Obviously it fits into what we're talking about because it 's a
VC
, starting a recruiting company that 's obviously gonna work with her portfolio companies, but is addressing what she says is the second question she gets after capital, which is how to hire.Share
12:10
And I think it really showed at least me that we're seeing employers slash founders change their mind on what it means to scale right now. They don't just need a C 00 to plug and play. They can do a part time ceo. And that 's a really interesting concept. If we think about it.
Share
Alex Wilhelm
12:26
Well, if you're a small company, you may not need a full time executive assistant for your Ceo, you may need a person who probably has 15 hours a week. So you cut it up into a couple of people, it 's suddenly affordable. Everyone 's happy.
Share
12:36
Another dynamic here in the section that I forgot to put in the notes, but I want to bring up at this juncture is just straight comp just just money and I think that in the older days it was easier to go to a large tech company, pick a name
Oracle
and be like, hi, listen, I know you're a PM at Oracle
, your, your life is hard.Share
12:55
You work for
Oracle
.Share
12:56
Do you want, do you want to come work for my cool startup, you won't make quite as much money both of some stock in there and you get to kind of have control over your life and destiny.
Share
13:04
Since then that feels like a very 2013 conversation if you will.
Share
13:08
Since then big tech companies haven't ratcheting up the comp and they have been, I mean, we both know this because we have friends that work for like every big tech company and uh, uh, it 's harder to go to someone making 400 at google and be like, hey, here 's what you should do, stop making 400 of google and cash and stock and all the other stuff that you get, you come work for 100 and 20 of my startup and we'll give you eight shares.
Share
13:31
Like it 's tough. There 's only so much Equity at an early stage company And if employees cost more, you have to dig deeper and deeper into your options school to make it kind of math out.
Share
13:39
That 's tough. And that to me is really where like salesmanship comes in like how good is your mission and culture really and can you take that and actually use it as a way to combat a lack of resources compared to alphabet and
Amazon
and Microsoft
and so forth.Share
Natasha Mascarenhas
13:53
Oh totally, I mean, and this really is us talking about like the recruitment portion of how things have changed recruitment. A lot of founders have told me that like, will even tell you in that first interview that we're not going to ever pay you as much as a facebook and we're not going to lie and pretend that you'll, you'll be making as much as one.
Share
14:08
And that has also helped weed people out in some ways. If you're the kind of founder that wants to recruit people for your mission and not try and bait them with money, which isn't a bad thing. I think everyone 's from a different life situation.
Share
Alex Wilhelm
14:19
Money is good if someone has too much money and doesn't want it, put it into a suitcase and email it to wherever our offices and we'll buy lunch. Actually don't, don't do that to be clear. That 's unethical. I'm, I'm just saying that in general, I like money.
Share
Natasha Mascarenhas
14:34
My friend of a friend who works at Facebook joined Facebook or
Meta
. Sorry and we asked them, how do you, how do you like working at Meta
. The first thing I said was, well the compensation is great and it 's kind of like walked away and I was like one that 's a lot to like fair.Share
14:49
I think that 's the sentiment we see all across the board and it 's, it 's one that I joke a lot about is her reaction, but also one that like, I think just like shows that were in just a new era of what it means to join a company.
Share
15:02
You're not joining a company because it 's your life 's purpose, you are joining a company because it 's a job that you will do, but your life is bigger than where you work. Like people used to live in
San Francisco
only to work now when you're in sf people are like why? Because it 's not for work and that 's kind of crazy to experience as well.Share
Alex Wilhelm
15:19
So on the recruiting front though, we know people are looking to VCS for help, we know things are very, very expensive. We know that C E O. S and their ability to, you know, kind of bring talent in the door. Super important.
Share
15:29
Talk to me about retention and what you're hearing from kind of the Edtech benefit side of things you mentioned upscaling earlier. So I'm presuming that that 's a lever Huge one.
Share
Natasha Mascarenhas
15:39
I think in the past retention was obviously something people tracked but it wasn't a metric of success or really something people viewed as like how do we find a return of investment in upscaling tools now? That 's all changing? I mean it is like the top priority as much as like profitability is For some companies is like, can we show our investors that we're able to keep talent on an ongoing basis.
Share
16:00
Remember
Duolingo
like notoriously in their S1 said like they only lost like 3% of people and and that was a flex, but I, I would, I will not be surprised if retention becomes statistic. We start to see more and more just to kind of give you a snapshot of how much attention is being paid toward it.Share
Alex Wilhelm
16:15
It reminds me one of my favorite business stories, gotta remember who the ceo of domino 's was at the time, someone was brought on to help kind of tune up domino 's pizza. This was way before the current era of dominoes share price appreciation and all that. And he was like, what 's our yearly turnover for in store workers?
Share
16:32
And it turned out it was over a 100 percent their recycling through their entire staff more than once a year on the front lines.
Share
16:39
And if you do that, what do you lose, you lose institutional knowledge, you lose camaraderie, you lose the ability to promote from within and to be clear if you're having over 100% retention, you're not doing a good job with those things anyways, but you can't at that point because that 's how bad it is.
Share
16:54
That 's why 2% is so impressive.
Darkwa
, which is built by the wanderlust group, Rhode
island based techniques.Share
16:60
We love to see it. I think they always bragged to me and our calls about their employee retention if I have my notes correctly. So it is a thing and it shows that people don't leave and that 's great because recruiting and recruiters as we know and we've learned from three recent pieces are expensive and in high demand expensive and high demand and also kind of changing their minds on who to serve.
Share
17:18
We talked about free agency a few weeks ago and that 's all about helping tech workers getting their own agent and their own kind of in house recruiter for themselves being the house. And I kind of loved seeing that concept. And so I feel like no one really agrees on the best way to recruit or routine right now and that is like a data point in and of itself is that like everyone 's kind of trying to beef up their own side.
Share
Natasha Mascarenhas
17:39
Employees though, seem to kind of be the center person that is benefiting recruiters are in high demand.
Share
Alex Wilhelm
17:45
There 's been a couple of pieces that I've read that discussed how like people are struggling to recruit recruiters, which is like, is there a better sign of the times than that? I'm struggling to think of a better indicator for how broken things are.
Share
Natasha Mascarenhas
17:55
It 's probably a really not a fun time to be a recruiter. If I was a recruiter, I would go on the employee side, I would not go on the employer side.
Share
Alex Wilhelm
18:01
So you would go on to the free agency route and represent individual talent.
Share
18:05
I think so, I mean, I feel like I can't imagine it being hard to represent a head of product from Shopify that.
Share
18:11
Well, no, that would be like itself Natasha Mascarenhas.
Share
Natasha Mascarenhas
18:14
However, that would be a little harder.
Share
Alex Wilhelm
18:17
Well no one knows the agents names of the, the
NBA
players, right? But they have enormous clout because they represent insert star, you know, if you're Steph Curry 's agent doesn't matter if your name is, you know, billy bob, whatever, like represent that person Perrigo, you matter. You know, you get to be in the room. I think it was a fun job.Share
18:36
I think it would be strange though, it 's just extracting value from companies, but at the same time, isn't that what we're supposed to do as employees so much to say about capitalism, the incentives and how venture capital fits into all of it, which I think is like where every Wednesday conversation goes these days, we're talking about essentially a particular dynamic inside of the economic model of startups and how it plugs into the larger economy and as things change in the, in the macro picture, of course things change in the micro picture and that 's why we're here.
Share
19:06
Here 's a question that I had to Natasha is, what about VCS who don't do recruiting help?
Share
19:12
Does that become like a dividing line in like venture capital deal access? Because the firms that we do talk about being super aggressive do bring this kind of help. And I wonder if if they realized that to move fast you have, you can't just offer a good term sheet today. You have to offer a good term sheet today and also promised to help fill the spin that the budget will bring.
Share
Natasha Mascarenhas
19:34
Yeah, I mean, I think it 's a story we've been seeing for so long now ever since, like the phrase like VCS need to be more than just a bank has come around like
VC VC
services.Share
19:46
Like I feel like VCs have been prepping for it. So I don't think solo capitalists will be surprised by the fact that they can't keep up with a Tiger who I think quite literally has thrown millions at single companies to help them with their recruiting budgets.
Share
19:59
So I don't think that they should, but I do think a side effect will see is maybe more interest in founders, early stage founders bringing on party rounds.
Share
20:07
Like we'll see the need to have 100 investors in your first round with smaller checks more than the single solo capitalists who may have been enough and could have been a great value add, but like why not spread your name wider across more people who can shout your praise in their networks.
Share
20:26
It 's kind of like, we know you're not gonna help us hire our next CFO, but if you could keep tweeting about us and keep being kind of on our team, we expect the manager to come back in some way.
Share
Alex Wilhelm
20:36
It 's amazing how much the old venture rules have been turned around. Like we used to say like don't raise money from the same investor two rounds in a row because it shows that you couldn't find a new investor? It 's a negative signal. Now if you don't raise capital from your last lead investor, what went wrong with that deal? Why didn't they want to double that?
Share
20:53
It 's an inversion of things. And the same way party rounds used to be this idea that like, oh, you couldn't find a lead investor, No one has enough allocation to really care about your company. A party round is a mess waiting to happen and more like a party foul.
Share
21:07
And now you're like party round. Great, more people promotion bigger network, easier to hire. It 's funny how that, how things when, when there 's more money in the space and a tighter labor market.
Share
21:18
The old rules turns out weren't rules. They were just ways to ensure long term venture capital returns.
Share
Natasha Mascarenhas
21:24
Yes. I think like it 's kind of like this conversation about like community is a community or is it just capitalism?
Share
21:30
And I do, I do still believe my theory of like it 's community because eventually that community or that party around or just spreading yourself throughout more and more channels of low customer acquisition costs when it comes to hiring is a smart thing to do if you're a founder in 2022 you're, you're not as well capitalized as the unicorn in your category or as the big tech company in your category.
Share
Alex Wilhelm
21:50
Oh my gosh, remember when unicorn was the way that people have tried to like build brand cred to get the ability to hire more.
Share
Natasha Mascarenhas
21:57
Yeah now it 's like your unicorn, how are you going to deliver on that?
Share
Alex Wilhelm
22:01
But now there 's another inversion it went from being like oh my gosh there 's a unicorn company now I'm like oh my gosh they have three million IRR $2 billion valuation and they really should be gross margins than around 60% per year. They're doomed. Like like right now we just kind of look for the weaknesses.
Share
22:18
Okay last thing for me on this topic is the following. What are the benefits for individual workers from this? Because it does seem you can extract a little more comp you have a little more flexibility now in terms of where you work and you can kind of you know argue like yes I'm gonna work from
Denver
and not columbus or whatever you know?Share
22:36
But like what else can employees due to like ensure that this moment of them having the more ascendant hand end up benefiting them. And it 's not just flexpen for your H. S. A. Like there 's gotta be something else that is this how we really get back to a good work life balance.
Share
Natasha Mascarenhas
22:53
I think like the empowerment is and then we shouldn't undermine and something that I've been kind of undermining. I think I told someone this and they were like I think it 's because all your friends are in their mid twenties and I don't think that 's true.
Share
23:02
Like I think that yes, my friends in their mid twenties are learning how to be more empowered at work, but my dad who has worked at the same company for over a decade, he 's not going back into the office and like, I think seeing people who traditionally weren't feeling empowered, starting to feel empowered is something that isn't going to go away.
Share
23:18
Think about it like work doesn't have to be what you define yourself by. It can be like the third data point about you. It could not be a data point about you at all.
Share
23:26
I don't know what we would do if that was the case.
Share
Alex Wilhelm
23:28
Like third data point.
Share
23:30
What are the first to do? I have anything interesting about myself, Well sometimes I don't wear shirts, that 's just a character flaw.
Share
23:39
I don't know, like it 's kind of it 's kind of cool though to see people like think about like I can use my work to fuel my side hobby or like I can become a creator and like start thinking of it in that way. And so, I don't know, I think the takeaway for people is like, you can be selfish again, you may not see an immediate benefit in that, but like that is a benefit.
Share
Natasha Mascarenhas
23:57
You aren't going to be stupidly loyal to your company.
Share
Alex Wilhelm
24:00
Also, I think that some of the old excuses don't really work, like employing companies like, oh, we can't offer you more stock because the options pool is limited. Well that sounds like a company problem to me, go talk to the board, get some more options in the pool. Like do you want to hire me or not? Like the old kind of B. S. Walls that were put up to prevent employees from having a greater stake in the company of success.
Share
24:19
To me, you have to go away, there 's gonna be a proper attention and proper hiring and you know what, I would be much more likely to go work for a company that was carving up a larger slice of its
Equity
to keep employees that were high quality than a company that was trying to, you know, constrain that and enrich their backers, but that 's my take because I'm a capitalist, but a bad one, You're a capitalist.Share
Natasha Mascarenhas
24:41
I'm an emotional one. And I think like it kind of creates this like perfect duo to be talking about the great resignation right now because it really does, even though it feels like it 's a lot about like dollar signs and like people leaving and kind of throwing the middle finger in the air.
Share
24:54
It 's kind of it 's also like people are taking so much for themselves again and that like kind of gives me goose bumps, Okay, I'll say it, startup, employees are people too, you deserve a good life and uh and we appreciate all the work that he did nothing to write about.
Share
25:07
So to the power of the employee, we love to keep it on that wavelength, as always on this show, Alex thank you so much for talking through I guess the impact of the great resignation and what 's going to stay to everyone else. We will be back online Thursday at 10 AM PT one p. m. Et on hopping.
Share
25:25
We're gonna be recording our classic Friday show but live. So join us and ask us some questions while you're at it. Why not? And for those of you who just want to listen to us on the podcast and don't want to see our faces, we won't be offended, listen to us Friday wherever you find podcasts.
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Natasha Mascarenhas
Alex Wilhelm