In the world of startups, innovation, and growth are of most significance. The process of hiring the right talent is a factor that can make or break a company’s route.
The year 2023 marked a significant milestone in understanding these hiring dynamics, which captured a special interest from Harvard Researchers, they conducted a special study where SupportFinity was part of it.
This Hiring at Top Startups (HATS) Study delved deep into the practices and challenges faced by founders of leading U.S.-based startups.
Through a comprehensive survey of 540 startup founders, the study shed light on the process of startup hiring. The study also reveals insights that draw attention to the role played by entrepreneurs, the influence of personal networks, and the details of compensation negotiations.
The study’s revelations offer valuable insights not only to entrepreneurs but also to job seekers, investors, and industry observers. Moreover, the report analyzes the specifics that define startup hiring practices.
Let’s explore further the key takeaways from the HATS Study. By peering into the world of startups through the lens of the study, we aim to uncover the strategies, dilemmas, and aspirations that make up any entrepreneur’s journey nowadays.
New Hiring Practices in 2023
The HATS Study’s exploration into startup hiring practices casted light upon the role founders play in each aspect of the hiring process.
Nowadays, in a world surpassing geographical borders, startups seek talents both locally and remotely. Moreover, they also seek other talents as contract workers becoming an integral part of their approach.
The study also uncovers the diverse resources founders consult for recruitment and compensation insights. Additionally, personal networks and employee referrals stand out as foundational pillars.
1. Changes to the Hiring Process
Within the world of startup hiring, the study reveals that the majority of founders opt for a collaborative approach during hiring. From the designing of job ads to the final steps of determining compensation, founders often collaborate with other individuals within the company.
However, when it comes to internal organizational roles, the study paints a general picture. In contrast to the collaboration seen in recruitment efforts, only 25% of respondents indicated that they have designated personnel to handle HR or people management. This suggests that collaboration is evident in certain aspects of startup operations. On the other hand, another considerable portion of founders bear the responsibility of HR themselves.
Moreover, the survey reveals that startups employ a range of labor types beyond traditional full-time employees. Contractors, part-timers, and temporary staff to form a diverse pool of talent that adapts to the dynamic needs of businesses. This not only enhances flexibility but also allows startups to tap into specialized skills without committing to long-term employment.
2. Local vs. Global Hiring Preferences
The HATS Study offers a glimpse into the approach of U.S.-based startups toward the global landscape when considering the locations of their employees.
The survey raised a question on where they would like their employees to be located. The responses shed light on a few possibilities, revealing intriguing trends that reflect the dynamic nature of modern hiring practices.
Apparently, a significant 14% of respondents exhibited a global perspective, opting for all three options presented: near their primary ZIP code, within the U.S., and even outside the U.S.
The majority, however, gravitated toward more localized preferences. Around 70% of respondents expressed a preference for hiring within the United States. This reflects the significance of a local talent pool in a sense of familiarity and shared culture within the startup. Conversely, the appeal of international talent was evident. With almost 35% of respondents indicating a willingness to hire employees located outside the U.S. This inclination highlights the strategic advantage of tapping into the global talent pool, harnessing a rich blend of perspectives and expertise.
Notably, more than 40% of respondents chose to focus on talent within proximity to their primary zip code. This trend suggests that while startups recognize the value of diverse perspectives from around the world, they also acknowledge the benefits of having employees in close physical proximity for easy collaboration and communication.
The survey’s revelations highlight that while the appeal of global talent is undeniable, founders also weigh the advantages of local connections and the efficiency of physical proximity.
3. New Ways to Find Talent
The process of hiring new employees extends beyond crafting job descriptions and conducting interviews. It’s a journey that requires tapping into diverse resources to identify the right candidate. The HATS Study delves into how startups leverage various resources to recruit new employees, shedding light on the efficiency of different channels.
When startup founders were asked about the helpfulness of several resources in the hiring process—including professional networks, personal networks, online job postings, employee referrals, recruiters, investors, and educational institutions—the responses unveiled their preferences.
Professional networks emerged as a standout resource, with more than 65% of respondents affirming its significant value. This indicates that startups highly value connections within their industry and actively engage with platforms that facilitate networking and collaboration.
Personal networks, while not as acclaimed as professional networks, still play a substantial role in the hiring process. Approximately 30% of respondents found personal networks to be very helpful, and over 40% found them somewhat helpful. However, it’s noteworthy that 25% of respondents considered personal networks not helpful at all, suggesting that while personal connections have their merits, they might not always yield the desired result.
Online job postings also found a place in the spectrum of helpful resources, with more than 30% of respondents acknowledging their value. In an increasingly digital age, online platforms provide startups with a broad reach and a diverse pool of candidates, offering a balance between convenience and exposure.
Surprisingly, traditional resources like recruiters, investors, and educational institutions held relatively lower levels of perceived helpfulness. Less than 20% of respondents deemed these resources to be beneficial.
The study’s findings regarding resource utilization in hiring emphasize the diverse strategies startups employ to find the right talent. The relatively limited uptake of certain traditional resources suggests that startups may be seeking more tailored approaches to candidate search.
Wages and Salaries Changes in 2023
The HATS Study also delves into the world of wages and salaries, uncovering the challenges and strategies startups encounter. Here we can delve into the role of compensation negotiation and its complexities, benefits, and many other aspects.
1. Salary Information in Job Posts
In Startups, transparency is a foundation to foster trust and attract candidates aligned with the company’s values. One of the most significant aspects of this transparency is the inclusion of salary information in job ads. The HATS Study discusses this practice, showing how startups approach the disclosure of compensation details in their job postings.
The responses revealed a few practices that mirror the diverse strategies startups use when it comes to compensation transparency.
More than 30% of respondents indicated that they voluntarily provide salary details in their job ads, offering potential candidates a clear picture of the offer. On the other end of the spectrum, less than 10% of respondents take an even more specific approach, voluntarily listing precise salaries alongside job descriptions. Around 40% of startups adopt a pragmatic stance, adding salary details to job ads only when legally required. Intriguingly, more than 10% of respondents stated that they refrain from posting job ads altogether.
The study’s revelations regarding the inclusion of salary information in job posts illuminate the multifaceted nature of startup hiring practices. As candidates increasingly seek transparency in compensation discussions, startups’ decisions in this realm play a pivotal role in shaping their perception and attractiveness in the talent market.
2. Top Salary Negotiations Drivers
Compensation negotiation in startups involves a careful interplay of various factors. The HATS Study sheds light on the considerations that guide compensation decisions, revealing key insights into how startups strike a balance between diverse aspects.
Work experience emerges as a top priority for startups, with over 60% of respondents deeming it highly important. Education, while valued, holds less weight, with under 20% indicating its significance.
Individual performance takes center stage, resonating with more than 80% of respondents, and showcasing the merit-based approach that drives many startups.
Business performance also plays a substantial role, influencing compensation decisions for over 50% of participants. Security, tenure, and external compensation benchmarks hold relatively lower importance, as indicated by slightly over 20% of respondents.
3. Salary Consultations
Determining fair and competitive salaries is a fragile balancing act that startups engage in. The HATS Study delves into how startups seek guidance in the process of setting compensations and salaries and offers a glimpse into the resources and platforms they rely on.
When founders were asked about the resources they use to determine new employees’ pay, the responses unveiled a few strategies. Half of the respondents indicated the use of two or more options from a range of choices: free online data resources, paid online data resources, industry surveys, government data, compensation consultants, and payroll data services.
Free online data resources emerged as a dominant preference, with over 70% of respondents turning to these platforms. This highlights startups’ reliance on easily accessible and broadly available data to inform their compensation decisions. SupportFinity offers free salary consultations, try it from here.
Paid online data resources found a smaller audience, with less than 25% of respondents utilizing them. This suggests that while startups acknowledge the value of more specialized and curated data, they may lean towards cost-effective options.
Industry surveys played a substantial role, with over 40% of respondents consulting them. This indicates startups’ awareness of the relevance of industry-specific benchmarks in guiding compensation structures.
Government data, compensation consultants, and payroll data services found limited uptake, with less than 20% of respondents utilizing these resources. This could be attributed to startups’ focus on targeted approaches when determining compensation.
4. Using Popular Consulting Platforms
In terms of specific platforms, the study’s findings show the popularity of certain websites among startups. Over 45% of respondents turned to Glassdoor, followed by over 30% consulting the Indeed platform. Other platforms like Monster, CareerBuilder, ZipRecruiter, and AngelList’s WellFound were utilized by smaller segments of respondents.
On a side note, nearly 40% of respondents used at least two of these platforms. This reflects the diversity of information sources startups tap into, indicating a strategic approach that considers multiple perspectives to ensure competitive compensation structures.
These multifaceted strategies underline startups’ commitment to informed decision-making in a context that significantly impacts their ability to attract and retain top talent.
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