The 4th episode in our Trilogy Search Series features Kristen Glenn from Reverb People. Kristen is an HR professional with over 15 years of experience in HR Leadership and Business Partner roles. We also have Cyrus Symoom, the Co-CEO of Clariti Software, Clariti helps governments across North America with permitting and licensing solutions. Finally, we are joined by Jennie Ellis, who is an Operating Executive specializing in Talent Acquisition with Trilogy Search Partners.
This episode is a deep dive into talent acquisition, sourcing, and HR function development. Each of my guests brings a unique perspective with their experiences in fractional HR for small companies, running HR as the owner of an acquired company, and talent acquisition.
The last several years have been challenging for recruiting and retaining great people across all different kinds of companies and search funds. There are special challenges for smaller firms in hybrid arrangements, and each of my guests provides great insight into how companies can find and keep great team members. Enjoy.
Live Oak Bank — Live Oak Bank is a seasoned SMB lender providing SBA and conventional financing for search funds, independent sponsors, private equity firms, and individuals looking to acquire lower middle-market companies. Live Oak has closed billions of dollars in SBA financing and is actively looking to help more small company investors across the country. If you are in the process of acquiring a company or thinking about starting a search, contact Lisa Forrest or Heather Endresen directly to start a conversation or go to www.liveoakbank.com/think.
Hood & Strong, LLP — Hood & Strong is a CPA firm with a long history of working with search funds and private equity firms on diligence, assurance, tax services, and more. Hood & Strong is highly skilled in working with search funds, providing quality of earnings and due diligence services during the search, along with assurance and tax services post-acquisition. They offer a unique way to approach acquisition diligence and manage costs effectively. To learn more about how Hood & Strong can help your search, acquisition, and beyond, please email one of their partners Jerry Zhou at [email protected].
Oberle Risk Strategies– Oberle is the leading specialty insurance brokerage catering to search funds and the broader ETA community, providing complimentary due diligence assessments of the target company’s commercial insurance and employee benefits programs. Over the past decade, August Felker and his team have engaged with hundreds of searchers to provide due diligence and ultimately place the most competitive insurance program at closing. Given August’s experience as a searcher himself, he and his team understand all that goes into buying a business and pride themselves on making the insurance portion of closing seamless and hassle-free.
(3:38) – Introductions, backgrounds, and thoughts on the current recruiting market
(8:59) – What are some tactics you’ve seen companies do to adjust downward as the market turns?
(11:30) – Challenges Cyrus faced in building Clariti
(13:43) – What ways have you seen talent compound at Clariti?
(15:41) – Is sourcing talent from companies that are going through periods of change an effective strategy?
(18:00) – How do you determine whether a company has good HR fundamentals in a prospective acquisition?
(23:05) – What was the HR function like at Clariti when it was acquired?
(24:25) – When did you decide to delegate out HR?
(25:28) – How do you coach people on developing their HR function?
(28:38) – How does the HR function look as the company scales?
(30:01) – What does HR at Clariti look like today?
(31:12) – What do fractional HR clients need to do to develop stronger HR functions?
(34:52) – At what stage do companies stop outsourcing HR?
(38:20) – What do some of the best HR functions have in common?
(40:36) – What metrics are most important at Clariti for recruiting and retention?
(41:19) – Can you expand more on the interview process at Clariti?
(43:47) – How do your periodic check-ins with employees differ from the initial interview questions?
(45:32) – How frequent are your retention interviews?
(50:20) – What are some best practices for retention in companies?
(52:40) – Where else can CEOs remind their team that communication should be open and transparent?
(54:11) – Where does Clariti need to improve the most in their HR function over the next 24 months?
Alex Bridgeman: I think one interesting place to start would be a quick background on each of you, so maybe 30 to 45 seconds background, but kind of building on that background, also thinking about what does the hiring environment look like today from what you’ve seen? What are some challenges you’ve run into, and how have you helped either your own company or companies you work with compete in this environment? Jennie, do you want to start and give us kind of your background and then kind of ways you’re seeing the market go in in terms of hiring?
Jennie Ellis: Sure, happy to. Well, I started out my career in recruiting almost, well, probably 28 years ago. And since then, I’ve flipped back from recruiting and HR. Every time there’s a downturn, I go into HR, and then every time there’s a hiring frenzy, I go back into recruiting. So, this is my fourth downturn that we’re in right now currently. And I’d say probably the biggest challenge right now for me and for my clients is that we’ve never had this much volatility in a two-year period. So, we went from all growing like crazy and then everything hitting the wall in the March to July timeframe 2020. And then we all had to stop hiring, and then, boom, around the July 2020 timeframe, everything kicked back in so that, for me personally, my business doubled in size after COVID, and then now we’re contracting again. And our clients are having the same thing – hiring spree, hiring freeze, hiring spree, hiring freeze. And so, it’s really difficult to find your footing right now. I would say that’s the biggest challenge that I’m seeing.
Alex Bridgeman: So, what are you advising folks to start doing and focus on when there’s this constant up and down and a lot of turmoil?
Jennie Ellis: Well, I think that for my clients, a lot of them know that our fractional model can really be your best friend. So, Kristen here with us also has a fractional model, where in a time like this, when you can only take a portion of a full-time person to help manage some of your key functions at your company so that you can then free up your time to focus on engineering and sales or the core fundamentals of your own business, that’s really important. And then just trying to avoid getting caught in the trap of paying new hires anything they’re asking for because I’m still, even now, though there’s a lot of layoffs still ticking up right now, I’m seeing candidates not being in touch with that and still asking for rates and pay and bonuses and equity that they would’ve six months ago. So, I think just trying to be conservative, and I recommend the use of bonuses as a tool during times like this versus increasing your fixed costs with really high salaries.
Alex Bridgeman: Kristen, would you share your background and then some of the challenges and ways to compete that you’ve seen?
Kristen Glenn: Sure. My background is solely in HR. I did a little bit of recruiting early on in my career and decided that I preferred the HR side of the house. So, I have worked for both small and large companies through my career and a few years ago decided that I wanted to move more into the consulting role. And it’s been just a ton of fun working with a number of different clients. Typically, I tend to work with small companies in a fractional model and provide them basically a level of HR support that they may not be able to afford on a full-time model at this point in time. And then in terms of kind of the challenges that I’ve seen in the recruiting side of the house is that companies had this idea that they had these huge staffing plans and had these huge ideas of how they were going to grow, and all of a sudden- and it’s different for different companies, but you’re seeing that they’re kind of having to go back and revisit those plans and really figure out what is that new model going forward, what are the have-tos versus what are the nice to haves, and what are the things that they can hold back on until they have a better understanding of where their footing is going to be going forward. And so, that I think is kind of the biggest challenge because a lot of that really impacts how they’re going to be managing their business as well. And like Jennie said, I would say that on the recruiting front, I still think there’s pretty much a disconnect. Companies are beginning, if they’re not doing layoffs, they’re at least starting to kind of look at their hiring and be more selective in what positions they’re going out for. And candidates still, they still hear, you still hear, about somebody who got a 50% increase to move to a different company to do the same job. And there’s always still going to be those things out there. But like Jennie said, having to figure out a way to still be able to attract people but not have to have these built-in huge salaries going forward because the market might change even more so. And so, I agree with her in that having things like sign on bonuses and looking at other tools to incent people that are not such a baked in part of the compensation structure, I think, is what I’m advising a lot of my clients to do right now.
Alex Bridgeman: You kind of mentioned it a few times there, but on the upcycle when costs or like salaries and compensation is increasing, folks are getting huge raises, maybe better bonuses and equity, what does the down slope of that tend to look like? You mentioned a few ways that employers react to that kind of softening of the labor market. But what are some other tactics you’ve seen companies do to help themselves kind of adjust downward from these really high expectations that are starting to shift a little bit more? What does that transition tend to look like?
Kristen Glenn: Well, I think first, like I said, the first thing they do is take a look at what their staffing model is going to be and what their hiring outlook is. And I mean, that’s the first thing that companies will look at. Obviously, for the people who are already there, they start to figure out are there ways to reorganize the business so that people can wear multiple hats. If we can’t hire, as an example, a full-time recruiter, could we hire someone who can do HR and do recruiting or who can do multiple components of marketing or something to that effect, rather than just kind of that one person who’s good at one thing. I think you’ll see also that there’ll be changes in the way that, we mentioned that companies are giving out large salary increases and bonuses and things like that to retain people in what was an upmarket. You’re probably going to see that those are going to be coming down a bit. It’s an interesting time because you have inflation going up quite a bit as well. So, employees know that. And so there is that expectation that at least they’ll be keeping up with inflation. If inflation is going up X, I should hope that I’m going to be getting an increase of at least that. And that really typically has not- the typical increase for most companies during just a normal time is probably around like 3% is what you typically see. And so that, I mean, right now is not even keeping up with inflation. So that’s going to be a tough message for companies. But you look at things like that. A lot of times, bonus plans are based on how the company is doing and the financials. And so, if the company starts to not do as well, then those will decrease as well. The final and usually the last resort for companies is to look at doing some selective and targeted layoffs. And there are some companies that are doing that that grew really quickly during this upturn. But I think you’ll begin to see more of that if this continues.
Alex Bridgeman: Cyrus, from my conversations with Aaron, the Clarity story is really interesting. And we talked about some of the recruiting and early talent challenges that you had. I’d love to hear what does the Clarity story look like? And what are some of those challenges that you encountered earlier in the business?
Cyrus Symoom: Yeah, so some context on the Clarity business now: So my partner Jake and I acquired it about two and a half years ago in January 2020. At that time, we were about 20, 25 employees out of Vancouver, Canada. Today, we’re closer to about 70 folks remote spread across North America. And I think it’s been an interesting evolution of that talent journey. I think similar to a lot of search fund companies that are acquired, when you first come on board, you don’t really have a talent brand. You don’t really have an employer brand. It’s difficult to have a kind of cohesive value proposition to candidates. I think in that first kind of 6 to 12 months, the most important thing was recognizing that Jake and I were the brand of the organization and that we were really the vision and the path forward for the company. And so, when it came to talent in the early days, it was really our role as co-CEOs and new owners of the business to be sourcing and finding, and frankly, convincing that talent. I think when you think about building out a leadership team for a company that’s 20, 25 employees, you are really banking on your vision versus the existing operations of the company. And so that wasn’t necessarily something that we could delegate to our team for. That was something that we had to explain ourselves. And so, I remember probably spending 30 minutes every night before going to bed on LinkedIn targeting my ideal HR leaders, my ideal marketing leaders, my ideal sales leaders, and just hopping on discovery and intro calls with folks in the industry really just to pitch them on what we were doing in the market and what we’re doing on Clarity. And as I look to a lot of the folks that joined us on that leadership team in that first year that are with us today, one person took three LinkedIn messages with no responses and a cold phone call before they came back to me. My sales leader took me two years and I think four in person meetings before we convinced them to come over. But I think it was that persistence and that prioritization of hiring in the early days that got us some of those first pieces of key talent. And the nice thing about talent is that it compounds. And so, I think as soon as you get that first leader and that second leader, they then have their networks, they have their teams, they have who they built in time. And that’s where I think you start to get some more talent density and it can start to build your talent structure. But it was very hands on for that first year. And I think that’s obviously evolved over time.
Alex Bridgeman: The compounding of talent is kind of an interesting concept that I hadn’t heard articulated that way before. What other ways have you seen talent compound in your company from 25 to 70? There must be a number of different ways that compounding occurs. I’d be curious to hear some more of those.
Cyrus Symoom: I think that in a couple of areas, it could take from. I think for us and probably similar to a lot of search businesses, we play in a niche industry. So there’s a handful of competitors, some of them private equity backed that play in this space. We love acquisitions and we love disruption. And so, we built a list of all of the companies that got acquired or turned over in the last six months where we know employees are probably going through a change and looking to kind of hire from those specific talent pools. You get folks that know the industry, you get folks that know the domain, you get folks that are kind of excited about the mission already. And I think what happens is when you acquire that first, second, third individual, you start to see the referrals of those employees back to their old companies. And so, I think that is kind of a combining effect on talent density. I think the second area is definitely on the leadership side. I think it’s kind of a common misnomer to hire someone on like a manager level or an associate level when you’re early because cash is tight and they’re more kind of effective. But if you yourself are the CEO of a company where you’ve never been a CEO before, it’s difficult for you to know how to manage a marketer or a sales individual. And so, we really took the approach of first hiring the leader, recognizing that the leader would have the approach of knowing how to build the team and the network of building the team. And so, some would argue that we were a little top heavy for that first year as we were building out the leadership team ranks. But again, I think it also contributed to that compounding of talent where those leaders could then pull from their networks, and I think build more structural teams than me pretending I know how to build a marketing function.
Alex Bridgeman: Gotcha. So, if you were going to build a team more or less from scratch, you would first make sure that you hire that manager first and then let them pick the rest of your team. Am I reading that right?
Cyrus Symoom: And I think it’s definitely a collaborative journey to kind of defining how to build out that team. But I’ve definitely found that hiring that expert first and working with them collaboratively was better than hiring the junior employee and trying to learn the function on your own.
Alex Bridgeman: Kristen is that, back to the strategy of sourcing talent from companies in periods of change, is that a strategy that you’ve seen be fairly effective in some of the companies that you’ve worked with?
Kristen Glenn: Definitely. I think what Cyrus is explaining, actually, I just had a conversation with another Trilogy CEO earlier this week about him doing the exact same thing and building his senior leadership team and recognizing that he’s not the end all, be all, know all of everything, and having a strong group of people that really know their stuff is going to be the most- is going to make him the most successful. And I think that, similar to what Cyrus was explaining, is that, especially in some of these industries that are a little bit more niche or smaller, it is going and kind of calling into those companies and into those and using LinkedIn as a great resource to cold call and reach out to people, especially when you are- people are getting still, I mean, while the market has kind of, there’s been a little bit of a downturn, they’re still getting contacts from recruiters on a daily basis through LinkedIn. But when you have a CEO reach out to you and say, “Hey, I saw that, I was looking at your profile, I think would be a great fit for our company,” that’s a whole different level of outreach that I don’t think that you would have these passive candidates- I don’t think they would reply otherwise, unless you have a really good recruiter like Jennie and her team. But no, I think that taking advantage of that, especially while there’s a lot of- there are a lot of companies going through a lot of change right now, and people are trying to figure out where they want to be. And I think a lot of times, it’s just being in the right place at the right time, calling the right person when they’ve had a bad day, and you can sometimes find some just incredible folks that way.
Alex Bridgeman: Yeah, that’s definitely a way I know that works. Just talking with friends who make hires, or they definitely talk about like right place, right time is a very big deal. If you can catch that person on a bad day or a bad quarter or something, you can make some headway. One other question is when you’re a company that a searcher might acquire where maybe you only have 15 or 20 people in the whole company, and you’re trying to evaluate whether this company is a good fit and you’re looking specifically at their HR function, how do you determine whether this is a good company or not based on HR? Or how do you look at the HR company or HR function and say this is either a good process or bad process, knowing that you are going to be ideally growing this company dramatically and that HR function is going to change? Where do you start with performing due diligence on HR within a prospective acquisition?
Kristen Glenn: Yeah, I mean, most small companies that I think the searchers look at, their HR is not typically one of those, whether right or wrong, it’s not usually one of those first hires. And typically, what I’ve seen a lot is because the information, salaries, and other things are considered confidential, a lot of times I’ve even seen that done by the CEO themselves. It’s not that uncommon that the CEO of a company is also doing the payroll and also doing the reviews and everything else. I’ve also seen sometimes it’s the CEO’s spouse doing it. So, I think that when a searcher goes in and is looking at a company, it’s not- there’s part of it that needs to be looked at in terms of how it’s getting done because ultimately, it’s still going to need to be done at some point when that person takes over. But it’s also what is being done. From a due diligence standpoint, there’s- I kind of think of it as two things. There’s the legal side of it, which is typically done by your outside counsel. They’re making sure that no major laws are being broken. There are a lot, especially now with companies that have a lot of folks working remote, there’s not only the federal laws, but multiple state laws that employers need to follow. And that’s great for the outside council to take a look at. They really know their stuff and can really point out if there’s going to be any major issues. Kind of like if you’re looking to buy a house. You have the inspector come and kind of tell you what are the problems, not to say that you’re not going to buy the house, but you just want to know kind of what you’re getting into, that there’s nothing major. The second side of due diligence because on the legal side, things come up, but it’s not- it’s fairly rare that anything major comes up. I think the thing that I see more often on maybe the non-legal side of due diligence, is taking a look at are there any red flags that you need to be aware of? What exactly are you inheriting? Some of the things- I remember having a call with a searcher who was looking at a company, and he was asking for some kind of just high level compensation data because he had a bunch of software engineers that this company was looking at and they were all making like $70-75,000 a year. That’s a big red flag because that’s really under market. And so, when you’re looking at the financials, and you’re taking all of this into consideration, you’re not going to continue to be able to pay those people that. And so, it might be a- you need to kind of just know what you’re getting into. Oftentimes with some of these small companies, because people have been there for a long time, they might know the owner or whatever the case is, and they like their job, and it’s kind of a big family, a lot of times you’ll see that people are really underpaid for the market. And so, you just have to be aware of that so that when it’s no longer the family and the owner is gone and the person’s like, hmm, and they look out and they say, “Hey, what can I- Do I want to stay here with this new company, with these new people, or should I look around elsewhere?” they can see that there’s a really big gap between what they make and what the market pays. And so that’s a big deal. I’ve also seen there’s also sometimes some big issues with kind of the benefits and making sure that they’re compatible with what the market is. Sometimes you see where a lot of times an owner might have- I remember there was an owner of a company that had been in the military. And so, he had just these incredible military benefits for people who were in the reserves and who had to go serve, which was fabulous, except these people were getting double paid by the company and by the military. So, you just have to take a look and kind of see and just to see- it’s kind of like the smell test to see are there things that- figure out what you’re inheriting and are there things that you’re going to need to address? And like I said, it’s not anything that is probably going to make you, just like buying a house, it doesn’t mean you’re not going to buy the house, but you just want to know kind of what are the things you need to fix after you move in.
Alex Bridgeman: Yeah, I’m sure those 75K software engineers were getting plenty of calls from Cyrus. Cyrus, what was the HR function like at Clarity when you acquired the business?
Cyrus Symoom: So, when we came on board, there was a part-time operations coordinator that was responsible for, I think, maintaining the HR function. And I think they had a consultant come in five or six years ago that created a lot of the initial process, which I think makes a ton of sense for a company of that size. I think the issue was they never updated or maintained a lot of those processes that were created. And so, as a result, I think there was not really any adherence to the processes that were posted. And because the coordinator did not have any HR experience, didn’t necessarily have the understanding or just the best practice on how to improve upon those process, and so I do think that HR really fell on myself and Jake for those first 6 to 12 months where it was being very deliberate about what are the key processes that need to be put in place today and taking the personal activity of actually creating those. And so, I think the one item I vividly recall coming in is there was no recruiting process. They would take friends, referrals, people that came in through the door, sit them down for 30 minutes and give them an offer. So, I think one of the first things we built really to improve the people and talent function was actually building a more thoughtful recruiting process, recognizing that one of our first priorities was bringing in new talent.
Alex Bridgeman: When did that role, that HR function, when did that become somebody else’s responsibility besides the two CEOs? When did that move away?
Cyrus Symoom: I think it’s different for every organization. Jake and I were probably a bit different in the sense that we actually prioritized people and talent even before sales or marketing when we kind of thought about building functions. I think it was the recognition that building that initial foundation would help us accelerate further down the road with that support. And so, we brought on our Director of People and Talent I think about 10 months into the business. And in bringing them on board, I think what we initially did in those first 10 months was we created a talent process kind of ourselves. We also refreshed our core values and our mission and our vision for the organization so that when we were speaking to people and talent leaders, they could see that we were serious about people and talent, that we were invested in the importance of people. And I think that was a really compelling notion for an individual to come on and join us. Because again, I think speaking to the vision was most important at bringing on leaders at that stage.
Alex Bridgeman: Jennie, when you talk with CEOs who have recently acquired a company and their HR function might be all with the CEOs or just the single CEO or it’s a mixture of a whole bunch of different folks’ jobs, how do you coach folks on developing that HR function over time? What are kind of the first couple steps in building a fully-fledged, fully fleshed out HR function over time?
Jennie Ellis: Sure. Well, I think as we talked, if you’re a really small company, a fractional model, like what Kristen does or what my firm does, is really ideal. And Cyrus talked about that, right? That’s what his company probably did back in the beginning. But as you grow and as things progress in a company’s life cycle, it’s important that you, one, if you newly acquired a company, you have to know, is there something on fire? Is there something I didn’t catch in due diligence that is now biting me? Is there a turnover problem? Is there a manager that everybody quits within three months of working for the person? So, there’s things that might happen that you did not catch in due diligence, and as both Cyrus and Kristen know, when you’re talking about people, those things are going to happen because people can be unpredictable. And so, I think dealing with the fires. And then I really agree with Cyrus in terms of establishing your values and what you want the company to be about, and then building out programs where you can start with your values and then cascade down what that means to each of your policies, your benefits, your pay practices, your equity strategy, who has it, who doesn’t. I’m actually a fan of writing a handbook because one of the biggest nightmares I’ve had in my career is being that first HR hire and nobody paid attention to consistency. And so, managers were hiring people in 30 minutes, and then every manager was offering people different benefits, different time off, different salary ranges. And so, you come up, if you hit too late into the process, it’s such a clean job for a new HR person that it can be really overwhelming. Some of my friends, when I’m recruiting for HR roles, will ask me, “Okay, is this a cleanup job? Or is this just a scale something strong?” Not that many HR leaders want to come in and do a cleanup job. So, I really applaud Cyrus for being the leader that he is and working with his co-founder or his co-CEO on establishing the values and bringing the people function in sooner rather than later. So, I think the fractional model is great up front and then making sure that you actually build something that people will follow, communicate it really well. If it’s important, say it three times, three places, three times a day, depending on what it is.
Alex Bridgeman: So, you mentioned there’s like the cleanup phase, but once you’ve cleaned things up for the most part, and there’s a structure starting to be built, what does the scaling model look like? Which of the HR functions start to resemble as the company grows?
Jennie Ellis: It’s really recruiting that kicks in the most when you’re scaling. And so if you’ve done the heavy lifting of setting your values and setting your culture and tying all your policies and decisions and governance around your values and your brand and how you want to show up, then it’s really about empowering your hiring managers and training them on how to interview for your values and not just hiring for culture fit but hiring for culture addition, culture expansion, and hiring people that will challenge you and make you think differently about problem solving. So, all that really comes down to recruiting at scale. And a lot of times, companies are really weak in their recruiting infrastructure and handle it really informally as Cyrus ran into where they’ll think, oh, let’s just hire all our friends. And that can take you a certain amount of time, but there comes a day when you’ve hired all your friends, so then what are you going to do?
Alex Bridgeman: That’s a good point. So Cyrus, what does the HR function look like today at Clarity?
Cyrus Symoom: Today, we have a director of people and talent, we have a people operations manager, and we have an operations coordinator based in the Philippines to support administrative tasks. And then on the talent side, we now have two talent actors and specialists. So, I’ve seen meaningful kind of growth since we first came on board two and a half years ago. And I think, to Jennie’s point, when we started to scale, it was really that talent function that was introduced where it no longer makes sense for the director of people and talent or myself and Jake to be making every hire. But because we had the foundation of core values, a talent process, guiding principles, we were able to start to hire and delegate that kind of talent acquisition to others. And I think also as part of that journey, I think for a growing company, it’s always difficult to know your hiring needs. And I think it’s also difficult to know your retention needs, particularly during that change management process of how many folks are actually going to turn once they’re shifting that culture. And so having that fractional talent support I think is amazing for additional support. And so, Jennie’s firm was actually one that we used as we were scaling up that talent function so we could have that additional support in case we were flexing up and down when it came to that headcount.
Alex Bridgeman: And Kristen, with your fractional client base, what does the early days HR function look like? And how do you help them develop a stronger HR function as their company grows?
Kristen Glenn: So typically, what I’ll see is when a searcher acquires a company, a lot of times it’s an asset sale. And so, what that means is that – and Cyrus, I’m not sure if yours was this as well – but what this means is that that company acquires the assets, and so you have to build up basically a new company from scratch, and that includes all of the HR functions. And so, as Jennie was saying, that’s what I get involved in a lot. That’s a lot of the cleanup. It’s a lot of figuring out what is broken, what needs to be fixed, what needs to be recreated, what needs to be created from scratch, and kind of getting it into a functional operational model. Then typically, I will usually, after a certain point, recommend, and actually I’m at this point right now with a few of my clients saying, okay, we’ve built this so that it can run, and we can pay people, and we have benefits for people and we have a 401k and we have a performance management process, and some rudimentary other processes, but now is really the time that you need to hire an HR leader who can then take that and run with that and kind of build that out even more. So, I would agree that that’s probably the next step. Oftentimes, if companies are not ready to do that, what they’ll sometimes do is hire maybe like a more junior person and still have someone like myself in a fractional role who can kind of help with some of those more technical issues that come up, more complex, some employee relations issues or certain things that person might not necessarily have the skills or experience to do. But at some point, I’ll definitely recommend that they have someone internally. I mean, I would love to say, sure, I can bill you for my fractional time for the next few years or whatnot. But at the end of the day, I think HR is one of those functions that ultimately should be- there should be someone who owns it at a senior level. Because I think that sometimes with HR- I mean, my children have grown up watching The Office, so their version of- what they believe I do for a living is based on that. And I think a lot of other people are as well. And they think that HR people are- they’re kind of, like I said, the police and they’re not- they’re really more pro employer and not pro employee. And so, I think if you have that person be an external person, that even just compounds that. And so, while I think it’s great to have someone like myself in a fractional model at first, it does make more sense to have someone that employees- who is part of the team, who has more of an idea, and has their pulse, has their finger on the pulse of how people are feeling and people feel like they’re connected to. And I do agree, I think that like what Cyrus said is if you can ultimately get to the point where you can hire someone who is a more senior person who is considered part of the leadership team, it makes people, I think, realize that you really are investing, not just by investing in HR, you’re indirectly investing in them and their livelihood, their wellbeing. And I think that goes a long way in establishing credibility and improving morale and having employee engagement, et cetera.
Alex Bridgeman: And where do you think that outsourcing to insourcing transition happens typically where they now start to establish a full-time HR team at the company? Like at what either revenue level or headcount level have you seen that start to happen?
Kristen Glenn: I think it just depends. There are so many variables that go into it. There’s this whole idea that HR is typically staffed, it varies, but like between 50 and 100 is equal- for every 50 and 200 employees, you have one HR person, but that doesn’t really make sense in a small company sometimes. And it doesn’t make- it depends on just where you are as a company, where you want to go. If you have a person who’s wearing multiple hats and also doing recruiting, like that’s a bigger job. Personally, I think that it takes- if they don’t have an HR person in the company at the time, I think that usually after the first few months after the acquisition, it’s time to decide what’s that next step. But again, if it’s a very small company, sometimes a fractional model can work for a period of time. I have clients that I have been working with for now two or three years because they’ve decided at this point that they were not ready to hire that senior leader. And so, they have a more junior HR support model internally, and then they have me. So, I think it just depends, like I said, on what your priorities are, what your needs are, how quickly you’re going to be growing, what you’re inheriting. So, I think it’s just, there’s no probably one set answer, unless, I don’t know, Jennie or Cyrus, if you guys have other opinions on it, but I think you just have to look at each scenario and figure out what makes most sense.
Alex Bridgeman: Yeah, Jennie, I’d also be curious about your take on where you see that transition start to happen and if you’ve noticed anything that peculiar about when those outsourcing decisions become full-time decisions at companies.
Jennie Ellis: Well, definitely if you see things like turnover problems, or in the hiring process, things are constantly breaking down, if there’s no person that can oversee these things internally and it’s left to just individual hiring managers that often get randomized with their time because they have full time jobs, and managing their own HR and recruiting problems can really pile up on their backs, I think that it typically will hit a pain point at about 50 employees, and it’ll typically hit a pain point to not outsource recruiting completely if you have more than 30 hires a year that you need. We usually recommend that when it’s time to insource that you start with a junior person, like Kristen is saying. So, for example, it doesn’t make a ton of sense for companies to pay my recruiters to coordinate interview schedules. And it doesn’t make a ton of sense to have my recruiters managing sending out company swag to candidates as a thank you for interviewing. So, if the first hire is someone that can really execute on day to day recruiting or day to day HR, like Kristen was mentioning, I think that’s the ideal first hire, but things will start to break down at about 50 people if there’s not one person kind of managing the whole thing, especially if it’s a high growth mode situation.
Alex Bridgeman: So once that company- once a company has taken the function fully in house, and there’s a growing team and the company is now growing, maybe there’s a hundred plus people at this company, what do some of the best HR companies or HR functions look like across the companies that you’ve seen? What’s typically kind of best in class or best practice with HR?
Jennie Ellis: It really depends on if they’re government contractors and they have really heavy reporting requirements or they’re recruiting engineers versus primarily call centers. It really depends, but typically you would want, at a hundred employees, you would want at least one senior leader at the table, at the table with the rest of the leadership team, probably one, I would say, like HR program manager that executes on day-to-day operational issues, including recruiting. At a hundred employees, I think you maybe could have recruiting still outsourced, but you’d at least have a recruiting coordinator or an HR specialist on staff. So, it’s probably about two and a half people at that point, at a hundred people. And then the other new thing, I hate to say it’s new, but diversity, equity, and inclusion, a lot of companies, it’s much more important to them than ever before. But recruiting diversity candidates takes three times longer. It’s very, very time consuming. And so, there’s new roles now in companies for people just to manage and promote diversity, equity, and inclusion, which is wonderful. But unfortunately, that’s kind of a new development. So, I think depending on the company, they may have someone also on board to manage that.
Cyrus Symoom: The other thing I was going to note, as you asked the question Ales, is I think all companies are different and part of it is what is the company culture you want to build? And so, when it comes to how big is your people and talent team or are they effective, what’s your employee engagement score? What’s your ENPS? What’s your time to fill? What’s your retention? If you don’t know those metrics, that probably also says something. And I think it’s on a business decision on how far do you want to push those metrics to optimize your business?
Alex Bridgeman: So, beyond those metrics, like what five metrics do you feel like are most important at Clarity for you to track both on recruiting and just retention?
Cyrus Symoom: Employee retention we definitely track, particularly with where the market’s been for the past two years and with the change management taking place. And so that’s kind of a high priority metric for us. ENPS for us is really important. We have kind of a fully set up engagement survey we run every six months to kind of collect feedback from the organization to see where burnout levels are, where engagement levels are, make sure that folks feel that they’re supported. And then we are scaling at this phase, and so time to hire, time to fill, where we’re kind of performing when it comes to filling roles quarter by quarter is also a high priority metric for us. And so those are the ones we’re using right now to kind of track health of our function. I think when those metrics improve, we will probably look to others.
Alex Bridgeman: One other piece of kind of building up your company over time and building out that HR function is developing a better interview process. You talked about the recruiting piece and doing it yourself through LinkedIn and then eventually having a more fledged recruiting function. But can you share a little bit about your interview process? That’s something that Aaron pointed out that was pretty unique that I’d love to hear a little bit more about.
Cyrus Symoom: It varies function to function somewhat. And I’d say at an executive level, it’s different than like a mid-level employee. I think what’s most important though is that folks have a process that they adhere to that has set criteria. I think it gets too loosey goosey if you don’t have a checklist or a scorecard or a couple of key areas that you’re evaluating a candidate on, and then you and the interviewee say, “Hey, I like that guy. Did you like that guy?” So, I think there’s a ton of different formats out there. Topgrading is I think a common one within the search fun community. The process we’re running right now is most of our candidates come from outbound sourcing still because our brand still isn’t large, or it comes from employee referrals. We’ll do a 15-minute phone screen with someone on our talent team, which is validating is compensation within expectations, is role within expectations, and candidly, I think selling them on the opportunity to get them excited about the opportunity. Following that, we do about an hour with a hiring manager. And that’s really spent digging into their past experiences and we’re looking at things like do they have a track record of success? Have they done 70% of the role before, that they’re going to come in with a good understanding, but still have growth opportunities, that they’re not going to get tired of the role? Do they have kind of good references and backgrounds from managers they’ve worked for in the past? And ultimately kind of shedding more on experiences than hypotheticals. And then we’ll do a culture interview with peers on the team, and that’s kind of assessing our four core values to make sure that they would be a good culture fit for what we’re looking for in the organization. And then we get together as a hiring panel. Everyone independently fills out their scorecards, and we have an objective discussion on did the candidate meet the job requirements or did they not? And I think for us, that’s been effective thus far. I think when it comes to these executive hires, again, we’re always trying to punch above our weight in bringing on folks that are joining us where we don’t have that story. We’ll involve our board. We’ll involve our investors. We’ll go down to meet these individuals. It becomes much more of that initial sell to make sure that they understand the mission, the vision, the growth of the company, where we’re going. And then once they kind of recognize that they’re excited for the organization, that’s when we kind of put them through a more similar interview process. But I just think the thing that companies often miss at our stage is it’s a lot more pitching and selling and vision sharing because of how important it is where you don’t have that brand just yet.
Alex Bridgeman: How do you use your lessons learned from interviewing, carryover, to retention? So, when you have 90 day or 6 month or quarterly check-ins with folks and just wanting to hear how their work is going or how they’re enjoying working at your company, how do those conversations tend to go? And how do they differ from those interview questions?
Cyrus Symoom: At the start of every interview stage we have, particularly the one with the hiring manager and the culture interview, we really do try to make those interviews two-way conversations. And so, when a hiring manager asks the question about a past experience, they don’t move on to the next question. They then say, “That’s great, at Clarity, this is the challenge we’re running into, and this is where we think that experience could actually help us.” In the culture interview, when we ask about, I don’t know, relentless building, the Clarity kind of individual then shares about how relentless building takes place in the organization. So, what we try to do is that by the time the individual gets the offer, they actually have a pretty good understanding of why they fit and where they don’t fit and what they’re coming into for the organization. So, they have a pretty good understanding coming in. And I would say that, again, at the early stages, there’s probably a lot of building. There’s probably a lot of broken things. There’s probably a lot of fires. And I think you need to embrace that, that’s part of the value proposition and the excitement of building something, rather than hiding away from that. I’ve seen other organizations where folks shy away from the fires, or they don’t necessarily reveal them. And then the folks get to day 60 saying, this is completely different than what I expected. I thought I was going to be doing X, Y, and Z, and I’m still here fixing X. So, I think attacking that head on, I think setting that expectation was really important. And so I think, what we used to get from folks at the 60 day mark is this is what we expected, this is what we signed up for, we’re excited. And there’s even been some positive surprises of how positive the culture is or how engaging the environment is. And I think that’s ultimately what you’re aiming for. And I think that interview process is critical to making sure that that’s the message you get at the 60 day mark.
Alex Bridgeman: And what kind of frequency are you having these retention interviews, its kind of a sloppy term, but like these conversations with folks on your team for just checking in and seeing how things are going?
Cyrus Symoom: We do a 30 day, a 90 day, and a 6 month, and that’s done one by the manager, that’s separately from the people and talent function. So we have kind of two avenues to get that perspective on how that individual is progressing. The first 30 days is more around feedback as to how the onboarding process was and the interview process was. the 90 days is more around how the role is kind of versus what they expected. And then the 6 month mark is just ensuring that they’ve kind of acclimatized to the organization, they’re onboarded and ramped and if they have any kind of feedback.
Alex Bridgeman: And building on retention a little further, Kristen, what are some best practices that you’ve seen for retention in companies?
Kristen Glenn: So I would say, it’s different for the new CEO who’s acquiring a company because I think the things there that they need to do within say the first 30, 60, 90 days are different than kind of what the ongoing model is. Going through a couple right now, actually, I would say that from a retention standpoint, some of the things I think that have made the transition most successful is, I know early on, even before the deal is announced, making sure if it is possible to get some of those key leaders, if they’re able to have those conversations and get those people on board because you don’t- so that on day one, those people are on team NewCo and they are your advocates because that will go a long way in kind of building that trust with the new company and with the new leaders. I think also that, it’s funny, I think that communication, I mean, these are just like baseline things, but that is like one of the most important aspects of the transition that I think you can have. You have employees who basically kind of felt like they didn’t have any choice in the matter, and then all of a sudden, now they’re part of this new company. And so, there’s a little bit of a lack of trust, a little bit of maybe some hurt feelings or maybe they felt like they were out of the loop. And so, bringing them, making them feel like they’re being brought into the fold and that they know what’s going on, whether that’s- and that’s not just from a top-down perspective and from the leaders and the CEO about what the mission and the vision is and what the next steps are, but it’s also the communications and building lines of communication internally within the organization. And then it’s also building in what Cyrus was saying, which is building in that bottom-up type of communication. So having a way for people to feel like they have a means to be heard. So, not only is it- I mean, I find that like engagement surveys and things like that are great for multiple reasons. Not only is it good to get that data to see where you are relative to your peers and where you can improve, but it’s also just great to be able to have employees feel like they have a voice and they have a means to be able to communicate what their needs are, their concerns, or whatever the case may be. And I think that that, in those early days, goes a long way because people are a little uncertain and they’re not sure of who these new people are. And usually, when searchers buy or take over a company, it’s usually from someone who has been there and this was his baby, and he usually was in that profession or in that field for years and then built a business and people have been with them for years. And so, you need to kind of- That’s a really strong bond and you need to show a way and show a path for employees to say, yeah, that’s gone, but this is going to be better for you. And you can only do that by building those inroads and that trust and through communication and whatnot. Down the road as the company matures, I think that then not only is it that, but then it’s people seeing kind of what is the path for me and making sure that there’s opportunities for people to grow and develop so that they don’t have to leave in order to get that opportunity. So really building out those types of programs and initiatives for people, really having that be a part of the company’s responsibility, not just HR’s, but the managers to kind of work with their folks to understand what they want to do and help them figure out a plan to get there because I think that- and then obviously, making sure that people are paid fairly and it’s a good livelihood.
Alex Bridgeman: Building on best practices further, Jennie, what are some best practices for retention that you’ve seen within your companies that you’ve worked with? What are some things that folks have done?
Jennie Ellis: Well, I think really good leadership is the most important thing. Employees want to know where they stand. They want to know as much of the truth of the opportunity and the enthusiasm and why the new owners bought the company and the vision that they see. So, I think there’s really no substitute for great leadership and vision and having someone at the helm that can not only recruit the employees, but re-recruit the current employees into the vision and really paint that picture of what’s in it for this person to be part of the organization going into the future. What kind of opportunities will that person have now to expand and grow in their skillset or get cross training or teach other people and mentor others? So, it’s really about painting a picture that’s compelling of the future and thinking of it as re-recruiting everyone all over again. I think that that’s really, really important. And you can also always add in incentives, bonuses for if you help transition this process, if you get this group up to speed, we’d be happy to pay you a bonus. You can do those things, but to me, there’s no substitute for just great leadership, great vision, sharing that, getting everybody excited, and then having a culture of transparency so that people can come forth and share their concerns. We have a lot of clients that we support that have town hall meetings or Friday chats, and everything is open for discussion. You can even see that, to get your most vocal employees, you can say, “Hey, Jimmy, I know that you always are questioning me in every weekly standup about this. Keep doing that because it shows other people that they can have a voice here and they won’t get in trouble.” So, I think that that’s just really critical.
Alex Bridgeman: Where are some channels within, some communication channels within companies where that message and transparency is reinforced? Town halls it sounds like is a good example, but where else can CEOs remind folks that communication can be open and transparent and that they should share how they’re feeling at any time and feel comfortable doing so?
Jennie Ellis: Working remote, you are literally losing the opportunity to chat with the CEO at the water cooler or chat with the head of sales at the water cooler. So, I think to the extent that leadership and particularly CEOs can engage with the employees in those places and share their personal stories about their weekend and even their struggles. One of my favorite things that I like to do is tell my employees, “I met with a really great company, and I really, really wanted to work with them, but they went a different direction, and I’m so bummed,” and our employees will literally say things to cheer me up. It’s like it works both ways, right? So, I think if you have a culture of support and feedback and the CEOs and the C-suite and everyone can be there as just a regular person talking about their weekend or their biggest exciting thing for this week or something that they’ve failed at but learned something from, I think that really goes a long way.
Alex Bridgeman: Cyrus, for Clarity, where do you feel like in the next kind of two or three years that Clarity needs to improve the most on in terms of HR?
Cyrus Symoom: Great question. I think for us, it’s tripling down on the remote engagement experience and what that looks and feels like. I think we’ve been one foot in, one foot out on really thinking about what does a hybrid model look like? What does investing in an optional office space look like? How do we kind of allocate our budget in all areas? I think this last six months has been where we’ve really invested in onsites and in person planning and in person engagement. And then we’ve just come to recognize how critical that is for the growth of our organization. And then we’ve also appreciated that being able to hire remote has been incredible for talent acquisition and that being differentiated for those folks that have decided to keep geographic footprints. And so, I think the next big investment for us in HR function is how do we create an incredibly engaging remote experience while investing in the right travel engagement where folks can still get together. I think that’s the next big rock for us.
Alex Bridgeman: That’s pretty exciting. I’m excited to hear how it goes. Thank you, all three of you, for sharing some time out of your busy schedules to put a podcast together. So, I really appreciate hearing all about HR and the different ways that companies are doing it well and improving it. So, thank you all for sharing some time. I really appreciate it.
Cyrus Symoom: Thanks for having us. This was fun.
Jennie Ellis: Yeah. Thank you very much.