Entrepreneur, Cases 2.01.2017
By Line Byrfelt Grønlykke

How much does one wrong hire in Trustpilot cost?

Trustpilot now has well over 500 employees and has, as a company, experienced crazy growth and many victories. But as all startups will evidently experience, Trustpilot, with the talented Peter Mühlmann at the helm, has made some mistakes.

Peter has time and time again said that if he had to do it all over again he would have been close to religious about who he employed, and invested much more of his time in recruitment. Naval Ravikant, CEO of AngelList, previously founder of Epinions and Vast.com even said:

“Hiring for a startup is harder than raising money”

I therefore met up with Director of recruitment in Europe at Trustpilot, Kristian Zakarias to ask him what mistakes Trustpilot made, that other startups can learn from!

Kristian.jpg
Kristian Zakarias, Director of recruitment in Europe at Trustpilot.

Kristian has since 2015 held the position as Director Recruitment Europe at Trustpilot and is responsible for recruiting teams in London, Berlin and Copenhagen. Prior to joining Trustpilot Kristian was head of recruiting in Accenture, where he oversaw their Nordic hiring strategy.

Kristian is intensely committed to getting recruiting right and starts by asking me what I think it costs to make a wrong hire! I miss the answer by miles. One wrong hire in Trustpilot can cost as much as DKK 1,343,901. This is worst case, where an employee is terminated due to lack of motivation and subsequently poor performance. When a motivated employee resigns the total average cost only amounts to DKK 671,201. Ok, so Kristian has cemented why it is so essential to hire the right people for your company.

So, let’s look at three major mistakes that Trustpilot made, and learned from. 

Mistake no. 1: No workforce planning
The first mistake Kristian mentions is the lack of workforce planning. From 2013-2015 Trustpilot hired A LOT of non-sales, which resulted in a distorted relation between sales and non-sales.  In Trustpilot, non-sales is defined by workforce supporting new sales. This includes both corporate support functions as well as customer support and sales retention functions.

 trustpilot one.jpg

Kristian emphasizes that recruiting is very much a planning exercise.

Mistake no. 2: No churn prediction planning
Inevitably, some employees will churn – and in that relation, it is extremely important to plan for churn. Kristian emphasizes that it is much better to predict than ignore churn completely.

You need to plan these things, so you can go ahead and initiate recruiting activities well in advance to people churning. Trustpilot did not have sufficient churn prediction planning in place a few years ago, which resulted in the management just gawking at each other in disbelief, when it did happen.

 
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Mistake no. 3: No succession planning
The third mistake that Kristian outlines is the lack of succession planning. He tells me about a young, and talented team lead, who was working at Trustpilot’s US office. He did great and was promoted. The problem, that many other startups will probably also experience, was that there was no one next in line in the wake of this promotion. Promotion gaps simply mean loss of engagement and also revenue. Trustpilot suddenly had a team with no leader, which, in turn, affected the team’s performance. Kristian says that had they thought of this in time, they would have had a person next in line ready to take over and lead the team to success.     

These mistakes all relates to different phases of Trustpilot’s journey. Kristian emphasizes that it is important to understand which phases the company has gone through:

The Wild West (2007-2011)
This phase was characterized by a lack of data registration and maintenance, while also only focusing on growth thus over-recruiting. In this period, Kristian outlines that there were no efforts in terms of employee development and retention.  

From teenager to grown-up (2011-2014)
This phase involved some reporting in terms of hires, leavers and churn. However, there was still no structure when it came to HR processes and global overview. This phase was characterized by Trustpilot growing very fast and opening new offices around the world.

Thinking global, acting local (2014-today)
This phase is characterized by having objectives and key results and quarterly reports to top management. Trustpilot are very strategic when it comes to their hires now as well as they have rolled out a leadership development program. They have managed to build a profitable recruiting organization and they are on-track with reducing recruiting costs per hire by 50% by end of 2018.   

What happened in 2014 was that Trustpilot started to build HR & Recruiting from scratch. They are now working strategically to increase volume through more aggressive sourcing mainly through LinkedIn and more referrals. They work to improve the quality and efficiency by, among other things, doing mandatory prescreening interviews and following their recruitment roadmap.

In Trustpilot they work with recruitment by preparing for three different scenarios:

”Clear Skies” (as is): Current FTE

  • Current skills assessment of the team (move recruiter team from farmer to hunter)
  • Focus on Volume Recruiting within Sales
  • Keep current assigned sales recruiters
  • Streamline the hiring process

”Stormy weather”: 50% FTE increase

  • Re-allocate recruiters to urgent positions where necessary
  • Increase recruiter LinkedIn outreach activity
  • Increase recruiting team and/or individual incentives for metric and hiring achievements
  • Activate additional recruitment agencies and re-allocate non-urgent positions to agencies
  • Temporarily increase employee referral bonus and provide marketing for increased employee awareness
  • Subscribe/Post positions to addition job boards

”Tornado”: 100% FTE increase

  • Re-allocate recruiters to urgent positions where necessary
  • Increase recruiter LinkedIn outreach activity
  • Increase recruiting team and/or individual incentives for metric and hiring achievements
  • Activate additional recruitment agencies and re-allocate non-urgent positions to agencies
  • Temporarily increase employee referral bonus and provide marketing for increased employee awareness
  • Subscribe and post positions to addition job boards
    • Additional actions: Hire experienced contract recruiters for 3-6 month assignment
    • Additional actions: Launch external referral bonus for non-TP employees to refer from their network to Trustpilot

The recruitment team at Trustpilot has managed to increase performance, having delivered all candidates on budget, they have decreased the churn in sales from 7 to 6% from 2015-2016 and ultimately, they are on-track with reducing costs per hire by 50%.  

So, what advice would Kristian give startups out there looking to avoid some of the mistakes Trustpilot made. Here are 3 pieces of advice for the hopeful entrepreneur:

  • Use HR and Recruiting as a strategic tool from day 1

  • Build an internal Recruiting Agency – Culture fit is key

  • Understand the importance of headcount planning (budget), and employee development (churn down/retention up).

I hope that these mistakes has made you more aware of what you should keep in mind when thinking about recruiting for your startup. You are more than welcome to provide feedback or contact me if you have ideas for future blogposts that will help you become a better entrepreneur.

Best,

Line Grønlykke
SEED Capital

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