LinkedIn and Modern Recruiting (A) Case Study PDF

CASE: HR-41(A) DATE: 06/01/15 LINKEDIN AND MODERN RECRUITING (A) INTRODUCTION Roli Saxena, LinkedIn’s director of sales within the Talent Solutions Business (leading the North A...

CASE: HR-41(A) DATE: 06/01/15 LINKEDIN AND MODERN RECRUITING (A) INTRODUCTION Roli Saxena, LinkedIn’s director of sales within the Talent Solutions Business (leading the North America Enterprise Business), was looking at her busy August 2014 travel schedule. She was about to start rapidly hiring 40 new people nationally for her group’s sales organization— increasing headcount by 35 to 40 percent in just three to five months. Because it was an attractive and popular place to work, LinkedIn, the world’s largest professional network, boasting over 300 million members, had the luxury of pulling in a large candidate pool. In the previous year the company interviewed 15,000 people at its Mountain View, California campus, and it reviewed 80,000 candidates in total. In 2013, LinkedIn hired over a thousand people. Explosive growth had brought LinkedIn’s headcount from 700 to 6,0001 in four years, and the company was continuing major hiring into 2015. LinkedIn’s employee base was about 43 percent sales and marketing; 41 percent engineering, product development, and customer operations; and 16 percent general and administrative functions.2 LinkedIn had done quite well in bringing in top talent, and the acceptance rate of candidates who interviewed at the company was excellent. Nevertheless, a challenge for LinkedIn was making sure it found enough high-quality engineers as it rapidly scaled. Competition was especially intense for tech talent in the San Francisco area and in New York City. LinkedIn also wanted to ensure that it was driving efficiency in its hiring process—rapidly scaling hiring, but doing so with fewer hours spent and less overall effort. (LinkedIn had a recruiting staff of more than 100 full-time employees.) The company found over half of its new hires using LinkedIn’s powerful recruiting tool, LinkedIn Talent Solutions. For these hires, LinkedIn focused heavily on passive 1 As of Q3 2014. 2 LinkedIn 2014 Annual Report. Debra Schifrin and Professor Kathryn Shaw prepared this case as the basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. Copyright © 2015 by the Board of Trustees of the Leland Stanford Junior University. Publicly available cases are distributed through Harvard Business Publishing at hbsp.harvard.edu and The Case Centre at thecasecentre.org, please contact them to order copies and request permission to reproduce materials. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means –– electronic, mechanical, photocopying, recording, or otherwise –– without the permission of the Stanford Graduate School of Business. Every effort has been made to respect copyright and to contact copyright holders as appropriate. If you are a copyright holder and have concerns, please contact the Case Writing Office at [email protected] or write to Case Writing Office, Stanford Graduate School of Business, Knight Management Center, 655 Knight Way, Stanford University, Stanford, CA 94305-5015. LinkedIn and Modern Recruiting (A) HR-41(A) p. 2 recruiting (recruiting candidates who were fully employed elsewhere and not necessarily looking for a new job), versus though candidate applications. The rest of the new hires came from employee referrals and university recruiting. In addition to looking for great skills, LinkedIn wanted candidates who also fit into its culture, which it viewed as essential to its success. The company only wanted candidates who were passionate about LinkedIn and its products. In her previous position at LinkedIn Saxena hired 200 people, and she found that she interviewed about nine people for each position to find the right candidate who would also accept the job. She knew that when she met high-quality candidates over the next few months, she would have to clearly present the company’s Employee Value Proposition (EVP) to get them to sign on. She believed the value proposition was strong, and employees tended to agree, but the company was continually evolving the method for expressing the EVP to candidates to bring on the best and the brightest. LINKEDIN STRATEGY LinkedIn’s 2014 - 2015 strategy had five major parts: 1. Foster Viral Member Growth: Continue to pursue initiatives that promote the viral growth of LinkedIn’s member base, specifically members inviting others and sharing content. 2. Serve as the Professional Profile on Record: Seek to create the primary professional profile for every professional worldwide. 3. Become the Definitive Professional Publishing Platform: Enable members to publish, discover, and consume relevant professional content at a global scale. 4. Expand International Presence: Continue to grow the international base by expanding sales, technical, and support operations in additional locations, and by further developing the LinkedIn brand across various international geographies. 5. Increase Monetization While Creating Value for LinkedIn Members: Ensure that customer-facing solutions add meaningful value for members. For example, by enabling members to represent their professional identities and build their personal brands, Talent Solutions customers (paying customers) can better identify members as passive hiring candidates. (See Exhibits 1 and 2 for financial statements and stock prices). LINKEDIN PRODUCTS LinkedIn’s core offering was providing every member with a free professional profile, accessible to all members on LinkedIn’s network. Members could see who viewed their profile, see their profile rank, provide examples of their work and skills by sharing rich media content, specify skills, search for skills across the network, and give and receive endorsements. Through LinkedIn Connections, once two members were connected, their profile information was shared and LinkedIn and Modern Recruiting (A) HR-41(A) p. 3 (subject to privacy settings) each member had access to the other member’s list of connections. Members could expand their networks by sending invitations, and LinkedIn’s search technology allowed users to conduct real-time searches across the network in a personalized manner. Search capabilities included people, job postings, companies, universities, groups, inbox messages, address book, and publishing content. LinkedIn members also had access to relevant news, posts by thought leaders, various types of groups, company pages, and university pages. (See Exhibits 3 and 4 for a list of LinkedIn products). LinkedIn’s monetized products fell into three categories: 1) LinkedIn Talent Solutions, 2) Marketing Solutions, and 3) Premium Subscriptions. 1) LinkedIn Talent Solutions LinkedIn Talent Solutions provided both corporate and individual products. LinkedIn Corporate Solutions The flagship Talent Solutions product was LinkedIn Recruiter, which enabled organizations to search the network of 300 million members (including tens of millions more than they could with LinkedIn’s free offerings) and use InMail to communicate directly with both active and passive candidates. InMail could be targeted at individual candidates, or an InMail campaign could send custom branded messages to a highly targeted audience in increments of 2,500 members. Other corporate solutions included Job Slots, through which an organization’s job posting automatically targeted relevant members on their homepages. The job posting also automatically showed up in job searches and on a company’s Career Page, where companies promoted their brands. In addition, Recruitment Media enabled organizations to target career- related messaging to qualified candidates. LinkedIn Job Postings Organizations could advertise jobs on the network through a self-service job posting. LinkedIn also used profile data to display relevant postings to members, even if they were not conducting a job search, through Jobs You May Be Interested In (JYMBII). Subscriptions for Individuals Recruiter Lite was a scaled down version of LinkedIn Recruiter, and Job Seeker enabled members to stand out to recruiters and hiring managers, get in touch with recruiters, and see how they compared with other candidates. 2) Marketing Solutions LinkedIn also monetized its platform through display ads, sponsored InMails, sponsored updates, and LinkedIn ads. 3) Premium Subscriptions This service targeted small and medium-sized companies, individual members, and business groups within larger enterprises. The subscription bundles were sold at different price points, and features included the ability for subscribers to send inMail messages and allow anyone on LinkedIn and Modern Recruiting (A) HR-41(A) p. 4 LinkedIn to contact them for free. Subscribers also had access to larger search listings and premium search, as well as visibility into who viewed their profile and how they rank. COMPETITION LinkedIn faced significant competition, and it expected that competition to increase. Companies such as Facebook, Google, Microsoft, and Twitter were either developing or could develop solutions that competed with LinkedIn’s solutions. LinkedIn also competed with online recruiting and talent management companies, as well as with larger companies that were focusing on talent management. Other competitors included online and offline companies that generated revenue from marketers, advertisers, lead generation, and customer intelligence and insights. LINKEDIN’S HIRING APPROACH LinkedIn’s approach was to look at internal candidates first when filling a position. The company considered LinkedIn employees who applied for open positions, but also recruited employees who were not necessarily looking for a new job. There was a lot of movement within LinkedIn, and it was not uncommon for an open position to be filled by an employee from a completely different part of the company. Even so, LinkedIn sought to balance “building” (hiring internally) and “buying” (hiring externally) its talent. The company hired externally for all types of roles. For 2014-2015, one major area of external hiring was people at all levels who had a proven track record of helping organizations scale. For hiring engineers externally, Pat Wadors, LinkedIn’s vice president of the Global Talent Organization and chief human resource officer, said the main focus was on professionals who were early in their careers—bringing them in at entry level, teaching them how to code the LinkedIn way and how to be productive, then grooming them internally. The same was true for sales, where much of the focus was on hiring younger professionals and teaching them how to navigate LinkedIn and sell its products.3 In 2014, more than 50 percent of LinkedIn’s workforce consisted of millennials. FINDING THE BEST EXTERNAL TALENT LinkedIn found external candidates in three main ways: 1) Using LinkedIn’s own online recruiting product: LinkedIn Talent Solutions (roughly 55 percent of hires) 2) Employee referrals (30 percent of hires) 3) University recruiting (15 percent of hires) LinkedIn Talent Solutions LinkedIn used its own LinkedIn Talent Solutions for over half of its recruiting and hiring. Of those, roughly 70 percent were passive, and the rest came from applications on LinkedIn’s Job Slots. Candidates applying directly for a job through LinkedIn Job Slots had the most success 3 All quotations are from case author interviews unless otherwise indicated. LinkedIn and Modern Recruiting (A) HR-41(A) p. 5 getting hired if they used LinkedIn to find a “warm path” to the company using someone they knew. Brendan Browne, LinkedIn’s senior director of Talent Acquisition, said that one of the most overlooked paths to LinkedIn was through people using their network. Candidates were also expected to “do their homework” and use LinkedIn and other content to really understand the company’s vision, mission and value proposition. Every year, LinkedIn hired hundreds of people who applied for a job. However, LinkedIn found the process of hiring through applications to be much less efficient than through its other methods. This was because of the time and manpower it took, and also because the percentage of highly qualified candidates coming out of the general application pool tended to be lower. Referrals LinkedIn actively encouraged its employees to refer people who would be assets to the company and whose performance and work efforts they knew and trusted. Like many other companies, LinkedIn gave financial rewards to employees if the company hired their referrals. LinkedIn also found that a powerful incentive for employees to refer good people was the recognition they received for helping the company. University Recruiting LinkedIn recruited heavily from top schools and also looked for nuggets of hidden talent by looking at LinkedIn profiles of students at other schools with relevant expertise and fit. When looking at profiles for engineers, for example, recruiters might look to see if they had built any applications, and what the quality of those applications was like. Browne said LinkedIn’s approach to recruiting was different from the typical approach of companies targeting universities to find the best people: Companies generally show up at college campuses and stick their flag in the ground, put their booth up, and hope they get enough interest to meet some kind of hiring goal. Our feeling is that two or three years before they graduate, I want to know who every single Bachelor of Science student is at a given university. I want to look at their skills, potential fit, and interest in LinkedIn, then figure out whom to prioritize and start building relationships with them. So by the time I show up at a campus recruiting event at a school, I’ve already got a relationship with a student that is a year or two old in some form or fashion. We are taking the long view of relationships. One way LinkedIn was building relationships with promising students was to send them content—a blog, article, or paper—related to their area of study that might interest them. For the most sought-after students, the content would come from a leader in engineering or sales, for example, rather than from an HR recruiter. LinkedIn tracked responses (through click-through rates, etc.), which gave the company more data about a potential candidate and helped determine the best way to engage him or her. LinkedIn and Modern Recruiting (A) HR-41(A) p. 6 HIRING PROCESS Once LinkedIn’s recruiting team identified appropriate candidates, they met with business units’ hiring managers to calibrate profiles and come up with a list of people to whom they wanted to reach out. From there, LinkedIn’s average time to hire was 55 days. The recruiter first arranged a warm introduction to a candidate, if possible, rather than cold-calling him or her. When LinkedIn used a warm introduction, it had a 63 percent higher hiring success rate. LinkedIn found that the best way to get a warm introduction was to look at a candidate’s LinkedIn network and see if there was a first- or second-degree connection with someone who worked at LinkedIn. That employee would then essentially become the initial recruiter. If a targeted candidate expressed interest, the recruiting team vetted him or her and checked references. The recruiter then spent half an hour with the candidate to make sure s/he understood LinkedIn’s business model and the mission of the company. If a candidate looked promising, the recruiter did a pitch to them to work at LinkedIn—emphasizing the company’s Employee Value Proposition. The recruiter then brought the hiring manager into the process. The interview sequence varied by department, but a typical hiring process involved functional screening, most likely over the phone. An area where LinkedIn was trying to improve was by increasing its efficiency at the early stages of the process, such as the phone screen. Then there was an initial meeting with a hiring manager—often a more casual meeting, sometimes in the form of a stroll around the Mountain View campus. This was followed by a day or day and a half of interviews with members of the team. How those interviews were carried out varied by function. Engineering interviews were often done in teams of two—around 10 interviewers in total. Interviews for sales positions involved a pitch to the team. Other functions had six to seven individual interviews by team members. By the time candidates got to the team interviews, they had been sufficiently vetted for skill, so the interviews focused on fit with the LinkedIn culture and the team. It was also a time for the team to make their pitch to the candidate. One LinkedIn employee described her experience with the team interview when she was a candidate: “When I showed up, they had put a welcome message in colorful markers on the white board, along with a gift bag full of goodies and a map with my LinkedIn profile and how it connected with everyone in my network. The interview team was obviously very passionate about working at LinkedIn and it was contagious. LinkedIn has very loyal employees.” In addition to doing interviews, LinkedIn immersed candidates in the culture through things like giving them tours of the campus and having candidates attend team lunches. To attract the best university students, LinkedIn also hosted dozens of LinkedIn “INvitationals” each year, where top undergraduate and graduate students would spend a day and a half at LinkedIn talking to senior executives (often the CEO), visiting different teams, and experiencing the campus through bike rides, yoga and meditation sessions. This was a chance for potential candidates to experience the culture, and for LinkedIn to see if those candidates fit into the culture. LinkedIn and Modern Recruiting (A) HR-41(A) p. 7 LINKEDIN CULTURE In deciding whether a candidate matched LinkedIn’s culture, interviewers kept in mind the company’s five core cultural tenets.4,5 These were released publicly, so both interviewers and interviewees would be well aware of them: 1. Transformation. People who work at LinkedIn are here because they seek to make a positive and lasting impact on the world, help realize the full potential of LinkedIn, and fundamentally alter the trajectory of their careers. 2. Integrity. We don’t believe the ends justify the means. Rather, we expect employees to do the right thing no matter what. 3. Collaboration. Much like the network effects inherent in our business model, we believe that as valuable as we are as individuals, we are all exponentially more valuable when aligned and working together. 4. Humor. Fulfilling our mission and vision requires an intense focus, so we believe it is important to not take ourselves too seriously and try to have some fun while doing it. 5. Results. We set clear, actionable goals and have high expectations for our performance. We count on our employees to consistently deliver excellent results, seek leverage through greater efficiency and effectiveness, and demonstrate leadership at all levels throughout the organization. Interviewers also looked to see if candidates’ values matched LinkedIn’s six core values, which were also available publicly: 1) Our Members Come First, 2) Relationships Matter, 3) Be Open, Honest and Constructive, 4) Demand Excellence, 5) Take Intelligent Risks, 6) Act Like an Owner. (See Exhibit 5 for more on LinkedIn’s values). EMPLOYEE VALUE PROPOSITION Human Resources would soon be presenting candidates to Saxena for consideration. She was expecting to do three or four rounds of interviews with different candidates and then determine which candidates she wanted to extend offers to. But throughout the entire hiring process she had to think about how to win over candidates. A big part of this was tied up with LinkedIn’s Employee Value Proposition. Compensation Practices An important part of the Employee Value Proposition was compensation. LinkedIn’s compensation package (cash, rewards, bonus, equity, perks) was highly competitive within comparable markets. LinkedIn chose a peer set for every candidate and rigorously benchmarked 4 LinkedIn Annual Report Form 10-K, on LinkedIn website, http://investors.linkedin.com/secfiling.cfm?filingID=1193125-12-94556. 5 For more on LinkedIn’s culture, see “LinkedIn: Transformation Driven from Within,” GSB No. OB-87. LinkedIn and Modern Recruiting (A) HR-41(A) p. 8 against those peers’ compensation packages using data from surveys done by compensation consulting firms. Base salary ranges were established for each grade, role, and geography within the structure. Variable pay (bonuses) was based on a combination of individual and corporate results. LinkedIn also provided RSUs (stock received according to a vesting and distribution schedule) to all full-time employees, and offered an Employee Stock Purchase Program for all eligible full-time employees in the United States, and was rolling that out to international employees. LinkedIn’s perks were substantial and competitive with other big name Silicon Valley companies. Those perks included two to three meals a day, state of the art IT at all times, on-site dental and haircutting services and dry cleaning. LinkedIn had a pay-for-performance system, which heavily weighted rewards toward the top performers. Employee evaluations factored strongly into compensation decisions. Employees did their own evaluations, were evaluated by their managers, and received peer feedback. Evaluations were done formally once a year and informally more often in many groups. The formal evaluations helped managers determine an employee’s salary and the individual portion of the bonus they should receive. The manager could also recommend an additional equity grant for an employee, at which point LinkedIn’s compensation committee would review and approve the recommendation. Transformation LinkedIn’s employment brand promise was that employees would have the chance to transform themselves during their time at the company. Transformation was a key part of LinkedIn’s five cultural tenets, summarized as: “Transformation of self. Transformation of Company. Transformation of World.” The focus on transformation involved formal and informal programs for employees to pursue their passions—including one Friday every month for employees to step away from their regular duties. Called InDays, these were designed to encourage employees to make investments in personal development, take the time to think, reflect, and learn, and to develop and build interpersonal relationships. InDays allowed employees to choose for themselves how to use their time, whether it was taking classes, attending conferences, mentoring someone, being mentored, volunteering for charity, or learning a new technology or language. The InDay initiative was inspired by the belief that taking mini-sabbaticals from work is an effective way to refresh and rejuvenate, as well as create more well-rounded employees. Consequently, once a month, employees were also expected to share their InDay experiences, findings, creations and new perspectives with others.6 Another way that LinkedIn employees could pursue their passions was through once-a-month “Hackdays,” when anyone in the company (not just engineers) had the opportunity to come up with problems they found personally engaging and pull together a team of five other employees to tackle these problems and come up with solutions. Teams would build a “hack” (a rapid prototype or demo) and present it to the whole company, with the executive staff acting as judges to award prizes to the best projects. As the company described it: “LinkedIn hackdays bring 6 This description comes from the Stanford Graduate School of Business case OB-87, “LinkedIn: Transformation Driven from Within,” May 20, 2013, by Professor Sarah A. Soule, Michael Golomb and Debra Schifrin. LinkedIn and Modern Recruiting (A) HR-41(A) p. 9 together hackers, code, caffeine, food, t-shirts, and prizes. We’ve got a hackday for everyone: one to engage women in engineering, a hackday for interns, and a hackday to benefit veterans.”7 Employees from every department have participated; one of the top hackday winners was in the marketing team. Tour of Duty Part of the transformation promise included what LinkedIn called a “tour of duty.” The company created a smooth path for many employees to change jobs within LinkedIn if they wished. Therefore employees could continue growing and learning new skill sets, and potentially change the trajectory of their careers. The tour of duty was also part of a strategy to prevent turnover in an area and an industry where employees often jumped to a new company after three to five years. According to Wadors, the idea of a tour of duty took into consideration many natural practices: People have a natural rhythm of wanting to change every three to five years. So how does a company harness that proactively and infuse change internally to avoid high turnover? The tour of duty provides change within LinkedIn, so we can show employees that they don’t have to switch companies or industries to get to what we call their “next play.” Many employees used the tour of duty opportunity to move into roles that were quite different from their original positions. LinkedIn also had other programs that fostered internal mobility or created job rotations through different parts of the company. One employee who participated in such a program was able to get hands-on experience in sales, executive recruiting, and customer operations in a short period of time. He said the company took the idea of transformation seriously: “Hiring managers continuously promote and encourage employees to pursue their passions, regardless of any business lines they might need to cross.” CANDIDATES AS CUSTOMERS In recruiting and hiring, LinkedIn looked beyond the actual hiring process and paid attention to the relationships it was developing with job candidates. Browne said that recruiters and hiring managers were really consumer marketers because the people they interviewed were also LinkedIn members: Your customers are right there in front of you when you are recruiting. It is analogous to being the general manager of a Four Seasons hotel and someone just walked in the front door. We want every candidate, even those who did not get hired, to have a mind-blowing experience with the process. For us it is also a “meta” thing, because the candidates are all members (users) of LinkedIn. The ripple effect is huge. We interview tens of thousands of people every year, and talk to even more. There is a lot at stake. LinkedIn’s recruiting team used a Net Promoter Scoring framework to assess the “candidate experience” each candidate goes through. This included a survey they gave to everyone who 7 LinkedIn website. LinkedIn and Modern Recruiting (A) HR-41(A) p. 10 interviewed with LinkedIn, which measured how positive or negative a candidate’s experience was with LinkedIn’s hiring process. The survey covered candidates’ experiences, interactions, and whether they would recommend LinkedIn to a friend or family member. CONCLUSION Saxena had previously handled mass hirings, both at LinkedIn and at other companies, and she appreciated that LinkedIn had moved away from relying on cold calls the way many other companies did and had become much more sophisticated. She saw that there was still room to grow, and she described what was next: “We are evolving to being more thoughtful about choosing who from the pool of qualified potential candidates we really go out and aggressively recruit.” LinkedIn was experimenting with new models to enable it to do just that, and was finding success. Saxena was looking forward to making use of those models as she began her recruiting process. LinkedIn and Modern Recruiting (A) HR-41(A) p. 11 Exhibit 1 LinkedIn Financial Statements Source: LinkedIn 2014 Annual Report. LinkedIn and Modern Recruiting (A) HR-41(A) p. 12 Exhibit 1 (continued) LinkedIn Financial Statements Source: LinkedIn 2014 Annual Report. LinkedIn and Modern Recruiting (A) HR-41(A) p. 13 Exhibit 2 LinkedIn Share Price Source: Yahoo Finance. LinkedIn and Modern Recruiting (A) HR-41(A) p. 14 Exhibit 3 LinkedIn Solutions Source: LinkedIn 2014 Annual Report. LinkedIn and Modern Recruiting (A) HR-41(A) p. 15 Exhibit 4 LinkedIn Product Overview Source: LinkedIn. LinkedIn and Modern Recruiting (A) HR-41(A) p. 16 Exhibit 5 LinkedIn’s Six Core Values 1. Our Members Come First. We encourage employees to know and understand our members and to ensure that we foster the long-term vitality of the LinkedIn ecosystem. 2. Relationships Matter. By fostering trust with colleagues and partners, we all succeed. We fundamentally believe that doing what is right is more important than being right. 3. Be Open, Honest and Constructive. We expect our employees to communicate with clarity and provide feedback with consistency in a constructive way. 4. Demand Excellence. Our employees are encouraged to lead by example, seek to solve big challenges, set measureable and actionable goals, and continuously learn, iterate and improve. 5. Take Intelligent Risks. Taking intelligent risks has been paramount in building the company to date. No matter how large the company becomes we strive to never lose our startup mentality. 6. Act Like an Owner. Talent is our most important asset. We expect employees to act as an owner in each decision they make, no matter how big or small. Source: LinkedIn.