15 Tips for Scaling your Startup’s Hiring Process
First, a little bit of history… (If you are impatient, just scroll down to the tips).
D.E. Shaw & Co. (aka DESCO) was one of the pioneers of modern quantitative trading. The firm was famous for being super secretive and super selective in its hiring. The firm’s success was predicated on bringing on board the smartest, most talented, and ultra-competitive people — from PhDs at top schools like MIT and Harvard to Putnam Medal winners. The place was as elite as it gets.
This is what DESCO’s current website says:
The quality of our staff is largely responsible for the firm’s success and reputation and is one of the main reasons that exceptional people are interested in working here. We don’t compromise when it comes to recruiting and developing world-class talent. We give special attention to candidates with extraordinary raw ability and long-term potential.
To ensure that the firm maintained its culture as it scaled, Charles Ardai, one of the early employees at DESCO, came up with a specific hiring manual and process. This process was later adapted and iterated on by Amazon because Jeff Bezos was also one of the early employees at DESCO.
The idea behind the process was to have an in-house recruiter, hiring manager, and a group of peers ensure that new hires were a strong culture fit.
The process always started with an in-house recruiter sifting through resumes and reaching out to candidates. There was a specific system where candidates referred by employees got special priority. To encourage existing employees to refer candidates, DESCO paid generous $5K–$10K referral bonuses.
The phone call with the recruiter was scripted and lasted 20 minutes so the recruiter could call three people back-to-back. The recruiters focused on the candidate’s school, work history, and interests.
But recruiters at DESCO weren’t simple recruiters. They themselves came from top schools like Harvard and Columbia and were typically wicked-smart liberal arts majors. DESCO promised these recruiters that if they crushed it at recruiting, they would then be able to move into trading or other areas of the firm.
The recruiter would send the recommendation and detailed notes to the hiring manager. If the decision was to move forward, then the recruiter and the hiring manager would pick four other people, pretty much at random, for the candidate to meet with. The only rule was that engineers would meet with engineers and quants would meet with quants, but otherwise, the picks were random and based on availability.
The total number of in-person interviewers was five — one manager and four peers. Each interviewer would ask the potential hire a set of questions related to their background, but also difficult mathematical and computer science puzzles. Each interviewer would decide on their own questions, and the puzzles were not shared among the team.
The group would then submit a blind ranking from 1–4 to the recruiter.
1 – Strong No Hire
2 – Inclined Not to Hire
3 – Inclined to Hire
4 – Strong Hire
The recruiter would tally up the score and speak with the hiring manager. In the case of all strong hires, they would quickly move to references and then the offer. If several people in the group said not to hire, the candidate would be declined. If most were strong hires with one or two inclined to hire, the group would get together live to discuss the candidate and make a decision.
DESCO was famous for giving really generous offers. Wall Street has always been competitive, and particularly back in the day, the competition for top talent was tough. DESCO was famous for saying to candidates: “We will give you $10K on top of any other offer you get.” Back then, that was quite meaningful. They also paid very generous bonuses.
The system that DESCO used probably can’t be used today verbatim, but here is how modern fast-growing startups can adapt this system to make sure they do an exceptional job hiring.
1. Hire the Best Recruiters and Motivate Them
Most companies fail to do what DESCO did so well — make sure that the recruiters are super smart and super motivated. Weak recruiters will cause a weak hiring process. While not every company can promise a young and hungry recruiter an opportunity to later become a trader, every company can make sure they are hiring the best recruiters and motivating them to do their best work. Recruiting is the profit center!
2. Define a Clear Hiring Process
Whether you run exactly the same system or a different one, you need a system. The system needs to be clear, written down, and most importantly, known and enforced by all employees. The head of recruiting needs to own the process together with the founders because culture is everything.
3. Offer Employee Referral Bonuses
It is a no-brainer to offer employees bonuses for referring candidates. First, it’s much cheaper than paying external recruiters. More importantly, this leads to an exceptional culture.
4. Have a Clear JD for Each Role
The JD should be created by the hiring manager and a recruiter. It should be super clear what the role is and what the qualifications are for the role. A clear JD will help employees refer and recruiters match more precisely.
5. Record All Interviews With Video
Video recording wasn’t available during the early DESCO days, but it is a massive unlock for any interview process. Videos can really speed up the hiring process and get everyone on the same page faster. Make sure you ask the candidate’s permission, but aim to record all virtual meetings.
6. Hiring Manager + Recruiter Select the Candidates
The recruiter should source the candidates, vet them against the JD, and present them to the hiring manager. Together, they should be the decision-makers for who gets interviewed. This works perfectly when recruiting executives as well because the hiring manager is the CEO.
7. Have a Scripted Initial Screen
The first screen should always be done by the recruiter to save the hiring manager’s time. There should be generic culture-fit questions as well as questions specific to the job. Because the interview is being recorded, the hiring manager doesn’t need to rely solely on the recruiter’s impression — they can see the candidate for themselves.
8. Make Hiring Part of Everyone’s Job
Having everyone in the company interview candidates all the time was a massive culture boost for DESCO. Interviewing wasn’t a burden — it was simply part of the job and was fun and super helpful. When everyone is part of the process, no one can complain about bad culture — because employees created the culture by choosing other employees.
DESCO’s concept of a panel of five worked really well. You can, of course, experiment with this concept and tweak how the panels are set up; for some roles, they may not be totally random, but there should always be random picks on every panel. This ensures fresh eyes and ensures that hires don’t just get pushed through.
9. Use the Board as Part of the Panel for Executive Hires
For key executive roles, the CEO may enlist the help of the board as part of the interview process. Whatever panel system you choose, the board can easily fit into it.
10. Ask Candidates to do Real Work During the Interviews
DESCO interviews were famous for intense puzzles and coding exercises. Modern interviewers can no longer rely on “take-home testing” either. This is especially true for software engineers but is also true for any other role because candidates can use AI to answer questions.
Live coding interviews and other live exercise questions are a must for any interview. Candidates have to demonstrate thinking on their feet and show that they know their stuff. Simply asking about things they’ve done in the past is not sufficient.
11. Never Hire Without Meeting the Candidate in Person
Even if the candidate is ultimately going to work remotely, they should not be hired without spending time on-site. This might be hard to implement for very large companies (although I think it still should be implemented), but it is a must for a scaling startup that wants to maintain its culture.
The onsite interview can be done as a half-day or full-day with the panel, or it can be the final step with the hiring manager and the recruiter, but it cannot be skipped. People are different IRL — sometimes for the better and sometimes for the worse. Pay for candidates’ travel — it is worth every penny.
12. Have a Blind Scoring System
Like DESCO, you should have a blind scoring system where feedback is sent to the recruiter and then synthesized. At DESCO, people simply emailed the recruiter, but you can set up a Google or another form to make it more convenient.
You can keep the same 1–4 system — it is simple and effective. In addition, always ask employees to provide qualitative bullets assessing each candidate’s abilities. This will also allow the recruiter to assess whether an employee is doing a good job articulating why they chose a specific score and will ultimately help improve the hiring process.
13. Never Skip References
Never ever skip professional references. They are so important and so telling. If the candidate can’t produce recent references, it is telling; if the references are not people who worked closely with them, it is telling; if the references are not strongly positive, it is telling. In short, doing references is a critical step that the recruiter has to do via quick phone calls.
For the references to be effective, you need to have a set of predefined questions, something like this:
In what capacity do you know the candidate, and how long did you work together?
What are their top three superpowers or best qualities?
What are the top three things they are not great at or need to improve?
Of all the people you’ve ever worked with in a similar capacity, are they top 1%, top 5%, top 10%, or top 25%?
Would you hire/work with them again?
Would they be your first call if you moved jobs?
What are we going to find out about them after six months?
What else should I know or ask you about them?
14. Let the Recruiter Negotiate with the Candidate
The hiring manager should give the offer together with the recruiter, especially for high-impact roles, but the recruiter should be the one negotiating with the candidate. Having the recruiter negotiate on behalf of the company will remove the friction of starting the manager/employee relationship with monetary negotiation.
15. Create a Feedback Loop
Three months after you hire a candidate and are happy with them, the recruiter should send them a feedback form to have them rank the interviewers, list favorite questions, and provide feedback on what can be improved in the hiring process.
