Greenhouse’s Daniel Chait: 'There's No Way Around the Fact That You Have To Think'

Hiring strategy is a huge determinant of every company’s success—or failure. This is why at Primary we have a full-time team devoted to helping portfolio companies get it right. It’s a function we need founders to nail.

Daniel Chait and Jon Stross were on the leading edge of bringing software into this equation when they cofounded Hiring SaaS company Greenhouse almost a decade ago.

“If you ever used Quicken, it was just your same checkbook but on the screen, that was the big deal,” Daniel says. “The next generation, like Betterment, is helping you manage your money in ways you couldn’t before. We’re kind of like that. Everybody can store resumes on a computer. Now what?”

Greenhouse’s mission, simply put, has been to make every company great at hiring, a vision that’s built into their SaaS recruiting and onboarding products now used at 5,000 organizations, reaching almost 100 million job applicants a year.

In this interview, Daniel takes me back to how it all got started and what other founders can learn from his experiences.

So congratulations on the TPG deal. You did that in a way that I presume means you're going to continue to aggressively build a standalone, NYC-based business. I'm sure you had lots of people interested in buying you in full, why did you decide to go this route?

First, for those who may not have all the details—earlier this year, TPG Growth and The Rise Fund made a major investment in Greenhouse and became a majority shareholder as a result.

As to the reasoning, yes, what you say is true. But moreso, we found the TPG opportunity uniquely compelling. The combination of TPG Growth—a premier growth investor who brings all the specialized expertise and resources needed for a scaling, pre-IPO company like Greenhouse, paired with The Rise Fund, who, with their unparalleled approach to social impact investing, offers us the ability to scale our focus on Diversity, Equity, and Inclusion and help millions of people get fairer access to career opportunities and fulfill their potential.

It’s incredibly exciting and to be honest a little daunting—as an entrepreneur, what more could I want?

What can we expect to see from Greenhouse as a result of this deal? Any big new changes, or just more growth?

Nothing specific to announce at the moment, but we are excited about the capabilities this new partnership has provided, whether it’s the ability to increase our investment in DE&I solutions, or just access to a wealth of resources to accelerate growth. “Watch this space” as they say!

If you think back, were there one or two things—a feature, a business move, whatever—that really catalyzed how you quickly hit a hip in the growth curve for Greenhouse?

The killer feature in the early days was the idea of the interview kit. It was this notion that it doesn't take a genius to write down questions ahead of time and ask all candidates the same questions and write down their answers. That’s going to be better than randomly asking employees to think of questions off the top of their heads. There are so many decisions made in hiring, done usually with no structure, no planning, and kind of badly. It was such an obvious improvement that we didn't really have to sell it, the fish were kind of jumping into the boat.

A lot of the low-hanging fruit is really simple ideas. Most companies really don't have a clear point of view as to how they are sourcing for candidates. When you open up a job, why are you doing the things you're doing to get the candidates you're getting? Most companies can't answer that question. And so you don't need artificial intelligence to look at the list of places you've tried finding candidates and where you found good candidates. A lot of it is just counting, not “AI.” Having said that, there are some really interesting things that we can now do.

Where are you seeing the most fruitful applications of AI and machine learning in hiring?

As we've gotten some scale, we start to see a lot of patterns in the data that are quite interesting, and there are opportunities for us to use machine learning to better identify patterns and trends, even in areas like combating bias, but also in areas like how companies spend their time hiring, which interviewers are more effective, which jobs are on track to be filled on time, where to refocus attention—there's tons of potential there. I just think you have to be really thoughtful about what you are asking the AI to do and what you’re doing with the answers.

When you started, you were selling mostly to startups. When did you know that you were ready to move upmarket? And how much of that was about seeing a gap versus feeling ready to compete with the big guys?

I mean, moving upmarket for us is a continual process. It happens in a number of different ways. I remember in the very early days, we won a deal, it was like a big advertising agency, and they had 12 offices. And we never sold to a company that had more than one office before, and the product didn't have this feature where you could actually list out your offices, and say which job is in which office. You just put a list of jobs in. And so they made that a requirement of signing the deal.

A month later, we shipped the offices feature, then we could sell to any company that had that problem. So you're just constantly finding what are the next half dozen features we need to do for customers of another size or complexity.

So you're an engineer by training. How has that been a critical contributor to who you've then become as a CEO?

I think it's helped me in the sense that I'm a big believer in doing things with a point of view, doing things for a reason, you know, engineering is a very practical science, it's not a theoretical science.

And so that mindset of really being motivated by solving problems and using data and logic has been integral to how we've thought about Greenhouse. I analyzed what goes on at companies and then we think critically about what an ideal solution would look like, and then we build toward that type of solution. It's not a typical quote-unquote HR way of thinking, but it's a very typical engineering way of thinking. You can't build a bridge or write software or do classical engineering sort of things without that compositional thinking, internal problem solving mindset.

I will say I'm certainly many years past being practical at any kind of software thing, so I don't want to overstate that either. I've spent a lot more time being an entrepreneur than I have been a programmer.

But you've been described as a really process-driven leader. I can't imagine that that's not related to you as an engineer or at least you becoming an engineer—whether it’s chicken or egg. Is there a single super unique Daniel-slash-Greenhouse management process that you've implemented here that you think has had an impact?

One of my biggest things is a getting-things-done system. David Allen wrote this great book Getting Things Done, and he talks about how generally the work of a knowledge worker in modern society is super loosely structured. So if you're writing, you know, a memo, or if you're making a presentation, when's it done? I don't know, never? You could always make it better. So that idea of where you should be spending your time is actually a hard problem for a knowledge worker and something that there's a lot of value in getting good at.

What about meetings? One of the things I find a lot of first-time founders really struggling with is, what should my weekly management team meeting look like? What should my board meeting look like? How do you do that?

Yeah. I think the quality of meetings is often under-appreciated by people earlier in their careers. But it has so much impact. And it's a simple thing. One time our CTO actually made a statement, during a meeting he looked around and he said, "So to have this meeting is costing us about $30,000. Are we spending that money wisely?" And when you put it in those terms, you just look at how many people are in the room and how long the meeting is taking, those things are tremendously impactful. And so, there's a lot of great thinking out there and writing about how to do good meetings. The Five Dysfunctions of a Team, and The Advantage, and all that kind of Lencioni stuff about the structure of meetings: Is this a problem-solving meeting? Is this a working meeting? Is this an update meeting? It has a lot of implications for how you do the meeting.

How do you distill, synthesize, keep your true north, and not let yourself and your organization get whipsawed by whatever new idea came up last week or in what you read this morning?

Yeah. Well it's interesting. So Jason Lemkin worked with my cofounder Jon many years ago, and when we started Greenhouse, he said, "Hey, there's this guy I used to work with, and he started writing some stuff about sales. You should talk to him." I'm like, "Okay, yeah, whatever.” And I get on the phone and it’s Jason Lemkin. My mind was blown. I was immediately like, "Oh my god, this guy's a genius," and am writing everything down.

Jason's always been an advisor, and we've got good access to him. But one thing happened along the way, and I forget exactly what the topic was, but he'd written some blog posts, in his very forcible way. And I was looking at them thinking, “But that's not really exactly how we're going to do it!” And I was really worried. Usually I would just do what Jason writes and it works out, but this didn't feel right. So I got him on the phone and asked about it and gave him some of the details of what we were doing. He was like, "Oh yeah, totally. Don't read that blog post. It doesn't apply to your situation. The way you're going is totally right."

I give that example to say unfortunately there's no way around the fact that you have to think. If you use your brain, it hurts sometimes. You have to use it really hard and you will no doubt get conflicting information, missing information, information that was right for that context but doesn't apply to your context. And so it's great that there's all these things out there. It gives you a good starting point, but you need to think of it as like a raw material starting point. And then you need to develop your own point of view. It's not that you need to reinvent everything—I don’t want to reinvent accounting. I'm a big fan of making sure that you’re clear on where you're innovating and where you're not and why.

So you've been in the New York tech scene now for a while. We've come a long, long way. Of course we all want more engineers and wish real estate was cheaper, but besides that, what are we still the most missing?

I mean it is remarkable how much things have changed. I started my first company, before Lab49, in New York in 1997. And in those days, the big thing was getting a building that was wired for internet, right? And there was no tech scene. You know, there was DoubleClick. And then otherwise there was just basically Wall Street and Madison Avenue.

Now, the fact that there is a New York tech scene, it's big, it's thriving, there's tons of investors, there's tons of startups, there's tons of companies, the ingredients are all there, and New York is obviously a unique global city that has human capital, great public transportation, and lots of money. So honestly I think the thing is time. You see now some second-time founders, you see executives who've been through the cycle a couple of times. In the Bay Area there's just another 30 years of people who've been through it.

And so it means that you have to be a little bit more willing to take your growth mindset, or to think about what you can teach versus what's intrinsic, and be a little bit less reliant on the fact that they've got that logo on their resume.

Now there's a flip side to that as well, which is: There's a mentor of mine who's very fond of saying that the world is filled with ordinary people at extraordinary companies. And so there is a thing in the Bay Area where if you're out of Google or Facebook, people might assume attributes of those great companies are from you, and they often aren't. So again, it just comes back to: There's no way around having to think.

Yeah, absolutely. And the more successful the company is, the less likely it is that it was influenced by you, whoever you are?

Exactly.

Are you going to do the raw startup thing again?

I hope not. I love this job, I want to keep doing it forever.

I get to work with amazing people. I'm doing something that I think is important for the world. The business is doing well. I get to learn tons of new things all the time, it's challenging. So I'm not interested in going anywhere. And we have a mission which is to help every company become great at hiring, and I don't think we're going to solve it next year. It's going to take a while.

If you had to run Greenhouse on two metrics, what are they?

I would say our customers’ candidate experience score. So the candidates that our customers are recruiting, are they saying that the experience is positive or negative of interviewing at those companies?

And is that what guides your customer success team?

There are a handful of what we call mission metrics, that's one of them. Others are like, “How fast is it going?” “Are they able to build a shortlist quickly?” “Given the candidate experience, are they collecting lots of data?” Those sort of things. And so those mission metrics are, more than anything, the sign that we're succeeding. And then I would say net customer retention, net dollar retention—because you can always add more logos, but what's your customer lifetime value? Are those relationships successful? That's the real measure of—I think—long-term success.

So you've made it through COVID...what were your unique secrets or tactics that helped your team perform so well during this crazy experience?

Well, if I told you they wouldn’t be secret, now would they? Ok fine, here it is: We trust our people; we focus on their physical, mental, and emotional well-being; and we all supported each other with empathy. It’s not easy but it is simple. Stick together as a team and treat folks well, the rest usually takes care of itself.

What's your post-COVID strategy? Are you guys going back in full, hybrid, or moving to a much more flexible model?

For the moment we are still evaluating as the situation is still evolving. From where I sit now (in mid-July 2021) there is still a lot we don’t know—about where vaccination rates will end up, about how employees will feel about various work arrangements, even about what other employers will decide—that will all have an impact on the best decision for us.

Ok, speed round: Ideal background for a founder? Engineering product, sales, marketing?

I don't believe in the concept of an ideal background for a founder.

Most fun stage of growth? Zero to 50 people? 50 to 150? Something North of 150?

Zero to 50 is the most fun.

Yeah. Sales driven or marketing driven?

Sales driven.

Blog or podcast that you still learn the most from?

NPR's Code Switch.

Favorite book, business or pleasure, that you've read in the last year?

Factfulness.

Fatfulness?

Fact. Factfulness. Not Fatfulness.

Your go-to stress release activity?

Sleeping.

Favorite New York spot for a business meeting?

The W Hotel in Union Square. The restaurant in the lobby. Because it's a block-and-a-half from our office.

Favorite coffee spot?

Think Coffee.

One more meal in your life in New York city, where is it?

I'm trying to decide which barbecue place. There's a lot of them. Yeah, maybe Hill Country?

Okay. Favorite way to spend a weekend?

With my kid riding bikes.