Zach Nelson

A CEO takes on the war for talent

October 24, 2012: 5:00 AM ET

NetSuite's Zach Nelson gets serious about hiring - and keeping - the right team.

By Jessi Hempel, senior writer

FORTUNE -- NetSuite CEO Zach Nelson has a problem that any executive would love to have: The company's business software, which is delivered via the Internet, is so hot that Nelson thinks NetSuite (N) could, in several years, book $1 billion a year or more in revenue, up from $236 million last year. But he needs more people knocking on doors and pitching potential customers.

Nelson is used to dealing with fervid demand. NetSuite has already more than doubled in size -- from annual revenue of $108 million in 2007, the year it went public -- largely because the existing team of sales reps worked harder, selling even more software (again, a good problem to have). To achieve his goal of quadrupling NetSuite's top line within six years, Nelson is working closely with his chief human resources executive to quickly and effectively recruit an army of new employees.

For fast-growing young companies such as NetSuite, hiring and managing workers are huge challenges. Rapidly expanding the workforce can strain a company's entrepreneurial culture. So can hiring people who have great credentials and the wrong temperament. But if a company waits too long to find the right people, it risks missing business opportunities.

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Hiring has become such an important strategic issue for growth companies that many CEOs are getting directly involved instead of ceding all responsibility to human resources. As part of the ongoing Executive Dream Team series on management collaboration, Fortune took a close look at how Nelson is teaming up with his chief people officer, Marty Réaume, to revamp the way the company hires and trains newcomers.

The pair started working more closely together several years ago. By the end of 2012 they will have hired 660 people, mainly in sales but also in marketing and product development. More than a third of the company's 1,600 employees will be newcomers.

Réaume joined NetSuite in 2005 and was the main architect of its recruiting structure. Her initial team of six or seven recruiters had to teach prospective job candidates what NetSuite did. (It specializes in customer-management and logistics software and competes with companies like Salesforce.com (CRM) and Oracle (ORCL).)

Problem was, too many of NetSuite's new hires weren't working out. In 2008, 100 of the 450 new hires left before they had been at the company a full year. At the same time, executives couldn't understand why it was always the same 10 guys pulling in the highest sales.

Réaume, who has a master's degree in organizational psychology, began to roll out an assessment tool called TriMetrix that is used to create a profile of the traits and behaviors of successful salespeople. Company stars consistently scored the same way; those who didn't make it also held a common profile. NetSuite started using the test in its recruitment of sales executives, along with in-person interviews. The result? Last year just five salespeople left within a year of their start date.

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Nelson also began to review every job offer the company made. "When I was at Oracle, Larry Ellison used to approve every offer, and I thought, How could he approve all these people?" Nelson says. Then he began to see value in the practice. As the company grew, he could no longer meet everyone in person, but by signing off on the incoming résumés he was at least able to get a glimpse at the type of talent NetSuite was attracting, and it also motivated the recruiters, who, Nelson believes, put extra effort into the hire when they know the CEO will look at it. Nelson occasionally even turns someone down, though he hasn't done so in a year.

Now that NetSuite has addressed some of its hiring issues, Nelson and Réaume -- who reports directly to the CEO -- have turned to retention and employee training. The big challenge? How to impart the company's scrappy culture to increasingly far-flung employees. (It has 14 offices in 10 countries, including the Czech Republic.) Réaume is developing a set of online tools to help newcomers get onboard. A leadership conference for top management is in the works.

Training isn't just for newbies: Nelson is also working with a coach to help him evolve his leadership style. "It's uncomfortable," he admits, but the coaching is helping him make the transition from being a startup CEO to running a much larger organization -- another problem a lot of executives would love to have.

This story is from the October 29, 2012 issue of Fortune.

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