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Finding good employees is challenging for companies of any size, but for cash-strapped startups in the midst of a talent war, it’s particularly difficult. AdventNet, Zoho’s parent company, is no longer small (now more than 700 employees), but our recruiting strategy was forged from the challenges we faced when we were just starting out.

Most HR departments use fairly conventional criteria to identify talent, namely an individual’s academic and employment pedigrees. There is nothing wrong with this, except that when everyone uses them, the candidate pool gets over-fished. As a bootstrapping startup unable to compete with compensation, Zoho had to recruit a different way.

Since we didn’t find any significant correlation between traditional pedigrees and real-world performance anyway, we thought, why not look to non-pedigreed workers and evaluate talent in terms of actual job performance? OK, performance can only be evaluated after a candidate is hired. But Zoho has developed a practice that allow us to recruit non-traditionally — and effectively.

Keep in mind that most of Zoho’s staff are in India, so our experience must be taken in context. But we have used the same recruiting rules for our operations in the U.S. and Japan, if on a smaller scale.

1. Use internal referrals
The best recruitment source is our own current employees; almost two-thirds of our hiring is done through this route. Rather than relying on monetary incentives for referrals, which merely produce a flood of resumes, we ask referrers to indicate how well they know the candidate and if they would be willing to make a strong recommendation. Referrers build a track record and hiring managers stay in close touch with them, which creates accountability.

2. Evaluate for passion, determination and adaptability
What about the remaining one-third of employees not coming in through a referral? We look for strong analytical and reasoning skills. Crucially, we also look for an ability to passionately argue a point of view, or for a level of enthusiasm and initiative in some non-academic area, such as sports. Particularly in India, where sports is barely encouraged in schools, people have to jump through hoops (no pun intended) to excel in sports. Since we have fairly flexible role definitions, we also look for a willingness to adapt, a key attribute of successful employees.

3. Be willing to train
For a system like ours to work, we have to invest in training. We used to simply have colleagues mentor and coach new hires. We still do that, but we augment it with classroom instruction if we feel that a new recruit has a substantial gap to cover.

The ultimate extension of this philosophy is what we call AdventNet University. In southern India, where colleges are little more than degree-granting mills, we found that college just doesn’t provide much in the way of an education. We decided to offer an alternative, and take students directly after high school.

We have a full-time faculty that devised a curriculum based on a typical undergraduate Computer Science course, with a heavy emphasis on actual programming. (We noticed that our students prefer the practical to the abstract. One reason college students get turned off Computer Science is the heavy emphasis on theory.) The program has been very successful for us, and it has been expanded recently, which has also allowed us to bring in fresh recruits from our Japan office.

4. Be flexible on role definitions
We find that it helps not to centralize job definitions too much, particularly for fresh employees. We have fairly fluid boundaries between development & QA, systems administration, sales and marketing, and so forth. We leave it to ground-level team managers to determine the role/responsibilities that will best leverage an individual’s talents.

5. Be patient
When we do these things right, the rewards are high commitment, high productivity, high job satisfaction and low attrition.

So, what’s the catch? Our approach requires patience: We cannot ramp up hiring quickly. This has implications for a VC-funded company with time-bound exit expectations, which is one reason we have elected to bootstrap, growing at a pace our recruitment model can handle.

Sridhar Vembu is co-founder and CEO of AdventNet, parent company of Zoho. Check out GigaOM’s video Q&A with Sri and his co-founder, Raju Vegesna, at Structure 08 here.

During a break at GigaOM’s Structure 08 conference this week, Found|READ sat down with VMware co-founder and chief scientist, Dr. Mendel Rosenblum.

Dr. Rosenblum developed VMware’s virtualization software while working on a supercomputer research project with his graduate students at Stanford University, where he remains an active professor of computer science. In 1998 he went on leave from Stanford to launch VMware with four business partners, including his spouse, Diane Greene, who remains the company’s CEO. It wasn’t easy going. Back then, VCs had a hard time wrapping their minds around the business opportunity in Dr. Rosenblum’s software, which allows one server to do the work of many.

Today, VMware has 100,000 customers and is expected to sell nearly $2 billion worth of its products this year. And that’s after debuting on the New York Stock Exchange last summer in one of the most successful IPOs since Google.
Om spoke with Dr. Rosenblum in December about the history of the company and state of the virtualization market. Here Dr. Rosenblum talks about being a founder.

F|R: Some of our readers refer to founding as a “lifestyle,” not a job. What convinced you to table your very well-established career in science and academia to risk launching a startup?

Rosenblum: We were working on this supercomputer, trying to figure out how you could build scalable computers of a very big size. I wasn’t really that interested in high-performance computers — for one thing, you’d sell very few of them, other than to the government. What motivated me was wondering whether you could use these computers for something else. I had this idea about virtualization, that you could carve this one, big computer up and use it for a whole enterprise worth of computing. I was just more interested in working on something that would have a large impact on the masses.

One of the nice thing about Stanford is that the path is pretty well worn into entrepreneurship, so it didn’t seem like this radical thing to become a founder. If you had an interesting idea, there were plenty of people who you could talk to about it. Part of what convinced me were the grad students; they’d seen the Yahoo people go off and so they were excited about starting a company. I was sort of trailing along thinking, “Well, it sounds like a fun thing to try out.” But the deciding factor was when my wife, Diane, got interested in it. That made it incredibly easy for me.

F|R: Finding the right co-founder is a critical step. There is an unspoken rule in Silicon Valley that VCs won’t fund husband-and-wife teams. You did not raise VC money to launch VMWare, but what advantages did you and Diane Greene have as a founding team because of your status?

Rosenblum: Yes, we just did some self-funding in the beginning and then brought in some friends later — angel investors — and that was enough to do it. I can imagine that husband-wife teams can work out badly, but in our case, I had confidence in her dealing with the business side and she had confidence in what we were doing on the technical side and so we just partitioned up the company that way. And we didn’t really have any conflicts whatsoever. The nice thing about being married is that is gives you even more time to talk everything through, and it kind of consumed our life for a long time — maybe to the detriment of our children — but we just had great communication. It was a benefit, too, in co-founding with faculty from Stanford (Scott Devine, Dr. Edward Wang and Edouard Bugnion). We knew were launching VMware with people we trusted.

F|R: What was the most difficult thing about VMware’s 10-year run to its IPO? And can you offer a piece of advice to founders just starting out?

Rosenblum: When we first started out the whole challenge was trying to convince people that virtualization was a good ting, what’s it’s good for — and trying to figure out for ourselves what it could be used for! There were challenges on the technology side and challenges about how to go to market. We took the approach that we wanted to partner extensively with [hardware vendors like IBM and Dell]. That ended up working out pretty well, though lots of people have made lots of money in shorter time that we did.

One thing I would say is important: Make sure there is more than one application for your technology. There were a dozen applications for VMware that we didn’t pursue. Some we did, and they didn’t work out. In the dot-com boom, we thought we’d sell our software to ASPs, who’d use it to manage other people’s applications more efficiently. Then all the ASPs went out of business. So we switched strategies to focus on selling VMware into enterprises, so companies could use it to run their own servers better.