Twine founders Joseph Quan and Nikhil Srivastava talk about their award-winning HR analytics startup.

The winner of Penn Wharton Entrepreneurship’s first ‘Startup Challenge’ is Twine, an HR startup that uses algorithms to find the best internal candidates to fill a company’s open positions to boost employee retention and reduce the cost of new hires.

HR Startup
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Founders Joseph Quan and Nikhil Srivastava, Wharton MBA students from the class of 2017, won in a field of 29 semifinalists after making their pitch to alumni and others to compete for funding, services and support. They received a grand prize of $30,000 plus $15,000 worth of legal, accounting and strategy services. Twine also is a member of the university’s VIP-Xcelerate, a 4-month startup incubator program.

The founders spoke with [email protected], which airs on SiriusXM channel 111, to talk about their startup.

An edited transcript of the conversation follows.

[email protected]: Where did the idea for Twine come from?

Joseph Quan: The genesis of the idea was a little bit circuitous. About a year ago, Nikhil and I came together with this idea of building a people-recommendation engine, essentially software that would help any person inside of a large organization algorithmically identify with other people they should be meeting. This was mainly for networking and mentorship purposes. We ended up piloting it, building it out at Wharton, signed up over 1,000 classmates — about 60% of the class — within a week.

… We had two fundamental hypotheses as we [sought] to build this out from a side project into a business or a company. First, we wanted to go B2B (business to business) rather than B2C (business to consumer) — sell it to institutions because a lot of value accrues to institutions over individuals when you deploy a service like this. And secondly, to go [to] corporate [clients].

We ended up taking this to the University of Pennsylvania and Wharton. They actually became our very first paying client. From there, we said if we validated the fact that an institution will pay and get value out of this, let’s take it to the corporate market. We ended up taking it to Fortune 1000 companies. … We discovered that while this was an idea that was really interesting to HR executives, there wasn’t enough pull in the short term to push it forward. But we did end up surfacing this overarching problem around talent acquisition, talent retention and recruiting that was immediately actionable for a lot of large companies. They care a lot about keeping and retaining their top talent.

[email protected]: I can’t tell you how many times we’ve talked about this issue and the losses that companies see each year from either not being able to match up a job with the right person, not retraining the people they have to fit those jobs, or losing people who don’t feel like they are doing a job that they want to do.

“Internal hires generally tended to perform about 35% better … and they tended to cost about 20% to 30% less.” –Joseph Quan

Quan: You’re witnessing a sea change in the labor market where these millennial employees are jumping ship every two, three years because they’re feeling like they’re outgrowing their roles. We find that there’s a subset of 10%, 20%, maybe even 30% of the market that really has forward-thinking HR departments and people analytics departments that focus heavily on those issues, but it just didn’t get the reception initially that we had wanted. We are starting to work with this pilot contingent of companies that are really passionate about these issues, and they’ve been great strategic partners in helping us advance this mission.

[email protected]: What other companies are interested in this type of project?

Nikhil Srivastava: We estimate that the average Fortune 500 company loses $100 million every year to preventable employee turnover. It’s a huge cost, and in many ways it’s a hidden cost. To answer your question, we signed up Wharton last year. We also work with a handful of other small and medium-sized businesses. About four months ago, we signed up our first Fortune 1000 client. That’s Nielsen based out of New York. We’re doing a project now with 10,000 of their North American employees, 20 of their internal recruiters. And we are currently building up our sales pipeline of other large institutions. We are mid-pipeline with a couple of those and in the pilot stage with a few more.

[email protected]: When Nielsen comes to you, what are they specifically looking for?

Srivastava: [They wanted to solve] two big problems. One is that their top talent often leaves the company. You look at the average tenure, especially of millennials and junior employees, it’s now two or three years. The average student coming out of college is expected to have 12 jobs in their lifetime. Thirty years ago, that was five jobs. Every time they lose someone, it costs anywhere from 50% to 100% of their annual salary to replace and retrain someone. The first problem is just losing skilled people. The no. 1 reason these people leave is because their jobs no longer fit their skill sets and their aspirations.

Second is this issue: We have these skill sets and this knowledge base, but is it being effectively deployed in our organization? [Should we] move this person from department A over to department B? Put them in a better role where they’ll be more engaged, more productive? And it’s better for us because instead of [their] going back to school, more employees are receiving on-the-job or experiential training in this new labor market.

They brought us in to solve both of these problems. We do it through deploying these algorithms to match people into new roles, and they’re using a web application to surface these recommendations.

[email protected]: Not only is there cost savings from incorporating people that are already in the company, but there’s a bottom-line benefit to the company to have somebody that is successful, motivated and really engaged in their job.

Quan: That’s exactly right. We’ll give a shout-out to Wharton professor Matthew Bidwell, who did research on this and published something through [email protected] a couple of years ago where research from his department showed that internal candidates tended to disproportionately outperform external candidates. Obviously, you don’t want an organization that’s 100% internally filled because that starves it of external innovation, but a lot of companies have a great potential to up their rates of internal hiring. They found that internal hires generally tended to perform about 35% better when you looked historically and empirically at all their performance ratings, and they tended to cost about 20% to 30% less. There’s a huge benefit and a huge boon just by leveraging the implicit knowledge that they’ve developed inside the organization and all the existing networks that your employees already have inside the company.

[email protected]: What was this experience like? When you’re doing the finals of the competition, you are presenting this idea to not only people of Wharton and the University of Pennsylvania but to outside business people as well. You are reaching

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