hiring as a core competency

Most startups spend plenty of time working on things like their product plans, requirements docs, market studies and the like. They are important aspects of running their companies and the kind of things that improve with collaboration and varied input from as well as from the iterative and inclusive process they typically require. You’d expect to find documents related to these sorts of activities on an intranet or company wiki and you’d expect that they’d be included in the occasional board package and discussed with advisors.

I’d suggest companies add something else to this list: a detailed overview of how they conduct hiring.

Most start-ups will tell you that hiring great people is one of the most important determinants of a company’s success. Why then is the process of hiring generally treated as a completely ad hoc exercise? In my view this leaves to chance and happenstance something that is much too critical to the successful operation of a business.  Here are some ideas I was recently kicking around with one of the companies I work with that takes the hiring process extremely seriously (and as a result has been extraordinarily picky about who they’ve brought on board).

  • Have a job description. I get it. You’re an early stage company and "people wear a lot of hats" around your shop.  Whatever. Get over that and write up a description of what you’re looking for.
  • There’s more to the job than the "to do" list. A good job description should include more than the daily task list for the job at hand. What kind of individual are you looking for? What kind of company culture are you trying to create? What personality traits are necessary for people to be successful at your business?
  • It’s not just the hiring manager’s job. I’m a big believer in having potential job candidates meet with people from across a company. This holds whether you’re in a 5 person start-up or a 10,000 person organization. I strongly believe the companies make better hiring decisions when more people are involved.
  • Try before you buy. While not everyone is open to a 30 day consulting gig before they come on full time, your interview process should include some kind of working session so you can get a good sense for how your job candidate works. This could be a product requirements meeting, a UI/UX discussion or building a sample financial model. It’s a great way to involve other people from the company even if they are not a part of the direct interview process and a well designed session should give you a good sense for how your candidate can contribute to the business.
  • Aim high. In the fast paced world of start-ups there’s a natural tendency to need to get everything done yesterday – including that latest hire.  As a result, it’s pretty easy to convince yourself that someone is "good enough" or "better than not having anyone".  Not true. Don’t settle in your hiring. It’s better to delay a product/release/market launch to find the right person for the job than to hire low and suffer the consequences. A bad team member brings the productivity of the entire team down.
  • Trust your gut. Isn’t this true of most things in life? It’s definitely true of hiring. If you have a bad feeling about someone, move on.
  • If it’s not working, call it. This is such a cliche, I almost didn’t include it. But it’s too important not to mention. It’s part of the old adage "Hire slow and fire fast" but if it’s not working out, it’s time to move on (see "Aim High").

Much of this post stemmed from a conversation that I had with one of the companies that I work with. At this company we had a long discussion with the entire company (at the time only 7 people but we’ve repeated this company wide conversation as we’ve grown) about how to avoid hiring mistakes and the stake that everyone around the table has in making sure that we bring only great people on board.

So talk openly at your company about your hiring practices and work as a group to come up with your own plan for how you’ll make hiring a core competency . . . and then put all that on your wiki so you don’t forget it.

 

    • I would also add “Don't overpay.” In the rush to hire, sometimes it's easy to think higher salary == “better.” And you don't always need rock stars. Worker bees are important too.

      • sethlevine

        good point derek. thanks.

    • I just attended an interesting presentation by Mike Lynch, CEO of Autonomy on the same subject. He had some great nuggets of wisdom from his experience growing from zero to $500M revenue. There is a summary here :

      http://shaivyakarnam.blogspot.com/2009/01/mike-ly

      And there should be videos to follow at Judge Business School,

      target=”_blank”>http://http://www.cfel.jbs.cam.ac.uk/“target=”_blank”>http:// href=”http://www.cfel.jbs.cam.ac.uk/” target=”_blank”> ” target=”_blank”>http://www.cfel.jbs.cam.ac.uk/
      Well worth watching (when they are put up) and he is quite funny as well.

      • sethlevine

        outstanding! thanks ian.

    • Nice post, seth.

      From conversations with a bunch of startup folks over the last few months – both founders/execs, experienced recruiters/hr managers, and relatively new hires – I've got a related point or two.

      I think the “hire slow” part of that old saying is especially relevant for startups. Yes, you need to be patient to find not just “great” but also “the right” people. Perhaps just as importantly, though, I've come to believe that it's vital to plan and understand how growing your team will affect *everyone's* jobs, and specifically every person's responsibility to do (or at least access to) “meaningful work.”

      This plays directly in into the importantance of company culture, something that I think I underestimated for a long time. I'm sure there are some startups that make it with a broken culture and unhappy employees, but I've heard from too many incredibly smart and amazing people who quit because they hate what (what used to be) “their” company has become. This includes everyone from key technical architects to entire engineering teams to the first marketing & HR hires.

      You can't overestimate the importance of chemistry – it needs to be addressed early and explicitly in the hiring process – or of culture, which can't be implemented top-down, after-the-fact. The lure of a payday through a big exit is not enough to hold a company together.

      Two things which, I think, are relevant here: I've always been a numbers-focused product & biz guy, so this stuff seemed “soft” to me for a long time. I was a slow convert, but I've just heard and seen too many horror stories. Also, we build online recruiting software. Yeah, our business is better when people hire more. and I still think that many companies need to slow down and think longer and harder about how not to hire or expand, but “grow a team” instead.

      • sethlevine

        great comments, luke. i completely agree that every hire in a start-up is both critical and affects the overall performance of the entire team.  one bad hire can really stall out a company’s progress.  and culture turns out to be a really big deal as well – i totally agree with your thoughts on that subject.  seth

    • Shane

      I have one thing to add, if I may. I attended a conference about two months ago, and one of the speakers had something very interesting to say. It runs somewhat contrary to the “Aim High” point, but I think it is valid nonetheless. Essentially, as a start up company, you cannot always attract the best and brightest engineers or salespeople simply because you cannot compensate them enough. In this context, he mentioned what he called “Pony Express Hiring,” which is essentially hiring the almost best and brightest, and riding them until you can upgrade. What do you think?

      • sethlevine

        you bring up a good point around sales, shane. i think a lot of companies assume that if they are selling enterprise software the best sales people they can hire are ex-Oracle or SAP or something similar. that sort of strategy almost never works out. selling at a start-up is just different than selling from a mid tier or large company. often i’ve found that the better strategy is to hire a solid and scrappy vp and then fill in with less experienced, but bright and hungry sales people who are more likely to both work harder as well as to stick to the program (sell the way you want them to sell).  i’ve had some companies (not just in enterprise software but will all varieties of products) that they best sales people they hire are the ones with the least experience but with the highest energy and drive.  i think the idea isn’t to upgrade later – but to build up a strong force yourself.  thoughts?

        • Phil Sugar

          I don't think you ever want to hire with the thought of “upgrading” later. How disheartening is that to the person you hired. As a company grows sometimes the “fit” between company and employee can change, and that is a tough situation to handle because I do like to leave with the team I went on the field with.

          As for the ex-Oracle/SAP sales rep or for that matter ex BigCompany finance person, marketing person, whatever, it won't work out. Totally different skill set and as you point out you can't afford them. (and you're not going to get a return on your investment)

          Last thought is that you can't be like that Dilbert cartoon where “we hire only above average people but pay below average wages”

          • Shane

            Phil, that was precisely the question that I posed to the individual who proposed this “Pony Express” hiring idea. I agree with you, it would seem to me that this could be detrimental to company culture. However, this individual was of the opinion that the individual would not necessarily have to be aware of your intentions. Like I said, I do not know if I agree with this strategy, I just wanted to pose it to the group here.

            Seth, I agree with you as well. That was actually something else that was posited at this conference that I attended. Especially the part about the “solid and scrappy VP,” that would seem to be the best way to build a strong core sales team.

        • Tim

          Appreciated your post. In sales “non-hiring” decisions also matter, approach seldom discussed; sales outsourcing(even for consultative process bound offers) can create market intelligence and market reach leverage for a promising start-up. Direct market research, relationship development, lead generation, account cultivation, and deals done as a variable cost. Also rapid course correction. No blind trust with partner; the caliber of your outsourcing partner''s leadership, staff, SFA infrastructure needs to be vetted. For providers, see The Brown & Wilson Black Book. Local provider I worked with and know of is Extended Presence. ” target=”_blank”>http://www.extendedpresence.com Note, various entry points, with a specific set of partner management risks.

    • Dave Ryan

      The other point I would add that seems to be missing is “Check references thoroughly.” I am often surprised by what I hear, both good and bad. Use your network to find others who have worked with the candidate that were not on the supplied reference list. Ask questions about work ethic, honesty and integrity, and “What tips do you have for me in managing and motivating this person.” Ask “Would you hire this person again?”

      • sethlevine

        great point, dave. an adjunct to that is to get some off-list references (i.e., don’t just call the people they send you to). it’s usually not that hard to find a few people one or two degrees away from you who have worked with your candidate before.

        • JRoth

          I agree with you Seth. I try to ask the reference for other contacts that would be relevant to the candidate. Also in my experience, the “would you hire this person again” question is a tough one to answer straight-up for the reference. As an alternate, I ask: “if you were to rehire this person, what advice would you give them to ensure greater success in their position”. The responses have been pretty insightful.

      • gpaskill

        If it weren't for the perils of negligent hiring, I'd pass a law to abolish reference checking.

        Going beyond references a candidate supplied can be tricky. Some have a hard time talking about someone to begin with. To appear more real they invent fake flaws. Another reference a degree away can sound unprepared and lost. As more candidates know this is in play, they'll tell their references what names to supply if asked.

        I had some cases where even though references didn't sound favorable, I went with the hire anyway. Their past environments didn't let them develop those stellar 1st and 2nd level references.

        American management suffers tremendously from lack of leadership. Pushing off hiring decisions through devices like a reference of a reference and hiring-by-committee means the manager is held less accountable.

        Job hunting tips abound on the Net, and as an employer it sickens me to see how many games appear on both candidate and employer side. So sad neither focuses on the work and developing a relationship based on mutual respect.

        • sethlevine

          i disagree with you on reference checking. finding “off deck” (meaning references that the candidate didn’t provide) can be a very helpful way of understanding whether you’ve got someone who will work in your organization or not. the challenge is asking the right questions in the right way (and of course it’s helpful if you have a relationship of some kind with the person you’re talking to – even if just from a friendly introduction – so you are more likely to be getting meaningful feedback). 

        • sethlevine

          i disagree with you on reference checking. finding “off deck” (meaning references that the candidate didn’t provide) can be a very helpful way of understanding whether you’ve got someone who will work in your organization or not. the challenge is asking the right questions in the right way (and of course it’s helpful if you have a relationship of some kind with the person you’re talking to – even if just from a friendly introduction – so you are more likely to be getting meaningful feedback). 

    • I'm a big fan of the shareware model of hiring. Set aside discrete tasks for a candidate you really like, then evaluate both their work product and how they integrate with the team. In particular, pay close attention to their ability to communicate, respond to feedback and willingness to collaborate/share incomplete work product.

      In a startup environment, you also need to evaluate commitment. People can get excited about something new, particularly if the team is passionate and sells the idea and mission well, but not everyone is prepared to make the clear sacrifices involved in an early stage venture (in particular, work/life balance). Be sure to probe deeply on this and clearly communicate your expectations of exactly how you want an employee to work early in the interview process.

      • gpaskill

        I've done this approach, the shareware model. (Others say it's like an “audition.”) It's really good to see which candidates are committed and can deliver. Experience is overrated, especially in a world of accelerated change.

        I've also had some candidates call me aside and say, “You know what, this kind of work isn't really for me after all.” Great! We say “Goodbye” without hard feelings, and they'll talk favorably of my company in the corporate grapevine.

        Of course, you can't have them work too much for free. Occasionally, you'll come across the money-oriented candidate. (Since when did talking money become taboo?) He'll smartly say, “If you want more, make me an offer!”

    • One more point: prepare your team for turnover early in the company's life. You want to retain the best talent and cycle out folks that aren't the right fit. Impact on morale can be managed by making the team aware that performance is key and pruning can make the company vine stronger.

      Did I really just use a plant metaphor?

      • sethlevine

        indeed, eric. plants or otherwise, both comments are very good points.

    • I sat in a presentation earlier this week from Tony Hsieh, CEO of Zappos. They have one interesting tactic in their hiring process that's pertinent to this discussion and your post Seth. After making a hire, each person gets about a month of training. At the end of the month they offer the person $2000 to leave. This 'self select' process ensures that new hires are really committed to the company obviously. And interestingly, they only get about 1-3% who take the offer… so he jokes that they may have to raise the amount.

      • sethlevine

        i hadn’t heard that, but it’s a pretty interesting strategy, chris. zappos does a lot of things right on in my view…

    • Roger Koby

      Having been a successful field sales person for a number of software startups, I agree that it is a different skill set needed to succeed vs. selling at existing large vendors. Each of the companies I have worked with have been acquired by large ($1B+) corporations. Most of the successful “hunters” that I know leave the large corporations soon after acquisition, and look for other, new, emerging software companies. It's not that they don't fit in or wouldn't be successful with the larger companies, but that they recognize that their skills, and the passion that it takes to call on prospects without the leverage of a well known name, does not typically work well (or is as satisfying) in that environment.

      The net-net is that there are many very talented and successful sales people who thrive on a startup environment. However, many of the top reps move into sales management. This than creates the environment described above…find new talent and teach them the skills.

      In summary, I would personally look for sales talent (management or field sales) who specifically have proven success working in a startup environment.

      • sethlevine

        i completely agree roger.

         

    • John_Kanarowski

      Great post and great comments.

      I spent several years at a rapidly growing software start-up – now medium-sized software company – that executed the hiring process well. We implemented a number of the things mentioned above and this was key to our growth.

      Couple of additional things we did that I think are relevant to this discussion:

      1. In the early days, remind people to place a higher value on versatility, motivation, cultural fit – than specific past experiences. This is really easy to forget when you interview somebody with a great resume who interviews really well. Particularly when hiring sales people for early stage companies, it's really tempting to overvalue somebody's past success selling a similar product to your target customer. Your target customer will evolve and you need sales people who will drive that process. Be mindful of the trade off between future versatility and past experience.

      2. Offer people a transitional opportunity to attract better talent. Start-ups can attract higher quality people if they understand where people want to go with their careers. For example, be willing to interview a marketing person for a sales job, a services person for a marketing job, etc. We got great hires this way. Don't forget to look inside for a transitional hire. You'll end up with more motivated, loyal employees.

      3. This last point is very tactical but makes a big difference. Come prepared to an interview with a customized list of interview questions. The 5-10 minutes of prep adds a huge amount of focus and value. Some startup execs try to “wing it.” This adds variability to the process. Plus, it sends a negative signal to the candidate.

      • sethlevine

        outstanding advice john. thanks for taking the time to post this.  seth

    • I would also add that good hiring takes a great deal of time in the interview itself. Most interviewing I've observed is a series of sequential one-hour 'first dates' where you learn nothing substantive. It's a process to hire good interviewees, not good employees.

      I always set aside at least four hours *per interview* in a single sitting, preferably more. By the third hour you're talking to the person, not the pretense. And before you think that's crazy, just think about the months you will lose if you make the wrong choice….

      You inspired me to write my own blog post about this very topic. Thanks.

      http://rulesforstartups.blogspot.com/2009/02/rule

    • John

      A couple of thoughts about in the hiring process for high growth companies. General stuff, but it does seem to apply across different companies.

      – Our ideal is often big company experience with an understanding and appreciation for best practices and scalable processes, as well as smaller, high growth/startup experience (you may have to make your own coffee and plane reservations). Beware of the corporate rock star who hasn't working in a small, fast growing business with a lot of uncertainty and a shortage of resources.

      – early on we're often trying to hire people with cross-cutting skills (ie they can pick up balls of different sizes and colors)

      – at some point as the business model starts to get traction and there is greater clarity around operations, we start to hire more specialized people (you pick up the red ball, I'll pick up the small green ball)

      – not everyone will make that transition – some great, capable people are color blind. The right people to pitch in and get a startup off the ground can't always transition to roles in a larger, more specialized organization….

    • The topic of hiring in startups is a critical one. One comment re: trusting your gut – you have to be careful about that, especially if you're hiring for expertise that you don't have. For example, sales people and biz dev people can often perform exceptionally well in interviews because they know what to say, how to present themselves, etc. And if you're not a sales person or biz dev person (and few startup CEOs/founders are) then you may find that “everyone is a perfect fit.” Your gut can fail you in those cases.

      My recommendation – have an actual recruitment process in place. As you point out, startup hiring is too ad hoc. Implement a stringent process (doesn't mean it needs 50 steps). And test. Test people – every single one of them that gets through the first (structured) interview. For developers that's easier, you can give them code-related tests. For sales people, biz dev, customer service, it's harder. But come up with something that you can measure and compare others against. And if you don't know what questions to ask in an interview or what to test people for — ask. Ask board members, colleagues, venture capitalists, friends, etc.

      A final thought – especially in these tough times when people are less apt to jump ship from their existing job (especially to a startup) – you need to focus on your brand and marketing from a recruitment perspective. Think of recruiting like you think of marketing – including viral marketing and social media marketing. Startups have a hard time differentiating and standing out, and appealing to the changing needs/concerns of talent – so you need to have an employer brand that you promote frequently and aggressively through multiple channels.

      • sethlevine

        great comments ben – thanks!

    • tones

      Just curious about the “slow to hire, quick to fire” adage especially for startups and want to get some benchmarks…what is a “normal” or “healthy” turnover rate for employees and new hires in a startup company? To give you an example, I work in a startup that currently has about 11 full-time employees and in the last year, we've hired & fired about 6 people. Not sure if the type or stage of the startup makes any difference, but I'd like to know what other startups are seeing.

      • sethlevine

        thanks for the comment. i do think stage and pace of growth effect your “fail rate” pretty significantly.  when you’re hiring a relatively few number of people – and particularly if you’re doing trial runs with them in a meaningful way – your failure rate should be pretty close to zero (think the first 10-15 people in a company).  as you start to get bigger, as you start to hire a little faster i’d guess that we see about 10% to maybe 15% failure in hires. there are two keys here – one of course is to simply try to keep the figure as low as possible. the other is to make sure that when you do make a mistake you figure it out in the first 30 days and take action rather than let people hang on (or simply not pay enough attention to know if someone is working out).

    • sethlevine

      My wise old friend Harry Levinson once told me that organizations are attack vehicles. Thinking about that comment, I realized that companies attack their markets and competitors, the Red Cross attacks natural disasters, youth soccer leagues attack lethargy and isolation in children, hospitals attack diseases, and health insurers attack our bank accounts. The list goes on. My experience long ago in the 3rd Infantry Division ( a literal attack organization) taught me that I did not want a squad of slumbering privates protecting my flank. It was also important to pay attention to how the whole platoon prepared to coordinate; in that metaphor, the machine-gunners had to coordinate their sectors of fire properly so that – when all hell broke loose – they had locked their weapons transversal arcs properly — if the handlers jerked wildly in the chaos, they did not end up swinging around and shooting down buddies on the line in-between. Sounds really simple, huh? Fact is, people make all kinds of allowances in hiring other people. They often don't act as though the choices they make in hiring can have dire consequences. We hire people because we have a problem that needs to be solved. Quickly! We are pressured to act expediently. The problem we have at the moment is: we need someone to solve a problem. We hire someone to discharge the tension we feel about our hiring problem, rather than for the ultimate purpose of solving the real subject problem — we don't “fire for effect.” Someone comes along and talks a good talk. Our HR people ask them targeted interviewing questions (e.g., Q: “Courage is important in this job. Can you tell me about a time that you were courageous?” A: “Walking home from work yesterday, I witnessed a muscular mugger beating up a child, so I decked the gorilla and rescued the child.”). Other than reference checking (in this lawsuit-avoidant environment?), there's no check for fabrication. Bingo! Hero gets the job! And we feel better because we've solved our ersatz “hiring problem.” Maybe creating a later firing problem? Why not see if the person can DEMONSTRATE courage right there in front of you? And then see how he/she coordinates with others expected to interact with him/her? I'm not advocating playing head games with the candidate. You're actually being fair to the candidates by giving them an opportunity to show you what they can do., not just talk about it. To elaborate on your “try before you buy” point – if you have a problem that the person you're hiring is supposed to solve, put that problem – or something like it – directly in front of them, and see how they attack it. Also find a way to put the candidate together with other people who are engaged with the problem, and see what value the candidate adds. Not just to the solution, but to the team's thinking about the solution; because there will be other problems that team has to solve. Do it again and again in different iterations. The best predictor of future performance is not past performance, it's current performance! Why just talk about hypotheticals (“How would you approach or solve this kind of problem?”), if you can give the candidates the chance to get on the line, in relatively safe pre-hiring circumstances, and show how they attack problems that could potentially put your company in the ground? Incidentally, my problem, at this moment, seems to be verbosity. Bernie Daina, Organizational Psychologist

    • gpaskill

      While it makes sense “to delay a product/release/market launch to find the right person for the job,” we must guard against perfectionism becoming procrastination.

      Hiring has deteriorated lately . Its main question is, “How do we avoid hiring mistakes?”

      Yes, get great people. Yet too many hiring managers, HR, and inteviewers find minor flaws in candidates then bellow, “Nobody is qualified!” Sorry, it's also a hiring mistake to let right candidates get away.

      You've got one smart way of fixing this mess. “Try before you buy” is great! Hiring needs to be less about “what you have done” and more on “what you can do.” (If you are a startup, aren't you all about defining the future? Why do my fellow Valley managers request resumes, devices that only talk about the past?)

      Intererested people don't want to talk what they did for others, they want to show what they can do for you. That separates competents from wannabees. That also sorts employers who know business from those who don't have their act together.

      • sethlevine

        i strongly agree on this point. we’ve used the ‘try before you buy’ idea very successfully at many companies to great success.

      • sethlevine

        i strongly agree on this point. we’ve used the ‘try before you buy’ idea very successfully at many companies to great success.