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There is no single recipe for building a great company, nor is there a definitive formula for becoming a truly effective leader. Anything that you hear or read that suggests otherwise should be treated with a high level of skepticism. Even among the world’s most successful and admired CEOs, there exists a wide variety of personalities, strengths, weaknesses, educational backgrounds, and general management philosophies.
In light of this high level of variability, I always find it particularly interesting when I find a commonality among successful leaders. One such commonality, that seems to be mentioned so frequently that it borders on unanimous, is as follows: Successful leaders tend to attribute a great deal of their professional accomplishments to the people and teams with whom they’ve worked. This makes sense, after all: What good is a CEO’s coherent strategy and compelling vision if his or her company doesn’t have the right people (sitting in the right seats) successfully executing on both?
Indeed, having the right people sitting in the right seats lies at the heart of almost every business problem and opportunity. My own experience as a CEO taught me this lesson first-hand: Quality issues with our product? People issue. Time consuming and ineffective budgeting process? People issue. Underwhelming corporate culture? People issue. And so on.
Given the importance of people to any business (and thus the hiring, onboarding, retention and termination practices of that business), CEOs would be wise to give these things the time, thoughtfulness, and level of attention that they deserve. In my own experience as a CEO, I learned that surrounding myself with A+ people (particularly at the senior leadership team level) was one of the most impactful things that I could do for both myself and my company.
It took me many years (and many mistakes) to learn about great hiring practices. To prevent you from making some of those same mistakes, below I’ve compiled a list of the major lessons that I learned while hiring members of my senior leadership team. Though I learned these lessons making hires at the Director, VP, or C-Suite level, I suspect many of these same lessons can be applied to substantially any hire within your organization.
1. You Will Make Bad Hires. It’s What You Do About These Mistakes That Matters
Hiring is notoriously very difficult. Countless studies have concluded that the job interview (the primary vehicle through which most hiring decisions are still made) is fraught with dozens of subconscious biases that hinder the effectiveness of the decisions made on the basis of those interviews. Indeed, the probability of fit and success of an average hire has been shown to be roughly 50%: This means that in building a management team of 8, the data would suggest that you’re likely to make up to 4 hiring mistakes. Even if you are above average with respect to your ability to hire great people (most people think that they are – yet most people are not), it is a virtual guarantee that you will make a hiring mistake, or more likely several mistakes, as you build your leadership team. I certainly did. I came to learn that it is what you do about these mistakes that separates the great CEOs from the average ones. Specifically:
- Hire slow, fire fast: Once you’ve concluded that you’ve made a hiring mistake, you must terminate that person as soon as possible. Within their first 0-3 months is ideal, but sooner is always better. Keeping them on even 1 day after you’ve come to your conclusion serves nobody, including the company, the manager him/herself, and the team reporting into that person
- Listen to your gut: Several mentors of mine told me to listen closely to my gut any time I was contemplating whether or not I had made a hiring mistake. Though this advice sounded somewhat “soft” and nebulous to me at the time, it turned out to be wise counsel: In my experience, in all of the instances in which I suspected I had made a hiring mistake, it turned out that I did indeed make a hiring mistake. In my early years, I made several justifications to myself about why each person should be kept on, at least for a little while longer. In my later years, I learned to raise a flag any time this early inclination even occurred to me.
- Validate your gut: If you’re not comfortable relying on your instincts alone (chances are relying on your instincts alone led you to make the hiring mistake in the first place), use processes like 360 reviews to validate what you think your gut may be telling you. In our case, part of our standard onboarding process was a 360 review of each new manager within their first 3 months on the job. I always found the results of these 360 reviews to be incredibly enlightening: In almost every instance in which I suspected I had made a hiring mistake, the person’s peers and/or team members noticed many of the same problematic things that I had noticed
It is human nature to justify keeping a bad hire on, and thus it’s an incredibly easy trap to fall into. Perhaps you don’t want any further disruption to the team. Perhaps they’ve made some degree of progress, and firing them would represent a loss of 1-3 months of time and effort. Perhaps you’re subconsciously trying to justify the sunk cost of making the hire in the first place. Perhaps you’ve convinced yourself that you only need a B level talent in that role anyways. Reflecting back on the rationale that I came up with when justifying my own bad hires (which included all of the above), I eventually came to see that they all amounted to excuses that prioritized short-term ease and convenience over the long-term health of my company.
2. “Hell Yes” or “No”
When it comes to hiring at the senior leadership level, there are only two possible answers when evaluating any given candidate: “Hell Yes” or “No”. If you don’t say “hell yes” to a candidate, then your answer must be “no”. This dynamic may be less true when hiring for, say, junior or introductory roles at your company, but at the leadership level it’s absolute: Wait until you’ve found your “hell yes” candidate before making a hire.
For this reason, in my experience it is also unwise to give yourself (or any other hiring manager) a deadline before which a hire for a vacant seat must be made. Such deadlines tend to be completely arbitrary at best, and encourage suboptimal hiring decisions at worst.
3. Don’t Ignore the Seat
When hiring for leadership team roles, most companies spend all of their time focusing on the person applying for the role, and spend almost no time thinking about the specific seat that person is going to occupy. But how can you possibly make the right hire if you’re not extremely clear on what you’re specifically hiring this person to do (i.e. their seat)? It’s not enough to say that you need to hire a CFO. After all, being a CFO of a publicly traded company is in another universe relative to being a CFO at a 10-person start-up looking to raise their first round of funding. Being the CFO of a high growth business is very different from being the CFO of a low-growth business. Being a CFO with a team of 20 is very different than being a CFO with a team of 3. And so on.
Importantly, this goes far beyond having a good job description. Before you make a hire, you should already have an objective (and ideally measurable) set of criteria against which any candidate will be measured. For example, instead of specifying that the CFO should “improve our collections process”, part of the seat description should read “decrease our Days Sales Outstanding from 40 days to 35 days within 5 months of start-date”. Notice how this includes a measurable, time-based outcome that will leave little ambiguity around whether or not it was achieved once you arrive at the end of the measurement period.
With a very clear description of the seat, not only will you have more objective criteria against which to evaluate the candidate in the interview process, you’ll have more objective criteria against which to evaluate them during their first few months on the job. This in turn will help you more objectively evaluate whether or not you made a hiring mistake in those critical first few months.
It’s also important to note that most A+ candidates genuinely appreciate being on the receiving end of this type of clarity. When I hired my own CFO, he used thumbtacks to affix the description of his seat right beside his computer monitor, so that he could see it every day. When I asked him why he did that, he said something to the effect of “I like being reminded of my priorities daily. If I ever feel myself going off-course, this is a helpful reminder of the job that you hired me to do”.
4. Beware of the “Right Seat, Wrong Person” Mistake
Hiring mistakes can be broadly classified in one of two categories: Wrong seat or wrong person. A wrong-seat-right-person hiring mistake comes when you as the CEO either don’t truly understand the seat that needs to be filled, and/or you hire the perfect person for your company but that person happens to be better suited to a different role than the one you’re hiring for.
In right-seat-wrong-person mistakes, you will have found somebody who is capable of occupying the open seat, but that person doesn’t represent a fit within your company culture despite their general aptitude for the job in question. By way of an illustrative example, consider the high-performing salesperson who always hits quota, but is cancerous to your culture and negatively impacts the experiences of his or her colleagues. Despite their strong performance against what the seat requires of them, this still represents a hiring mistake that must be dealt with swiftly.
To avoid right-seat-wrong-person hiring mistakes, you must not only test candidates against the requirements of the seat, but you must also explicitly test them against your company’s culture to see if you’ve found the right person. To do this, you must have already defined your company’s culture by way of its core values, a topic that I cover in a separate blog post (“Why Your Company Needs a Set of Core Values (or Why Yours May Not be Having an Impact”) (note that this link may not be active until this post is published). By explicitly testing candidates against your core values, you will be adding rigor and objectivity to the otherwise nebulous question of “is this the right person for our company?”. For example, we tested candidates against our core values by asking questions similar to the following:
- Core Value: Thinking & acting like an owner, getting sh*t done, never saying “that’s not my job”
- Question: Tell me about the last two times where you performed tasks that would otherwise be performed by somebody several levels below you in the organization, or by somebody in a different area of the organization entirely
- Core Value: Embracing balance and being multi-faceted
- Question: Tell me about two of the most meaningful non-work-related goals that you’ve accomplished or have worked on within the past year, and why these goals were important to you
- Core Value: Teamwork & interdependence
- Question: Tell me about a time where you helped out a teammate (or another department) at your current company, where there was nothing in it for you personally
And so on. If your candidate isn’t able to come up with recent examples, struggles to recall them, or gives you “stretch” answers, then the “right-seat-wrong-person” flag should be raised and carefully considered. Of course, the questions that you ask of your own candidates should be specific to your company’s core values.
5. Beware of the “Big Company” Candidate
Hiring senior management candidates from companies significantly larger than your own can present a risk to SMBs if you’re not careful. I am not suggesting that you don’t hire candidates coming from such companies, but what I am saying is that you may wish to subject these people to a higher level of scrutiny than you otherwise might.
I hired some of these people myself, though none of them worked out in my case. I figured that our company could learn from their experience in working in a significantly larger organization, and that we’d benefit from the discipline, organization, structure, and process orientation that I assumed big companies had. While this made sense intellectually, in practice I often observed something much different. Below are some things to look out for. Keep in mind that I’m painting with a very broad brush below, and that my experience shouldn’t be assumed to be unambiguously representative of the typical one. Nonetheless:
- People who work in very large corporations often “romanticize” the notion of working in small, entrepreneurial, agile environments. As anybody who has ever run a small business can attest to, the realities of these environments are often far less glamorous than the perceptions that external observers possess. Once some big company candidates actually join a SMB, they come to see that the reality of the day-to-day is far less romantic than they may have anticipated
- Some big company candidates (particularly those coming from high-ranking positions within their previous companies) are used to managing managers, not managing individual contributors. If you’re hiring somebody to manage individual contributors, you must understand that a very different skillset is often required to do this successfully. You must ensure that you’re comfortable in your candidate’s willingness and ability to play this very different role.
- SMBs are perpetually resource-constrained environments that often lack the tools, processes, and structures that some big companies possess. When certain tools, processes, or structures inevitably don’t exist in a SMB, you need a candidate who will say “I’ll build this myself”, as opposed to lamenting the fact that something doesn’t already exist. Ensure your candidate has the former mindset, and not the latter
- It’s easy (on a relative basis) to generate a lead, structure a partnership, or hire an engineer when your work for Microsoft. It’s much harder to do any of these things when you work for a company that few outside of the immediate ecosystem have even heard of. Past performance isn’t always indicative of future results, especially if that past performance was generated in a materially different environment
6. Good People are Worth Paying For
When you finally do find your “hell yes” candidate, in my experience you must be comfortable with the possibility of having to exceed the initial budget that you set for the role. I’m not suggesting that you shouldn’t be thoughtful and prudent in regards to parting with your company’s capital (you obviously should), nor am I suggesting that you explicitly tell candidates that there’s upside to the salary that you have publicly communicated. I’m simply stating that if good help is indeed hard to find (and it is), then by the laws of supply and demand, one should expect truly good help to come with a price tag that accurately reflects their relative value. Remember, the market value of A+ talent has no regard for the budget that you have set for the role – like any market, the price of anything (or in this case, anybody) is dictated by simple supply and demand. This of course is completely independent of how much you’d ideally like to spend on a candidate.
In my own experience, building my senior leadership team from 0 to 7 people, I materially exceeded my own budget twice, as I thought the two candidates were simply too good to pass up. In both instances, within 3 months of their start dates, both hires made me completely forget that I had exceeded my budget for that role in the first place, as they added even more value than I had originally expected.
Remember, with certain decisions, price is only one of several important considerations: Nobody wants to go to the discount eye surgeon.
7. Don’t Ignore the Importance of Onboarding
A good onboarding process is at least as important as a good hiring process, if not more so. Yet it receives considerably less time and attention, and as a result is fumbled much more frequently than it ought to be. If you don’t thoughtfully and deliberately onboard your new hires, you will waste time (and thus money) in your effort to get the new employees productive as soon as possible. Moreover, a disorganized (or worse, non-existent) onboarding process risks creating a sense of “buyer’s remorse” from the perspective of your new employee. After all, they presumably just exited a competitive hiring process with several other attractive offers from companies still looking to fill an identical seat in their organizations. In light of this, they should still be considered to be highly mobile, and as a result you don’t want them to walk into an environment characterized by ambiguity, lack of structure, and disorganization.
In my experience, the characteristics of a good onboarding process are structure, organization, and clarity. A new employee should never wonder what they’re supposed to be doing, with whom they’re supposed to be working, or when certain things need to be completed by.
Our onboarding process started with a two-hour meeting with me on day one to review the company’s mission, vision and values. During that meeting, I would walk the new employee through their “onboarding checklist”, a printed copy of which was sitting on their desk prior to their arrival. Their onboarding checklist naturally covered tactical things (signing payroll documents, enrolling in HR systems, etc.), but more importantly covered all of the knowledge and experiences that we needed them to accumulate within their first month or so at our company. For every item on our onboarding checklist, we included four columns: 1) The training/onboarding task in question; 2) With whom they should be working to accomplish that task; 3) When we expect it done by; and 4) A simple done/not done categorization.
We often tried to build these onboarding checklists to cover at least the person’s first month at our company. In this way, the new employee never had any uncertainty about what they should be doing, when, and with whom. Though this may sound a bit heavy handed, our experience was that substantially all of our new hires appreciated the clarity and direction that they were provided with to govern their first ~30 days on the job, a period which is often characterized by ambiguity, lack of productivity, and questions about whether or not they’re spending their time on the right things.
If you’re interested in learning more:
Geoff Smart and Randy Street wrote perhaps my favorite book on hiring. In their book, Who, they outline general their philosophy on hiring, but also a very practical set of tools that hiring managers can use to drastically increase their odds of making a successful hire. This method, known as “Topgrading” became a required process at my company any time a senior hire was made, and generated tremendous results for us.
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