Why Paying More For A+ Talent Is A Bet I’d Place Every Time
As the companies in our portfolio continue to grow, the biggest conundrum for our leaders is hiring top talent. Many find high salaries hard to swallow, especially on a startup budget and when they’re not making as much money as the potential recruits they’re considering. Tough cookies. Paying more for A+ talent at your company is worth the investment many times over, 99.9% of the time. Here’s why.
In today’s crazy fast-paced business world, anybody who is even being considered for an early hire at a startup is in the top 25%. That’s simply the ante to play, no matter the role. However, the difference between someone who’s at the 80th percentile, versus someone who’s at the 90th, or the 99th, is vast. The difference is only in 19 percentile points, but in reality, the productivity boost can be 50x between them. Where does this value get driven up by 50 times? Let’s take a look. With a small team, every person’s value-add is much more important because each person carries a heavy load at a startup. The trickle-down adds up quickly, and has an immense effect.
Johnny, the new CTO, takes it upon himself to bring in bagels and coffee every week for the development team as part of his newly-implemented product huddle. As part of this recurring meeting, he encourages all engineers to bring their weekly project roadmap and goals, as aligned with the overall product plan for the quarter and year. The group discusses missteps and wins from the previous week and how to make the next week most effective. Would a B-level person have been able to rally a group together and create a culture of accountability? Would he have taken it upon himself to do so, without being asked? I’d say that’s 50x, as your company’s technology grows at scale as you ramp up.
Susie, your new VP of Sales, lands a client that will be your biggest all year. You didn’t ask her to chase that one, you didn’t have a connection with their buyer, you didn’t know she was even going after them. And yet, she knocks on your door and gives you the big news. I’d say that speaks for itself in that it’s a major boost, definitely a 50x step up in value. How much can you extract from the fact that you didn’t have to hold her hand through the process? How important is it that she was self-directed enough to know that they’d be an appropriate customer for you and then close the deal? Seems like a no-brainer to me.
Karen, your new office administrator, finally gets up the courage to speak at one of your weekly team brainstorming meetings. When she does, she brings an idea to the table that changes the direction of your company, and that pivot perpetuates your hockey-stick growth. Was paying her a bit more worth it? Of course.
While there are countless anecdotal references that could prove the point, let’s look at the math behind my strategy. You’ve narrowed the field for an open position at your company down to two candidates. One, candidate X, is very exciting to you and you know X could make a huge impact; the culture match is obvious and the candidate seems eager to make an impact with your mission. However, X’s salary would be $125K. X’s competitor for the role would be competent and could add some value to the team as well, and this person (candidate Y) has credentials to “check the box” of what you’re looking for. Candidate Y would require $100K, so in the short term, you have $25K more to deploy, potentially going after a junior developer that’s much needed, or beefing up your threadbare marketing spend — those dollars are precious. While that $25K may seem like the end-all, let’s look at it differently. If candidate Y delivers you $100K worth of work, you’re cost-neutral — money well spent. However, if candidate X delivers you 50x that (through various channels like the above examples), now you’ve gleaned $5 million from the same person, for only $25K more. While it’s easy to tally up your “savings” by settling for a B or C-level person, the upside that an A+ team member can bring will far exceed the near term cost difference. When you get down to it, the “risk” of paying up for the best and brightest is simply not a risk at all. Rather, it’s the way you’ll accelerate growth and ultimately win big.
Note: this post originally appeared on my Forbes channel in February 2014. For an inside view into my world as a VC, entrepreneur, author, and keynote speaker, visit JoshLinkner.com and pre-order my new book, “The Road to Reinvention,” on Amazon.