Can you pick out the Heroes from this crowd of people? That’s… kinda like hiring.

How Not to Hire Like a Clownshow—Evergreen Business Weekly 2: Hiring

The Evergreen Project is a group of aspiring managers, founders, and investors. We contribute resources about one topic each week, which are synthesized and shared in this Weekly Edition. The aim is to learn more efficiently through increased context and concentration. Join here to contribute to or receive the next Edition of Evergreen Business Weekly.

This Edition is built from 3 books, 7 posts, and a podcast with 7 bonus materials at the end. See all of the resources and previous Editions in the Evergreen Business Library [coming soon].

Remember, these are designed to feel like short books, you’re meant to meander and spend ~3 hours on this topic this week. Save some of these links and read them throughout the week. Immerse yourself in this topic and leave the week smarter than you started it!

The Importance of Hiring well

Every task or challenge has it’s ‘Penalty for Failure’. For failing to make the bed, it can be minimal. For failing at free-climbing Half-Dome, it can be death. In business, the penalty for failure at Hiring can be massive.

When Steve Jobs hired John Sculley (using the famous line “Do you want to sell sugar water for the rest of your life, or do you want to come with me and change the world?”) it was a mistake that cost Jobs his job, his company, and nearly lost Apple to the world.

There’s no debate on the importance of hiring and hiring well. Nearly every article, book, and interview lists is as the most important skill in building a successful enterprise. After all—you don’t get to make every decision, but you do get to choose the decision makers.

Component Parts of ‘Hiring’

Hiring is the highest-leverage activity of a founder or manager. It should be a core competency of any company, because it is the meta-function. The success of an organization in hiring determines it’s ability to succeed in it’s other functions.

In all my research, no one has ever spent too much time on hiring. No one has failed due to an over-investment in hiring. It’s a long process that incorporates multiple decisions and multiple different types of talent.

Here’s the simple run-down:

  • “When to Hire” Decision
  • Recruiting
  • Interviewing
  • “Who to Hire” Decision
  • Onboarding

Each of these deserve another level of zoom, which we’ll get to at some point in the future. For now, let’s do each on a high level and see how they fit together. Let’s get into it…

“When” Decision

First things first—you have to decide when is the right time to add someone to the team. As Sam Altman says in his blog post How to Hire: “Don’t Hire.”

“Many founders hire just because it seems like a cool thing to do, and people always ask how many employees you have. Companies generally work better when they are smaller. It’s always worth spending time to think about the least amount of projects/work you can feasibly do, and then having as small a team as possible to do it.
Don’t hire for the sake of hiring. Hire because there is no other way to do what you want to do.”

There are (of course) some conflicting ideas about when to hire. There are plenty of people advising the opposite with equal fervor: Hire before you need to. Rob Hayes puts it this way in this piece on FirstRound.

When you do the math on an amazing prospective hire, it’s probably worth paying several months of unexpected salary to land incredible talent and jumpstart a part of your business you already know you’ll need. “When you happen to come across these really good people, don’t let an arbitrary schedule tell you you don’t need them until March of next year. Just get them in the door,” Hayes says. “You’ll get all that time back that you would have spent in the recruiting process too.”

This point is best resolved in this article featuring Drucker’s timeless wisdom, as applied by Mandel’s incredible hiring run. The timing question is flexible, based on whether or not you’re hiring an ‘A player’.

Mandel, by contrast, is unbending. He recounts waiting many months, years even, to get the right person into a key slot. On the flip side, if he finds a true A and doesn’t have a job immediately available, Mandel will try to bring him or her into the organization anyway and “park” the person.

Don’t compromise on the quality of a hire due to time or external pressures. At the same time, never miss an undeniably quality hire due to ‘not needing them yet’—if they’re that good, they’ll find a way to contribute anyway.

Hiring is time-consuming and tiring. It requires a huge amount of effort. A founder or manager that is realistic about her non-superhuman level of available effort will realize that she’s unlikely to make 30 perfect hiring decisions in a row. As Hayes points out, it’s a wise strategy to “Find your lieutnants first.” Your team leaders should be hiring their own employees, and you’ll scale your efforts earlier in the hiring process.

Thanks to Ben Redfield of Density.io for suggesting Sam Altman’s blog post, and to Mike Betts for contributing Hayes’ words on Firstround. Credit to Daniel Pearson for suggesting the Forbes article featuring Mandel.

Recruiting

Your hiring process starts the moment the company is conceived. Recruiting, the art of attracting prospective employees to your company, begins in your product. The most effective method of building interest is to create a beautiful product that people want to contribute to and be associated with.

When Jony Ive went to go work at Apple, it wasn’t because Steve Jobs made some grand overture and sold him on the idea—Jony had used a Macintosh in college and fallen in love with the product.

“I discovered the Mac and felt I had a connection with the people who were making this product,” he recalled. “I suddenly understood what a company was, or was supposed to be.”

In addition to product as a beacon that attracts recruits, your other two assets are your mission and your team. These are the only two answers to the question you should be asking yourself: “Why should the 20th employee want to join my company/team?” This idea comes from Peter Thiel in Zero to One.

You’ll attract the employees you need if you can explain why your mission is compelling: not why it’s important in general, but why you’re doing something important that no one else is going to get done.

[…]

However, even a great mission is not enough. The kind of recruit who would be most engaged as an employee will also wonder: “Are these the kind of people I want to work with?” You should be able to explain why your company is a unique match for him personally.

Thiel sums it up like this: your company’s advantage in hiring is to offer “the opportunity to do irreplaceable work on a unique problem alongside great people.”

Recruiting is a huge topic and certainly deserving of it’s own Edition on Evergreen, so join now and receive it soon!

Interviewing

It seems naïve to prescribe Interviewing advice, because it’s all about extracting the criteria that are important to each company for their individual decision-making process. We’ll attempt to focus on techniques that are more generally applicable and important no matter what the industry, company, or role. However, it’s worth keeping in mind that McDonald’s interviews and hires very differently than McKinsey.

So you’re sitting across from some stranger, and have an hour or so to get to know if you want to adopt him. I mean hire him. What do you look for? What do you ask?

There are as many ways to interview as there are interviewers. In order to decide know what to ask, you need to understand what criteria you’ll be making the decision upon (next section). Only then can you back out to what questions will help you uncover the candidate’s virtues.

One thing that was pervasive in the resources on Interviewing was the need to know not just what they’re like in an interview, but what they’re like on a daily basis in real working setting.

Auditioning vs. Interviewing is a concept that is explained well by Sam Altman, though the wisdom is as old as interviewing itself. This is a technique Jeff Atwood, co-founder of Stack Exchange, advocates as well:

If you want to determine beyond a shadow of a doubt whether someone’s going to be a great hire, give them an audition project — even before having them speak to other employees on your team. I’m not talking about a generic, abstract problem. I’m talking about a real world, honest-to-God unit of work that you need done right now today on your actual product. It should be something you would give to a current employee, if they weren’t all so busy.

A point that seemed unique among resources, yet important (and very much appreciated by the job seekers of the world) is to move quickly and smoothly. Paul English, in his post on Hiring Religion, talks about the 7-day rule of hiring. Moving this fast is a serious advantage to snap up talent.

The more closely interviews can mirror real working conditions, the more you’ll learn that will actually help you make a hiring decision. Which, as it turns out, is actually the hard part.

Deciding ‘Who’

So let’s imagine the job-seekers are beating a path to your door, and you’ve got them all interviewed (and auditioned). Time to decide who you want to work with. What do you want in your team members?

Airbnb wants a rabid dedication to it’s culture and values. The interview question designed to bring this out came from CEO Brian Chesky. In the early days, he would ask candidates “If you got a bad diagnosis and had one year to live, would you still take this job?”

Along these same lines, Zappos famously offers new hires (after their 4-week onboarding program) a few thousand dollars in cash to quit right then and there, and never come back to Zappos. These are brilliant moves, not only for those that they get to quit, but also because of the Consistency & Commitment bias that now lives in those employees who stick around.

What does Google look for?

Google, famous for it’s intellectually elite hiring methods which basically filter for intellectual horsepower, have changed recently based on what they learned about current successful employees, and there is a valuable lesson in the shift. Thomas Friedman writes about it in the NYT:

For every job, the No .1 thing we look for is general cognitive ability, and it’s not IQ. It’s learning ability. It’s the ability to process on the fly. It’s the ability to pull together disparate bits of information.

What else does Google look for? Emergent leadership, then intellectual humility, and a sense of ownership. The least important thing to them is expertise, because they believe that people with the proper learning ability, strengthened by intellectual humility and ownership of the results will come to the same (or better) conclusion of someone with expertise in the field.

This observation from Google complements this post by @seldo, “Why you’re not hiring good developers.” His post is about technical hires, though the advice is so good, it should apply anywhere.

The primary mistake that people make when interviewing is over-valuing present skills and under-valuing future growth. Don’t hire people for what they already know; the pool of people who do exactly the thing you need them to do is much, much smaller than the pool of people who are smart enough to be good at that job.

He also warns about false signaling, such as being overly impressed by fancy degrees and/or powerful brand-names.

Thanks to Aaron Wolfson for contributing this fantastic post.

What does Warren Buffet look for?

Mr. Buffett doesn’t make a lot of hiring decisions. However, he does make a lof of investments and acquisitions of companies run by people, whom he’s placing a bet on. There’s a hiring process hidden inside his investment process, and it’s a make-or-break factor in where he deploys capital.

“You’re looking for three things, generally, in a person,” says Buffett. “Intelligence, energy, and integrity. And if they don’t have the last one, don’t even bother with the first two. I tell them, ‘Everyone here has the intelligence and energy — you wouldn’t be here otherwise. But the integrity is up to you. You weren’t born with it, you can’t learn it in school.”

Who NOT to hire

As Charlie Munger often echoes from the famous algebraist, Jacobi: “Invert, always invert.” It’s important to know your goals, and equally important to know what you want to avoid. Hiring is a great place to apply this idea.

Make a list of traits that will make for a poor hiring decision, and do your best to avoid them. It’s worth digging for evidence of entitlement, anger, immaturity, conceitedness, and general shittiness as a human being.

There are legions of people on either side of the “Hire friends!” and “Don’t hire friends!” debate, to which the right answer seems to completely depend on how smart and cool your friends are.

Most terrifying to a hiring manager should be hiring ‘B players.’ They’re the ones that you’re not sure you can fire, and not sure they deserve it, but they’re subtly underachieving compared to what an A player would deliver.

B’s are tricky. They “hang on,” Mandel says. “They bat .270 and don’t make any errors in the field, but they can’t help you win the pennant. They cheat you from achieving all you could. Even worse, you probably won’t know what you failed to achieve — all because you had a B player with whom you were comfortable, in a job where you could have had an A.

The impact of an A player over a B player is variable by role and industry. This was one of the genius insights of Steve Jobs that gave Apple it’s incredible strength-to-size ratio. Here’s Steve’s answer when asked about the talent that he consistently brought to Apple, NeXT and Pixar:

The key observation is that, in most things in life, the dynamic range between average quality and the best quality is, at most, two-to-one. For example, if you were in New York and compared the best taxi to an average taxi, you might get there 20 percent faster. In terms of computers, the best PC is perhaps 30 percent better than the average PC. There is not that much difference in magnitude. Rarely you find a difference of two-to-one. Pick anything.
But, in the field that I was interested in — originally, hardware design — I noticed that the dynamic range between what an average person could accomplish and what the best person could accomplish was 50 or 100 to 1. Given that, you’re well advised to go after the cream of the cream. That’s what we’ve done. You can then build a team that pursues the A+ players. A small team of A+ players can run circles around a giant team of B and C players. That’s what I’ve tried to do.

Onboarding

Hiring doesn’t stop when the ‘who’ decision is made. However, this Edition of Evergreen Business Weekly does. We’ll dig into onboarding as a separate topic. If you aren’t signed up to receive emails when new Editions come out, please share your email here.

More Resources

Not every awesome resource finds a home within the Edition. Here are more great suggestions as further reading.

How to Interview a Programmer by Bill Venners, from Aaron Wolfson

How I Hire Programmers by Aaron Swartz, suggested by Aaron Wolfson.

What is wrong with the hiring process [Quora] suggested by Shay Colson.

The one-question interview by Bob Baxley.

The Checklist Manifesto, by Atul Gawande.

Why unqualified Candidates get hired Anyway, by Anna Secino.

How to Start a Startup, Lecture 2 by Sam Altman. (Also a Podcast)


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Thank you

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Never Enough

As my Father always says: “There’s always room for the best.” There’s always a better resource out there. These collections can always get better, and I hope that they do. If you can think of anything that was missed, I welcome you to share it.

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Here’s all of the previous Editions of Evergreen.

Inspirations

This Edition of Evergreen, along with all of my others and the ideas behind this project, are inspired by the excellent content created online every day. To name a few that hold particular places in my heart:

If you liked this, check out other Editions of Evergreen:
Building and Managing a Team:
How to Find and Recruit the Team you Need
How Not to Hire like a Clownshow
Compensation Rules Everything Around Me
Why Employee Onboarding is holding you back
How to Boost Employee Retention
Secrets to Perfecting Organizational Communication
How to Fire an Employee
Strategy and Competitive Advantage:
How to Master the Craft of Strategy
Competitive Advantage: How to Build a Winning Business
The Power of Network Effects
How Cost Leadership Builds Powerful Businesses
Why the Best Brands Stand Out
Building the Business:
How to get good business Ideas: Mental Alchemy of Ideation
Product/Market Fit: What it really means & How to Measure it
How to Failure-proof your business with Customer Development
How Strategy and Psychology Work Together to Perfect Pricing
The Most Important Equations in Business - CAC (Part 1)
The Simple Math Behind Every Profitable Business - CLV (Part 2)
How Psychology behind Word-of-Mouth Works
The Secret Core of Every Successful Business--Distribution
The Most Important Lessons in Sales
How to be a Great Employee:
How to Start a New Job: Handling Career Transitions like a Boss
How to Master the Discipline of Product Management
I've also written about How & Why we started Evergreen:
How a prototype's failure created the next iteration
Mission & Method of Evergreen
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