As you know better than anyone, the entrepreneurial environment has changed dramatically in recent years. It doesn’t matter whether you’re a sole proprietor working out of your home, a hot tech startup, or an old-fashioned brick-and-mortar business. The world around you is significantly different, and if you don’t respond and adapt, you’re going to struggle.
Moore’s Law, formulated in 1965 by Gordon Moore, the co-founder of Intel, was prescient in its prediction that the number of transistors in an integrated circuit would double about every two years. The larger meaning of the prediction (which has proven to be accurate) is that technological speed increases exponentially. As an entrepreneur, you are well aware of how technology has affected your business. It has brought in new and sometimes unexpected competitors (you’re competing with a small company in China that sells to your market via the Internet). It has created all sorts of new selling opportunities for you via social and mobile tools.
While these changes are numerous and varied, they have one overarching effect on entrepreneurs: Hiring the right people in the right way is crucial.
You may be skeptical about how much recruiting has changed, and whether you really need to custom-fit talent to your organization or accept only individuals whose values and work styles are compatible with your company’s culture. Perhaps you’ve experienced a significant amount of success in the past because you came up with a great product or service or hit upon an innovative strategy. I’m not telling you those things aren’t important. I’m telling you that they have become less important than people, and that your entrepreneurial mindset may be causing you to doubt this statement.
How do you define yourself as an entrepreneur? If you’re like many people who lead startups or are founders of other types of enterprises, you possess some if not all of the following traits:
Ambition
A strong belief in the company, product, or service you created
Self-confidence
A near-obsession with financial issues
Pragmatism
Trust in instincts
I’m not knocking these traits; they probably helped you build your company. But they also predispose you to focus on individual effort rather than a team approach. They convince you that your ingenuity or the greatness of your product or idea can help the company succeed in the long term. And they cause you to prioritize strategy over recruitment, training, and teamwork.
In his book, The Hard Thing About Hard Things, Ben Horowitz, a Silicon Valley entrepreneur turned venture capital investor, talks about how tough it can be to start and run your own business. Horowitz has found that entrepreneurs take on an enormous amount of work as well as an enormous amount of stress. As a result they focus, sometimes myopically, on putting out fires and getting work done through bursts of superhuman effort. Unfortunately, they are so consumed by these tasks that they fail to pay much attention to other ones, such as hiring people who could make it easier for them and help the company become more successful.
Are you this type of entrepreneur? Answering three questions will help you make this assessment. Here’s the first one:
Do you think HR is a core process that will make or break the company?
The odds are, you view HR as a secondary function, a way to deal with difficult employees, handle legal matters (i.e., meeting equal opportunity requirements), and fill out forms. You, like many small business owners, see HR as a necessary evil—you know that if you need to involve HR in a business issue, then there’s a big problem (like an employee lawsuit). So you have a reflexively negative perspective on human resources.
At the same time, many entrepreneurs are involved in traditional HR process—your HR people may conduct initial employee interviews, for instance, but you’re the one who makes the key decisions, especially when it comes to your executive team; and you make those decisions by the seat of your pants. HR, then, does the grunt work, but you or another executive handle the “business” side of human resources.
Here’s the second question to determine if you’re the traditional entrepreneurial type:
How important do you believe culture is to the company’s success?
I don’t mean culture as in having an employee game room with ping pong tables and arcade games or putting signs on the wall like “We’re All in This Together.” These are superficial aspects of culture. Culture is really about values and the types of behaviors that are consistent with these values.
In fact, recruiting for values fit can do more than help your company grow; it may very well allow it to survive disaster. Consider the case of TriNet, a world leader in cloud-based provision of HR services such as payroll, benefits, and employer compliance. TriNet was founded in 1988. By 2000 it had grown to a company of more than 350 employees and was about to go public. Then the dot.com bubble burst. Not only did TriNet founder Martin Babinec have to shelve the IPO post road show, but as revenue plummeted, he had to reduce staff by more than half. The key to surviving what Babinec calls the company’s “nuclear winter”? Being able to retain TriNet’s best, most highly skilled talent in every division. Even in tough times, these folks were extremely marketable and could have chosen to jump ship. But they believed in TriNet’s values and its mission, and they stayed—allowing the company to survive and rebuild as the company rebounded, leading to a successful New York Stock Exchange initial public offering in 2014 and continued growth as a public company today.
Nonetheless, many entrepreneurs don’t esteem culture as highly as they do product development, strategy, customer service, finance, and other functions. It’s not that they discount culture; even entrepreneurs in the past sought to create a “family atmosphere” in their companies. But they see culture as a luxury, and the other aforementioned functions as necessities. For these entrepreneurs, culture is all about having a good working environment. But they see it as important for morale, not for business results.
And here’s the third question:
When push comes to shove, do you feel that you alone are responsible for the company’s success?
Entrepreneurs need their egos. You must possess chutzpah to be an entrepreneur, to take the risks necessary to succeed. For this reason, it’s not unusual for some company founders to believe that they and they alone can save the company when it’s in trouble or grow the company when opportunities present themselves. Yes, they value their employees, but they know the business better than anyone and they alone possess the experience and expertise necessary to make the tough decisions and to evaluate what risks are worth taking.
If you answered yes to any or all of the questions, welcome to the club. This entrepreneurial mindset is pervasive and served companies well for years. Today, however, things have changed. Let’s look at these three factors and how a new mindset is necessary to succeed in a changing world.
This subhead is a great bumper sticker that all entrepreneurs should stick on their cars. As company after company is discovering, culture isn’t a “soft” asset but one that translates directly into productivity and profits. If you are skeptical, think about the world’s best companies: Apple, General Electric, Johnson & Johnson. All of them have strong cultures, and all of them recruit and promote people whose values and behaviors align with their cultures.
In entrepreneurial businesses, culture has become equally critical for success. If you look at startups, you’ll find that the most successful are the ones that have strong cultures. Salesforce, Facebook, Google, Amazon and others have well-defined cultures and recruit people whose beliefs and behaviors are aligned with these cultures. They do this not because they want to work with people who think and act alike (in fact, they value diversity of ideas and personalities) but because they know that values-consistent cultures create highly profitable companies.
Why is that? Think about a fictional company called Klingon, Inc. If you’ve ever watched Star Trek, you know that Klingons are a highly aggressive race of warriors. So Klingon, Inc. may have the opportunity to hire as their CMO one of the most skilled marketing people on the planet (or planets) who during interviews suggests a marketing strategy that strikes the Klingon leaders as brilliant. But this “ideal” candidate who meets all the specs happens to be a nice guy—he’s very laid back, believes in participative decision making and reaching consensus before taking action. If he’s hired, he will be a disaster for Klingon, Inc. because his values are antithetical to those of the culture and the Klingon CEO. He will create all sorts of dissension if he’s hired, and his poor fit with the culture will subvert whatever marketing contributions he might make.
In the past, companies could live with cultural misfits; entrepreneurial organizations often did. You probably are aware of family businesses where internecine struggles between family members created all sorts of problems—decisions reversed, favorites played, nepotism entrenched. Yet back then, there was a greater margin for “error.” Competition wasn’t as fierce, and companies with good capital resources and strong products and ideas could overcome an inconsistent cultural composition.
Today, as I outlined in the introduction, financing is plentiful for many reasons—venture capital, low interest rates and so on. Great products and ideas are also abundant, due in large part because of the speed of information and how innovations can be identified and reproduced faster than ever before.
So entrepreneurs need a competitive advantage, and that advantage is a group of people rather than a strong individual at the top. I’m not discounting the value of a strong leader; I’m just suggesting that it’s no longer enough.
The most successful startups are often the ones with great, value-consistent teams. Many times, founders create these teams organically; they recruit college friends or other colleagues with whom they share similar visions and work styles. Though they’re not consciously trying to create a startup where people share the same mission and values, they do so based on their “natural” recruitment methods. As a result, these startups move forward with astonishing speed and success. They don’t get bogged down in counterproductive clashes over how to get things done or in arguments for different agendas. They may (and probably do) have different personalities, skills, and ideas, but they are working in alignment and adding magnitude to their vector because they are all of one mind.
Napoleon Hill, author of Think and Grow Rich and other books, talks about how when two brains come together, this melding of minds creates energy; it is the concept behind Mastermind groups, teams of people who rely on “collective intelligence.” Michael Leavitt, former Utah governor and former head of the Environmental Protection Agency and Health and Human Services, co-author of Finding Allies, Building Alliances, wrote about the need for collaborative effort in the twenty-first century; how the world has become more global, more interconnected and more competitive, favoring agile groups of people with “collaborative intelligence” over the old pyramid and command-and-control structures.
What all this boils down to is that entrepreneurs who recruit the right people will succeed while those who recruit the wrong ones—or who try to do everything themselves—will fail. No less an entrepreneurial guru than Dan Sullivan espouses recruiting as a critical entrepreneurial skill, and he cites a historical example to make this point. Sullivan, founder of Strategic Coach and someone who has provided insightful advice to small business owners for years, views Thomas Edison as the prototype of the modern entrepreneur. When I talked to Dan, he explained, “[Edison] set the model for an individual who is self-made, who comes up with an idea, knows how to organize himself, knows how to put teams [together], knows how to attract investment, knows how to package it, knows how get it out to the marketplace.” Right in the middle of reciting this list, Sullivan said that Edison knew how to attract talent and assemble teams, and that’s one of the things that made him a giant.
Too often, though, we neglect developing and using this skill, as the following example illustrates.
Kevin was the founder and CEO of a New York City–based online marketplace that was one of the fast-growing small companies in the city. Kevin was a great strategist and his previous two startups had also done well, but this one was really taking off, and he needed to add people quickly to keep up with the rapidly expanding business. Kevin, a disruptive innovator, had a grand vision of what his company could be, and he knew that time was of the essence if he wanted to realize it.
The most critical hire he needed to make was for COO. To build the company’s infrastructure, people, and processes for scalable growth and to ensure they hit the metrics necessary for the next round of venture funding, Kevin needed to find a COO who was experienced and skilled at these tasks. To find this individual, Kevin contacted a large search firm. Kevin had a connection with one of the firm’s partners, and he told him it was critical that they conduct the search as fast as possible to find the individual his company required. The firm partner assured him that they were capable of moving quickly, and within a week they presented a group of candidates to Kevin.
What Kevin didn’t know was that the senior partner had assigned the search to a junior partner who was overworked; and that the junior partner was engaged in Level 2 recruiting, which as you’ll recall, involves candidates who are available and convenient. In this case, they were people who were “leftovers” from other searches the firm had conducted.
Still, the list of people they presented to Kevin seemed qualified for the position: They had the experience and skills to meet all the job specs. After interviewing the three most promising candidates, Kevin hired Phil, who seemed to have a bit more experience than the others.
Phil lasted three months. Part of the problem was that he was methodical and cautious, and Kevin was driven by a desire to get things done immediately. Another part of the problem was that Phil didn’t share Kevin’s vision for the company (even though he indicated in the interview that he did). Phil thought Kevin was a dreamer, that he would bankrupt the company if he moved forward as quickly as he planned; Phil assumed that Kevin would come back down to earth when Phil presented him with a cost study he was making of Kevin’s expansion plan. And Phil was a reserved, quiet guy who didn’t tell Kevin everything he needed to hear; Phil’s communication style drove Kevin nuts. And so they parted ways after three months, requiring Kevin to launch another search for a COO and invest even more time in a task that Kevin wanted completed yesterday.
You don’t have to be a Type A personality like Kevin to want things to be done yesterday. Entrepreneurs live in a world where there is intense pressure for performance. Startups have venture capital people or angel investors wanting a return on their investments—and wanting that return sooner rather than later. Every small business is operating with tighter deadlines than in the past. Even a “sleepy” family business has new competitors; the market leader in their industry who ignored them for years and allowed them to occupy their niche now is eyeing their market and wanting a piece of it.
Even when deadlines aren’t imminent and scary, it feels as if they’re looming. Data creates a psychological fear of the ticking clock. Every day, we receive information on our devices about competitors, about mergers and acquisitions, about the economy, about new government regulations. All this creates a sense of urgency—we need to act now before it’s too late.
This mindset affects entrepreneurial decision making in many areas, but especially when it comes to hiring. Many entrepreneurs are in a rush to fill a position. Whether it’s a waiter, an administrative assistant, an accountant, or an executive, they are more interested in speed than accuracy. They prefer to have someone competent in the short term than wait and find an employee who will pay dividends for many years.
As you read this, you may be thinking: “Dave doesn’t understand. Every day I don’t have someone competent in this job, I’m losing money. It would be great to have someone who would be a productive employee for the next ten years, but I have to be practical.”
But being practical today means adopting an abundance mentality rather than one of scarcity. When entrepreneurs stop thinking as they did years ago—that they were one mistake away from bank-ruptcy—and recognize that numerous options and opportunities exist, then they can free themselves from this belief that beggars can’t be choosers and they must make the first decent hire they can.
Author, speaker, and entrepreneur Peter Diamandis writes about this world of abundance, and he makes a convincing case that things are getting better, not worse. He cites many statistics demonstrating that people are more educated, are living longer, and are less violent than years ago. But he also makes the case that the news media creates the perception that things are getting worse: He calls CNN the Crisis News Network because of their focus on death and destruction around the world.
Many entrepreneurs share this negative perception, and it convinces them that:
1.There aren’t many good people who can do this job.
2.I should hire the first one who seems capable of doing it.
3.If I wait, I might not find anyone or I might have to hire someone who isn’t very good.
This is akin to the twenty-five-year-old guy who decides to marry the first person who shows any interest in him because he’s convinced there aren’t many good marriage candidates out there and if he waits much longer all the good ones will be taken and he’ll go through life as a bachelor.
Yes, the clock is ticking, time is money, and all that. But I would argue that we live in an age of abundance—especially people abundance. Consider that we have this incredible incubator system for entrepreneurs that we never had in the past. The proliferation of startups has produced the perfect training ground for all types of functions and positions. Startups prepare people to take risks, to be agile in their thinking, to innovate. These are skills critical to any entrepreneurial enterprise, and people are acquiring them in startups all over the United States as well as in other countries.
Second, we’re seeing more business schools providing formal education for entrepreneurs. Northwestern University, for instance, has the Farley Center for Entrepreneurship and Education, a highly regarded entrepreneurial training program. Other universities also have launched entrepreneurial divisions of their business schools or at least offer courses in entrepreneurship. In fact, if you go to https://www.princetonreview.com/college-rankings?rankings=top-25-entrepreneurship-ugrad, you’ll find a list of the top entrepreneurial business schools as ranked by the Princeton Review testing service, including a wide range of universities with an even wider range of entrepreneurial offerings.
Third, the best and the brightest no longer want to work at Fortune 500 companies. Many of the people graduating from the top business schools are seeking jobs at startups or hope to join other non-technological small businesses (or start their own). Similarly, a significant percentage of employees are leaving big corporations hoping to land at smaller enterprises that offer greater opportunities to be creative and to have more flexible work environments.
Obviously, it’s more difficult to fill some roles than others—if you are looking to fill a leadership position in a company with a distinct culture and you require an unusual mix of skills, then you’ll have a smaller pool of candidates than for other positions. Even then, though, you can find the right people if you look the right way. But before addressing what the right way is, we need to understand the concept of alignment and how it helps take companies to the next level.
When I talk about alignment, I’m not suggesting that entrepreneurs hire people who all think and act alike; that would be a disaster. You need different personalities from different backgrounds to create a diversity of ideas. Creative friction on teams is great. The type of alignment to which I refer involves mission and values.
Consider how quickly entrepreneurial organizations grow today relative to how they used to grow. How long did it take IBM to move from inception to a billion dollar business? The correct answer is sixty-eight years. Relatively recently, it took Facebook nine years to become a billion dollar company. Even more recently, Instagram hit the billion dollar mark after only nineteen months of existence.
It is not possible to grow this quickly without everyone being on the same page in terms of where the company is heading and the cultural behaviors that are acceptable and unacceptable. There’s no time to deal with serious value conflicts. If some people are acting in ways that others feel are unethical, the divide can easily destroy the company—or at the very least create the types of dissension and morale issues that stop them in their tracks.
When people are in alignment, on the other hand, meetings are short, consensus is usually achieved after some discussion and debate, and people are all working toward the same longer-term goal in ways that are consistent with the company culture. In these companies, people don’t waste time playing politics or pursuing their own agendas. Instead, they can bypass a lot of the red tape and act with amazing speed and agility. They don’t have to waste time with committee meetings and approvals and filling out lots of forms. When they operate with a sense of shared mission and values, they know exactly what they have to do and how to do it.
To achieve alignment, entrepreneurs should focus on recruiting people who possess TSNL potential—they can Take Stuff to the Next Level. This means they’re not just getting work done, but they’re getting it done in ways that synch with the company’s culture and mission. It means they are accomplishing goals in ways that are consistent with what the company believes in. For instance, they aren’t just doing a transaction with a supplier but creating a long-term relationship that will benefit both parties. Or they aren’t just telling their team members what to do but helping them learn and grow in the process.
TSNLers are capable of getting things done horizontally and vertically. They don’t just do stuff; they do stuff in ways that amplify the company culture and pave the way for quantum leaps.
This is the plus of hiring the right people. Just as important, though, is that the more right people you have, the more wrong people you avoid. Think about your current workplace or companies for whom you’ve worked in the past. Invariably, there are employees who are good at their jobs—they have all the skills their position requires—but who alienate their colleagues for any number of reasons: They humiliate their subordinates, they are loners who can’t communicate well, their ethics are questionable, they are arrogant, and so on. Needless to say, they don’t function effectively on teams. While they may be able to accomplish necessary tasks in the short run, they do little to foster the values or further the mission of the company.
Here and in the Introductory chapter, I’ve suggested a number of factors that make hiring the right employees a priority today, including the need for people who can perform well on teams, who can achieve the company’s mission rather than just do the job, and who can provide a next-level edge in an increasingly competitive marketplace. But I’d like to expand on these factors or at least translate them into language that will resonate with all different types of entrepreneurs.
To that end, there are three reasons that you require a process to recruit people who fit your company (rather than hire people who only meet the job specs):
It doesn’t matter what type of business you have—hot dog stand or hot tech company—you know that significant mistakes today have much more serious consequences than years ago. That’s because mistakes are magnified by technology. For instance, you hire someone who sexually harasses another employee. The harassed employee files a lawsuit, and social media spreads word about the lawsuit. You’re in danger of losing customers who hear of the suit and want to know what kind of company you’re running that permits this type of behavior. Or perhaps the mistake involves a product recall—one of your developers dropped the ball and failed to perform enough tests to get all the bugs out before the product release. Again, social media spreads the word about this recall with astonishing speed and your stakeholders are upset; you’re in danger of losing a major source of funding.
In entrepreneurial companies years ago, a greater tolerance for these types of mistakes existed. Back then, you might have been able to assuage the offended employee and prevented a lawsuit or recalled and reconfigured the flawed product without the whole world knowing about it. You had more time to fix mistakes and you had less competition to take away your disappointed customers.
If you hire the right people, they increase the odds that you won’t make these types of mistakes. They may take risks and fail, but they understand the parameters—what is acceptable failure within your culture and given your mission and what is unacceptable.
In the past, entrepreneurs could make a nice life for themselves and for their families by creating a small business and adopting an informal “maintenance” strategy: The company delivered a nice little profit year after year but the founder usually took few risks and was content to maintain the status quo. This strategy is increasingly difficult to sustain in a time of increased competition, higher costs, and rapid rates of change.
Most startups adopt a de facto growth strategy from their inception, and other entrepreneurs are doing likewise. Most entrepreneurs no longer dream of increasing profits incrementally from one year to the next. Instead, they dream of franchising their initial concept; or moving from local to global; or of identifying and tapping into emerging markets; or transitioning from a brick-and-mortar business to a digital one. To chug along with marginal profits year after year or to try and maintain the same product mix, marketing, and so on annually is a much tougher challenge today than years ago. Entrepreneurs need and want to grow, and you can’t grow organically without people who fit your company.
Remember our discussion of alignment. You need people who are aligned with your mission if you want to become a bigger and better company. They are the ones who won’t just meet deadlines and accomplish tasks but will do so with a larger purpose in mind. They will help grow their own direct reports so they can add more value in the long term. They will forge relationships with suppliers, customers, and other stakeholders that will lead to better opportunities.
You need people who are not only thinking about the task at hand but who are thinking ahead. They’re the ones who will help you evolve rather than just maintain what you have.
Two heads are better—and faster—than one. Entrepreneurs are often one-person gangs. If you’re the founder of a small company, how many times have you been frustrated by how slowly your people seem to be working and said or thought, “I can do this faster myself.” Individual effort has always been a signature of entrepreneurial companies. Rugged individualism—whether on the part of the CEO or her people—has been the type of behavior encouraged historically. The employee who works over the weekend or through the night to finish a project is a small business hero.
But if speed is the goal—and it often is in a volatile, ultra-competitive marketplace—then businesses need people who can work well together. Teams of employees who are attuned to their company’s culture and long-term goals can operate with remarkable speed. They don’t have to keep knocking on the boss’s door and asking permission for this and that. They recognize what “growth hacks” are acceptable with their culture. They are willing to sacrifice their egos for the greater good—this means that they don’t slow up progress because they’re pursuing their own agendas. Perhaps most important of all, their alignment helps avoid the sort of conflict that turns one-hour meetings into endless debates. They all recognize the end goal and how to achieve it, and so they don’t get bogged down in the types of personal feuds and obstructionist tactics that prevent quick decisions and action.
Once you’re convinced of the value of fit, you need to think about the next recruiting issue that is very much a product of our current environment: the challenge of prying the right person out of a current—and often very good—job.