Many entrepreneurs will admit to hiring mistakes, but they aren’t always aware of the cause of these mistakes. With hindsight, they recognize that they settled for a second-tier candidate when they might have attracted a top-tier one; or that they hired someone who was qualified for the job but not a good match for the company; or that they assumed that they’d attract a slew of great applicants but instead attracted a lot of mediocre ones.
Even the smartest entrepreneurs make these mistakes because they’re easy mistakes to make. If you’re not fully invested or lack experience in the recruiting process, then you will probably hire the wrong person.
This lack of experience and investment makes you vulnerable to recruiting myths—myths that have gained traction over the years among all types of entrepreneurs. Two myths in particular cause entrepreneurs to make hiring mistakes:
•The Myth of Greatness: Our company is so terrific, our products and services are so amazing, that the best and the brightest will be falling all over themselves to apply for our job openings.
•The Myth of Smallness: Our company is relatively insignificant compared to the larger companies or the market leaders; none of the top candidates would want to work here.
As you can see, these two myths are opposites, and entrepreneurs often recruit under the influence of one of them. Let’s examine how this is so.
Sam graduated from a top business school and spent a few years working for (and doing well at) a large Silicon Valley company before he decided to strike out on his own. Partnering with two fellow business school graduates, they came up with an app that their mentor—a well-known business school professor—told them was one of the best new products he’d seen in years. Sam quickly found angel investors who put a significant amount of money into the company, and the buzz in Silicon Valley was that Sam’s company might be the next big thing.
Needing to staff up quickly, Sam put the word out (through his contacts as well as via Internet job sites) that he was hiring, and he assumed that he would be inundated with calls from the best engineering, marketing, and finance people in the Valley. In fact, he received a much smaller than anticipated response, and most of the applicants lacked the skills and experience Sam required. He did receive an application from one individual who did possess these skills and experience, but when Sam pitched her on the benefits of receiving a certain amount of equity in the company (to compensate for the relatively low salary) this candidate quickly said she wasn’t interested.
Sam’s launch was delayed by almost a year. During that time, Sam had to do another round of fundraising among investors to gain additional funds for salaries. He also had to hire an outside recruiting consultant to do the hard work of searching for, finding, and selling key people on joining the company. As a result of the delay, two other competitors with similar apps entered the marketplace ahead of Sam, and as of this writing, he’s still playing catch-up.
With hindsight, it’s easy to see that Sam bought into the myth of greatness. In his small pond, he was a big fish. Based on the encouragement of his professor, his partners, and the Silicon Valley grapevine, Sam was convinced that top people would beat a path to his door. Like some other entrepreneurs who experience initial success, he was convinced that much greater success was assured and that others would feel likewise.
Now consider Terri. After college, she worked for a series of retailers in sales and did well, being promoted to regional sales manager for one national chain. Then she took some time off to have children and decided to go back to work when her kids were entering high school. Her goal was to start her own business: She wanted to start a service that provided new moms with support and a variety of services during the first year of their babies’ lives. Terri did her research, became certified as a doula, and enlisted a few friends in her project. She combined personal home visits with home-baked meals and a website that only subscribers to her service had access to.
The business started slowly, but after almost two years, Terri had more business than she could handle—mostly from word-of-mouth in her suburban town. A friend of her husband’s was a consultant, and when he heard about what Terri was doing, he suggested that she consider expanding the business throughout the metro area. He created a business plan, brought in some investors, and explained to Terri that she needed to hire a few people, especially a marketing manager (promoting the business via digital and traditional media was central to his plan).
Terri placed an ad for a marketing manager, but she was less than impressed with the candidates—most of them either lacked sufficient experience or the type of knowledge she was sure was essential for success. What she really wanted was to hire someone who had helped a small business expand regionally through a savvy marketing strategy. But rather than expand her search, Terri settled for a candidate who she liked and thought would be fun to work with, even though he lacked the drive and savvy that Terri had hoped for.
For Terri, the myth of smallness made her aim too low. She convinced herself that her business was too insignificant to attract the candidates she wanted. Plus, she knew she couldn’t pay them the salary that she assumed they’d demand. Rather than test the waters and develop a plan to make a critical hire, she settled for a lesser candidate.
For Terri, Sam, and millions of other entrepreneurs, these myths have a powerful hold on their thinking. I understand that it’s a natural result of their entrepreneurial experiences. But to do a better job of bringing in the right people, they need to broaden their perspective.
Many small business owners like Terri view their ability to attract talent with skepticism. Consider the typical owners of local plumbing businesses. It may be a good business that provides the owner with a nice living, and it probably grew slowly but surely over the years. When the owner had to hire people, he usually leaned on his network of friends and family; his Uncle Joe had a cousin who knew someone who wanted to get in the trades. So the owner naturally draws from this network when he has to hire someone.
But what if this plumbing business had an opportunity to grow in a much more significant way? What if the owner had developed a specialized method of basement waterproofing that was more effective and less expensive than other methods on the market? If she wants to grow and scale this business, it’s unlikely that Uncle Joe will have a cousin who can help her. To find the people who not only possess the necessary expertise and experience but who share this plumber’s mission and values, the search must expand beyond a limited network. Unfortunately, this plumber may not think in these terms; she may believe that the individual who helped her develop a yellow pages ad will be equal to the task of developing a regional advertising campaign. Or, of even greater concern, she may not even consider how a potential job candidate might contribute to a growing company’s culture; how a managerial candidate might grow and develop young people, model ways of working for others, deal with conflict, and so on. These qualities may not be matter when it’s a three-person local shop, but if an entrepreneur has a bigger vision, then they’re vitally important. If these entrepreneurs are burdened by the Myth of Smallness, they won’t think to search beyond the borders of their experience.
Being positive and proactive about your ability to recruit is an antidote to this myth. Irving Grousbeck has taught at Stanford Business School for over thirty years and has probably done more than anyone to bring entrepreneurial studies front and center in the business school world—helping shape countless business leaders and enterprises in the process. In Grousbeck’s estimation, if entrepreneurs find themselves needing to fill key managerial roles and they lack internal candidates, they haven’t been doing a very good job as leaders.
To avoid this problem, Grousbeck believes in recruiting for “upside potential”—people who can expand their responsibilities as the company grows. To do so, however, you need to possess the confidence that high-potential people will want to work for you; that they’ll be willing to join your company not because you’re offering them the best compensation package or the most prestigious company name but because your goals and values resonate with their own.
At the other end of the confidence spectrum, we find a different type of limited perspective. Some people—especially relatively young entrepreneurs in hot sectors like technology, food, and fashion—have enjoyed a great deal of early success. They’ve done well in school, obtained a terrific first job, were seen as fast-trackers and then opened a business with lots of financial, mentor, and peer support.
Their perspective is limited by two factors. First, they are focused solely on outward signs of achievement—the schools people went to, the organizations they’re members of, the awards they’ve won, the successes they’ve enjoyed. As a result, they only want to hire people who have achieved in these ways—people who are mirror images of themselves. Second, they can’t imagine that potential job candidates would view their businesses differently than they do. For most of their adult lives, people have showered them with praise, and so they are convinced that others will immediately gravitate toward their vision of their companies.
As a result, they either are turned down by lots of top people or look for the wrong types of employees. The Myth of Greatness convinced them they need to load up on expertise and they don’t need to be concerned if a candidate fits their culture and mission; and they are blind to how top candidates view them and their companies.
Beware of the three lies entrepreneurs tell themselves:
1.We’re the hottest game in town.
2.We hire the best people.
3.We have the best culture.
These lies all feed the Myth of Greatness and create dangerously narrow perspectives. They make you feel like the only hires worth making are creative geniuses and charismatic characters; you’re more like a casting director going for a certain look rather than substance. I knew an entrepreneur who told me that he wanted to hire “fun” people. His tech company reflected that desire: He had more video games than many arcades, no set hours for employees, and an open, laid-back culture that encouraged a free exchange of ideas. It was a fun place to work, but it went out of business two years after it made an initial splash in the marketplace.
I’m not against fun, but if it’s all play and little work, then a company isn’t long for this world. That’s especially true if recruitment prioritizes fun qualities—humor, adventurousness, coolness—over industriousness. While successful entrepreneurs may attribute many factors to their success, they all consistently hire industrious people—individuals who work hard, produce a lot, and generate results. Perhaps more to the point, they aren’t limited by their own sense of superiority. They get that the work has to get done for the company to achieve its objectives, so they’re open to any candidate who looks like he or she can execute.
Under the influence of a myth, entrepreneurs can make what seem like sound hiring choices but in fact are bringing in underperforming employees at best and saboteurs at worst. I’ve touched on some of the mistakes earlier, but it’s useful to highlight them here so that you have top-of-mind awareness of what they are.
•Underbudgeting for a key position. The thinking goes, “There’s not much point in spending a lot to fill this job, since even if we somehow manage to land the best possible candidate, she’ll probably leave as soon as she gets the chance.” Many entrepreneurs have cost-containment mindsets, and while you certainly need to keep costs under control, skimping on key people is a big mistake. If you have a growth mindset, you are willing to pay a market-competitive price to bring in a significant hire who can help the business expand.
•Settling for competence. Here, entrepreneurs believe that anyone with adequate skills can do the job, seeking competence when they should be striving for greatness. Entrepreneurs need at least some employees capable of going beyond competence, who are motivated to take good risks, to test innovative ideas, to work zealously to achieve stretch goals. But if you’re thinking only in terms of competence, you’re not going to attract potential high achievers in your recruiting efforts.
•Failing to sell the company to top candidates. Entrepreneurs usually are excellent salespeople, but of ideas, products, and services rather than their companies. With the Myth of Smallness dominating their perspective, they don’t court top candidates; they don’t communicate their vision for the company with passion and eloquence; they don’t make a convincing case that a highly talented individual should leave a good job for a potentially great one.
•Choosing control over profit. In The Founder’s Dilemmas, Noam Wasserman distinguishes between people who are motivated by control versus profit. Entrepreneurs under the influence of this myth tend to choose control over profit. They prefer the security of smallness, of having control over every aspect of a business instead of ceding control to others in order to grow and become more successful. Therefore, they hire people who they know they can control rather than individuals who are leaders and who are willing to voice ideas and take the company in directions that are different from the companies’ founders.
•Winging it. When entrepreneurs are overconfident without cause, they believe they can spot a great hire instantly and instinctively. As a result, they lack a process for identifying which candidate would be a good fit for the company, both in terms of skills and values.
•Bringing in the clones. Many entrepreneurs hire people who possess similar backgrounds, personalities, and interests as themselves. These entrepreneurs want to surround themselves with like-minded employees, people who are fun to be around and who make good first impressions. The entrepreneurs have big egos, so they want employees who are chips off the old block. This is the fraternity president style of hiring, where the “cool kids” are offered membership and the freaks and geeks are excluded. This is very different from hiring people who share similar values, since people can have the same beliefs and mission as an entrepreneur but have wildly different personalities and ways of working.
•Paying too much for too little. Convinced that huge success is around the corner, some entrepreneurs don’t mind spending a lot of money for a key hire. The problem: They’re buying reputation and skills rather than fit. They may get someone who is excellent at a given set of tasks, but if the fit isn’t there, the hire may leave after a short tenure. Even worse, if he stays, he may create morale problems because his style may clash with the company culture.
•Failing to search long and deep enough. Impatience is a problem for entrepreneurs who perceive greatness when they’re far from it. They feel and act like CEOs of Fortune 100 companies, and as a result, they expect everything to happen immediately. For this reason, they don’t take the time to seek out, assess, and spend time with job candidates. They choose the first person who strikes their fancy rather than waiting for the person who is right for the job.
Awareness of these myths goes a long way toward preventing them from damaging the recruiting process. Awareness alone isn’t enough, however. I’ve worked with entrepreneurs who are aware that their sense of smallness or greatness is affecting their decisions as leaders, and as much as they may resolve not to let their ingrained viewpoints shape their actions, their resolution can diminish over time.
Therefore, let me offer you some suggestions that will help you counteract the power of these myths, first for the Myth of Smallness:
Calculate the value of a great hire in a key position. I’ve found that entrepreneurs are willing to spend money to hire great people when they recognize how much value—both directly and indirectly—those hires can add to their companies. Rather than commoditize the labor function, they should attach value to hiring the right person for the job.
To illustrate how this is done, consider a conversation I had with a CEO of a small tech company that was going through a rapid growth period. At the time, his payroll was $5 million, and he was concerned that if he overpaid for the new managers and specialists he needed based on their growth spurt, he might jeopardize the company’s future. I responded, “Let’s say your worst fears come true, and we overpay everyone we hire by 20 percent and your payroll goes up to $6 million. What value might you obtain in return if they’re the right people for the job?” Here’s the value we calculated:
Increased productivity by 10 percent or more, often exponentially
Fewer management problems because of their fit with the culture
Increased enjoyment being CEO (because a better fit means fewer conflicts and problems)
Increased revenue by at least 15 percent because of better expertise and opportunities to use this expertise (people perform better when they are in synch with company work style and values)
A few years later, after making the hires we recommended, this CEO sold his company for $800 million based on $25 million in revenues—more than two and a half times the multiple on a publicly traded, SaaS enterprise business at the time. This was in large part due to the investment in getting “top of the market” people he brought into his company.
Pitch the company to candidates like you pitched your products and services to customers. Most entrepreneurs have natural sales ability, but too often, they aren’t involved directly in the recruitment process or they are involved but fail to communicate their vision with power and passion. It may seem odd to some entrepreneurs to do this sort of thing—after all, you may think “I’m the buyer here, not the seller”—but sometimes, this is the only way you’ll be able to convince a top candidate to join your company. Candidates need to feel a kinship with you, a belief in what you’re trying to accomplish and feel that there’s a natural affinity between themselves and your mission. When they feel that, they’ll have trouble saying no.
Be willing to hire people who know more—or different things—than you do. If you’re thinking small, this is a scary suggestion. You lose a measure of control when you become dependent on someone else to help the company grow and prosper. At the same, you gain an invaluable resource for the company, both today and in the future. If you want to scale and grow, you probably need at least one person who has done what you haven’t, who can fill in the knowledge blanks. Most entrepreneurs I know love to learn—to master new areas of the business. Think of the person you hire as not just an employee, but as a teacher. As much as the new hire can learn from you, you also can learn a lot from her.
Here’s how to counteract the Greatness Myth’s effects on hiring:
Focus on execution. More specifically, vow to hire people who are brilliant at getting things done rather than those who look great on paper, possess great bravado, and seem like they’re smarter than everyone else. Some people talk a good game and others possess terrific track records and reputations, but entrepreneurs much more so than big corporations need people who can meet deadlines, implement strategies, and achieve stretch goals. Don’t be impressed as much by personal style or how someone presents himself as by his ability to execute. When you interview candidates, ask them about how they managed to accomplish a difficult objective—what they did to make sure they achieved it. Note if they talk about how they cut red tape or found shortcuts around policies and procedures to get things done. In every company, there’s someone who understands how to work the company’s system—how to speed up processes, how to spot and correct mistakes, and so on. Of course, make sure their shortcuts and other execution tactics were ethical, safe, and legal. A big difference exists between finding ingenious ways to get things done versus taking shortcuts that expose a company to lawsuits, that expose people to harm, or that are morally wrong.
Emphasize candidate diversity. Don’t get locked into only interviewing people who have MBAs from top programs or who have worked for prestigious consulting firms. There’s nothing wrong with any of those credentials, but you want to make sure that you’re not ruling out people who would be great for the job except they lack a singular credential. Be entrepreneurial in your hiring—be open-minded, creative, willing to take a risk. Consider a range of candidates before making your choice.
Recognize that there’s more than one great candidate out there. I know an owner of a fast-growing retail business who was smitten with an executive vice president of a large corporation who at a conference had expressed interest in joining an entrepreneurial company. As this owner’s business grew, he became convinced that this guy was the one and only person who could help him take his company to the next level. When he offered him the job, though, the guy said it was a bad time for him to leave and he turned down the offer. The owner was devastated and couldn’t muster the energy to interview anyone else, turning the hiring process over to an assistant who proceeded to make a mediocre hire.
Over eight years ago, I made my first placement as an independent executive recruiter. An advertising technology company had raised $8 million for a travel-related startup, and they needed to hire a sales leader. They needed someone who understood the intricate metrics of digital marketing, and so we focused on finding someone from Google, since they had a deserved reputation for employing salespeople who were highly analytical and could communicate about digital marketing to CMOs. We had a thirty-day window to find and hire someone, and on day twenty-eight we made an offer to a Google executive. Though we had assumed he would take the job, he told us his wife didn’t want him to leave Google, so he turned us down. But we had other Google sales executives in the candidate pipeline who were also finalists for the position, and we called one of them. Not only was he as good as the person we initially offered the job to, but he turned out to be an even better fit: His values matched those of the startup founders, he was great at closing deals but also at growing his own people (a critical cultural requirement), and his style of working blended perfectly with that of the executive team. He took the job, was there for six years, and helped the company surpass $100 million in sales during that time.
The moral of this story: Don’t be discouraged if your first choice turns you down. There are other candidates out there who will be excellent, but you may have to dig deeper and wait a bit longer to find them.
At a certain point in the lives of their companies, entrepreneurs need to make a crucial hire. Typically, it’s at a point where the company is on the cusp of significant growth, and the founders realize they need to find someone who has capabilities beyond those that any of their existing employees possess. This is when they need to get serious about Level 3 recruiting, since odds are that the person they seek isn’t in their network. Myth of Greatness entrepreneurs are likely to choose the candidate with the most impressive resume, feeling that this is the right match for their incredible company. Myth of Smallness entrepreneurs are likely to choose the most affordable candidate who also has the experience and expertise the job requires.
Both groups of entrepreneurs, however, are likely to be blinded by competence. More specifically, they won’t assess for values because they are so concerned about a candidate’s capabilities. Again, I’m not suggesting these capabilities are of no significance. But values are crucial for long-term productivity and success, and both myths direct people toward technical competence. The small myth entrepreneur thinks, “I’ve got to compromise between a person I can afford and a person who will be able to do this job effectively.” The greatness myth entrepreneur thinks, “I deserve the best of the best, the smartest and most competent person available.”
How can you refocus attention on values? Here’s a simple technique I’ve used over the years that helps:
1.List five people you’ve worked with over the years who you enjoyed working with and who performed well within your company and culture.
2.Identify three out of the five with whom you resonated the strongest, who seemed to be attuned to your goals and beliefs.
3.Name the values these individuals shared.
4.Determine if candidates for important positions also possess these values.
Using this method will help you avoid compromising on values. It’s fine to compromise on technical chops—to take someone who may lack a certain amount of experience because she is a high-potential hire who might grow with the company or an individual who is burning to learn a new skill. But values are a non-negotiable. In fact, you want people who not only fit with your values but who can amplify them. Make the effort to interview people and search for their beliefs and motivations. What are their hopes and dreams, their goals for the future? Once you know their core values, you can not only determine if they fit your organization but you can create a vision for them of what their career and life will be like if they accept your offer. In this way, you can convince them that greatness is attainable within your company, and this more than anything else will convince them to sign on.