Chapter 11 - The Most Proven Way to Hire Well
To read:
How NOT to hire: Businesses have never been hiring as many people, nor have they ever doing it so badly, argues Wharton School Professor Peter Cappelli in this essay.
In defense of ego: Ego is the invisible line item on every company's profit and loss statement, argue authors David Marcum and Steven Smith in this excerpt from their boo, Egonomics.
To watch:
Building a workforce: Wharton School Professor Peter Cappelli explores effective ways to build a great workforce in this interview.
Chapter 11
The Most Proven Way to Hire Well
“People are not your most important asset. The right people are.”
— Jim Collins, Business author
If there was a secret to the early success of my fifth company, Bazaarvoice, in its early days, both in building the culture and energizing performance, it was that we were obsessed with recruiting. In retrospect, some 15 years, another co-founded company, and more than 100 startup investments later, our novel approach and process back then seems blindingly obvious today. Which is why we use a version of that model at data.world. What is far less obvious is why so many enterprises continue to do this wrong.
The core issues, which I’ll explore in detail, are rigor and grit. They are the force multiplier for any startup. Rigor is the difference between excellence and mediocrity in recruitment and retention. It’s also rare. Grit is the measure of determination in the person you are evaluating. This was the insight Co-founder Brant Barton and I made back in those early days of Bazaarvoice, after a stumble or two at my prior company, Coremetrics.
But to back up, the playbook for recruitment is in many respects pretty much unchanged since Dwight Eisenhower’s America, of a piece with the mass organization that established many of the categories of our lives, businesses, and thinking in the era following WWII. William H. Whyte’s 1956 bestselling and influential management book, The Organization Man, is still a worthwhile read to get your bearings on the origins of today’s hiring practices. Since then, the basics have been that the HR department puts together a job description, carves out the position’s place on the organization chart, and assigns a pay scale. Ads and announcements go out in one manner or another, and resumes and candidates arrive similarly. There are some drills, perhaps a Myers-Briggs Type Indicator or other tests. References are checked. In recent years, security checks, citizenship, and visa compliance has been added to the ritual.
And then there’s the interview. Sometimes it’s an interview in a conference room with two or three managers or executives fielding the questions. Sometimes the applicant rotates through the offices of the interviewers for one-on-one conversations. I’m pretty sure readers of this book have been asked the questions: “Where do you want to be in five years?” Or, “What’s your greatest strength and weakness?” Sometimes it will get a little more granular, as in “What makes you passionate about working here?” Or, “Do you see yourself as a team player?” As if anyone would answer no. And of course, there’s a reciprocal search for commonalities, a bit of repartee around schools attended, hobbies pursued, sports participated in, or mutual acquaintances.
I suspect this sounds familiar. We have, of course, thankfully improved our openness, engagement, and outreach to cultural, gender, age, and physical diversity — although I believe society has a lot of work remaining. But the choreography, the process of recruitment, and hiring are stuck in many ways in the era of Don Draper’s Mad Men. The only real change — and I’m not sure we should call it that — is that we’ve mechanized this choreography and in many ways disempowered our own HR departments with recruiters, AI scans of resume keywords, and digital tools like LinkedIn.
Now don’t get me wrong. As you know from my last chapter, the virtues of identifying and using natural and created networks are central to my business philosophy. And recruiters and social media tools like LinkedIn can be network turbochargers to find and recruit talent. But they don’t automatically deliver the rigor you need for a people-centric culture and motivated team.
“The recruiting and hiring function has been eviscerated,” wrote Peter Cappelli, a professor at my alma mater the Wharton School, in an essay you’ll find on the Digital Companion. “Many U.S. companies— about 40 percent, according to research by Korn Ferry — have outsourced much if not all of the hiring process to ‘recruitment process outsourcers,’ which in turn often use subcontractors, typically in India and the Philippines... To hire programmers, for example, these subcontractors can scan websites that programmers might visit, trace their ‘digital exhaust’ from cookies and other user-tracking measures to identify who they are, and then examine their curricula vitae.”
This is crude, unnecessary, and hardly a recipe for success. And I’d like to think it’s no accident that Professor Cappelli is a thought leader on this issue. Because while it was years before I fully realized why and how, it was Wharton that taught me what was to become my approach to hiring — before I’d even enrolled.
These processes that I’ve described, which are essentially sorting processes, really fuel the beliefs of many executives — especially experienced ones — that their gut instinct on people is what matters most. For those executives, I recommend you read the book Egonomics by David Marcum and Steven Smith. It too is reviewed on the Digital Companion, and it will show you why you are dead wrong.
The reality is that you must test those that you want to hire.
Many pristine, even perfect resumes will find you. Applicants will ace those questions I describe above. Many candidates will say that they are passionate about joining your company. They may well be sincere. But they don’t know that. No one knows if they are truly passionate about joining your cause until they experience it. It is all romance in the beginning. For example, when I was a teenager I thought I was passionate about learning to play guitar like David Gilmour of Pink Floyd after I became obsessed with listening to his guitar “sing.” But then I tried guitar lessons and I quickly realized it was not for me.
That experience contrasted a decade later with how badly I wanted to get into the Wharton School to earn my MBA. At the time I applied, Wharton’s MBA program was ranked No. 1 in the country and had been for the prior six years. It was very intimidating to apply. It was a daunting amount of work and the fear of potential rejection was visceral. So I prepared for two months: studying for the Graduate Management Admission Test (GMAT). I wrote and rewrote my essays countless times, with my wife Debra critiquing each and every iteration, and often telling me to start over. By the time I got to the interview stage, I had searched and scoured my soul for all the reasons not only that I wanted to get an MBA, but that I wanted to get it at Wharton. This was grit. And I got in — and it changed my life.
That experience and background of running such a long testing and preparation gauntlet to get into Wharton — that rigor — framed my thinking going forward. And in the early days at Coremetrics, which I founded in 1999, I suggested to one of our vice presidents that we should test our candidates. The VP shrugged it off, spoke of trusting instincts, and used that very lazy phrase and the excuse of a competitive job market to say we shouldn’t “slow the process down— it’s a very competitive market for talent.” I didn’t know better at the time and the VP was much older and more “experienced” than I. So I let the executive run with that plan. You’re probably guessing the pattern with this and several other employees in the months that followed. A deadline would get missed. Then two. That employee hired “on instinct” would begin to complain about the work. I’d begin wondering if we’d made a mistake. And then, with little surprise, I’d be told six months later that it wasn’t a great fit or that the employee was fired for lack of performance. That VP was wrong 50 percent of the time and soon we were clocking a 50 percent turnover rate overall.
What was the answer? “It’s all a numbers game,” I was told — and not just by that executive but by other CEOs with whom I discussed the pattern. Sad to say, this was an industry norm. More than two decades later, it hasn’t changed. In fact, in 2020 the turnover rate in the U.S. workforce was 57.3 percent, according to the Bureau of Labor Statistics. A numbers game indeed.
Meanwhile, it is embarrassing to you as the leader. It’s often humiliating and painful for the person who didn’t work out. It is erosive to the morale of your entire company. Most importantly, it’s disruptive to your culture and your performance. Think about the opportunity cost alone. Startups are very hard. The last thing you want is constant turnover and an attitude of “it’s all a numbers game.” As if your creation is a soulless factory or something. These are people. It is their livelihood — and it is yours too. I struggled with this, mulling the issue with the team repeatedly at Coremetrics without ever fully producing an enduring solution. So by the time I was readying to launch Bazaarvoice in 2005 with Brant Barton, Wharton’s rigor was on my mind and I wanted to make sure that we tested the grit of those that would join us, just like Wharton had tested mine. Which is how Brant and I came up with “The Test” — really a simple, but profound, insight and process.
The first person to join us at Bazaarvoice was indeed the first person to go through “The Test.” This was Paul Rogers, our first VP of Engineering and a legendary CTO at several companies since. The way it worked was simple. When we got to our finalists after five to eight interviews and everyone was ready to hire them, we would call them up — typically on a Friday — and say, “Congratulations, everyone at Bazaarvoice that you interviewed with wants to hire you.” We would let that soak in. As time went on and Bazaarvoice became known for its culture, that really soaked in. It was a badge of honor to get to that point, as we were known to be one of the hardest companies with which to land a job, and also as one of the best performing.
And then we would drop the hammer:
“There is just one more thing we need you to do as part of this process.” And this was where “The Test” would begin. We wanted them to get a small taste of what the job would be like, to make sure this wasn’t a case similar to my hapless run at guitar lessons back in the day, and to really see if their expressed passion would stick. For example, for a sales director candidate, we would continue and say, “We need you to come in on Monday and present to us like we are a prospect.” This was exceptionally hard for a candidate to prepare for in the early days because our company was in stealth mode. This was pretty much guaranteed to “ruin” the candidate’s weekend as they needed to spend 8 to 16 hours preparing. Now I put “ruin” in quotes because it wasn’t nearly as bad as either one of us making the wrong decision about their candidacy at Bazaarvoice. Everyone loses when it’s a bad fit and again, we wanted to avoid the embarrassment, impact on our culture, and the loss of opportunity cost. If you step back for a moment and think about it, spending up to 16 hours is nothing for a job that could both transform your wealth and fulfill your soul, and even become your calling in life. During the presentation, we would interrupt the sales candidates, and push them hard on items like pricing — even though they couldn’t possibly know at this point. Essentially we’d act out a tough prospect environment to see how they would react.
The Test was much harder for executives, and our recruiters groaned when we got to this point. It is, after all, harder to find the right executive vs. the right salesperson. For their test, I told executive candidates, “I need you to present your 100-day plan to the executive team — what you plan to accomplish at Bazaarvoice in your first 100 days.” You learn a great deal with this exercise. I remember when one of our executive candidates called me from Spain, where he was on vacation at the time, and said, “You weren’t specific about something — I assume it is okay if I ask my peers and potential team members what they think is most important for me to accomplish and what the company’s biggest current priorities are.” Bingo! “Congratulations,” I replied. “You passed executive IQ test number one, which is to assume that all resources are available to you in startups and even when constraints are forced upon you, find a way!” He laughed and then spent around 50 or 60 hours preparing for his presentation — while still on vacation in Spain. It was one of the best in Bazaarvoice’s history. It was not unusual for an executive candidate to spend 40 hours preparing for this.
What was unusual was when they didn’t prepare at all. For example, I had some CFO candidates who didn’t pass test number one and presented a very generic “here is the job of a CFO” primer. Game over. Clearly, they didn’t have the passion to prepare. But even worse, they didn’t have the collaborative gene, which is essential to perform in a startup environment where resources are so limited and your very existence as a company is on the line. Even worse than that, some would respond when faced with rejection, “But you didn’t tell me I should prepare that way.” I was very direct in my reply to that, and I hope that I helped them succeed in their career later. Life is too short to not live your passion… we spend more waking time at work than doing anything else.
What were the results? Well, at Bazaarvoice we certainly improved our success with new team members, to around 80 to 90 percent retention, which compared dramatically with the 50 percent turnover we endured at Coremetrics. And our sales defied gravity as compared to most startups in Austin. In seven years, we built a public company and had one of the top five IPOs of 2012 as named by the Wall Street Journal. As importantly, our process helped keep the best people at Bazaarvoice. Around half of our new team members came from referrals. When I asked new people why they joined Bazaarvoice, “the people” was always one of their top three answers. When I asked people why they stayed at Bazaarvoice, “the people” was always one of their top three answers, too. Bazaarvoice became an elite kind of club — a badge of honor for those getting through that “brutal” recruiting process, not unlike what I saw and felt myself, both upon arriving at Wharton with other new students and of course upon graduation.
Some years after developing “The Test,” I was having lunch with the Co-founder and CEO of Whole Foods, John Mackey. I told him about how we uniquely hired at Bazaarvoice, and he shared a similar story on how they did it at Whole Foods. They would have their candidate answer questions with all of the interviewers present, surrounding them in a kind of circle. This way all objections and clarifications were clearly out there on the table for all to hear, creating a more collaborative assessment and eventual buy-in on the candidate. And then, for most of their candidates that passed, they would hire them for 30 days and determine after that whether to convert them into full-time hires. That is an extended test for sure! Does it sound intense? Well, ask yourself: does Whole Foods have one of the most respected business cultures in the world? Amazon thought so, as did Fortune magazine, in their 100 Companies to Work For list year after year.
Another lesson I’ve learned from experience is that with certain candidates, particularly executive hires, a meal is a good tactic. Think about any interaction over food, from that first sandwich with your college roommate to that initial meeting with your future in-laws. It’s hard to hide over lunch or dinner, and you learn a great deal about people. If the candidate is going to be in sales, their interactions with the wait staff will be telling. Conversations become more casual, and traits like poise and self-confidence have the opportunity to be seen. You learn a lot when you interview someone over lunch or dinner, and Debra has been right there with me for some of the most important ones as she has an amazing read on people.
Needless to say, we’ve carried over all of this practice to data.world since the beginning. And it still surprises me how often we are wrong when we get to the test process and how thankful I am that we practice this. It is painful when we are wrong, but it would be much more painful if we were wrong for six months and had to let the person go. We have an incredibly strong team as a result of this practice, including an awesome leader of human resources (we call it Employee Experience) in Vice President Lisa Novak and a rock star recruiter in Stephanie Fuller. I feel very thankful to work with this gallery of heroes.
This is a subject on which I’ve written and spoken a great deal, through my time mentoring Austin startups, my time as Entrepreneur-in-Residence at the University of Texas at Austin, and countless interviews. I believe these lessons have been adopted by more startups in Austin than perhaps any other in my years of evangelism on the topic. We’ve gone from a norm of “guessing” to a norm of “proving” here, and I believe it is directly correlated with the success of startups in Austin overall.
Opportunity cost is a real cost, and time is money in a startup’s life. Momentum begets momentum. This is true on the recruiting front, just like it is true in any area of business, from fundraising, to sales, to culture, to a winning spirit, and, of course, to results.
“If you think it’s expensive to hire a professional, wait until you hire an amateur.”
— Red Adair, Texas’ legendary oil well firefighter