(I originally wrote this article back in 2000 when I was Entrepreneur in Residence at the Carleton University Tech Venture program)
I often hear entrepreneurs express frustration with a recent hire, yet when I probe about how the person was hired, I find out that very little effort was made to properly qualify and recruit the person. Since it is generally accepted that people are the keys to success in business, why then, do entrepreneurs so frequently cut corners in building their teams?
The excuses are many and I know them well myself, since my own track record in hiring is not perfect. Running a start-up means you are doing the work of ten people with immense pressures on your time. You are facing incredible uncertainty that makes it difficult to know what is the right type of hire and when. If these challenges do not create enough of a burden, you also have less profile to leverage in attracting recruits than established companies in your business and you are under-resourced making it difficult to pay market rate salaries. So you cut corners. And why not? You are an entrepreneur and one of your primary skills is your ability to operate under pressure. You learn to trust your gut and take risks.
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You might think that the risk of a hiring mistake is manageable; that you can remove the person if they don’t fit, but if you consider the costs of a bad hire, perhaps you will think again about cutting corners. Each time you hire someone, you will be making a huge investment in time and money to train the person and once aboard your small team, the new person’s work habits will affect their peers. I have seen good teams spoiled by bad recruits that didn’t have the same level of commitment or share the same work ethic as the original team members. A bad hire can be even more costly if the new person is in a customer-facing role and poorly represents your company or provides unsatisfactory customer service. This could cost you business.
There is also a personal cost associated with a hiring mistake. No one joins a company to fail. A new recruit will, in most cases, spend a great deal of effort trying to meet your expectations. If you hire the wrong person onto your team, it can be a very frustrating and stressful experience for that person. From your perspective, the investment in time and money was a waste of your time, but consider that you have also cost the employee time that could have been spent building their career elsewhere. If you have to release that person, it is a black mark on their career and it may be awkward for them to explain what happened to prospective employers they may approach in the future.
There is no way to look at a bad hire as an acceptable business cost, so you simply have to take hiring very seriously. You have to aim to hire the best person each time.
Then what are the rules of for hiring the best?
Start by knowing what you are looking for. What is your company’s culture and what kind of people make you successful?
Second, make it your mission to make each of your hires a “world-class” hire. Great talent attracts great talent and if you commit to building teams of great people they will help your company succeed.
To find great people, you don’t need a lot of money, a search agency or a huge billboard to attract great talent (although these help). At no cost, you can leverage your network of contacts while you conduct your business each day. Regularly ask your customers, your suppliers and other people you respect if they can refer candidates to you. Also implement mechanisms to generate an ongoing stream of candidate recruits such as an internal referral program under which staff members are rewarded for presenting candidates. And don’t forget your recruiting agenda when you are doing interviews with the media. Seek as much media exposure as possible to promote your company as an exciting and rewarding place to work.
When you come across a candidate, you have to be able to effectively qualify them and determine whether they can help your company. I look for attitude and aptitude over experience. Domain and functional experience are important, but a resume and long list of qualifications means nothing to me if I am not convinced that the person can help my team move forward. I look for people that will be passionate about achieving the company’s goals. I care that a candidate desires to solve customer’s problems, is fearless about learning, and can accept the ambiguity that is so prevalent in the start-up phase. I want to know that the person has balance in their life that protects them from burnout and the emotional and physical strength to handle the start-up roller-coaster. I want to know they will stay positive in the face of endless challenges.
How do I evaluate these qualities?
I spend time with a candidate. Before a meeting, I will prepare questions that I want to ask to evaluate role specific skills and if possible, I will request work samples.
A candidate’s personality is also very important to me. I will ask the person about themselves, their background, the work they like and dislike, and what their aspirations are. Do they recognize the mistakes they have made and draw lessons from them, or do they blame others? Are they analytical or emotional and what consumes their time outside of work. I ask the same questions over again to make sure I understand what I am hearing. Sometime I will ask offbeat questions like what they would be doing if they won the lottery or what kind of animal they would choose to be and why. I want to know what makes the person tick.
I also want to see how the person will fit with the rest of the team, so I bring them together. I let the rest of the team meet the candidate so they can interact and provide me feedback on the candidate. I arrange for the meeting to take place in the company offices so that the candidate can see how and where we work.
It is important to evaluate the level of engagement from the candidate. If they don’t ask questions about how we plan to be successful and the support they will receive, I become concerned about their standards and whether they are just seeking a job versus seeking the best job. Qualification in hiring should be a two way street and the candidate should be given every opportunity to make sure the job is the right one for them.
Meeting and speaking with someone will tell you a lot about them, but reference checks are mandatory to gain a full picture, even if there person came to me via a referral and I like what I see in speaking with the person. The references that a candidate offers are useful, but often it is more insightful to speak to others that are not on the list. Contact previous employers who are note referenced and those in your network to gain additional insight into the candidate’s personality, reliability, capabilities and work habits.
Compensation can be tricky to handle. There is a temptation to discuss salary early in the recruiting process, but I prefer to discuss compensation after you and the candidate have had a chance to get to know each other and only after I know I want to hire the candidate. Furthermore, compensation encompasses financial rewards such as salary, stock and benefits as well as non-financial rewards such as vacation and memberships. The better you know the person, the better you will be able to make an offer than will be make the person happy and the company successful.
Finally, when I decide to hire someone, the type of offer I extend is also important as it sets the tone for our working relationship. I like a probation period with an early performance review to give both the company and the new recruit a chance to ensure fit. I also like team and individual performance bonuses as a way to ensure accountability and commitment to the company’s goals. Sometimes, I will hire a candidate on contract to help me deliver a project. This gives me a good chance to see the person in action myself.
Once a new hire is on board, there is much work still to do in retaining the person and helping them realize their potential, but if you have taken the hiring process seriously, you have likely added a great member to your team.
As I said before, many of us make hiring mistakes, but the most successful entrepreneurs are religious about recruiting the best talent. If you care about your success, you will be too.