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My heart was beating so fast it felt like it was going to explode out of my chest. I knew it was the right thing to do, but that didn’t make it any easier.
“Richard, I’m sorry, but we are letting you go.”
Richard was our East Coast sales manager. I had flown from San Francisco to Boston to fire him. As difficult as it was, I felt a massive sense of relief once it was over. His performance was hurting the company, and we needed to let him go.
So why am I telling you a story about firing someone in an article about hiring to scale your business?
Well, unfortunately, both hiring and firing are inseparable, crucial skills for the head of any young company. Move too fast or make the wrong call, and you’ll end up in a situation similar to what I describe above. That said, making mistakes is just part of the business of hiring, and even the sharpest CEOs make decisions that they end up having to remedy later. I’ve been there many times.
In this post, I’ll share with you my experience from years of running tech companies, including guidance on when to hire, whom to hire, whom to fire, and what you should expect from staff once they’re on board.
Why is all this so important?
The bottom line is, it is virtually impossible to successfully grow any business without great people, and finding them can be tough, especially in the early stages.
You start your company with visions of a great future. Slowly but surely your business grows to the point where you need help.
But you’re worried. Can you really afford to hire someone? Where do you find the right person? What do you pay the right person? Do you give your new hire equity?
Hiring and firing are some of the most important skills (if not the most important of all) you will need to master as your company grows. To drive that home, here’s a great video of a very young Steve Jobs talking about hiring and building a great team:
With that, let’s dig into the process of hiring the world’s best people for your business.
When to hire: Venture-backed vs. bootstrapped
“Don’t worry Brett, we’ll support you,” one of our investors said to me. He was pushing me to hire engineers at a faster rate than our original plan called for.
He left out one thing in his statement of support: “…until we don’t.” Investors or a board of directors will always support you until they decide things aren’t going the way they want.
This means you have take their statements for what they are: statements. Then, you have to make the right decision for your business.
If you’re bootstrapped, it’s an easier situation. You make the right decision for your business, period.
So let’s say you are working hard and the business is growing. You know you need help. When should you pull the trigger?
It’s a delicate balance. Hire too soon and you run the risk of burning through your cash, and having to lay off the person you hired later. Hire too late and things start falling through the cracks. Customer support starts to suffer. You feel overwhelmed. The long-term growth of the company may be at risk.
But when it comes to finding that balance, I always lean in the direction of hiring at the last possible moment. Here’s why:
1. I want to reduce the risk of running out of cash. I would rather have more of a burden on me for a longer time than run out of cash, because we don’t have a business without cash.
2. I never ever want to lay someone off. Layoffs suck, and letting people go, especially really good people, really, really sucks. You have a responsibility to the people you hire to only bring them onto your payroll when you can afford them.
Yes, you may slow your growth, but too many companies have died because they ran out of cash too soon. Don’t let your company be one of them.
This brings us to our next step in the process:
Always be interviewing, even if you don’t have an opening
One of the smartest things I’ve done was establishing the discipline of always interviewing possible new hires long before we wanted to add them to the team. There are several reasons you should establish this practice too:
- You learn what’s available out in the marketplace
- You are ready to go when you need to hire
- You always learn when you interview
- It’s an opportunity for you to practice selling the company
- It takes time to hire people, sometimes six months or more
Now you have a group of qualified candidates ready to bring on when you are ready.
What to look for: My four-step guide to hiring the right people
1. They Must Have Integrity. Need we go any further? Why would you ever hire someone if they don’t have integrity? Actually, I think we do need to go a little further.
Everyone at some point will face the dilemma of interviewing a clearly talented individual who seems a bit ethically iffy. Don’t hire them. Ever. No amount of ability makes up for a lack of integrity.
2. They Must Be Smart. We want people who are very smart. Who doesn’t, right? Well, it’s surprising how often I see people who only hire those who clearly aren’t as smart as they are. Don’t be intimidated by those who might have something you don’t. Be grateful you can add them to your team.
3. They Must Have Passion. I don’t care how smart, and how much integrity an employee has. They will not work out if they are not passionate about what they do. They also won’t work out if they’re not passionate about what you do. When I interview, I always look for people who are committed enough to my cause to have done their research and found out as much as possible about my company.
4. They Must Be A Company Fit. People frequently overlook the importance of cultural fit. Desiring cultural fit does not mean that we want people who are clones of each other. Have you read Netflix founder Reed Hasting’s manifesto on the importance of culture? If you haven’t, read it today!
Diversity is vital, but diverse employees had better mesh well with each other. Throw a bunch of ingredients that don’t go together into a pot, and you have a horrible meal. Throw the right stuff into that pot, and you’ve got gourmet cuisine. Aim for a five-star group of employees.
Four common problems people have hiring employees
Okay, this is a pretty simple, easy to follow criteria, right? So why do so many people struggle with hiring the right people? I believe there are four main reasons:
1. Not prioritizing hiring. Hiring needs to be at the top of your priority list. Hiring people who fit all of the above criteria needs to be so important that you never compromise.
2. Letting HR do the initial interviews. (Skip to number three on the list if you are a solopreneur.) I have seen this mistake repeated over and over again. HR knows how to compare the qualifications on a resume with the basic qualifications for a position. You know what you are looking for. I know it’s time consuming, but you will be much better off if you do all of your own interviewing.
3. Growing too fast. Growth is great because it creates new opportunities and promotions for existing employees. However, a company growing at a rate faster than its ability to hire exceptional employees will become mediocre over time.
This is called “Packard’s Law” after Hewlett-Packard founder David Packard. I’ve seen Packard’s Law bring down great companies. I was working at a great company years ago. The company had almost exclusively A-level talent for the first 15 years of operations.
The company was growing at a very good rate. The investors rewarded the company with a very high stock price. Growth started accelerating even more. The company went on a hiring spree bringing in B-level talent to keep up with the growth. Sure enough, the company’s performance slowly began suffering, and it’s never been the same since.
4. It’s tough to find exceptional employees. I’ve spent my whole career in high technology, and it’s always been difficult to find exceptional people. I would bet this is true, from talking with my friends, in most other industries.
Nevertheless—and it’s so important that I want to repeat it again—compromising in hiring, rather than finding exceptional employees, is always a ticket to mediocrity at best.
Remember Packard’s Law: Let your ability to hire A-level talent determine the growth rate of your company.
How do you determine what to pay someone?
The rule I use, and the rule I suggest you use, is pay fairly. Let the market determine what to pay your employees. Underpaying and overpaying are problematic for different reasons.
Underpay your employees and they will resent you. You will not be able to hire great employees, and you will not build loyalty with the employees you do hire. Overpaying your employees doesn’t guarantee success either. You likely will not overpay all of your employees, so the ones that are paid less will resent you and their colleagues who are making more money.
Instead pay all your employees fairly. Paying employees fairly builds trust between you and your team. That leads to loyalty between you and your team. And that leads to a motivated workforce operating at its peak. And that’s what you want, isn’t it?
How do you know when to fire someone?
And now we’re back to my story about Richard…
What I didn’t tell you was firing Richard was one my first acts as VP of sales. I was previously VP of marketing at this startup, and the CEO fired the VP of sales. I volunteered to be VP of sales, and the CEO gave me the job.
I had experience working with all the regional sales managers, and I felt Richard had to go. I had visited customers with him, and his people skills were horrible. You could see that customers didn’t respect him. Richard was the face of the company to the customers he worked with, and he was not making us look like a winner.
So, I felt we had to make a change.
That’s the first way you know you need to fire someone: The person is not doing a good job. This can actually be one of the easier problems to see as a manager. It was obvious that Richard wasn’t very good. I just needed to pull the trigger and act.
What other problems should be grounds for dismissal?
Let’s list them off:
Group 1: Breaking the law.
This includes theft, stealing trade secrets from a competitor, or generally committing a crime. I’ve seen all of these occur during my years in business.
I’ll give you an example. Years ago, a company I worked for hired a sales manager in Japan from our direct competitor. There is nothing illegal about that. That’s part of business. What the sales manager did next was not business as usual.
He used business cards from his old company to set up customer meetings. He misrepresented himself as being employed by his previous employer, so he could learn information about customer projects.
He was immediately fired when we found out. I seem to remember him being arrested by the FBI when he returned to the United States.
Here’s one more example from the same company. There was an employee who had worked for the company for years. Then, the employee was arrested for child abuse. Obviously, everyone was shocked. The company put the employee on leave until the case was resolved, and fired him when he pled guilty.
The longer you are in business, the more crazy things you see. Sadly, there are a lot of bad people in the world, and you are likely to encounter some of them.
You need to take swift action when you encounter these people for common sense reasons:
Your own integrity is on the line. Imagine what would happen if you didn’t take swift action? Other employees would start asking questions about you and they aren’t going to be good questions.
The company’s integrity is on the line. Your customers are not going to want to do business with you if your company cannot be trusted. Remember the adage that bad news travels quickly. Word will get out.
Group 2: Cultural Misfits
Now, we’re into the grey area. What do you do with someone who has the capability to do the job well, but is causing a ton of other problems? Here’s one example of what I did:
“Brett, you look like you’re a million miles away,” Randy (not his real name) said to me. He was right. I wasn’t focused at all on him. I was waiting for Tina to come into my office.
“Where’s Tina?” I asked.
You see, this wasn’t a normal meeting. It was a meeting to terminate Randy. And Tina was there to witness the termination.
We had set up an employee meeting with our benefits provider, so Randy could leave without feeling humiliated. Tina was introducing our benefits provider to the employees, and I had to wait.
Finally, she came into my office.
My heart rate shot way up. I let Randy know we were terminating his employment. I ended my comments with, “I’m sorry.”
“I’m sorry too,” Randy said.
Tina ushered Randy into her office. I felt sad. Really, really sad. I just let a really talented person go.
Why? Randy was, to put it mildly, a handful to work with. There were too many complaints from too many people. He was verbally abusive to, well, just about everyone. Somehow, he seemed to think his behavior was normal.
Too many people were quietly miserable. They weren’t complaining, but you could see the frustration written on their faces. It all came to a head when he started yelling at our VP of engineering during an engineering review meeting. I called a staff meeting the next morning.
I told everyone we had a choice to make about our company. Did we want a company where everyone treated their co-workers with respect or not?
I then went around the room and asked everyone for comments. When it was Randy’s turn, he said, “I’ll resign right now if all you want is a bunch of ‘yes men.’”
I knew we were probably going to have to terminate Randy if things didn’t change, and I learned at that moment that things that would likely not change.
The reality is, Randy didn’t fit with the team and the culture the company was building. I chose to terminate him because I felt, as talented as he was, the interpersonal problems would hurt the company if I just let things stay the same.
One of the most overlooked areas of running a successful business or managing a team is the culture.
When everything is going great, culture doesn’t matter. But look out below when things are bad. That’s when company culture is crucial. And believe me, every company goes through bad times. Your survival and your company’s survival might depend upon the team you built.
What do you want from team members once they are on board?
Now you’re solidifying your team, you’ve got your payscale decided, bad actors are out of the picture, and with any luck, things are starting to gel. It’s important to be aware of what you want from your team, so you can articulate your expectations and cultivate your team to meet them.
Here’s what I would ask of an ideal employee:
Be loyal. You see, everyone kisses your ass as CEO. It’s part of the job, and ass-kissing certainly makes your ego feel good…for a bit. Then reality sets in, and you wonder whom you can really trust.
The answer is, you can trust very few people in your company. Let me be clear. By no means am I saying that an employee should agree with everything you say (in fact, that’s the last thing a company needs). However, you do want your employees to support your decisions, even if they don’t agree with them.
Be a positive force. This goes hand-in-hand with loyalty. Everyone likes to complain. It’s normal. Your employees need to understand that the other employees look up to them, and they have influence. Employees must know that their voice and influence can help or hurt the company. You want constructive employees that think of solutions when they see something that isn’t right.
Always do their best. It’s all any CEO can ask—for an employee to do the best job they can do. A lot of things can be forgiven when you see people are genuinely doing their best.
Recruit their friends. One of the best ways an employee can help is letting their friends know what a great company you have. Maybe they can ask their friends if they are interested in joining the company. Recruiting friends is a great way to help ensure the company’s success. Friends and past colleagues are a known commodity. You are not likely to refer someone who isn’t very good.
Have the company’s best interests always in mind. It’s easy to do things that might be in the employee’s best interests but aren’t in the company’s best interests. Maybe they want to protect an employee who isn’t doing good work any more. At first, it sounds okay, and the CEO may never find out. However, your co-workers will find out, and you will lose credibility with your co-workers.
Own up to mistakes. We’re all experts on making mistakes. I can promise you that we all make them. Mistakes are a key part of how we learn. One of the toughest things to teach is how to own up to mistakes. This requires you, the CEO, to create an environment where it is safe to reveal mistakes.
Oh, please don’t wait to tell management they made a mistake. Management needs to know sooner rather than later about a problem, so they can fix it. We’ve all seen this one, and I know you have too. An employee waits until there is no time left to do anything before telling us about the problem. Waiting to tell management about a problem is a killer because then nothing can be done to fix it. It is not about busting anyone, it is about fixing the problem.
Go the extra mile. Great employees are rewarded because they go the extra mile. You want people on the team who keep fighting. That’s part of how you build a competitive advantage. Hire a team of people willing to do extra things to succeed and you will dominate your niche.
Provide help when asked. You want to hire team members that the other employees look up to. In short, you want a team of leaders. Leaders always help their fellow employees when they ask for help. Leaders understand that helping others allows them and the other employees to succeed.
Don’t be afraid to ask for help. It’s not a sign of weakness; it’s a sign of strength. There’s an old saying, “He who asks for help is a fool for a short time. He who never asks for help remains a fool forever.”
Summary: Hire Well Now and You Won’t Have To Later
Hiring the right people at the right time is critical to successfully growing your business. You need to spend a significant amount of your time recruiting to get this right.
You will interview plenty of B-level and C-level talent along the road to hiring the A-level team you need to succeed. The worst mistake you can make is being impatient and hiring someone who doesn’t meet your standards.
Remember to let Packard’s Law guide you: Let the ability to hire A-level talent determine your ability to grow your business. You will be on the road to success.