Discussing “Hiring Dilemmas: The Right Hires At The Right Time” by Noam Wasserman

Written by Lance Hillis

Bringing forth your personal preferences in hiring can be dangerous, and organizations and stress on employees and founders can change overnight as the company goes through its growing pains when scaling. Between Evan Williams time starting Blogger, he was relying on cheap and volunteer labor in important functions, as well as family. After selling Blogger to Google, and concurrently working there, and starting Odeo, he had the experience and understanding of streamlining. He raised funds, hired executive recruiters and relegated the hiring of talented programmers to them.

Whether intentionally, or unintentionally, Williams had found himself through found Blogger as using a “commitment” blueprint, which was low paying, slow growth, but was a passion project, and for Odeo, using a “bureaucracy” blueprint, which was much more professional and systematic, with an exit plan in place, and utilizing investor funds to hire skilled individuals to execute his vision. These blueprints were developed by the Stanford Project on Emerging Companies (SPEC), which developed a framework to interpret business’s hiring decisions.

The Three R’s Framework

In SPEC’s blueprints, there are three R’s used to explain why founders make their particular hiring decisions. Relationships, or who to hire, Roles, what positions to create and what types of people to hire into those roles, and rewards, being compensation and equity.

Relationships are not only useful for developing your personal network, and knowing you have someone you can trust in your corner, there’s a quantifiable rate of success in it. Companies who hired non-founder executives through the founder’s personal network, they received a valuation on average that was 37% higher than those who chose to seek executives that were unknown by the founders. As companies go through later rounds of funding, the executive team begins to slowly see a larger presence of members that are chosen directly by investors, especially CFO’s (which actually seems like a more than fair tradeoff, based on investor’s incentives and reporting expectations).

Next are the roles. Now, once again to no one’s surprise, startups frequently begin as top heavy organizations with few hires, and with founders taking executive level roles. Once the company begins to scale, the growing pains begin to develop, as new roles are implemented, VPs are assigned, and most painfully, founders are forced from C-Suite roles to find others that are experienced in handling the companies needs at that scale.

There is also the issue of what types of people to hire into a role, and the consequences of that. Dick Costolo, Founder-CEO of Spyonit and FeedBurner, expresses the need to ensure that individuals fit the role. When he was working on Spyonit, they had decided to hire on an VP of Human Resources, who had controlled hiring. They had noticed that the VP of HR was hiring on individuals who were underqualified and creating bugs and issues in code, so they decided in FeedBurner, that they would conduct all of the interviews to ensure that their hires were capable and that they were more apt to recognize that than a VP of HR.

And the final framework is rewards. Most startups that don’t have much cash have to get creative with their compensation, using financial and non-financial incentives. This can come in the form of equity, contingent compensation such as performance based bonuses, and noncontingent compensation, such as a salary. On average, bonuses, which are tied to performance, make up approximately 28% of an executive’s compensation, CEO’s are around 37%, and the VP of Sales being the largest percentage at 49%. However, other factors such as industry, gender, VP vs. Exec Equity, etc., all ultimately skew the level of compensation that leaders receive.

Employee Dilemmas: What Is Holding Them Back From Joining Your Team?

Additionally, I wanted to see from the perspective of talented individuals and what obstacles keep them from joining your company. In Red Seat Review, Talley Flora writes that some of the biggest obstacles you’ll face in acquiring talent is in building trust. She notes that as a smaller company, you may not have the same brand recognition as larger companies, so she recommends reviewing your website, social media, and ads to ensure they are viewed as professional by prospective talent.

There is also matters of culture match and salary and benefits expectations, which fits hand in hand with the SPEC blueprint mentioned earlier. Whether your organization has a commitment or bureaucracy blueprint, ensuring that both the hiring party and potential employee are in lockstep is of the utmost importance. This is also reflected differently depending on the stage of your startup, as relationships, roles and rewards change as the company evolves as well.

All-in-all, hiring dilemmas are an intense and ever evolving situation for Founders. In the attempts to standardize this process through the Three R’s Framework, other factors such as Startup Stage of Development, underperforming employees, reward alignment and scale are some of the very many dilemmas that you’ll likely encounter as your business continues to grow.