Further Adventures in Hiring for Hypergrowth

Hiring for Hyper-Growth More advice and tips on scaling digital businesses through smarter hiring practices

Foreword When we released ‘Hiring for Hyper-Growth’ in 2013, we were surprised and gratified by the response. It turned out that many people in the industry found value in our analysis, and we’ve since had many requests to address other thorny issues in a similar way.

This handbook, which is a companion to Hiring for Hyper-Growth, is designed to shed light on eight further scenarios that are live issues for many of our clients. In each case, we apply pattern recognition borne of years of immersion in the digital economy, to analyse, simplify, and suggest fruitful approaches to these challenges.

These are big topics, on which much has been written and said, and we can’t hope to do them justice in the space available. We hope, however, that this handbook proves a useful starting point for thinking them through.

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1. Ensuring cultural fit Cultural fit has been widely adopted as a core hiring criterion, but there is no settled view on how to ensure that it happens. This is partly because there are at least three separate things that need to be understood in order to set up a meaningful filter - what is meant by culture; the type of culture that exists within the company; and what it means to be a good fit.

One way of defining culture in this context is the set of values, assumptions, behaviours, skills and personality traits that a company values in its employees.

This will differ from company to company, as will tolerance for nonconformity. In a decentralised, non-hierarchical business that relies on informal working relationships and individual initiative, a close fit will be critical. Conversely, in a more orthodox command and control environment, some degree of cultural deviation may be acceptable.

There is also a need for any cultural filter to be scalable, which has led some companies to adopt simple criteria such as whether the interviewer wants to work with the candidate. The problem is that simply enjoying someone’s company for half an hour is far from being a guarantee of cultural fit.

Here are some ideas that our clients have found helpful: • It's critical to understand and be able to articulate in detail the behaviours and skills that you value in employees. Encapsulating cultural fit into one word (at Google they call it ‘Googliness’) can be useful, provided everyone understands what it means.

• Interviewers need to evaluate candidates with reference to these behaviours and skills, which includes asking specific questions aimed at illuminating these areas, methodical and accurate scoring, and a conscious effort to avoid subsuming these items into a catch-all ‘likeability’ metric.

• The candidate’s CV also contains vital clues as to potential fit. If a candidate failed to thrive in a culture similar to yours, that could indicate a potential issue.

• There’s no substitute for spending time with the candidate, and exposing the candidate to the company’s operations and employees. A smart candidate will be just as keen to ensure a cultural fit as you are.

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2. Creating and maintaining a talent pipeline When you’re growing fast, delays in filling critical talent gaps have a disproportionately disruptive effect. So, anything that can reduce time-to-fill is worth doing, and having a pipeline of potential candidates is clearly a valuable asset. A pipeline is also useful in keeping your company top of mind for superstar candidates, and reinforcing your brand in the market as a company that’s expanding and thinking ahead.

Yet companies with a scalable, effective talent pipeline are the exception rather than the rule. A number of things tend to get in the way. Few if any Applicant Tracking Systems were built to handle contacts before they become candidates, and they are hard to repurpose given the need for records to be constantly updated. Low tech solutions tend to be very inefficient. Also, building and maintaining a pipeline takes a lot of time and resources - scarce commodities in a fast-growing business, with an ROI that’s hard to quantify.

So how should companies think about addressing this? Here are some tips: • Aligning the company behind pipelining is critical given the resource requirements, so a key first step is measuring existing hiring time-lines, and estimating the opportunity cost of delays.

• Use this data to educate hiring managers and recruiting teams on the value of a talent pipeline.

• Start with critical roles where future growth is clear, and focus particularly on areas where you’ve traditionally struggled to hire well.

• Choose a tracking system, and stay alert for new technologies (manual solutions don’t work).

• Agree a pipelining methodology, conventions, milestones and deliverables.

• Incentivise your employees to refer great people, and if possible bake it into their KPIs. • Assign an owner to be responsible for the health of the pipeline, and to manage the relevant stakeholders in accordance with the chosen methodology. This is a critical piece - without clear ownership, talent pipelines are prone to degrade fast.

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3. How to think about acqui-hires Acqui-hires* are amongst the most puzzling phenomena in the recruitment landscape. Put simply: why would a company pay to compensate shareholders of the target firm, when they could theoretically just poach the employees directly? Legal risk seems an inadequate explanation (investors rarely sue entrepreneurs), and loyalty to investors doesn't explain why the acqui-hirees can't simply accept a cash sum for leaving the company and compensate the investors themselves.

The acqui-hiring phenomenon emerged in California, and so far doesn’t seem to have gained much traction elsewhere. However, it is important for all tech companies, wherever located, to understand its dynamics, since the experience of the Silicon Valley giants suggests that hiring proven, high-functioning teams can be an effective means of rapidly boosting engineering capacity.

Here are some reflections that may help guide your thinking: • Unlike bankers and lawyers, founding engineering teams seem to be reluctant to defect on mass, which means an acqui-hire may be the only way to get them. This has been explained in a number of ways, including ties of loyalty to investors (which, for psychological reasons, are not satisfied through compensating them personally); a fear of reputational damage amongst the wider investment community; and the kudos of proclaiming a successful exit.

• Although IP acquisition is by definition not the aim of an acqui-hire, acqui-hires do have the advantage of avoiding any IP overhang. With a straight hire, there is always the possibility of a legal claim over unauthorised use.

• An acqui-hire is more visible than a straight hire and can be used to send a message to other stakeholders that the company is ambitious and growing (cf.

Yahoo’s purchase of Summly).

• On the other hand, acqui-hires are time consuming and expensive, and a questionable use of expensive corporate development resources.

• Also, it’s important to avoid a situation, sometimes observed in larger Valley companies, where product leaders desperate to expand their teams use acqui-hires to bypass hiring restrictions. *The practice of buying a company for the sole purpose of recruiting some or all of its staff, usually the founding engineering team.

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4. Eliminating buyer’s remorse Buyer’s remorse is the deep dark secret of the HR world. In a recent global survey, over half of employees hired during the previous year regretted joining their companies.

Conversely, one in eight new employees were regarded by their employers as failures*.

Apart from general failures in the hiring process, the main factor underlying buyer’s remorse on the part of employees is the job being missold. Without a clear understanding of the role, reporting lines, corporate culture and so on, an employee can easily find herself taking a job quite different to the one she had in mind. With employers, the main drivers are over-reliance on hiring manager evaluations, and the employee over-selling herself.

The latter point is emerging as a key risk, as competition for jobs intensifies, and the internet provides ample advice on interview techniques and, frequently, tips for getting a job with a specific company. Increasingly, the hiring process is seen as an obstacle course where success is the result of practice and understanding the rules of the game, rather than a genuine fit between candidate and company.

For executive roles, using search firms like The Up Group should all but eliminate this risk, but for management hires, proper internal incentives allied to a robust hiring process (perhaps deploying some of the advice in our handbooks) is key. In particular: • The incentive structures of managers and recruiters need to have employee retention and happiness baked in. If recruiters are compensated on transactional hiring metrics, you’re creating an undesirable trade-off from the outset.

• Honesty and openness should inform the entire interview process. A delay in filling a management gap is vastly preferable to a disgruntled hire.

• Equally, interviewers need to be skilled and properly briefed, and rigorously apply the most sophisticated methods of assessing achievement, motivation and potential.

• It is important to democratise the hiring process, so that the decision is not reliant exclusively on the opinion of one, usually hard-pressed, hiring manager.

*DDI Global Selection Forecast 2012

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5. Constituting a board Boards of hyper-growth companies tend to look different from other boards, both in behaviour and function.

The separation between ownership and control is typically much less stark in companies at this phase of growth, as senior executives will typically have a significant stake in the business. This means there’s less need for traditional management monitoring. Also, the board typically brings human and social capital (expertise, networks and so on) that may not yet be available within the company itself. The need for the board to provide critical functional and strategic advice is particularly acute during this phase - strategic decisions and operational challenges come thick and fast, and even experienced management will look to directors for specialist advice. Finally, where the founder is on the board, her strength of vision and, in some cases, dominant ownership stake can sometimes tend to suppress conflicting views in strategic decision making, for good and bad.

In short, the constitution of the board, during this phase, matters a lot. Here are some things to look out for: • Boards should be able to provide expert help with the specific challenges facing the company. Some obvious areas where board expertise can improve decision-making are internationalisation, going public, launching new business lines, and growing through M&A. • This means each NED should add demonstrable value to the company’s decision-making.

• On the other hand, expert input should never undermine the operational autonomy of the CEO. • Chairmen often play more of a ‘coaching’ role during this phase, helping the CEO adapt her style and broaden her perspective as the company scales.

• Because the business landscape changes so fast in hyper-growth companies, CEOs and Chairmen need to keep a constant eye on board composition, and be prepared to make tough decisions.

• Groupthink is a constant risk to be aware of, and quality of decision-making should be regularly reviewed as a separate KPI.

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6. Referencing 101 Taking references is one of the most neglected aspects of the recruitment process. It's typically done poorly or not at all, and it’s rare for a candidate to fall at this hurdle.

This is not surprising. By the time references are taken, people have typically spent a lot of time satisfying themselves that the candidate is right for the role. Even when conducted properly, the reference process is frequently stymied by referees’ reluctance to say anything negative through fear of legal or personal consequences.

Companies that don’t take referencing seriously are playing with fire. Even a well-executed interview process ultimately only tests the ability of the candidate to perform well in interviews. Without unbiased feedback from former colleagues, companies are depriving themselves of critical information, namely how this person actually performs in the field.

Here are some things we've learned: • Whilst seniority of referee, relationship to the candidate, and freshness of memory are all relevant factors, the value of speaking to nominated referees depends largely on the quality of questioning.

• The aim must always be to acquire new information - that is, information that you couldn’t have simply guessed at. There are a number of useful techniques, including: o Ignore any opening feedback, and ask ‘Among all of the people you’ve seen in this position, on a zero to 10 scale, where would this person rank?’.

Follow up by asking why the candidate doesn’t rank higher*. o Treat the reference call as a mini-interview and apply the same level of rigour.

Be structured; test hypotheses. o Disregard the outliers. References that are gushing or damning often imply a strong personal friendship or a specific grievence respectively.

• It is always a good idea to take informal ‘soft references’ from known contacts who are connected to the person, in addition to their nominated formal referees.

• Finally, don’t wait until you’re at offer stage before taking references. The more you have invested in the interview process, the greater the temptation to go easy.

*This technique has been credited to Scott Cook, co-founder of Intuit

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7. Bridging the digital marketing talent gap The dearth of available digital marketing talent has fast become a cliche. In the latest* of many similar surveys, only 8% of Fortune 500 executives polled thought that they were strong across all digital areas.

In our experience, the challenge facing growth companies is not the shortage of great digital marketers per se (which is certainly the case, and not surprising given the rate at which technology and consumer behaviour is changing), rather it is how to think about identifying and attracting the digital marketing talent that does exist.

Companies often forego hiring rigour to secure a prized candidate - a phenomenon akin to panic buying. Ironically, the scarcer the talent, the more important it is to enforce the quality bar: a mistake will take a long time to remedy. In other cases, companies don’t stint on quality, but end up compromising on temperament, experience or expertise.

Bringing in great marketing talent is eminently achievable, given patience and discipline. Here are some things to bear in mind: • Although digital marketing capacity is hard for a non-expert to evaluate, a top marketer will recognise another top marketer within minutes. Also, digital marketing activities can usually be independently verified and evaluated through elementary desktop research. So, done properly, there’s no reason why the interview process cannot be conducted quickly and smoothly without sacrificing robustness.

• All marketers need to be adaptable and able to think strategically, as well as understand the mechanics of the core disciplines. So beware of marketers: o seemingly strong in specific channels, such as paid search, who lack an understanding of first principles and concepts; or o who speak fluently about the marketing mix, ROI, and so on, but don’t understand the basic mechanics of (say) CRM and retargeting.

• Digital marketing is a very wide-ranging discipline, and just because an individual has excelled in one type of company, does not mean she will thrive in yours. It is critical to understand what KPIs are relevant to your sort of business, and ensure that the candidate has a track record of delivering to those specific targets.

*’The State of Digital Marketing Talent’, Online Marketing Institute, 2013

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8. Avoiding own goals Companies going through hyper-growth face all sorts of challenges, but sometimes the biggest obstacles are self-inflicted. When it comes to HR practices, there are three ways, in particular, in which these obstacles arise.

The first is where bad decisions are made during the early stages that are difficult to change.

A classic example is dishing out titles without regard for future hiring. If the first marketing hire is called ‘CMO’, then, when (as often happens) the company wishes to hire a more senior person down the line, it’s faced with an unattractive choice between downgrading the existing CMO’s title and possibly losing a talented executive as a result, or sticking with an unsuitable person in that role.

The second is where decisions appropriate for the start-up phase need to be modified in order to scale, but become set in stone. A common case is where a commitment to (low) initial salary bands prevents the company from being able to attract more seasoned executives later on.

The third is where an initial mindset persists beyond its usefulness. As discussed elsewhere in this handbook, commitment to retaining initial board members regardless of need can fall into this category.

The net effect of these scenarios is that companies can get stuck. Here are some tips to avoid this: • It’s important to distinguish between practices that are necessary to get a company up and running, such as giving away equity, multi-tasking, and so on, and taking the path of least resistance. Calling someone a CMO just to get them through the door is an example of the latter.

• Flexibility, willingness to experiment and a recognition of the need to fail fast are hallmarks of most hyper-growth companies. These practices should be extended beyond commercial and product strategy to embrace HR practices.

• Whilst ‘think like a start-up’ is the mantra of many internet giants, they didn’t get to be giants without a clear-sighted understanding of, and a commitment to implementing, the practices and policies appropriate for each phase of growth.

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Eight further challenging scenarios, with expert advice from Europe’s leading digital search firm.

“Even better than Hiring for Hyper-Growth. An indispensable guide from people who really get it.”

Jack Huang (TRULY, Keynoir) “Illuminating, reassuring and helpful. Every tech boss should read this.”

Brian Tookey (Google, Brandwatch) “The Up Group are excellent. Firstly, they understand the technology, internet and digital sectors incredibly well. Secondly, they deliver not just excellent candidates but an overall process, providing confidence and credibility end-to-end. I value them not only to deliver but to add value through their knowledge, insights, straightforward communication and superb networks.”

John Kelly (GSMA) The Up Group is Europe's largest specialist digital executive search firm. We deliver outstanding digital talent and industry insight to the world's most innovative companies. Based in London, we serve clients and candidates from across the world.

Text © The Up Group Ltd 2014. Images © Last Lemon Productions Ltd 2013.