Why Startups Should ALWAYS Compromise When Hiring? — Never!

Reading a blog on the venture capital website Start Up Hire called: Should Startups Compromise When Hiring? I found a reference to a blog Dharmesh Shah, Chief Technology Officer & Founder of Hubspot* and Onstartups.com, wrote, “Why Startups Should ALWAYS Compromise When Hiring?”. I posted a comment to the blog as I felt Start Up Hire’s blog and Dharmesh Shah’s blog both have valid points, but neither blog strikes a talent management, financial case.

I post the thread here as I found it relevant to my last blog: The VC’s Missing Formula: Human Capital Discounted Cash Flow.

Below, you first see the Start Up Hire blog [initalic], then Dharmesh Shah’s blog [in blue text], and finally, my comment follows.

From Start Up Hire’s, Team Building Blog, page:

Dharmesh Shah shared some thoughtful insights recently on “Why Startups Should ALWAYS Compromise When Hiring? It’s true that any new hire brings a balance of skills, traits, experience, and relationships. Finding the right balance (or compromise) is the key, and this needs to be done in the context of both the specific job and the broader organization. For a team to be more effective than the sum of its parts, there must be a constructive mix of different experiences, complimentary skill sets, industry relationships, ages, and personality types. The requirements matrix for any one job may contain binary criteria like cultural fit, passion, intelligence, integrity, etc. The subjective criteria will vary by position with “relevant experience” being high on the list, especially for more senior roles.

Time is a scarce resource at emerging growth companies and speed is critical to success – speed to market, the agility to change direction on the fly, and the ability to iterate faster than the incumbents. To quote Rupert Murdoch, “The world is changing very fast. Big will not beat small anymore. It will be the fast beating the slow.” The implication for startup hiring is that there is little to no time available for on-the-job training nor room for the rookie mistakes. Good ideas and ripe markets get competitive very fast … thanks partly to the flood of venture dollars (but that’s another story.) While every hiring need will have its own prioritized criteria, relevant experience will invariably rank towards the top of the list. Experience is not surprisingly well correlated to relationships … and the right relationships provide tremendous leverage and the ability to move that much faster.

Startups should hire the best people possible. But, if you re-read the title, you”ll notice that I’m saying you should always compromise. Why? Because there’s no such thing as the absolutely perfect hire along every possible dimension. If you recruit people that you think were a “no-compromise” hire, you’re deluding yourself with unrealistic expectations. Nobody’s perfect (and if they are, you probably couldn’t recruit or afford them anyways).

Everyone you bring on is a compromise. The trick is to compromise on the right things.

Let me explain. Here are several different attributes or “dimensions of awesomeness” you might seek for your startup recruit:

  1. Passion: Are they fired-up?
  2. Experience: Have they done this particular job before? Did they succeed at it?
  3. Intelligence: Are they smart?
  4. Academics: Do they have the right degree? From the right place?
  5. Hunger: Are they motivated? Are they ambitious?
  6. Risk-Tolerance: Can they share the risk? Or, are they looking to make fair market value?
  7. Scrappiness: Can they get by with little? Are they resourceful?
  8. Loyalty: Can you get them to commit to your cause? Will they be fiercely loyal?

Those are just a few I thought of off the top of my head. It’s by no means a complete list. I intentionally left out things like “integrity”, because it’s hard to argue in favor of compromising on integrity. That’s just plain stupid.

But just about all of the attributes listed above could be compromised a little in exchange for something else. For example, if you were somehow able to grade a recruit along all these dimensions, you might find that someone scores “average” in the academics dimension – but is off-the-charts smart (happens all the time). So, you might decide that it’s OK for them not to have an ivy league degree. Or, someone might be so smart, passionate and entrepreneurial – but lacking in experience. Perhaps that’s OK too. Or, maybe you really do have to have the absolutely perfect person along every possible dimension, but they’re so good, you’re just not sure you’re going to be able to keep them engaged. Perhaps you’ll have to compromise on the loyalty front.

The point is, like with just about everything related to startups (and lots of things in life), there are tradeoffs. You need to figure out which dimensions are absolutely critical (where you will not give), and which ones you’re willing to compromise a little on. There’s no right answer – it depends on your business, your culture, your values and your instincts.

Toby Elwin says:

August 11, 2009 at 3:37 PM

Startups should never compromise, if their human capital is as important as their financial statements.

My current work as an independent consultant is almost entirely framed in a 20-year history of organization development and marketing. I find human capital the most important discussion to have and to relate direct to business results. Your talent is your bottom line.

Most organizations are continually challenged to hire the right fit, manage their success, and maintain their motivation [known in some circles as recruit, train, retain]. The “X” factor in all organizations is how to manage talent.

Technical ability and motivation are mutually exclusive. It takes talent to implement a strategy, it takes talent to leverage technology, it takes talent to follow processes. If your talent is not motivated none of the above will happen.

I have come to analyze likely executive, operational, or functional success with talent-related research such as emotional intelligence for team and relationship predictors; cultural assessments to match talent to corporate culture; and a group of communication strategies to align an organization’s talent to expectations and goals.

The ability to manage an organization through rapid growth relies on bringing the right talent in, identifying the characteristics of risk in current- and future-state talent needs, and being aware that managing a $1 – $5 million a year company relies on a different work force than managing a $100 million company. The CFO of your start-up may have little ability or comfort to take you on the road to an IPO.

Many post-merger culture assessments don’t provide a road map for that growth, don’t account for the human capital [talent management] role to realize synergies, and don’t focus on talent strategies that can manage towards strategic needs. It is a stock market fact that acquiring company stocks drop when an acquisition is announced. If your acquisition’s top talent leaves, you are left with hard assets, but perhaps little motivation of those who stay on. The cultural fit is the most overlooked in an assessment of synergy.

Passion, hunger, risk-tolerance, scrappiness, loyalty can all be managed with human capital assessments. Experience, intelligence, academics are all technical accomplishments that rely on motivation. For an organization or a leader, hunger is less important than knowing when people will be hungry and what your people feed on. No matter the knowledge, ability, or skill, if there is no motivation, there is no contribution.

I believe VCs and private equity firms can realize a greater portfolio return when they build human capital into their risk beta.

The link to the blog is here human capital valuation.

[*In the spirit of disclosure, I count Hubspot as one the best businesses I have dealt with for social media and inbound marketing analysis and impact. They define the term community and I count on Hubspot, their employees, and their learning environment as a singular source to navigate social media and the new world of marketing and public relations. I am not professionally affiliated with Hubspot.]

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