Founder's Mentality Blog
We’ve discussed the talent gap faced by insurgent companies several times in these blog posts—noting that they face many years where their revenue grows faster than talent, leaving them in a perpetual scramble to find good people. We’ve also noted that far too many companies try to fill the gap by adding systems, rules and procedures, which only feed the bureaucracy, creating distance from the front line. To date, we’ve summarized three sets of best practices: a) we suggested CEOs should use the talent table to match the best recruits to the most important jobs; b) we provided the case example of Yonghui, a company that has successfully brought in professionals to complement the founders; and c) we noted that the leader needs to be accountable for getting the balance right between heroes and systems.
Because this issue is so critical to founders, we had a special session at our recent meeting with founders in Dubai to collect tips from participants. Their responses tended to organize around two overarching points. First, companies should begin their search for talent within their own four walls (which implies that they should be actively nurturing their best people to begin with). Second, if searching outside is necessary, companies should not simply outsource the job to a search firm. It is crucial to take an active role in pinpointing what talent the company needs. Within those two categories, here are the top seven tips.
- Build a talent “watch list.” One of the participants described how a member of his board of directors (and an original company founder) keeps a list of 20 of the best people in the company. The founder makes it his responsibility to mentor them and act as their guardian. Another participant explained that each member of his HR team is responsible for staying close to 10 company high performers.
- Create a three-year leadership-development program now. Blackstone’s Sandy Ogg noted that on all issues, companies greatly overestimate what they can accomplish in a year and greatly underestimate what they can accomplish in three years. When it comes to talent, this means that it is very hard to imagine you can develop a robust internal talent pipeline in a year. But given three years, it is equally hard to imagine you couldn’t develop a good development program that begins to deliver the next generation of leaders.
- Create a plan right away to retain your stars, focusing on their long-term development. One participant described how his company uses geographic expansion as a tool to motivate its top people and give them exposure to global opportunities. “As an insurgent,” he noted, “you often have great domestic opportunities, but can’t match the global development program of the large MNCs. We found that even opening up one second market gave us a chance to offer international opportunities for our people.” Another participant explained how he distinguishes between training and development. Training helps people do their job better; development involves interesting projects, internships and higher-education opportunities that encourage people to grow and stay motivated. He ranks his employees on both performance and potential, and tries to move his talent to the “high-high” quadrant by systematically investing in their development. Similarly, another participant described how he allocates a percentage of his revenue to talent (training and development), just as he would to marketing—this signals to leadership that talent is as big an asset to the company as its brand.
- Start recruitment by defining the “unit of experience”—and beware the “beaver’s conceit.” The key to good recruitment is for the leadership team to define exactly what job needs to be done and what kind of person can do it. This sounds obvious, but left to a search firm, the definition will be cast in terms of company pedigree or functions—and not the unique requirements needed to serve your unique strategy. And, in fast-growing companies, you need people who have built new systems, not just run existing ones. Participants in Dubai warned that many recruits take far too much credit for building systems at their old companies—which reminds me of a parable on humility Walter Isaacson noted in his book The Innovators: A beaver is talking to a rabbit at the base of the Hoover Dam. “No, I didn’t build it,” the beaver says. “But it was based on an idea of mine.” Beware the “beaver’s conceit.”
- Favor references over fit, and don’t be seduced by likeability. Several participants noted that while it is critical to do multiple interviews on fit, it is almost always more important to collect your own independent references. One said, “Move quickly through the references the candidates provide, then find ones of your own that you can thoroughly check.” While great company brand names on the resume are often viewed as a proxy for good training, it is important to recruit the “black sheep from blue chips”— i.e., recruits who were dissatisfied with the trappings and bureaucracy of a larger company. One participant noted that the best resumes don’t necessarily indicate the best fit for an insurgent culture. He worries more about who needs the job the most, and who has a family to support (which sounds a lot like what we heard during our forum for founders in a Brazil last year, where several participants said the best salespeople are those who had to support their parents). Finally, participants warned against confusing fit and likeability. One of them said his company forces itself to keep objective scores of candidates—“fit against brief”— to try to prevent giving too much weight to likeability. As British psychologist Rob Yeung argues in his book on recruiting: “Most interviewers subconsciously rely too much on the likeability factor.”
- Don’t recruit like an incumbent. Even if you are a large company, many participants pointed out the danger of recruiting like one—i.e., promoting the value of joining a big, established company, with little risk and huge stability in career paths. “Recruit as the insurgent,” one noted. “You’ll get risk takers and you’ll get people far more willing to live with ambiguity and to do what it takes. Avoid folks who spend all their time trying to bring predictability and certainty to a turbulent world.”
- Develop alternative channels to build your external pipeline. Participants suggested several best practices around increasing the pipeline of external candidates. One described how a member of his HR team is a designated LinkedIn specialist. His job is to scrutinize the unit of experience required to do a job and then mine LinkedIn for profiles that match the description. Another participant described how he goes to industry conferences to scout for the best talent in the industry so that he’s meeting the people who best understand the sector.
For insurgent companies, revenue is always growing faster than talent. But maintaining the insurgent culture and mission demands that you recruit for strategic purpose and concentrate on finding those candidates who will enhance the founding culture, not detract from it. The temptation is to either fill gaps with secondary talent or become seduced by blue-chip résumés. What matters most is finding people who can get the right job done, even in an environment defined by turbulence and change.
The three elements of the Founder's Mentality help companies sustain performance while avoiding the inevitable crises of growth.