Hiring the Right People

Okay, let’s assume that you’ve got your idea, your business structure, and your money in hand. The next thing you’ve got to get your hands on is good people. In many ways, this is the scarcest commodity of all.

Before you hire, you have to figure out:

            •           what skills ­you’re looking for, and in what combinations

            •           what type of people are likely to have these skills

            •           how much time you can allow for individuals to begin to produce

 “in most start-ups, you’re far more likely to need multi-talented people who are willing and able to take on all kinds of tasks.”

            •           how much you can pay

            •           how much responsibility and authority you are really willing to give up (even to the most talented people in the world)

            You’ve certainly heard the axiom that your people make or break your business. In my experience, that’s almost always been true. But keep in mind that your business will need different kinds of people over its life span, and the people who are most valuable at the beginning may be less valuable as time goes by and the business changes into something new.

            At the outset, you may very well need some “sharpshooters”—people with very specific and targeted skills, who are themselves a key competitive edge for your company. There are manufacturing people, and creative marketers, and salespeople, etc, etc., who fall into this category. Figure out what you need, find a way to compensate them, and then sign them up.

            But for most jobs in most start-ups, you’re far more likely to need multi-talented people who are willing and able to take on all kinds of tasks. You need people who either aren’t accustomed to all the perks and support systems of corporate life, or who are consciously making a trade-off that they think will be good for them. But even these people, who are more or less going in with their eyes open, are likely to be astonished at the realities of life in a small business. If they spill their coffee, they have to clean it up themselves. (Did anyone remember to buy paper towels?) If a nut falls off the bottom of their chair, they have to find a wrench and put it back on—and by the way, they should check the rest of the chairs while they’re at it.

            Compensation can be a critical issue. There’s almost no way a small company can compete in terms of salary, so to get talent, you’ll need to offer other kinds of incentives to key employees. Equity—a piece of the company—is something that lots of people are looking for today, and it is a tool that’s available to you. Hanging on to as much equity as long as possible is a good rule to follow. If you give away equity, it should be tied to sustained individual and company performance.


”  The opportunity to learn many aspects of business can be a strong lure for many potential employees of entrepreneurial companies.”

        Equity can be given up front or in the form of options. Options can be exercised on certain measured performance levels of the individual or the company, and may also be contingent on other factors (such as number of years employed at the company). Be creative with equity. Structure options to meet the needs of both the individual and the company.

            An alternative to high salaries or pieces of the action is bonuses. These can be based either on objective or subjective measures, but you’re likely to create less unhappiness if you can point to some benchmarks that the individual has hit. John Korff, the events impresario, hires young people with a predetermined bonus figure in mind—a sum that he builds into his budget as if it were deferred salary. If the individual doesn’t earn that bonus, John knows he’s made a serious hiring mistake.

            The opportunity to learn many aspects of business can be a strong lure for many potential employees of entrepreneurial companies.

            Recruiting, like almost all other aspects of business, requires salesmanship. When you spot a great potential hire, figure out what he or she needs from you, and—within the bounds of practicality—give it to him or her. Maybe someone needs to leave a big corporation because that company’s hours are too inflexible. It’s not that they won’t work lots of hours; it’s that they sometimes need to be out for two hours in the middle of the day. Well, if you can afford to offer flexibility, offer it. Stress the things that your little company does do, rather than the things it doesn’t (yet) do. Maybe your 401k plan is still entirely funded by your employees. But, hey, at least you have one; and maybe you have a timetable in mind for starting corporate contributions to that plan in the future. Are you willing to pay for certain kinds of training, so that your future employee can make himself or herself a more valuable commodity? If so, mention it, see what kind of response you get, and move forward from there.

            Is the person you’re talking to a techno-wizard? Can you honestly say that you’re committed to providing the best technology possible—or, alternatively, that you’d be willing to back that person in a large-scale effort to upgrade your company’s technology base? How can you sketch out an attractive future for this individual in the context of your company? How will your vision be liberating, empowering, and financially rewarding for that person?

            When doing due diligence on an entrepreneurial company he’s interested in investing in, Mike Hsieh always makes a point of meeting with the key people working for the entrepreneur. He feels that if the company’s personnel are high quality, then most likely the entrepreneur is high quality, as well: quality people want to work for quality people. So, recruiting and developing great people may also have a bearing on your ability to attract the capital needed for growth.

            Don’t think you’re alone or that you’re a bad person if you absolutely dread the prospect of dealing with personnel issues. The personnel function is the Great Black Hole of business. People can be complicated, unpredictable, and demanding, and they can suck up all the energy that’s available out there. You don’t have enough time in the day to make everything right and everyone happy. You’ll drive yourself crazy if you set that kind of unrealistic goal for yourself.

            But you do have to make as big an investment as possible in your people, and this begins with an effective recruitment process.