It was my first really expensive mistake but it taught me a valuable lesson. For the first time in my career I was hiring for a VP of engineering. A vital role for an early stage company. I went through a long interview process and spoke with many candidates, none of whom immediately stood out. In the end, time pressures and our so-called expert advisors led me to pick the candidate with the most relevant experience.
It quickly became apparent we had over-focused on domain experience and had not considered other important leadership attributes such as the person’s relevant skills for the particular stage of the company, work ethic and passion for the job. The VP at first seemed to hit the ground running, but after a while it became clear he didn’t really dig into details, was very indecisive, didn’t inspire confidence with his team and was holding the company back. After about a year we had to let him go, but his influence had already helped veer the company off course. I never calculated the exact cost of that mistake, but when you consider the expense of a bad hire and the opportunity cost of having someone underperform, it was extremely high. As a simple example, I would conservatively put the cost of hiring a bad sales rep at a software company at more than $1 million when you factor the cost of hiring, the opportunity cost of missed revenue, and the cost to remove and replace that person. In fact, the Zappos CEO Tony Hsieh famously estimated that his hiring mistakes had cost the company over $100 million.
At MongoDB we compete in a market with aggressive startups as well as large incumbents with huge resources. But none of them keeps me up at night. My biggest worry is our ability to execute – and that starts with our ability to recruit a disproportionate share of top quality candidates.
Think of yourself as the manager of a sports team. Even if you are the best basketball coach in the world, if you don’t have great players you will never win the championship. On the other hand, if you recruit LeBron James to your team, then even an average coach will see success. The lesson is that if you do a great job recruiting, the work required to get the team to produce becomes so much easier. Conversely, if you recruit average people, no matter how much effort you put in into developing and leading your people you will likely get average results.
Here are a few things I think every leader should keep in mind when they build their team:
When in doubt, don’t hire
We are all under pressure to hire to ensure we deliver on the commitments the business expects expects from us. However, hiring the wrong person can be a cancer on the business. For instance, a bad sales rep can contaminate an entire territory by creating a poor impression of the company with customers in that area. Even after replacing the bad rep with a good rep, it will take a long time to recover the company’s reputation. Moreover, a bad hire penalizes the good people who are working hard to move the business forward, and in many cases demotivates the people who are actually producing good results. Recovering from a bad hire is much harder than having an open headcount for an extended period. If in doubt, do not hire.
A’s hire A’s
Another motivating factor for keeping your standards high is encapsulated in one of my favorite sayings: A’s hire A’s, B’s hire C’s, and C’s hire F’s. The reality is that no one wants to work for a bozo, and employees can instantly assess if their boss is a bozo. The team who works for a bad boss will quickly get demotivated and leave. Then the bozo will hire other bozos into the company. Hiring a bad leader compounds like high interest on a bad debt. Conversely, A players will recruit other A players, and the team will quickly self-select to ensure the bar remains high. The lesson is: don’t lower your standards, as mediocrity can rapidly seep into your organization.
The Devil You Know vs. The Devil You Don’t
A classic mistake hiring managers make when evaluating internal versus external candidates for a leadership role is that they miss the asymmetry of information between the two candidates. With an internal candidate, you have more history and data, so you have a far better understanding of their strengths and weaknesses. However, there is limited data on an external candidate – it’s based on the interview process and reference checks. When interviewing, external candidates always put their best foot forward. In fact, they may never look as good afterwards. Invariably, the external candidate is picked over the internal candidate because the external candidate’s positives outweigh the more nuanced view of the internal candidate. Later, you end up realizing that the external hire also has their own strengths and weaknesses, and perhaps the internal candidate was the better choice. Unfortunately, the internal candidate is demotivated because they got passed over, and may have already left your group or the company.
To be clear, I am not suggesting that you only promote internal candidates – there is plenty of outstanding talent available that you should recruit. What I am saying is that you have to make sure that internal candidates are treated fairly in the evaluation process when being considered for larger roles. Moreover, by promoting internal candidates you preserve the culture of the company, send a clear signal that there’s a real meritocracy, and illustrate that people can have a career, rather than just a job, at your company.
Hiring is the most important skill for any manager. You owe it to the business, your employees and yourself to recruit the best people possible. In my next post I will discuss how to qualify, interview and hire great candidates.
Let me know what you think: @dittycheria
