Episode 2: How to Hire

Episode Transcript

JOHN HENRY: I’m John Henry and this is Open for Business, a branded podcast from eBay and Gimlet Creative about building a business from the ground up. Today’s episode: hiring. And here at the beginning of the show, a business that specializes in endings.

JOHN HENRY: I’m John Henry and this is Open for Business, a branded podcast from eBay and Gimlet Creative about building a business from the ground up. Today’s episode: hiring. And here at the beginning of the show, a business that specializes in endings.

PHIL: With a cemetery, there’s zero room for error.

JOHN HENRY: That’s Phil. He’s a cemetery director. We’re calling him Phil because he asked us not to use his real name. And when Phil says there’s zero room for error, that’s because there’s very high stakes when it comes to his line of work.

PHIL: You cannot -- you can’t put the loved one in the wrong space. We have a hundred acres of land and we have twenty-six gardens, and in each one of the gardens are a thousand spots where you can bury a body. And most of the spots are family plots where Mr. and Mrs. Smith, in 1950, bought four spots: one for themselves, and then one for each of their two kids that they had. Okay, so it’s now sixty years later, Mrs. Smith has died. We have to make sure Mrs. Smith gets into the proper space out in the cemetery. So you’d have to go out in the cemetery and you’d have to plot where that burial should go. And you have to make sure that Mrs Smith isn’t in Mrs. Jones’ spot.

JOHN HENRY: It’s harder than it sounds to find an employee who can make sure that Mrs. Smith isn’t accidentally in Mrs. Jones’ spot. Which means, that hiring is key. To gain a sense of just how key it is, recently when Phil was looking to hire someone, he found a candidate that seemed perfect on paper. Phil’s employees have to be really good at calculating and measuring, because they have to figure out exactly where the graves should go. And this candidate Phil found was a veteran whose job in the military was to coordinate where explosives should land.

PHIL: He had been in a mortar company. Now mortars, and if you don’t know, they’re little rockets, and they’re computerized. And if you want the rocket to hit in a certain spot, you have to put in the details and the coordinates, and then you press the button and the rocket goes. And it’s a great attention to detail in that job, and obviously a lot of mathematical skills.

JOHN HENRY: So this is a guy who, at his last job, literally had lives depending on him to get the calculations right. So Phil hired him and the guy started. But almost immediately after his first day, there were problems. Phil found himself having to double check every single thing this guy was doing.

PHIL: Everyday or every other day he was making some kind of a mistake with his calculation. Sometimes he’d get it right. He’d get it right ehhhh sixty to seventy percent of the time. Towards the end, when he would get it wrong, what he would say is “Gee I got it right yesterday. You can’t expect me to get it right all the time.” Oh my goodness if no one had checked his work, there would have been a Mrs. Smith in the wrong spot.

JOHN HENRY: Phil had to fire the guy, start the search all over again, and find and train someone new. And that brings us to our topic for today’s show...a topic that every growing business has to face sooner or later: hiring.

I’m an entrepreneur myself, and I know first hand that it can be pretty scary and tricky to go from a one man operation, to growing a team and hiring people. Making sure that they get along and that they do their job well. I started and sold my first company a couple years ago. It was an on-demand dry cleaning service called Mobile City. And today I invest in great entrepreneurs through a couple of accelerators that I run here in New York City. The goal of this podcast is to bring you lessons about starting a business that I wish I’d known when I was just getting started.

Every business owner wants to hire the right person. You hold interviews, you read resumes, you search and search, and you think you’re doing everything you’re supposed to be doing. But you can still end up with the wrong person for the job. And those hiring mistakes, they cost a lot.

According to the progressive think tank, the Center For American Progress, it can cost up to a third of an employee’s annual salary to replace them. The more senior the job position, the more expensive it’s going to be for you. In this episode, we’ll hear from business owners, HR professionals, and recruiters who have all made good and bad hires. We’ll explain how to avoid some classic hiring mistakes, and leave you with five lessons on how to get hiring right.

So to introduce Lesson One: Brina Bujkovsky. Brina sells gifts online: ceramics, wedding decorations and other home goods. A while back, she needed to hire someone quickly to work in her warehouse.

BRINA BUJKOVSKY: So we posted the job on Craigslist and we started to sift through the applicants. One guy who applied was clearly overqualified for the job. So we interviewed him and he was well-spoken, he was well-dressed, he was showered, the whole thing. He told us he was just looking to get back on his feet, and alluded to a divorce, debt. And red flags were flying, but I wanted to get someone in the position and I wanted to get back to work. So I gave him the job and he started the next day.

JOHN HENRY: It did not take long for Brina to realize that the red flags were flying for a reason.

BRINA BUJKOVSKY: So I went to lunch that day I came back to an empty warehouse. And his backpack bag was gone. So I assumed that he had walked out on the job, I assumed that he must have realized how basic a position it was and perhaps he decided that it was just beneath him.

JOHN HENRY: But, that wasn’t the reason why her new hire disappeared on his first day...

BRINA BUJKOVSKY: So a couple hours pass and it’s late afternoon when he comes stumbling in from behind the trash dump in the parking lot behind our warehouse. And his pants are unbuckled, and he’s wet. He had passed out drunk, peed himself and was just now coming to. Here we were in our own warehouse with this strange drunk wet man.

JOHN HENRY: If we’re going to boil down Brina’s hiring mistake down to just one moment...it’s this one…

BRINA BUJKOVSKY: Red flags were flying, but I wanted to get someone in the position and I wanted to get back to work.

JOHN HENRY: Looking back on it, Brina says she ignored the red flags and rushed the hiring because, in that moment, anybody seemed better than nobody. Which brings us to Lesson One...

ADAM ROBINSON: Just have a process.

JOHN HENRY: That’s Adam Robinson, CEO of a company called Hireology, based in downtown Chicago. For the last two decades, Adam’s been obsessed with solving the problem of hiring, and his company Hireology sells a software that they think has cracked the problem. By saying “just have a process,” Adam doesn’t mean that you have to implement some super complicated hiring protocol or even that you have to buy his software. He just means that you have to pick a process and stick to it. Ask the same questions of each applicant, and have the same people interview them.

ADAM ROBINSON: Ask a ten question stock interview, and if you start there in a 30 minute conversation you’re going to be way better off than you were talking about what college they went to, or tell me about your last job, and you know, reading a resume to them and having them nod. Right? Which is what most interviews are...

JOHN HENRY: Oh man, I’ve made those hiring mistakes. That’s been me before.

ADAM ROBINSON: Yeah because no one knows what to do. And you know, resumes are marketing documents, designed to get an interview.

JOHN HENRY: Implementing a process gives you data that you can work with, so you can then make comparisons. If you ask ten people the same exact questions, then you have a place to start when you want to compare answers later. Adam’s advice to just have a process, it sounds deceptively simple but, it’s also surprisingly rare.

ADAM ROBINSON: Most companies have a hiring success rate right around forty to fifty percent on average.

JOHN HENRY: So what does Adam mean by hiring success rate? Well, Hireology measures hiring success through surveys. Ninety days after the employee first starts, they ask the employer the following question: “Knowing what you know now, would you choose to hire this person again, if given the opportunity to do so?” They find that more than half the time, the answer is: No.

Adam says that by putting the right process in place, it can bump up a company's hiring success rate by quite a bit, something like forty percent. It also reduces that costly turnover. So, having a process helps, but also, the more time that your company devotes to thinking that process through, the better.

ELANA KRIEGER: Everyone’s really busy at a start up and interviewing isn’t always on the top of their mind. But the more people you have on a panel, the more likely you are to find the right fit.

JOHN HENRY: Elana Krieger is the Head of HR at Boxed, a company that sells bulk groceries and goods online, think, a trip to Costco from your phone. Elana’s advice is to make sure that your hiring process is collaborative.

ELANA KRIEGER: If you can get a panel of four or five people, then you’re more likely to get a better hire out of that process. And also take a look at who is on that panel, make sure they have diverse perspectives and are looking at hiring from different ways.

JOHN HENRY: One more thing, if you’re the boss, then you are by necessity a part of this process. My producer Nicole asked Adam about this.

NICOLE WONG: How much time should a CEO of a small company spend on hiring?

ADAM ROBINSON: If they are growing -- twenty-five to thirty percent. If you’re growing a high growth team and you have designs for being that big company some day, you are never not looking for that next person. Right? You’re always looking. It’s a day to two days a week.

JOHN HENRY: This blew me away when I first heard it. At a growing company, the CEO should be spending roughly a third of their time recruiting and hiring new employees. It sounds like a ton of time, but in the long run, it’s worth it. Because hiring can be pretty easy to put off, until all of a sudden it becomes insanely urgent, and that’s when you end up rushing through it without any process at all. And if you do, you can end up bringing someone in who ends up peeing himself, behind a dumpster, in your parking lot on day one.

Okay, so Lesson One: have a process, make it collaborative, and don’t rush through it. But, what are you screening for in that process? Well that brings us to our second lesson...

KATIE CHRISTIANSEN: My worst hire ever was one that I made probably about a year and a half ago, to work for me.

JOHN HENRY: That’s Katie Christiansen. Katie is the Director of People Ops at Gimlet Media, the podcasting company that’s also our parent company. One of the many things she does at Gimlet, is oversee all of the hiring. And this story comes from before she was working at Gimlet, when she was a recruiter...

KATIE CHRISTIANSEN: I was totally wowed by this woman’s enthusiasm and excitement, and just general kind of approach to life. And I would ask a question about like organizational skills, and she would give me this amazing answer about color-coded Excel sheets. I just like so specifically remember hearing the words “color-coded” and I lost it. And just was like, I need search no more. This is perfect.

JOHN HENRY: Shortly after she hired this woman, who during the interview, seemed to be the answer to her prayers, Katie started noticing some odd behavior around work ethic.

KATIE CHRISTIANSEN: It was probably about a month into her coming on board. She would go and get ice cream with this friend of hers that also worked at the company. But they would just go and kind of like wander and be gone for a long time, and she would come back with these really elaborate, giant neon ice creams, with like a big bowl, and a little bit of soft serve, and like fruity pebbles and chocolate chips and gummy bears. I would just never disappear for half an hour, when I was new to a job, at a not-lunchtime period, and come back with like a hot pink ice cream creation.

JOHN HENRY: The ice cream breaks were a symptom of much deeper problems. She’d tell Katie that she’d finished tasks that she never finished, and that she’d met with clients who had never heard from her.

KATIE CHRISTIANSEN: And the final kicker was we sent her on a trip to one of our offices out of town in California, and she lied about going and told us that she was there for an entire day that she was not actually there. Like I got conned, and I’m a hiring professional!

JOHN HENRY: To Katie, the woman she interviewed was a completely different person than the woman who actually showed up to work. And that brings us to Lesson Two, which is during the interview process, to screen for attitude. Now, if you hear the word attitude and you think it’s something fuzzy like it’s all about having a smile on your face, or generally being a pleasant person, we have news for you. Or rather, Adam from Hireology does.

ADAM ROBINSON: I always like to quote a University of Minnesota study that talks about identical and fraternal twins separated at birth. They ran this very famous study now in hundreds of twin pairs. And they tracked all sorts of stuff. As it related to job satisfaction, what they found was, it didn’t matter what education you had: white collar, blue collar, hourly, salaried, married, divorced. It didn’t matter. Twins showed statistically identical levels of job satisfaction. What that implies, it doesn’t prove it but it certainly suggests, is attitude toward work when you control for genetics, is hard-wired.

JOHN HENRY: So are you screwed if you don’t like to work? You know like, are you saying some folks are just born with a negative disposition toward work?

ADAM ROBINSON: What I’m saying is that’s what the research shows…

NAZANIN RAFSANJANI: So what is your takeaway from that?

ADAM ROBINSON: Hire people that exhibit a positive disposition toward work, because the person walking around your office with a rain cloud over their head is probably born to have a rain cloud over their head.

JOHN HENRY: Thank god for twins who are willing to participate in this kind of research! One of the studies that we cited in the first episode about if there’s such a thing as an entrepreneurial gene, was also a twin study. The twin study that Adam’s talking about was published in 1989. We talked to the author, and yeah, the study suggests that people are born with a set disposition towards the idea of work. It doesn’t even matter what type of job, just work itself.

So how do you screen for this? Well, one way to get at someone’s innate attitude towards work is to screen for what Adam calls an internal or external locus of control. So that’s a technical way of saying that if something goes wrong, does the candidate, (A) Have the self awareness to claim their own responsibility in what happened, or (B) Do they look to blame others. Adam told us how to screen for locus of control in an interview...

ADAM ROBINSON: You ask a question like, “tell me about the last time you set a goal for yourself but were unable to achieve it?” Right? And so you listen, but it doesn’t matter what the goal is because the next question is, “Well what was going on? Tell me about why that happened?” Internal locus of control would yield an answer like: “I should have done a better job at setting that goal in the first place, I set a goal that was too aggressive.” Or, “you know what I thought I had it in the bag but I didn’t.” Okay, internal locus, I own that, my fault. Someone with an external locus would say something like, “our marketing team couldn’t get enough leads in the door, or the economy was bad. Or the funding environment is horrible we couldn’t raise the money.”

JOHN HENRY: Simply put, hire the people with an internal locus of control. They tend to be way more successful at their jobs. If Katie, the woman who hired someone with a fondness for ice cream breaks, had screened for attitude during the interview, before she made her hire, it could have saved her a lot of headache down the road. And so, Lesson Two is: hire for attitude and accountability and understand that to some degree, those attributes are hardwired.

And now, we’ve arrived at Lesson Three. And Lesson Three is not necessarily something to look for, but something to beware of. And that is, hiring people who remind you of...you. Here’s Elana Kreiger again, from Boxed, to explain...

ELANA KRIEGER: People are really interested and attracted to people who are just like them, and that’s probably not the person you need to hire. You can really be deceived and start hiring people that look the same, maybe they’re a similar age…

JOHN HENRY: Got it.

ELANA KRIEGER: ...and I think that is really where you wind up in a deficit because you wind up with a group think. If I’m interviewing with a woman who has a similar background to me, maybe she has similar experiences to me, I might feel really comfortable with that woman. It’s not really about, “do I want to have a beer with this person on Friday night?”

JOHN HENRY: I had a buddy who is a CTO and cofounder at a company and their entire hiring premise was, can I have a beer with you? Needless to say, that company failed.

ELANA KRIEGER: Oh really? And I mean listen, I’m sure maybe there’s great companies where “can I have a beer with you” is the criteria and they’re super successful, but the problem is you’re just, you’re replicating a culture. If you’re looking “can I have a beer with you,” if you’re an extrovert, that probably means you’re only looking at extroverts. You’re discounting almost fifty percent of the world that’s an introvert for example, and sometimes those people are going to have very different skill sets than you have. So you’re potentially going to wind up with weaknesses.

JOHN HENRY: A classic example of this is dress code. At Boxed, the company where Elana works, the dress code is pretty laid back.

ELANA KRIEGER: Some people come in for an interview in jeans and a t-shirt, and some people come in for an interview in a suit and tie, because that’s how they’ve interviewed before. And I’ve really spoken to a lot of the people who do interviewing at the company about not making judgments just based on somebody’s clothes. Just because they came in a suit and tie doesn’t mean they’re a stuffed corporate shirt, it just means that historically they’ve probably worn suit and ties on interviews and that seems like what they’re supposed to be wearing.

JOHN HENRY: Lesson Three is: Be aware of your natural bias towards sameness. Don’t just hire someone because you like their t-shirt, or because you have a good gut feeling about them. Because:

ELANA KRIEGER: Your gut will deceive you.

JOHN HENRY: This might sound counterintuitive for a lot of entrepreneurs because when you’re first starting out, you trust your gut for just about everything. You probably relied on your gut to start your business in the first place. But when it comes to hiring, don’t just trust your gut.

ADAM ROBINSON: I would say that the gut feeling is a great tie breaker. If the data is ambiguous and it’s right on the line, let your gut break that tie. But do not let your gut play until you see the data.

JOHN HENRY: Got it. Okay.

ADAM ROBINSON: Because it’s no better than a coin flip and what I will advise companies do completely facetiously, is if you don’t buy what I’m saying just flip a coin and hire all the heads. Because it’d actually be better than what you’re doing which is producing a forty percent success rate. So at least we’ll get you to fifty percent. Just flip the coin. Because your process is yielding a worse than random result.

JOHN HENRY: Sometimes trusting your gut can lead you to make surface level judgments, which means you might end up hiring someone based on how much you like them, and not necessarily how good they are for the job. Use your gut as a tiebreaker, and not as a shortcut.

So, Lesson Number Three again, is to acknowledge any natural biases that you have toward sameness. Which can be tough for a lot of entrepreneurs, especially when you’re looking to build a culture at your company. And if you’re not careful, you can mistake sameness with culture. And that my friends gets us to Lesson Four: know what culture is and what it’s not, and what it means to your company. Culture isn’t ping pong tables, bean bag chairs, and free snacks. Here’s Elana from Boxed...

ELANA KRIEGER: I think it’s important to get down to really what culture is. So at small companies, sometimes the culture is, “this is our life. We are on a mission and it’s a 24-7 mission, and we’re gonna be in the garage and we’re gonna create this baby.” And at some small companies the culture is, “this is a job, this is really important but I also have other really important things in my life and so we come in at nine and we leave at six and we put in our all during the hours.” Right? That’s an example of something I want to keep in mind when I’m hiring for culture.

JORDAN INSLEY: The day is done when everything is done, or as much as you could get done was done. That was one of the battles I guess you could say that I’ve always had.

JOHN HENRY: That’s Jordan Insley, CEO of QuickShip Electronics, and this exact miscommunication about what culture really means, fundamentally changed the course of his entire business. Jordan started out selling sports memorabilia on eBay. He then moved on to selling electronics, also on eBay, and he’s grown QuickShip into a multi-million dollar business with over thirty employees. But, it almost didn’t work out that way, and the reason was a difference of opinion over culture.

JORDAN INSLEY: In the early days I actually had a business partner that I worked with back in 2006. So it was myself, him and then we had had a couple of people that had worked for us. And we started working together and found that unfortunately after a couple of years I had a different vision, and I really wanted to make something big like I had said.

JOHN HENRY: Jordan and his business partner ending up parting ways over this because they didn’t agree from the get-go what type of business they were getting ready to grow. So Jordan found himself reinventing his business at the worst time possible.

JORDAN INSLEY: So the week of the stock market crash, of all things, is the week that I started my business myself.

JOHN HENRY: Jordan rebuilt his business on eBay, and he learned what culture means to him. To him it meant building something big and working furiously towards it.

JORDAN INSLEY: You know if I were to build QuickShip over again, or if I were to do something differently, what I would really focus on is having a really really small team. And that team would be you know like I said, today we’re thirty-five people or so. It would be focused on going out and finding people that work as much if not more than I do, and I work a lot, and really trying to build something as the team, that the team all had some form of ownership in, so they would all continue to drive and build. And it would be with some really really smart people, that you know, ultimately would want to create something really special, and would never give up to get there.

JOHN HENRY: Lesson Number Four is, know what culture is, know what it’s not, and know what it means for you. And make those values known to the people that you work with.

Okay, so we’ve arrived at the last lesson: Lesson Five. I think out of everything that we’ve learned from researching and talking to different people about hiring, this is the lesson that resonated the most for me. It’s not about something that can go wrong, t’s about something that can go right. I’ll let Kyle, also not his real name, tell his story…

KYLE: So I was working in an extremely small town as an afterschool program coordinator.
I had interviewed this man who told me this really inspiring and fascinating story about the turn and shift that he had made in his life. He had been in and out of school, in and out of trouble, but had recently decided to make a positive shift in his life, and wanted actually to focus on child development and working with youth.

JOHN HENRY: Kyle was moved by this guy’s story. So he hired him to run the afterschool program: tutoring, taking kids on field trips, that sort of stuff. But then...

KYLE: But I began to notice some interesting things as time when on. About a month in, we’d been taking various field trips. He was very very well known around town. Everybody knew his name. People would always say “Aww, he’s working over there, huh? Wow, that’s interesting…”

JOHN HENRY: Eventually, Kyle learned what people meant by “interesting…”

KYLE: Turns out, the activity leader of the afterschool program, running groups of twenty to thirty kids on a daily basis was one of the top members of the local gang.

JOHN HENRY: So once he recovered from the shock of accidentally hiring a gang leader to run an after school program, Kyle did something unexpected.

KYLE: And so I had to sit down, and we had to have a really open and honest conversation, and it was a really difficult conversation. We actually were able to make the decision that he was able to stay on the team. It turns that out he had been making shifts, and he did still have some involvement but we believed it was not a negative impact on our group of kids and on our organization. And he stayed with us and had a lot of success.

JOHN HENRY: He didn’t fire the guy! On paper, this guy is clearly not fit for the job, but he was trying to turn his life around and Kyle saw something in him and took a risk. And it paid off. The guy ended up staying for three years, and then went on to attend, and graduate, from a child development program at a nearby community college. He still works with kids, and he hopes to open up his own community center one day. And this is our last lesson. Lesson Five: hire for potential. Sometimes, hiring is about taking a chance on someone who might otherwise not be a natural fit for the job.

ELANA KRIEGER: I think it's important to generally hire for potential and not necessarily someone who has done the exact same thing before.

JOHN HENRY: How do you measure potential?

ELANA KRIEGER: When I'm looking at someone’s potential, what I'm really looking at is if I think that they can grow into the role. There are people who throughout their career get placed in positions of increasing responsibility. People who really thrive in ambiguity and they just thrive in those situations, and really shine in those situations. And I think those are the people who demonstrate that based on their past experience that they really have potential to grow and thrive in your position even if they haven’t done it before.

JOHN HENRY: Lesson Five: Hire for potential. So, how do you get hiring right? To re-cap:

Lesson Number One: Have a process, make it collaborative, and don’t rush it.

Lesson Two: Screen for attitude. Hire people with an internal locus of control, who take ownership of their actions, and don’t blame others for their mistakes.

Lesson Number Three: Be careful of hiring people who are just like you. Different perspectives and personalities can help make a stronger company.

Lesson Number Four: Determine what culture actually means for you and your business, whether that means you work around the clock, or it means that you place more of an emphasis on work-life balance.

And lastly, Lesson Number Five: Hire for potential. Just because someone hasn’t done something before, doesn’t mean that they can’t be great at it in the future, with the proper training of course.

And that’s it for today’s episode on hiring. We’ll be back in two weeks with an episode on how set a price for your product. Pricing sounds really easy, but it’s not as straightforward as you might think. And, getting it wrong can cost you. Fortunately, we’ve got concrete steps that you can take -- using tools like big data -- to help you arrive at the right number.

Open For Business is a branded podcast from eBay and Gimlet Creative. A special thanks to Robert Carroll from Gild, and Kathleen Mahoney. Our theme song is by Vulfpeck.

If you want to learn more about Open For Business visit ebay.com-slash-open-for-business, where you can find more episodes of this podcast, and also get tools and information about how to start or grow a business on eBay.

Check us out! Subscribe to Open For Business on iTunes or Google Play. I’m John Henry. This is Open For Business. Thanks for listening.