Dec 11, 2013

The Importance of Talent

Arguably, one of the most crucial, if not the most crucial decision you have to make as a start-up founder is choosing who you surround yourself with. And knowing how to hire is one of the most difficult parts of the job.

Traditionally, companies emphasize first-order competency in their hiring process. They look at the specific experience and skills you have. Are you good with Excel; can you code in Javascript; are you familiar with Healthcare; have you brought a product to market? Although these big companies will claim to look for "smart people" with "potential", their main imperative is to fill in a specific position with a specific candidate. They are not looking for the best, and why should they? They just need someone who can fill the role with minimal risk and friction. Eric Paley encapsulates this concept well in The Curve of Talent. "The large company corporate world is filled with C players. [...] C performers struggle to competently fill their role, but are somewhat productive with sufficient coaching. [...] Large companies thrive on inertia and the core job description of a large company employee is to keep that inertia going and do nothing to screw it up.

As much as this type of thinking works for large companies, it can lead to costly mistakes for start-ups. Start-ups are constantly on the edge of failure and cannot afford to have reasonably competent individuals at their core - people who deliver only the bare minimum. The truism "If there's any doubt, there's no doubt." is particularly applicable here. What they need are individuals with strong second-order competency - those who can learn quickly, adapt and roll with the punches without losing their resolve.
If you think about return on investment as a curve over time, you will realize that those with simply experience have a higher Y-intercept - they are more valuable at the time of hiring, but their competency is "maxed out". On the contrary, a candidate with greater potential but less relevant experience has a steeper curve - he starts lower but will, not too far down the line, become far more valuable to the company.

Don't hire based on Y-intercept.

(Taken from Professor Ousterhout's class at Stanford).

These individuals are much harder to find, because their potential is not written black on white on their resume. These are hires you can only appraise by sitting down and engaging with, rather than putting them through a formulaic interview process. Not only that, they are very selective about who they choose to work with. So keep looking for that candidate that will give your team a boost, and don't settle.

The compounding return on hiring decisions doesn't only apply to your core team, but all the people who are involved in helping your venture in some shape or form: lawyers, accountants, contractors and even advisers. In these situations, the better options are often the pricier ones, but well worth the cost. Their increased competency and better decision-making will have an outsized effect on the fate of your start-up.
Unless you can't afford it, you are better off with a lawyer who is twice is expensive if you think they are at least twice as good as your other options. Even more so for a top-notch developer who can get the job done 10x as fast and take your product to the next level. A caveat to my point is that the more expensive options are not always the best ones - as with everything you buy, the price tag is reflective of quality only to a certain degree, the rest is up to your better judgement.

The bottom line is, you should always be selective about who you work with, even if that means taking a little longer to find the right person.


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