Adapting Hiring Strategies Over Time

David describes the differences in what kind of people principals should hire during the early stage of their creative firm’s development when it’s all about “what we can afford,” the middle stage when it’s about “what we need,” and then the later days of an agency when it’s about “what we can learn.”

Links

“How Your Hiring Strategies Change” by David C. Baker for punctuation.com

“The Problem of Standards” by David Maister

Transcript

Blair Enns: "David, you really have my attention with this week's episode." Pause for retort. [laughs]

David C. Baker: Unlike previous episodes.

Blair: [laughs]

David: It only took 200 episodes to get your attention. That's not bad.

Blair: How Your Hiring Strategies Change. I really like this post that you wrote. People can find it on punctuation.com, your website. We'll post the link in the show notes. I have questions. I have so many questions, but let's start at the top. What was the impetus for this article?

David: I think as an outsider, I can see how firms take the employee thing differently, how they treat it very differently at different stages. It's more obvious to me as an outsider. Then I was sitting one day thinking, "Oh, how did you do this, David, when you ran a firm?" That was a mistake because I did not find a lot of encouraging evidence from my past year. I don't think I ever got past the first stage. I think that was one of the problems with the firm.

It was just a reflective moment noticing how we hire people at different phases. Sometimes things just hit you in the forehead and you think, "Wow, do they not realize how crazy that is? Do they not realize that having 16 people answering to them is not a good idea? That's a sign of a firm that's using the people that they hired in an earlier stage and they can't quite get out of their own way, and they're having to control everything that happens."

Anyway, it just hit me that we have different stages. We're going to talk about them in three stages, but they're not quite that obvious when you're in them. I think it's a lot more incremental when you're actually making these decisions. You don't all of a sudden wake up and say, "Oh, I need to hire differently." It's just more that every time you do it, you start to learn a little bit differently.

I'll tell you the other thing that hit me too, to answer your question about what prompted this, I used to say that what would make you think differently about your firm was when you just got really tired of clients. I'm not sure that's the case as much anymore. I don't have any science behind this, but I think it's more when you get tired of employees, that's your fault. That's 100% your fault. You're in charge of that. It's worth thinking about, I guess. That's to answer your question.

Blair: You've laid out three different stages of hiring, early days, middle days, late days, and we'll get into each of them. I looked at it, I thought, "Oh, yes, this is all very logical. It's intuitive. It makes a lot of sense to me," but it didn't always make a lot of sense to me. After 20-plus years in business, when I was reading through the post, I was actually recalling specific conversations that you and I had, and you effectively giving me advice about where I was and the people I was hiring, or how we had evolved to another level.

As you go from one stage to another stage, your hiring strategy should probably change. Is this a logical progression? Should we all start with the early days approach and progress in this? Is this a prescriptive approach or is this just an observation of the way it happens?

David: Yes. I'd say if we can skip the early days, we ought to skip the early days. [chuckles] I don't think there's any advantage in early days. The only reason you hire in the early days the way you do is because you're forced to.

Blair: You're cash-constrained. Let's unpack that first stage of early days. It's really about affordability, right?

David: Yes.

Blair: The people you hire have what characteristics?

David: They're cheap.

[laughter]

Blair: Okay, that's early days. [laughs]

David: Next, as soon as you can, go to the middle days. Now, they're cheap, right? Not a lot of great things come from this, but a whole lot of great memories come from this. These are people that are cheap, they're inexperienced. They're blank slates because they're just hungry to basically learn everything they can from you. To whatever extent you have great habits or great knowledge or great approaches to solving problems, then by God, they're going to learn them, but they're going to learn all your bad habits too, right?

Blair: Yes.

David: These are people that are eager, fresh, dedicated, glad for the opportunity. They don't think about how many hours they're working. There's a camaraderie here because these are people that are thrown into war completely unprepared generally. They're generalists, they're young, they're not making much money. The word I would write on a banner across this time in your life as a business is family. That's how you think of them. It's not a good plan, but that's how you think about them. [laughs]

Blair: We're going to come back to this idea of your team as a family because I encounter this a lot. I have, and even to this day, continue to think of my team as a family. I think there are times when I have to look in the mirror-- These days it's mostly family.

[laughter]

David: That's why it's family.

Blair: Because it's family.

David: All the rest of the non-family members decided, "Oh, let's just let the family take over here."

Blair: Yes. Maybe I'll quit using my own example to illustrate this. I think everybody can identify with this. The early days, it's like, "Okay, we need somebody. We can't afford somebody really expensive." Is there also this idea of, are we threatened by people who are more experienced and more expensive than us?

David: I think that's probably true in some cases. I hadn't really thought about that. You could test that by saying, "Okay, if I had the money, would I hire somebody?" I don't know. Most folks probably in a sane moment would say, "Oh, would I love to have a really great account person, and I don't have to watch everything they do. They can handle a client who is a little bit annoyed with us at the moment. They can help grow accounts or something like that." I think this is a little bit related to our industry because if you're building a law firm, you go to law school, and then you might work at another firm to learn how to deal with clients and so on.

In our field, it's like you have a particular skill, and now all the rest of it has to come, how to run a business, how to deal with clients, how to manage work. What's all this insurance stuff? It just becomes a little bit overwhelming. On top of that, you have all of these people who are usually hired because of their work ethic and because they're a great fit for the culture, but the rest of it is lacking. They don't necessarily have those skills because if they had those skills, they wouldn't work for what you're willing to pay them. They'd go somewhere else.

Blair: Yes. They're also at that point in their career, so it's win-win for everybody. I know you say we should skip over the early days, but I still think there are a lot of good things that happen in those early days, as long as you don't get stuck there too long. As you were saying, these new blank slate employees or team members, they pick up your good habits and your bad habits.

In the early days of your business, if you're a young entrepreneur, you're imprinting all of your dysfunction onto these people as well, and here I am speaking of myself, so it's good and bad. At some point, and maybe you want to speak to when that point is, when do the early days turn into the middle days, and if early days are characterized by this idea of, "Here's what we can pay," what are the middle days characterized by?

David: What prompts it is you just get tired of this, and you start to flirt with the idea that, oh, maybe I could spend more money-- Like you're talking with a peer. They're talking about the team members that they have and so on, and you contrast that with yours, and you think, "Oh, my. I'd love to be able to take some time off and not worry about the firm." You think, "Now, what are the weak spots at the firm? Oh, now let's think about the strong spots. Oh, I don't see many. What if I hired one person that, in fact, I have a specific person in mind, who could probably take the place of two of my people, and I'd be further ahead." You start playing with this idea, and you just do it.

If you're starting a firm from scratch, and you're in your 30s maybe, something like that, late 20s or 30s, you can't really skip the early days. If you have worked at a bunch of other firms before, you're probably going to hire people that you know who have been at the same level you have been, and so you're jumping right into the middle days. These are the people-- there are significant upgrades.

They have experience of at least two or three years that they're bringing. Still some good and bad habits, but they have experience. They don't have all the same basic questions that the other people do. They expect more formal things, and so they prompt you when it's like, "Oh, benefits? Oh, what's an employee review? We ought to be doing those?"

Blair: Policies?

David: Yes. Titles become more important at this stage. There's always a carryover from the early days to the middle days, and that's usually one person. I call it the power position. This is one of the first people you ever hired, and they're still with you in these middle days. What makes them unique is that they have done every position at the firm, and they are sure to tell every new employee that they used to do that position.

That's not the bad part. Where it starts to go a little bit bad is when they start to lose their footing because they don't have the same deep expertise that the other new employees do, and so they're sitting here thinking, "Where do I fit in all of this? Oh, what I have that the other people don't have. I don't have that deep experience, but I do have a very close relationship with the principal, and maybe I can leverage that." Then they start to say, "Listen, if you need to know where the bodies are buried, I can help you here. If you need to know how to approach Tim or Jan, let me know." They start to gather some power for themselves.

This is the carryover from the early days and you have to get rid of them at some point. It's that power position. That's usually the only carryover. The rest of the people are people with two to three years' experience. They're not high price people yet, but they cost a little bit more. They have expectations. They have more boundaries around their work life and they expect you to, I guess, respect those a little bit more and so on. This middle stage is the weird stage. It's a lot easier to describe the early and the late one. This middle one is sort of like a mess.

Blair: Early stage is family, late stage is more like a team. This is the mix of family and team.

David: Yes. You are closer to some people than others. You know more about their lives. You go to their wedding. They may pick up the dry cleaning for you or catch a kid at school because your meeting is late. The rest of the people, you're not that close with them. You still haven't figured out how to really be a boss. It's still a lot of fun. You're starting to see, "Oh, we broke a million or two here. This is pretty cool."

You're starting to find your place in the world. You maybe are starting to specialize and you're realizing that this needs to carry over to how you hire. Your clients are starting to get attached to individual people at your firm, not in a bad way, in a good way. There's just a messiness. It's like the awkward middle-aged stuff that happens to all of us as we're growing up, I think.

Blair: Is it fair to say, whether we like it or not, most of us are going to start in the early stage where we're hiring based on what we can afford?

David: Right.

Blair: We really want to get to the later days where it's-- you call it what we can learn. We'll get to that in a minute, where it's more of a serious team. We would be well advised to get through the middle days period as quickly as we can. Is that correct?

David: Yes, that's a good point. Yes, exactly right. This is where you're not just hiring because I've only got this kind of money, I need a body to fill the seat that can take direction from me. This is, "No, I need people who have a little bit more experience. They still can't be turned loose, but it's not quite what I envision. It's not what I see when I talk to my peers who are running firms full of really tight specialist people who really know what they're doing, but it's a necessary stage to get to." I don't think you can go from the early days straight to the later days. You have to learn how to hire differently, how to manage differently, and you earn this by just sticking in this middle-day stage.

Blair: Yes. It's really the transition from generalist roles to specialist roles. As you point out, that power position, that early employee who is so valuable in part because they could do everything, they knew where all the bodies were buried, they become less viable in the new model moving forward. They hold on. It creates some tension. I've seen this a lot. I just imagine a lot of firm owners listening to this are thinking about that one person in this moment.

David: Yes, probably so. Right. Glad that they're gone or also thinking, "Oh, I probably need to make a change." We have to remember too that our clients are different in these different stages too. In the beginning, you have more unsophisticated clients. Some maybe you brought with you when you left the company and they said, "Yes, we'd like to be one of your first clients." In this middle stage, the clients have different expectations of you as well. You have to meet those in the moment and can't just make stuff up.

Your clients, it's not just you as the principal wanting different things around your life at the firm, it's your clients are demanding things too. There's a really obvious difference between the employee who just has the right instincts in the moment and the one who doesn't. You just slap yourself and say, "Oh, gosh, I can't keep solving these things. This is better than the early days, but it's not quite where I want to be."

Blair: Yes. You're the safety net and you'd really rather not be the full-time safety net. The latter days, let's get to where the place we want to go eventually. You characterize it as hiring based on what we can learn. What do you mean by that?

David: In the early days, you know more than anybody else. In the middle days, you still know more than anybody else, but they aren't blank slates. They're bringing some experience. They've had two or three years of experience somewhere. You just twist that a little bit, redirect it a little bit, but you're not having to start from scratch. In this third phase, the biggest difference is that you're trying to hire people who can teach you something. These are people who, on the first day, they hit the ground running, and they are bringing processes or experience or knowing how to use tools.

You're not giving them direction anymore, you're simply creating the culture and the environment where they can thrive. You're hiring people who are not blank slate to the very beginning, not people who have two or three years. These are people who know more about what they're being hired to do than anybody else at the firm. This is where your firm shifts into overdrive and begins to really thrive. Some of your clients will appreciate it. You're having to charge a lot more for your stuff too. Other times, you'll look across your client base and realize, "Oh, wow, we are actually quite a bit better than our client base right now."

Sometimes your client's needs for what you do grow faster than your capabilities, but that's not usually the case. Usually, your capabilities grow faster than what your clients are asking of you. It becomes pretty apparent in this stage where a client in the past would have said, "Hey, this is what we need from you," and these new people that you've hired say-- they say it gently, but, "No, that's really not what you need here. This is what we need to do." The client's looking there with their mouth open like, "Oh, wow, we've never gotten this kind of advice from this firm before."

It's a whole new day, and all of a sudden you feel you're taking this firm very, very seriously, you realize, "Oh, this could be a career here. The sky is the limit." Your focus now is not on clients like it used to be. Your focus now is on keeping an eye out for other amazing people that you'll need to hire, and maybe even jumping on an opportunity for somebody that comes across your path that you don't even need right now, but you hate to miss. You start to realize that if your life is going to get better, it's not so much about clients, it's about your team, and this team is amazing. That's that third phase.

Blair: It reminds me of the David Ogilvie line, "If we hire people who are bigger than us, we will become a company of giants." You also make the point that now you're hiring for competence and it's not really about the money. It reminds me of a line-- There's somebody you and I know. A highly paid, highly competent person in the field we serve was looking for a new home. I put some feelers out for this person. Their salary demands were very high. I won't say the number here, but really high.

When I shared the salary demands with the potential employer of this person, his response was, "In my experience, somebody at that price range is free." What he meant was if somebody's insisting that they're worth that much money, they're almost certainly going to generate multiples of it. He was not afraid of the number. That's to me a sign of somebody who is at this level of hiring. They're seeking to hire people bigger than themselves so that the company will become a company of giants.

David: There's one mistake that sometimes firms make here in that they decide to go to this third stage, this latter stage, and they hire an expensive person. That first person is usually sacrificial. They don't usually last.

Blair: Like the first pancake, they get thrown away, yes.

David: [laughs] Right, because you don't know how to hire that person first, but often you're hiring somebody that comes from a less of an entrepreneurial environment, and you stick them in your environment. They don't have all these people to delegate to like they did where they came from. They also don't operate as quickly as you do. Don't hire somebody you love because they're going to be sacrificial. Save the second hire for the person you love.

Once you figure out how to hire really experienced people and pay attention to the signals around culture, then it's like, "Oh," then there's a light shining on all the people who are not very good at your firm. You're not discussed, but your impatience with some of those people is accelerated because of the new people that you have at your firm. It's not like these phases are so obvious to you. It's not like they happen overnight, but it's easier to step back and say, "Oh, I can see the broad patterns here about how I hire and what I did well, what I didn't do well."

Blair: I think the same patterns that I do among-- Most of our listeners here are owners of independent creative businesses, ad agencies, design firms, hybrids, et cetera. I see in the independent firm, I'll put it into this category of the third hire, the first third hire, this is the point where we're going to go hire the big agency person from the big network agency in New York. It almost never works out because they think that big agency person is going to bring some big agency magic. What they bring is big agency systems and bureaucracy and demands for other things. That's a generalization. I'm painting a lot of people with the same brush, but I've just seen that pattern over and over again. You see it too?

David: Absolutely, I do, yes. I think there's probably ways to avoid it. In fact, if you could avoid even having these big three jumps, that would be great, but it's just a warning that I've seen it over and over and over again, that first one. The other thing that happens there, I think, too, this is a psychological thing, is that you're paying somebody more than you ever have, and your expectations are a little bit whacked.

You have less patience for anything that doesn't go perfectly well, and that's not really fair to this person, but because you're paying them so much money and they have all this experience, you just think that, "Oh, it's going to be magic. There are going to be very few mistakes. They're going to bring in all kinds of work." When that doesn't happen, you're realizing that your expectations don't match reality, but part of the problem is not reality, part of the problem is your expectations too.

Blair: I have some more questions, but let's just sum up what we've talked about so far. The subject is how your hiring strategies change. You delineate these three stages of early days where you hire based on what we can pay, middle days we hire based on what we need, and the latter days we hire what we can learn. You've also talked about going this transition from it's a family at first to eventually it evolves into a team. This reminds me of what I have for 10 or 15 years now said is I think the best piece of thought leadership I've ever read. It's David Meister's post from davidmeister.com, you can find it. I think we sometimes post a link to it in the show notes.

It's from September 2001, it's called The Problem of Standards. There's a lot of really good things in that post, but one of the things that I take away from it is this idea-- He doesn't use the term macro culture, so they're different cultures. There's an infinite number of different cultures of different businesses out there. Based on that post of Meister's, I see only two macro cultures. There's a macro culture of family, and there's a macro culture of Olympic team, and it's one or the other.

As Meister points out in this post, there's no right macro culture, but you can't mix. You can't have people who just want to belong to a family be on the Olympic team because the Olympians are going for the gold, they're trying to be the best they possibly can be. If there are not high standards that are enforced, then those people leave. When I look at your three stages, I see this transition, or what I think should be this transition, I think you probably agree, you can speak to it, from family to team.

I understand why it's a family in the early days. It's like you're living this. This is just an extension of your family. This is your baby, this business as you birth it. The first people you invite in, they are family members. At some point, for a lot of different reasons, you do want to get to this place of the team. You want to be surrounded by people who are going for Olympic gold, do you not?

David: Yes, you really do. Yes. I remember after writing this and saying something about it on LinkedIn, I remember thinking, "Oh, what would be good advice for an employee at these different stages." I thought, "Oh, this is such a glaring omission from this article, because what's the right role for an employee to play at these different stages?" If you don't mind, I want to touch on that just a second.

Blair: Yes. I want to know if you're the person in the power position, I'm sure you'll get to it, what do you do? Go on.

David: Yes. In the power position, your best bet is to hang on to something that's very incriminating of the principle.

[laughter]

David: If you're working in this first place, and you're younger, you're not making a lot of money, you should try to figure out where you want your career to go over time. You're a generalist, and you've talked about how it's really a phase you shouldn't try to skip. That's where you learn your strengths and weaknesses, and you learn enough about other areas where you become more valuable in the area where you will eventually focus. This is where you ought to experiment and figure out what you're good at. In fact, nobody goes to school for account management or project management.

They all go to school for something else, and in this early phase, they realize, "Oh, I'm not very good at those other things, or at least I'm not as good as my peers are, but I can see where I'm shining in some other role here." That's the first stage. You figure out what you're good at. In the second phase, you ought to figure out how to manage people because you're not going to go far in your career unless you manage people. It shouldn't be this way. I think it's a big mistake in how we run businesses, but it's just a fact of life. If you don't learn how to manage people in a way that they appreciate your management and they learn from it, then you're not going to go very far.

Learn how to manage people, take that experience. Any opportunity you're given to manage people, do it well, and think not just about your job, but think about how to manage people. In that third phase, you need to begin to think like an owner. If you want to be really valuable in an institution at this highest level, you think like an owner. The owner knows you think like an owner, and they keep giving you more and more responsibility, and eventually, you might just buy the firm from them. Those are the three ways I would react to this if I were an employee.

Blair: That's really good advice across the three rungs. I have nothing more to add to that. This has been a really interesting topic. Once again, you've given me some things to think about, as I'm sure you have to the listener as well. Thanks, David.

David: Thanks, Blair.