What are the secrets to deciding who to hire? How do you know if you chose the right person? What are the consequences?
I’ll show you.
Why Does Hiring Properly Matter?
What did Richard Branson, Warren Buffet, Sam Walton, Elon Musk, Steve Jobs, and Mark Zuckerberg have in common?
They were all incredibly good at choosing the right people to hire.
According to billionaire Reid Hoffman’s book The Start Up Of You, Mark Zuckerberg spends a good portion of his time just finding and recruiting the right people.
According to this interview, it’s 25%:
It’s not the most glamorous skill but it is one that they were all really good at.
It’s what the team that wrote Good To Great concluded after spent years analyzing the most successful businesses in the world in a rigorous scientific analysis: first, you must get the right people on board.
It’s highly underlooked, but maybe the most important thing.
Microsoft, Apple, and quite frankly most successful businesses were successful because they started with the right people.
Richard Branson emphasizes in his book, The Virgin Way, that he still makes the time to personally interview and screen people to hire (I’m assuming the top executives) because it is one of your top priorities and not something that should be delegated.
This article will be different than the other viral articles out there.
I will do this by providing actual valuable content from solid, reputable, credible sources.
Rather than some random guy who posts an article with advice he made up.
It will also be short and to the point.
You already know the importance of good employees… right?
Or do you?
Most people under-emphasize this.
“The secret of my success is that we have gone to exceptional lengths to hire the best peop|e
in the to exceptional lengths to hire the best people in the world.” -Steve Jobs
Steve believed that the performance difference between the average programmer
and a great one is at least 25 to 1.
“And when you’re in a field where the dynamic range is 25 to 1, boy, does it pay off.”
Why is this ABSOLUTELY critical?
I’ve found that it is the bedrock of many of the most successful businesses to exist.
A good employee can dramatically increase how well your company does: better customer service, more goodwill, more word of mouth referrals, a better reputation, a more positive experience, more efficiency in the work place, more results, and the list goes on and on.
One bad employee could destroy a business:
“Really, back early, one bad manager could have pulled us under.” -from the book Made in America, about the founding of Walmart
Yes many mediocre businesses treat this as a low-priority task.
How to Hire Correctly
Don’t discriminate based on Education
Having studied many successful people (into the thousands), I found that many did not have fancy Ivy League educations.
Some were high school drop outs.
Some didn’t go to high school.
Some had mediocre jobs.
“Ninety percent of the CEOs currently heading the top five hundred American companies did not receive undergraduate degrees from Ivy League colleges. In fact, more received their undergraduate degrees from the Univesrity of Wisconsin than Harvard.” –Rework
So I try not to discriminate based off education, which is very contrary to what a lot of big companies do.
What you should focus on is their ability and potential. Can they get the job done or learn how?
If you don’t do this, you are intentionally excluding a lot of incredible, hidden talent.
According to one of the most successful businessmen of all time, Sam Walton, he found some of his best employees by not discriminating.
Look at this quote from Sam’s book Made in America:
“None of these fellows like Don or Claude had any college…
I found out that he had been able to save on his salary, and I usually felt that if a fellow could manage his own finances, he would be more successful managing one of our stores.” –Made in America
Jason Fried, of 37 Signals, goes so far as to say don’t care about GPA either.
This is awesome for someone like me because I tried really hard and school but never got Straight A’s.
Do it yourself first
Jeff Cavaliere, founder of a multi-million dollar brand, Athlean X, said to not hire for anything until you’ve done it yourself. This goes for copywriting, sales, and so on.
Jason Fried says the same thing:
“You should want to be intimately involved in all aspects of your business. Otherwise, you’ll wind up in the dark.” –Rework
Hire To Fit Culture
Tony Hsieh (net worth of $840 million), founder of Zappos, credits a big portion of his failure of his first company to hiring too fast and too indiscriminately. He warns against hiring too fast. Ideally, you want to hire slow enough so everyone fits with the culture.
The Honest Company, with a billion dollar valuation founded by Jessica Alba and Brian Lee, hires based off the airport test and if they fit with the bigger mission of the company. The airport test is if you could stand hanging with them for 5 hours at an airport. They will actually turn away people who have the technical skills, but do not believe in the bigger mission of the company (providing safe products for children).
The billionaire Richard Branson of Virgin has a very similar philosophy. Virgin has a very distinct culture that is first.
Look for people who can do things better than you
I recently watched an interview of the billionaire John Paul DeJoria at Joe Polish’s Genius 2015 Network Event. has an employee turnover of
He said he has an employee turnover of less than 75 people year. That’s incredible. How?
He said he looked for people who could do things better than he ever could or had the potential to do so. He did this for every role, from receptionist to a chief officer.
Get the right people on the bus first
Good to Great is one of my favorite business books. They did extensive research on a number of the most profitable companies in history. They found that the ones who succeeded took extensive time to hire the right people, rather than what other companies do, which is hiring indiscriminately and fire late on to eliminate mistakes.
Mark Zuckerberg of Facebook says he only hires people who he could imagine working for himself. That’s an even better test than the airplane test.
A-Players Are Worth 5 or More B-Players
The entrepreneur Russell Brunson of Clickfunnels.com learned this the hard way. His current business has 11,000+ members paying at least $67/month. It took him 3 years and a team of developers to build a shopping cart, which never functioned right. He hired a star player who build a functioning version in 2 days. He learned this lesson numerous times with developers and designers. What he now does is look solely for top performing employees (A players, rather than B or C players). It costs him more in the long run hiring a bunch of B players who don’t get results. He learned this through hiring numerous cheap outsourced employees that cost very little but didn’t get the job done. Sometimes you do get what you pay for.
Screen Candidates With A Project
One thing he advises you do is run a small project. Pay 3 candidates to complete a small but important project. Compare their results afterwards to see who does the best and is an A player.
The millionaire entrepreneur Brendon Burchard asks candidates to do a mini-project on the job posting.
For example, for content creation positions, he has them write out an article and film a video to apply.
The best selling author Ramit Sethi does something similar. Having been burned in the past with people who would never follow up or do any real work, he screens candidates he meets in person who say they want to help by asking them to do a small project, like sign up on his website and create a profile, to see if they’re legit.
Tell them what it’s really like to work here. Don’t make it seem better than it is.
The problem with most hiring processes is that it’s like dating:
Both people are on their best behavior and only show the best sides of them. The employee shows only the best version of himself and the interviewer only shows the best parts of working at the company.
But what this ultimately leads to is high employee turnover (people leave when they find out what it’s really like). This wastes a ton of money hiring, recruiting, and training people that quickly leave.
Call centers figured this out and have started telling potential employees exactly how its actually like to work there. They don’t hype it up. They simply act out an example situation where you have to deal with a tough customer and ask if this would be something they would be interested in.
This ends up saving the call centers a lot of money because the people who join actually stay. And their turnover rates are usually very high and they go through their whole team in a year, which costs of money.
What to look for when interviewing
Intelligence, Integrity, Hard Work, and Passion
Don’t over complicate it.
I took that straight from Warren Buffett. He’s been asked this numerous times.
That’s his simple answer:
“Somebody once said that in looking for people to hire, you look for three qualities: integrity, intelligence, and energy. And if you don’t have the first, the other two will kill you. You think about it; it’s true. If you hire somebody without [integrity], you really want them to be dumb and lazy.”
Integrity is HUGE.
If anything, look for this.
It’s SO under-emphasized. The business world and the real world has a lot of dishonest people who will screw you over.
There’s hundreds of stories of business owner’s having their money stolen from them by an untrustworthy business partner. Don’t let this be you.
With a honest, ethical business, you can sleep well at night, have a great reputation, and reap the goodwill it will bring (returning customers, more profits, word-of-mouth referral, and so on).
I’ve found that a lot of the best business partnerships come from people who have been friends for life before they started their business.
Rich Devos is worth 5.4 Billion and growing. In his book, Simply Rich, he was friends with his business partner since childhood. They wrote letters during the war to pledge to survive and start a great business. I recommend his book, it’s a quick mini-biography. He’s really ethical and a good deal like Sam Walton and Warren Buffett, eerily. (A ton of these guys all had paper routes as a child and other strange similarities).
Having that bond with someone you can trust is critical.
One could say others have had this too to a lesser degree: Jobs and Woz, Gates and Allen, Buffett and Munger, and so on.
If you don’t have a life-long friend, that’s still OK.
Great businesses have been built without a lifelong best friend business partner. Just be sure to take your time deciding on your partner because they help a lot. Also, remember that a lot of failed businesses emphasize a bad business partner for why they failed.
This is my personal preference:
All three are looked for but in this order: integrity > work ethic > intelligence.
Work ethic is next and intelligence is last because of another one of Mr. Buffett’s quotes:
What if you could buy 10% of one of your classmates and their future earnings? You wouldn’t buy the ones with the highest IQ, the best grades, but the most effective. You like people who are generous, go out of their way, straight shooters. Now imagine that you could short [editor’s note: ‘short’ means bet against] 10% of one of your classmates. This part is usually more fun as you start looking around the room. You wouldn’t choose the ones with the poorest grades. Look for people nobody wants to be around, that are obnoxious or like to take all the credit. If you have a 500 HP [editor’s note: HP means horse power] engine and only get 50 HP out of it, you’ll be beat by someone else that has a 300 HP engine but gets 250 HP output.
It’s not the size of your engine, but the EFFICIENCY.
Think of the Tortoise and the Hare fable.
If you’re super smart and super lazy, you will be beaten by the hard worker.
“The only thing that I see that is distinctly different about me is I’m not afraid to die on a treadmill. I will not be out-worked, period. You might have more talent than me, you might be smarter than me, you might be sexier than me, you might be all of those things you got it on me in nine categories. But if we get on the treadmill together, there’s two things: You’re getting off first, or I’m going to die. It’s really that simple, right?
You’re not going to out-work me. It’s such a simple, basic concept. The guy who is willing to hustle the most is going to be the guy that just gets that loose ball. The majority of people who aren’t getting the places they want or aren’t achieving the things that they want in this business is strictly based on hustle. It’s strictly based on being out-worked; it’s strictly based on missing crucial opportunities.”
Finally, outside the trifecta that Warren Buffett recommends.
It is has been brought up numerous times that passion is important.
It should be self-explanatory.
Someone has to have fun and be passionate about what they do. You could have all the skills to be a personal assistant to the CEO but depending on if that person enjoys the job or not, their attitude to tasks will be incredibly different.
Trust Your Gut and Heart
The billionaire John Paul DeJoria and motivational speaker Tony Robbins both run billion dollar companies. Both have admitted that they screwed up early on in their hiring life because of naivete.
Both said that they focused too much on whether or not someone fit the skills looked for and not enough on what their heart said.
Make sure you look for someone who has high integrity because all the other skills, intelligence, and work ethic they have will turn against you if they’re a liar.
Jon says to ask yourself, “Is this someone who would enjoy working here? Will they fit into the family? Will they be happy here?”
Don’t Overemphasize The Value of Interviewing
Don’t overemphasize the value of an interviewing. It has been proven to be one of the worst indicators of performance. Studies have shown that it is the worst predictor of if an employee will fit. It has scored lower than everything else (performance tests, job skills tests, personality tests, standardized assessments, etc.).
A study done by the University of Texas medical school found that applicants that scored highest in the interview process performed no better than the group who scored the worst. Both groups performed just as well in the next year of residency.
Interviews have been ingrained into our culture so that we assume that we have to.
How to Screen Candidates
“Sam is very sharp on being able to read people and their personalities, and their integrity.
And he didn’t make any mistakes back there picking people.” -from the book Made in America
Not all of us are naturally gifted at reading people like Sam Walton, founder of Walmart. But this tip might help.
This is based off a passage from the book, The Education of a Value Investor:
There are some people where you just know.
In the book, the author asked Mr. Buffett how he was so perceptive at reading people. He responded in a very surprising way.
He said that if he would meet a group of 100 people, about ten of them he would immediately know are awesome, about ten he would know to avoid, and the other eighty he wouldn’t be sure on yet.
Even for him, he cannot deduce everything for everyone that quickly. Some things take time to gauge and sometimes, your gut feeling about someone has a lot of hidden power.
But it’s really important to make an effort because people lie. They can appear awesome, but be a different person behind the scenes. Place some importance on screening. Here’s what Tucker Max said about his second multi-million dollar business failure:
“I saw this early, didn’t like, and still I ignored it. Why?
If I was going to blame them, I’d say they lied to me. But that’s bullshit. I don’t think they ever told me a flat out lie. They just told me what I wanted to hear, and I ignored everything else.”
You can have mini-screens to test people too. One I recently saw was to write a sample blog post and upload a Youtube video. It really screens out the hundreds of people who just spam resumes and have no attention to detail or time to even read the application fully.
Richard Branson’s Hiring Way: Personality Must Fit With Company Culture
According to Richard Branson in his book, The Virgin Way:
Personality is important. He wants someone who is fun and enjoyable to be with.
He recommends having current employees to assess your interviewee to see if he fits.
He also advises you to get your employees to detect to see if there are any body language signs that the interviewee is lying about what he or she claims.
He uses a specific “first impressions” philosophy: Your first impression of them is usually them on their best behavior. If you’re not getting a good vibe, it’s usually downhill from there.
Having said that, he also acknowledges that people are nervous for interviews and their true personality doesn’t always come out. So he suggests asking them to tell a joke as it lightens the mood, even if they can’t think of a good joke. He still recommends you trust your instinct.
Branson also says that versatility is important. Although he also values specialized skills, he says that transferable skills should not be underestimated.
He also states that you should also be open to mavericks that may not seem to fit at first. Some of his best hires were like this and they ended up seeing things in a different way and creating opportunities from problems.
Slow to Hire, Slow to Fire
In the 2016 Shareholder’s meeting, Warren Buffett said big companies get bloated when they start hiring people they don’t need. He says you should only hire people you need.
Take your time in hiring the right person so you don’t waste time or money.
It will take time to feel out the right person to see if they truly are what you think they are.
Test drive them in field and in different situations.
See if that’s their true character and personality.
“Get the right people in the right seats on the bus.”
By hiring slowly, you don’t have tons of bad employees that you keep having to fire.
As illustrated by a story in the book, one of the biggest wastes of money is letting a mediocre employee slide through that sticks with your company for years before you identify him and pull him out. That’s why you hire slow.
Once you’ve hired slow, be slow to fire for great employees.
As the book states, it is better to see if they can fit in another department or occupation first. Sometimes, it is hard to find incredible employees again and they could do an even better job with just a department change.
(Note: Having said that, I’m reminded of some small businesses that are too in love with an employee that’s decent at best to let him go. Don’t be this guy either.)
You might be wondering about the credibility of Good to Great. It’s one of my favorite books because of the scientific analysis that went into it. They literally did extensive research in finding the absolute most profitable companies over many decades, finding controls that they can compare it to, throwing out the rest, and doing incredible comparison analysis over many years. You can get the print book or audiobook by clicking here. I will get a small commission if you purchase through that link.
When you find someone truly spectacular, it is worth waiting to get that person.
Sam Walton found someone he waited over 20 years to get:
“I tried for almost twenty years to hire Don Soderquist away from Ben Franklin.” -Made in America
According to Richard Branson’s LinkedIn article, he focuses on personality:
While it may seem a desperate rush to get somebody through the door to help carry the load, it is worth being patient to find the right person, rather than hurrying and unbalancing your team. I heard a great line by Funding Circle CEO Samir Desai at the IoD Conference in London (quoting Apple’s Dan Jacobs) about making sure you hire (and fire) the right people: “It’s better to have a hole in your team than an asshole in your team!”
Be careful of Snakes!
This goes back to the integrity point but goes further.
You have to realize that social skills can be developed.. and therefore used for evil reasons.
Beware of someone who is skilled enough to kiss up to you, pass the interview, and pass off all the work to lower level people. One bad apple could pollute a whole bushel.
People can hide their true nature, but eventually it comes out. That’s why test driving can be important.
How to treat Employees and Why It’s Crucial
More important than hiring is treating them very well. As a manager or owner of a business, how you treat your employees will determine how they treat the customers.
Where the real profit is to be made:
According to Sam Walton:
“The way management treats the associates is exactly how the associates will then treat the customers. And if the associates treat the customers well, the customers will return again and again, and that is where the real profit in this business lies, not in trying to drag strangers into your stores for one-time purchases based on splashy sales or expensive advertising. Satisfied, loyal, repeat customers are at the heart of Wal-Mart’s spectacular profit margins”
Let’s break down that quote:
The real money is in the back-end.
Why do so many mediocre businesses look for more clients?
They keep looking for brand new people to sell their stuff for a one-time purchase.
Walmart has incredible profit margins because they have customers that come back again and again to be served.
Why don’t you have that?
Is it because you don’t have more products to sell? Or is it because your products are mediocre at best and they never return?
If so, fix it.
If you already have something like that, how can you make it better?
I’ve heard emphasis on the importance of the customer, product, and employees above all else from very successful businesses.
It’s no wonder Jack Ma of Alibaba said this:
“It’s customers [who are] number one, employees, two, and shareholders, three. It’s the customer who pay us the money, it’s the employees who drive the vision, and it’s the shareholders who when the [financial] crisis comes, these people ran away. My customers and my people stayed.”
It’s why Jason Fried of Rework says to not get investors or look to sell out your company in a few years because they distract from what makes a true great business: a great service or product to your customers.
“You should be thinking about how to make your project grow and succeed, not how you’re going to jump ship. If your whole strategy is based on leaving, chances are you won’t get far in the first place.” -Rework
Richard Branson argues a similar point. He emphasizes putting the employees before the customer in terms of who you should care for an nurture.
You can easily see why: how you treat your employees bleeds down into how the customers are treated very directly.
So how do you do that?
- Show appreciation (written notes, thanking them, in-person meetings, small gifts, etc.)
- Give them the proper tools to do what they do. Make sure they’re the right tools.
- Look after them.
- Make and keep them happy. (See my article on The Cyclic Effect on the great importance of happiness)
Mainly Promote From Within
The book Good to Great goes into extensive scientific detail on how the best businesses in the world almost always had CEOs that were groomed within the company and promoted numerous times over many decades. The most famous example is Jack Welch who worked at General Electric for 21 years before becoming CEO.
They found that the mediocre comparison companies hired hot-shot CEO’s from outside, which failed for numerous reasons:
- they didn’t know the in’s and out’s of the company as well as someone within with decades of experience.
- they cared more about their own ego, how good they looked, how much of a hero they were, and spent too much time trying to please the press and make the company appear amazing than actually making it a great company.
I’m not saying to never hire higher-up’s from outside, but just do it sparingly and with great judgement. The billionaire Richard Branson agrees:
In a London Business School interview, Richard said he mainly promotes from within because hiring top executives from outside can demoralize employees who have worked there for a while. Also, you already know your employee’s strengths and weaknesses after seeing them as employees for a while and there are less mistakes in hiring made.
Richard goes into more detail on the pros and cons of hiring from within versus outside in a blog post:
“If you hire the wrong person at the top of a company, they can destroy it in no time at all. Promoting from within is generally a good idea as the employee who is promoted will be inspired by the new role, already know the business inside out, and have the trust and respect of their team.
Equally, bringing in fresh blood can reinvigorate a company. Virgin Atlantic and Virgin Australia recently brought in CEOs from outside – John Borghetti at Virgin Australia and Craig Kreeger at Virgin Atlantic. They have brought a lot of fresh ideas into the company, as well as experience of what the competition is doing well and what they are doing badly.”
Find independent managers and DON’T micro-manage
“I didn’t give them enough guidance on what I asked them to do, and then get pissed when they didn’t do what I wanted, and start micromanaging them.” -Tucker Max on his first failed business venture out of many to come.
This is semi-related but worth bringing up:
I’m going back to Made in America:
I’m paraphrasing, but in the book, it said that if you hired someone, step back and let them do the job. You didn’t hire them to do everything in the job for them.
Sam had a specific way of managing. I don’t think it’s the one and only way that works, but I call it the “over the shoulder” method:
He’d let them do their stuff but would check up on them to make sure everything is in order.
Warren Buffett applies something similar:
Because he always takes extra time to make sure to get the right managers on board first (honest, hard-working, intelligent people who love what they do), he let’s them do what they are best at on their own with occasional check-up’s.
That’s often what business owners and managers want anyways, especially if they’re bought out by an investor – they don’t want to be actively controlled or micro-managed by a majority stakeholder.
As an important note, don’t take all of this as gospel truth.
Some of this stuff may be wrong. It may be flawed.
It may not work with specific, unique situations.
I just did my best to curate some good advice from people far better at me at this topic.
Make sure you check out my article on how to be a serial entrepreneur like Richard Branson to learn more specifics about hiring.
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