Hiring at the early stages helps define the momentum at which a company grows. In this episode, Vikram Vaidyanathan, MD, Matrix Partners India, captures some of his learnings from having worked closely with founders on what works when hiring for a startup. Dna based hiring versus hiring for skill set is another challenge that founders deal with and in most cases founders have found the former to be more effective at least in the initial phase of their company. Listen in to know more.
Salonie: Hi and welcome to Matrix Moments. This is Salonie. And I am here with Vikram Vaidyanathan, Managing Director, Matrix Partners India. In today’s episode we are going to be talking about extreme hiring and why it’s the most underestimated role of a founder. At Matrix, we spend a significant amount of our time with founders helping them hire and pick the right people of their team. Vikram, can you tell us a little bit about this?
Vikram: Salonie, good to be here. And this is a topic that’s really close to my heart. I personally spend a lot of time on it. It’s a running joke in the family. My wife thinks that I’ll make a better recruiter than a VC. And if this VC gig doesn’t work out then that’s the role for me.
Salonie: Fantastic idea.
Vikram: Yes. And so, this podcast is learning from working closely with our founders, speaking with founders in the ecosystem on what’s worked for them. And we are trying to put all of this together. I want to set it up by talking about how I think about building like a hot institutional startup. I always compare it to sending a rocket ship to moon. A lot of things must come together in exactly the right time, at exactly the right proportion for even that rocket ship to take off. And very few of these rocket ships take off.
And even once it’s taken off, you need boosters at every stage to make sure that it gets from one orbit to the next. And often some things will get stuck in orbit. And often we hear stories of things failing in spectacular fashion where the rocket ship has crashed back to the earth.
And the founder’s role is really to find these boosters which take them to the next level of orbit and the next level of orbit. And apart from getting consumers to adopt the most important booster in my mind is finding people and finding people who take you to that next level of orbit. And so, the first learning I want to start with is hiring momentum especially at early stages is equal to company momentum. How fast you can get people to get onboard with your idea and join you and take that idea forward defines how fast your company is going to grow.
Often founders want to start with a perfect team. Get their first 10 hires exactly right. I am of the view you need 10 people to begin with. And then you start with the 10 best people that you can find. So, you need to have enough people who can throw at the problem. Sometimes there are operational issues. Sometimes you just need to figure out how get an admin to run the office. You need all kinds of people initially. And getting first 10 people gives you enough momentum to start getting the next 10, to start getting the next 10. And you’ll get about 50% of them right.
So instead of agonizing of exactly the right kind of people, I think initially people should focus on getting the first 10 and getting momentum around the first 10.
Salonie: Right. So very often when hiring founders are faced with a dilemma or the tradeoff that’s required to be made between; one, a candidate who is hard working, a hustler, ready to work the long hours, probably take a pay cut, work on ESOPs, equity, full of passion. You find the connect, chemistry with them; all of that. And then on the other hand, you have a candidate who has got 7 to 10 years’ worth of work experience in the industry, super deep product knowledge, a great network within the space etc. He has got the whole package. But how do you really make the tradeoff between the two? Which one should you pick and why?
Vikram: Yes, this is the conservation that happens every day with founders, which is I really like this guy, but he doesn’t have the experience. Or, this person has all the experience, but I really don’t like him. And it’s a hard call. But, if I had to give an overall underlying principle, I would say overweight DNA versus skill set especially in the initial days. And my partner Avnish calls it intrinsic, and intrinsic-based hiring and intrinsic-based evaluation. And we definitely overweight that.
So, I would say that role is probably very easy to apply when three things are true. First, it’s very early in the journey. It’s new pace with high uncertainty, so you really don’t know what anyone’s role is really going to be. Product role might be a business role. Or, business role might be operations role. And people must really go with the flow. And the third most importantly if it’s co-founder, CXO level position, just overweight DNA. That’s the only way that that partnership will last.
The biggest tip I have there is to define that DNA and make it part of the vocabulary of the organization and make it part of the vocabulary of hiring. So, this is how we have implemented it internally. We have different intrinsic that we look for, but one of them is hunger and hustle. And call it H&H which is our own abbreviation. And hunger is deep ambition to achieve something and hustle is to an ability to get things done. And we will be having discussions or debriefing after an interview and we will say low on H&H or very high on H&H. And we will immediately know what the other person is saying. And that becomes an easier discussion to have between co-founders, between top management rather than saying, “Oh, this guy is like me. I like this guy.” Whereas if you define the vocabulary and say, “You know what? These five things on DNA are most important to us.” It also makes it easier to have hiring discussions internally and debriefing on interview discussions internally.
There are times when you just need the person with that skill set, experience, and capability. And it’s probably again three criteria which makes it easy to choose capability over others. Or, there are times when skill set I wouldn’t say trumps, but skill sets overweight DNA. It’s when you have scaling challenges and people have solved those scaling challenges before. You don’t want to re-invent the wheel. So, you want somebody who has already invented wheel.
The second is it’s a very defined problem statement and you want specific capability. So, for example, handling concurrency issues in backend servers. It’s a very specific. And unless someone has done it before, you can’t bet on somebody to come in and learn this. So in those times I am probably taking it to an extreme to make a point, but there are areas whether it’s finance, whether it is - it might be AI, it might be engineering management where there are people who with experience will actually do a better job in taking your company from maybe not 0 to 1 journey but maybe the 1 to 5 journey and definitely in the 5 to 10 journey.
Salonie: Right, technical knowhow part of the job.
Vikram: Yes, I found founders who are on both sides of this. I think it’s important to - on both sides this, I found founders who are on both sides of this debate. Some people will say I want only DNA and some people will say I want only skill set. Beyond a point, you can’t actually second guess your own thought process as a founder. I think it’s important to realize that this is what you overweight and you over index on and understand what the shortcomings of that particular strategy is or not.
I was having this conversation with a founder of a large unicorn, and he said, “Hey, I know this that I am overweight on DNA. And I am okay with my company getting a team discount which is a capability discount, but I am not okay with my company getting a cultural discount because that’s who I am. I don’t want this to be a culture discount.” And I think he picked it up from one of the wisely talks and so on, and he really implemented it. I thought that was a very self-aware statement to say this is who I am; therefore, I am okay with this. And I will be okay if people say this team doesn’t have the kind of capability, but this team has a fantastic culture because that’s who I am and that’s what I want to be.
Salonie: Right. Fair enough. But coming back to intrinsic which is what you just mentioned, how does one when you - so for example, when you look at a CV and you are meeting the person and you are evaluating their CV. And in that process if you must sort of break their CV down in terms of reading in between the lines and knowing whether that matches the DNA vocabulary that you are looking for and whether they would a good fit for your company or not, how do you really assess that?
Vikram: Yes, it’s a tough one. Everybody says that they want to do this DNA-based hiring. And then go back to doing skillset-based hiring once they start looking at CVs. I think if you are doing DNA-based hiring, if you’ve decided that’s what you want to do early, you must adopt extreme referencing. I am going to point a podcast by my partner Tarun Davda, who is the extreme referencing Nazi internally. And he has a 30-minute podcast coming up on extreme referencing.
But let me just set up how we think about it. Extreme referencing is making sure that you are talking to people who know this person really well. And from an intrinsic perspective, we believe that 80% of who that person is you can actually find out by talking to people who know that person really well and we are point in the one hour, two hour discussion that you are going to have with that person, you are not going to discover what makes that person really tick.
Now the biggest mistake with referencing is that it comes too late in the process. And it’s done as check the box. And almost after the decision is made to make sure that, “Oh, I want to make sure this decision is not so wrong,” after you have made the decision. For us, extreme referencing is it comes very early, ideally even before you meet that person or after the first conversation that you had to make a hypothesis about that person or to actually you verify certain things that you found in the first conversation. So very early in the process, ideally before you meet or after the first discussion.
The second thing is it’s 360 degree. You don’t just talk to the bosses. You talk to peers. You talk to people who have reported to them. You talk to friends who know them socially. And if you can get away with it, have a coffee along with the spouse. So, then you will know what makes that person tick. So, it would need to be truly 360 degree if you really want to hone in on the intrinsic.
And the final tip on extreme referencing is ask the soft questions. Don’t be afraid to ask the questions which are if you were their mentor, what would you tell them. What would hold them back in this particular role. And if they were not to succeed, what would you think will not make them succeed. And then you can hopefully get to what makes them tick. Again, tips and tricks in Tarun Davda’s podcast.
Salonie: Okay, got it. But this sounds slightly complicated. How would you recommend a founder goes about doing this? Like should they hire a recruitment agency or a consultant or just do it themselves?
Vikram: Yes. So, it’s important to build this muscle early both for the founder as well as the organization. And I often talk to founders and they say - what’s your number one problem. They will say people, hiring. I don’t have enough of them. And then I say how much time are you spending on hiring. He will say, “Oh, I don’t have the time to spend on hiring. Oh, I am spending like 5%.” Now it can’t be your number one problem and you are spending less than 5% of your time on it.
So, the first thing is to manage your own calendar as a founder. So, this is like a diet plan. It is going to sound like that. But if you follow it, you will become thin. And it sounds simple enough, but very few people do it. So, this is sort of a recommendation. And one is every day of the week set aside two hours for hiring. One hour in the morning; one hour in the evening. An hour in the morning figure out who you want to ping, figure out you are talking to your recruiter, talking to your consultant to make sure that they are prioritizing the right things through the day. And one hour in the evening maybe half an hour, half hour slots, or 45 minutes, 45 minutes slots talk to two people. And make sure that this is your calendar slots. Nobody else can take them and you are just in the habit of doing these discussions every day. And screen through the week. Ideally do it on video. And I seldom recommend doing things over a call but doing it on video would be ideal and just do two 30-minute, 45-minute videos.
Screen through the week, and then on Saturday or Sunday whichever is your favorite day to work, figure out a six-hour slot where you can meet people and make decisions and get into the habit of making decisions every week. Don’t postpone these decisions and say, “I want to make these decisions at the end of every month.” Every week there is momentum of offers that you are getting out. If the founder is doing this, the rest of the organization is building a muscle which is getting people in the door, getting interview scheduled, making sure whoever is needed to make that decision gets in the room. All of this is automatically happening. So, the founder’s calendar and time management is probably key and number one.
The second is every employee is a source. Make every employee say get me two people. And if you’ve over indexed on getting 10 people and each of those 10 people gets you two people, you are at 30 pretty quickly. And you hit your goal. And if you can figure out how every employee is in-charge of hiring, I think you have really maximized the initial talent that you have got in.
The third question I often get asked is should I hire a recruiter, should I do an RPO, should I do a consultant. The net of it is that you should do a combination of all. But if you had to do only one, get a recruiter. If you have to hire more than 15 to 20 people in year, you need one person whose life depends on this. This is your most important problem. And somebody’s life every day should depend on getting people hired.
And we will get into what makes a good recruiter, maybe that’s a topic on another podcast. But having someone who even skimps through all the CVS, says this looks like a fit, figures out how to make sure that scheduling is happening, figures out how other people are interviewing are the right time so that they can make a decision. That’s a full-time role.
The second is RPOs or call it recruitment process outsourcing, which is RPO, which is consultants who are working internally full-time or half-time with you. Again, these are guys who can get a lot of the process part of recruiting which is making sure your applications are getting tracked. All the CVs are together. All the notes are together. Making sure things are getting scheduled. That’s a big part of the friction in getting your recruitment muscle going. So, RPOs are a big help.
Consultants, I mean whether you love them or hate them, you’ll need them. So, build a network of them. You will know what CVs are in the market. And as an early founder if you don’t know what CVs are in the market, you won’t have your top of the funnel. It’s the same as consumers and customers. So, you need the top of the funnel. And you need those CVs. So, build that network. And especially before you build an employee and hiring brand, consultants are an extension of that.
Salonie: Got it. Vikram, is there a one sort of example or anecdote that you can share with us where you have hired someone, it’s gone terribly wrong, and your biggest learning from that?
Vikram: This week? Or, this month or…?
Salonie: Whatever. You can decide. You can pick that, whichever is the worst hire of all.
Vikram: Seriously, by definite hiring is not an exact science. You are looking for a missing puzzle piece and you don’t even know what looks like. And you also need to make sure that the puzzle is then fit for the puzzle piece. So, in all of this, you get - if you are getting 50% of your hiring decisions right, I think the founders are on fantastic track.
Now I don’t want to go into a specific situation, but I will tell you like two - three situations where there are learnings. The first learning is when you get someone who you think is not a DNA or culture fit with the organization, the organization actually rejects them. And you don’t diagnose it early enough and you find them being a misfit in rooms, misfit in discussions. And then you have not set that person up for success or setup the org to accept that person. That’s probably the first place where things go wrong. And I think founders can intervene if they diagnose it early and they say that I am going to make sure that this person is successful. I think you can make a hire like that work.
The second is you are not committing to the success of that person and avoid having real conversations when you see something like that happen. And a real conversation is to sit down with that person and say I believe in you, but I see all these different issues and I really want to make this work. And having that conversation consistently over the first two - three weeks because once this conversation gets away from you where the organization has decided to reject that person, it’s a downward spiral for that person.
And the third, when you have done all of this and the person fits, and then suddenly that person leaves. Usually that’s because founders have not had the journey conversation. And the journey conservation is about money. How much money do you want to make. About designation, what you want your long-term designation should be. And the third is about learning.
And again, it’s important to have some of these real conversations along the way and make sure you can deliver on that person’s overall aspirations. Not according to exactly their timeline, but at least you’ve understood their aspirations and you are committed to delivering them.
Salonie: Okay. And my last question, which is sort of like a follow-up to the previous question, which is what happens when you hire and then you realize that you have obviously made a blunder. You have picked the wrong person. Or, you have made a mistake. Should you then pull the plug? Or, reinvest in that person through deep training?
Vikram: It’s a very hard question. And there is so much context to this question because if your startup is in a 3-month runway situation versus a 12-month runway situation versus you are trying to build a specific function. So, there is a lot of context. So, without going into all of that context and context-specificity let me try and generalize and answer on this. I think it’s important to remember while hiring and investing in people, you are dealing with people’s lives and careers, and people spend 80 - 90% of their time in your organization. And founders who understand that and connect with their team at a real level, usually build loyal organizations that go the extra mile for them.
You could have made a mistake as a founder in, let’s say, three ways. The first is you hired someone with wrong intent. They don’t work hard. Or, they are always talking about other people behind their back. There are some things that are just no, nos. They will be a source of enormous negative energy and drain the energy of the organization. With them, I think you have just act swiftly, cleanly, and make sure that you have amicable separation, but a separation.
The second is you have gotten the intrinsic right and you have got the DNA right, but that person is struggling in terms of the enormity of the problem that’s in front of them. For them, I would always give long rope and make sure that you are surrounding them with capability.
The third is that you have got the capability right, but the chemistry is off. That’s when it becomes very nuanced where if you can - I would urge founders to overinvest at that point in time. And it’s easier said than done. And whenever I have this conversation, founders will say it’s easy for you to say, you don’t have to deal with that person every day. And I say that’s true, which is why I can also give you this advice outside in that you actually have to invest in building some of this chemistry because this is a person who has delivered in their lives previously, and they are not delivering here. Can you create an environment where they can deliver? And it’s up to you to create that environment where they can deliver.
Salonie: Right. Thanks, Vikram. Thank you for listening. And you can find the transcribed version of this podcast on matrixpartners.in. You can also follow us on Twitter and LinkedIn for more updates.