A Friday series exploring Startups and the people who make them go. Read all If the Shoe Fits posts here

Entrepreneurs love hiring so-called stars; they work hard to steal them from a rival and brag about what their newest hire did previously.

Which, unfortunately, has little to do with how they will do in the future—think Ron Johnson and JCPenney.

Yet, no matter how often they are disappointed, bosses of every kind continue to hire based on history, with no consideration of contributing factors.

“Across all our studies, the results suggest that experts take high performance as evidence of high ability and do not sufficiently discount it by the ease with which that performance was achieved,” the paper reports.

Passion can take your company a long way, but if it isn’t backed up by good hiring you’ll be in big trouble, because the wrong hire can quickly derail success.

This isn’t new info, nor is it rocket science; people do not perform in a vacuum and common sense should tell you that environment and colleagues are an integral part of any individual success—but it doesn’t.

… not only were the studies’ subjects [business executives and admissions officers] unable to counteract this correspondence bias, they remained susceptible to it even when warned explicitly of its dangers. (…) …seasoned professionals discount information about the candidate’s situation, attributing behavior to innate ability.

The outcome is one of which you should be hyper aware.

“One of the consequences is that you end up admitting people who should not be admitted, and rejecting people who should not be rejected.”

It takes hard work to beat an innate prejudice, but it can be done

Take a moment to download The 12 Ingredients of a Fillable Req, CheatSheet for InterviewERS™, and CheatSheet for InterviewEEs^™; implement them and you will be well on your way to better hiring.

Image credit: HikingArtist

A Friday series exploring Startups and the people who make them go. Read all If the Shoe Fits posts here

1. How fair is your company’s compensation plan?
2. Do you have a compensation plan for both salary and stock?
3. Do you pay your “stars” more, whether cash, stock or both?
4. Do you offer it to lure them in the door?

If you answer ‘yes’ to questions 3 and 4 then you must answer ‘no’ to 1 and 2.

Winging it with no plan is a major ingredient of financial disaster.

Offering high salaries and/or giant stock options before knowing how well a person will perform at your startup is a recipe for talent disaster—history may not accurately predict the future.

One of the key determinants of satisfaction — or dissatisfaction — with compensation is how employees feel their pay package compares to others, according to Wharton management professor Matthew Bidwell. “No doubt if somebody thinks he or she is doing the same work as another who is paid a lot more, this leads to resentment and ultimately to disengagement.”

And the last thing you need in a startup is resentment and disengagement.

Image credit: HikingArtist

A Friday series exploring Startups and the people who make them go. Read all If the Shoe Fits posts here

Wally Bock, who provides some of the best and most pragmatic content available on being a boss, shared the story of Ron.

I’ve known many Ron-s in my time, both male and female, and the managers who hired them—hired them even when they knew better.

They ignored the red flags and rationalized away any information or signals that contradicted their desire to have the Ron on their team

Often the Ron came in as a star; the person who could save the project/product or bailout the team.

But stars can turn into shooting stars, since their reputation and achievements are often a product of their skill at managing up.

How many Ron’s have you hired?

Image credit: HikingArtist

I’ve worked for years with the tech world, particularly startups and young/growing companies mostly run by guys.

Too often by guys who know it all and/or have little use for wisdom that comes from outside the tech world.

What I tell them is that wisdom comes from everywhere and every level and if they plan to succeed they had better open their minds along with their ears.

What can you learn from an entrepreneur who sells dog food?

A hell of a lot, actually.

Jen Guzman is C.E.O. of Stella & Chewy’s, which sold $8 million worth of organic veggie/raw meat frozen or freeze-dried dog and cat food nationally in 2010 and making it number 424 on the Inc. 5000 in 2011.

Eight million dollars isn’t chickenfeed and I know of no business of any size that wouldn’t kill for comparable testimonials.

Here are three major (IMO) points that any founder would do well to remember.

The right candidate isn’t always a star or the strongest or possess the hottest skills.

The right one is the one who fits best.

I try to hire the best person for what the organization needs, and who can fit into the culture, rather than just hiring the person with the strongest résumé.

These are great questions to ask a candidate, but paraphrased, they are also great questions for investors to ask an entrepreneur.

Why do you want this job? Why do you think you would be good at this job? And what do you think are the five most important qualities or things that you need to be good at this job?

Guzman came from private equity where one of her jobs was assessing potential CEOs.

I looked for people who could explain their business and how they were going to succeed in simple terms, as in: “This is my business model. This is why it works. This is what I think we’re going to achieve next year, and this is how we’re going to do it.” Someone who can boil it down to something very simple, to me, really has their arms around their business. If it’s too complex, how are their employees going to follow it?

The key here is “simple;” a term often seen as offensive when used in conjunction with any one, let alone all, of her questions.

Out of the hundreds of entrepreneurs I’ve talked with over the years maybe a third of them could respond well to these questions.

Be sure you are one of them.

Flickr image credit: Stella & Chewy’s

In a celebrity-driven culture and considering the hype around global startup salvation, you might start believing that founders are, indeed, some kind of superhero, different from the rest of us, and worthy of adoration.

But you would be wrong.

“Throughout history, narcissists have always emerged to inspire people and to shape the future. The ones who lead companies to greatness are those who can recognize their own limitations.” –Michael Maccoby (2000 Harvard Business Review article about the pros and cons of narcissistic leaders.)

A Fortune article, with heavy input from Zachary First, managing director of The Drucker Institute, does a good job kicking holes in the idea.

Star CEOs grow dangerous when they see their success as destiny, their place at the head of the pack as the only path possible, rendering all of their choices justified. The best leaders might enjoy the red carpet, that’s fine, as long as they understand that being the best fit for the CEO job is a relative status — relative to the needs of the rest of the people in an organization at a specific moment in time.

And fame, no matter how great it may feel, does not equal infallibility.

Steve Jobs is considered a star CEO, but it’s questionable whether he would be if he hadn’t brought in John Sculley, been dumped and then come back.

While it’s not good to believe you’re the smartest person in the room it is far worse to actually be the smartest.

There are many things you can do if you want to stay grounded; here are the basics.

• Hire people who are smarter than yourself;
• encourage feedback and don’t dismiss it;
• listen and hear what you’d rather not;
• build a culture with sans fear where the messenger is never killed; and
• don’t believe your own hype or drink your own Kool-aid.

And above all, stay aware.

Flickr image credit: Cory Doctorow

Have you heard about a very smart startup called Developer Auction?

Developer Auction, which allows companies to bid for the services of high-performance software engineers. It’s a disruptive idea because the San Francisco-based company makes it easier for companies to find workers, which in turn get more money for their services.

It generates revenue by taking 15% of the negotiated salary and then kicks back 20% of that to the candidate.

I’m sure it will make a lot of money, at least in the short-term considering the current hot market.

It also is the absolute stupidest hiring move companies can make, not that that will stop them.

I can think of no better way to find developers to whom money is everything and product passion and loyalty are words in the dictionary.

Not to mention the effect on the current team, company culture and internal salary structure.

But it does offer the wow factor of cutting-edge bragging rights and the fanfare will probably camouflage the hiring manager’s lack of staffing skills.

Rather than address the stupidity again, I refer you to three posts I wrote early last year, insanely stupid hiring, insanely smart hiring and insanely smart retention and stars that thoroughly cover the subject.

Take time to read them and feel free to call or email me (contact info on the right) if you need any assistance at no charge—I never charge for doing good deeds.

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A Friday series exploring Startups and the people who make them go. Read all If the Shoe Fits posts here

Last year I reminded entrepreneurs that, like Roman generals, they weren’t gods.

But what about kings?

In an excellent article in U~T San Diego, Neil Senturia and Barbara Bry, serial entrepreneurs who invest in early-stage technology companies, explain why they ask anyone presenting to them whether they want to be rich or be king—those who want to be king are politely shown the door.

The concern is valid, since few founders are capable of scaling their company and that desire to control has a bad impact on the bottom line.

“Founders who kept control of both the CEO position and the board of directors held equity stakes that were only 52 percent as valuable as those held by founders who had given up both the CEO position and control of the board.” —The Founder’s Dilemmas by Noam Wasserman, HBS

Not to mention its effect on talent.

Being king undercuts the ability to recruit and keep good people making it impossible to build a world-class team.

People don’t believe authoritarian visions are trustworthy.

People whose voices aren’t heard have little reason to be care.

Kings like to believe that they can buy stars and then own the team.

There are two reasons that doesn’t hold true in the real world.

First, people who join for money will always leave for more money.

Second, the only stars worth having are the ones who join the team.

Would you work for a king?

Or be one?

Option Sanity™ is not fit for a king.
Come visit Option Sanity for an easy-to-understand, simple-to-implement stock allocation system.  It’s so easy a CEO can do it.

Warning.
Do not attempt to use Option Sanity™ without a strong commitment to business planning, financial controls, honesty, ethics, and “doing the right thing.”
Use only as directed.
Users of Option Sanity may experience sudden increases in team cohesion and worker satisfaction. In cases where team productivity, retention and company success is greater than typical, expect media interest and invitations as keynote speaker.

Flickr image credit: HikingArtist

I’m not really a sports fan, but I read the NYT and occasionally an article that focuses on the human side as opposed to the play intrigues me. That’s how I ended up reading about Jeremy Lin and using him as an example of how easily bosses miss their real star talent.

In mid-March another Knicks story caught my eye.

[Coach] Mike D’Antoni and the Knicks parted ways Wednesday — an event that seemed fated once the franchise acquired Carmelo Anthony, an immense talent whose individual playing style clashed with D’Antoni’s spread-the-wealth offense.

At first glance you might not think this is applicable to business; obviously, no boss is going to quit when an employee disagrees with the culture, no matter how good he is.

In fact, it’s much more likely that the boss will laud him and shower him with whatever perks, bonuses, promotions and raises possible.

Anything to keep him happy; anything to keep him, period.

Not all star players have star egos; from the little I’ve read Lin is the former, while Anthony follows a more typical star profile with the ego to match.

So what really happens when a culture starts focusing on star egos?

The most obvious problem is the deep doodoo you are in if your star ego is injured or leaves.

The more subtle crisis takes place quietly over time as all the potential star players leave for more spread-the-wealth cultures and bosses who will give them a chance to shine.

Flickr image credit: Joshua Smith

A Friday series exploring Startups and the people who make them go. Read all If the Shoe Fits posts here

By now, everybody knows that the Jets management turned itself into a pretzel and spent big money to acquire Tim Tebow from the Broncos.

Notice I didn’t say “add him to the team,” because from what I read there is no team, just a series of “splashy acquisitions.”

That’s the difference between the Jets and the Giants.

…championship teams are built, not bought, not bartered. … The Jets have yet to learn what the Giants already know: championship teams are built, not bought, not bartered. The Jets lacked two important elements last season: roster depth and locker room cohesion. They built their roster as if playing fantasy football, certain Coach Rex Ryan could glean character from a locker room full of characters. But when this grand chemistry experiment blew up the Jets’ laboratory, with players arguing in the huddle and on the field, Ryan acted shocked.

Last year I wrote Insanely Smart Retention and Stars (the third in a series; it contains links to the first two, Insanely Stupid Hiring and Insanely Smart Hiring) and last fall I posted the story of what happens when a founder sets out to hire a star.

In one form or another I and others have been warning that hiring stars is an iffy business and your energy is better spent building and maintaining an all-star team.

So which is your company channeling?

The Jets or the Giants?

Option Sanity™ is a team-builder.

Come visit Option Sanity for an easy-to-understand, simple-to-implement stock process.  It’s so easy a CEO can do it.

Warning.

Do not attempt to use Option Sanity™ without a strong commitment to business planning, financial controls, honesty, ethics, and “doing the right thing.” Use only as directed.

Users of Option Sanity may experience sudden increases in team cohesion and worker satisfaction. In cases where team productivity, retention and company success is greater than typical, expect media interest and invitations as keynote speaker.

Flickr image credit: HikingArtist

A Friday series exploring Startups and the people who make them go. Read all If the Shoe Fits posts here

Bosses hiring for startups (or existing companies) wax lyrical on the benefits of hiring “stars” and are willing to jump through almost any hoop to get one.

Those of you who crave stars would do well to read the story of Jeremy Lin, who plays for the NY Knicks in the NBA.

Nobody considered Lin a star or even a potential star.

He was cut in December by the Golden State Warriors, his hometown team, after one season in which he rarely left the bench. The Warriors were intrigued enough to sign him but not enough to keep him. The Houston Rockets gave Lin a quick look and cut him.

Of course, his coaches didn’t play him, so they never learned what he could do.

The Knicks almost made the same mistake.

Lin started with two strikes against him; he is Chinese-American and graduated from Harvard—he doesn’t fit “the profile.”

In spite of superb high school playing he received no scholarship offers.

Similar scenarios play out every day in hiring decisions across industries and around the country.

In doing so managers walk by some of the best talent available.

How many Jeremy Lins have you missed?

How many of them now work for your competition?

Option Sanity™ recognizes stars-to-be

Come visit Option Sanity for an easy-to-understand, simple-to-implement stock allocation process.  So easy a CEO can do it.

Warning.

Do not attempt to use Option Sanity™ without a strong commitment to business planning, financial controls, honesty, ethics, and “doing the right thing.”
Use only as directed.
Users of Option Sanity may experience sudden increases in team cohesion and worker satisfaction. In cases where team productivity, retention and company success is greater than typical, expect media interest and invitations as keynote speaker.

Flickr image credit: HikingArtist