How Big Of a Tradeoff is Hiring Top Talent During Scaling?

Typically every time you double the size of a company, some people will be a good fit. You'll have some turnover as well because they're not necessarily the right people for the next stage of growth. And it's not to say double, it's just a saying that people have in business. But you usually notice big milestones from like a million to 10, 10 to 100, 100, call it to half a billion or a billion.

Yeah.

I also believe there's a time to weed out the bad people, when things are flat, growing slowly, or declining. And what you'll find is some people just aren't able to cut it during bad times. And the ones that are tend to do really good during good times as well. But you can really see people's true colors during hard times.

Yep.

And you'll quickly know who's in it and will just do whatever it takes to succeed. We're not, of course, telling people to break laws or do anything unethical, but still like just who's in it, willing to grind it out and fight it out and who's not. And there's a lot of people who aren't.

You know who I stole this question from? Vinod Khosla. So I'll let you finish in a sec. But like his question, one of his favorite interview questions, like, tell me about a time where you worked your absolute hardest. Like what were you working on? Why was it important to you? But more importantly, how many hours were you working per week? I still talk to people sometimes like, oh my God, it was so hard. Like working so hard. So you're working like 40 hours a week? Oh yeah, 40 hours a week. I'm like, oh, okay. So you don't know how to be punched in the face. But that's another great question. Go ahead.

Dude, I had someone ask me that question.

Ask you that question?

Uh-huh.

Why ask you?

They wanted me to be the CMO of their company, and this is a publicly traded company, and they wanted me to move to New York. I didn't want to actually do it. And they were just like, I want you to come join our company. And I said, dude, I already have a company. I'm not going to end up joining the company. And then I already know what the CEO gets paid because it's publicly traded. I'm like, the economics aren't going to work out because I have a business and I'm the majority owner. Economics are easier when you're on—

There's no incentive.

Right. And he's like, just come on, come on. I'm like, dude, I'm not going to take this. And I know the CEO like personally, and it's a big company. They're not worth like, you know, $100 billion or $50 billion, but they're not worth $2, $3 billion. They're north of $10 billion. So they're a good-sized company.

Yeah.

And we're talking back and forth. He's like, just humor here, like, let's go through it. I'm like, dude, I promise you I'm not going to end up taking this. And I also said too, I'm not the right fit. So they're like, he started asking me, he's like, why don't you think you're the right fit? I'm like, let's take money aside. He's like, yeah, yeah, let's take money aside. Why aren't you the right fit? And I'm like, Your organization has too many people. I don't do well with big organizations and bureaucracy, especially in marketing. Once I get frustrated in this, I just want to quit. And I just want to go back to being my own boss because I have no one who can tell me.

You get to be yourself.

I can be myself and I don't have to deal with like, it's like Sergey Brin. I'm a much smaller company, but still if Sergey Brin didn't like anything at Google, he's like, you go deal with this. I'm going to do whatever I want. He doesn't care about a budget or what someone says or feels.

Dharmesh, probably Same deal.

Probably same deal. So he was asking me different questions like, why don't you think you're a good manager? How many people do you manage? Like, you know, what would you change differently? One of the questions he asked was—

I would change nothing. I would want to be myself.

Yeah. One of the questions he asked me was about like, you know, what was the time like that things were really hard and like that you worked really hard? And he was asking me how many hours I work. And I was like, dude, I don't count how many hours I work. I work a lot of hours. But when he asked about that tough moment, And I was just like, that I really had to grind it out. And for sure, I'm like, I think you're missing the aspect of being entrepreneur versus a hired gun.

You're always on.

I'm like, I'm always on. I'm like, those tough moments that I really had to, they weren't really about hours or working harder. It was more mental because things weren't going the way that I wanted them to go. So you feel it more when things just keep not going the way you want versus when you're working really hard and things are going the way you want, you're on cloud nine and you don't feel like It's work. You feel like it's work and things are just terrible when like you're doing all these marketing experiments or changes and trying to get more traffic and you just keep getting slapped and things go backwards and conversion rates go down and competitors come out and start charging less than you. I'm like, that's when you feel it and you got to figure out how to persevere and you may or you may not, but that's when it starts getting to you.

Yeah. Well, so here's another thing because you mentioned the founder aspect. So going back to that pod and I should send it to you because it's actually a really good one. But So at Rippling, they have, I think, 50 or 75 founders on a team, and they like to look for founders. Why is that? Because founders know how to bend reality to their will. Like, well, this is made by a founder right here. This is made by a founder right here, right? All these things. And so my point is, like, if you're lucky enough to find a founder who actually wants to work in your company, or maybe you acquire a company or what, and you've done this quite a few times, which I actually want to come back to in a second, because you've done a handful of these acquisitions and you keep the founders. They're a different hybrid. I'm not saying it's founders versus employees or whatever. I think you need a good mix of both, but tell, like, talk about your experience. You like, you got that design firm, right? The creative firm. Like, how did that work out? Founder's still there?

Founder's still here.

Yep.

And done with earnout, no more earnout.

And still there?

Still here. She'll take a global role. We had one in Asia that we did where the founders are not here. We did, when we bought the company though, one of our leaders who's a managing director of a few different countries in APAC worked for them. Okay, so his name is Gary. So Gary worked, manages a few regions for us and he worked for them. So we had a lot of color on that business from his perspective of being an employee. And he's done well for us and he's produced not only from management, cleaning stuff up, keeping clients happy, growing revenue, bringing hunting and bringing his own business. So we trust him. So we knew that organization had a good name, had a lot of employees, had a culture that wasn't fit for our culture.

Mm-hmm.

But they had everything that we were lacking in the 3 countries that they were dominating, and we kept going against them in those 3 countries, Malaysia, Singapore, and Hong Kong. Yeah, those 3 countries. And when we were dealing with them, the first thing we knew was like, if people on their team said, hey, we have a lot of work, we need more people, they would keep hiring them. They never looked at what people are actually doing. So when I went there to go visit the company for the first time, at this point we already bought the company, the deal already closed.

Yeah.

But my team already met with them in person. I was talking with the founders for probably 6 months to a year before, no more, probably a year before the deal closed. Yeah, actually closer to a year. Got to know them and I quickly realized that they're great people, they're just not a similar mentality. So if there are people like, we need more people, we need more people, they just keep listening to them. And when I was there in their office and it was a client event, A lot of people decided to play ping pong or whatever game instead of talking with their customers and helping them out. This is an event where we're inviting clients. And you know what I said? I said to Dan who runs the region, I was like, this person's not going to work. This person's not going to work. This person's not going to work. And I just started firing them off. Not necessarily firing the people.

Severance.

Not severance. I would say at this point we've turned over almost the whole company. It's taken us— Oh, wow.

So you kept the logos at least?

Kept the logos, kept the key players. We turned over everything else and the client results are better now. There was some turmoil in between when you do that, but we knew that going into it. We knew that before we bought the company that we needed to make a lot of changes culturally because we knew where their weaknesses were because Not only did we have people that worked in our organization that worked there previously, we knew other people in our organization who also looked at that deal in the past.

I think the point we're getting at here is sometimes you, if the founder wants to say there's a good cultural fit, you keep them, right? Sometimes there's, 'cause there's a lot of power you can bring with the founder. They bring a lot of, again, they make things happen, right? But sometimes if it's not a good cultural fit, you're going to have to make some changes, which is arguably a pain in the butt for you guys because That's a lot of work, right? Ideally you buy a company where it's like it slides in well, but it's not going to be the case a lot of times.

Yes, but within that region there wasn't a ton of companies to buy as an option and I just wanted it and we knew this going into it and I was okay. But when you say founders being a fit, I want to know that before I buy the company. So we already had a transition plan from them before we bought the company.

And they knew.

And they knew and we made it very clear. So one of the founders, he wasn't on payroll and he wasn't part of the company from day one. He was checked out for a while, but we're just like, cool. And then the other one, we set up a transition plan so it wouldn't be too much of a cultural shock. And then, you know my personality and attitude, there's only so long that I can deal with things not going the way I want. So I'm like, oh my God, let's just—

It's very short.

Let's just do this much quicker and just pull off the bandaid and screw it. But the Rebel House acquisition—

That's a creative shop.

That's a creative shop. We knew from day one we liked her and we wanted her to stay on. And same with like Mick Verma, our app agency that we ended up buying in the UK. When we met him in advance and his personality, I'm like, I like this guy. I'm like, he'll be a good fit. What I just want to change is how they— I want to tweak, not necessarily change. The company was pretty fine-tuned, but— I just wanted to make them more operationally grown up. And then we made those tweaks and the company started growing faster.

Alright, so I wanted to take a moment to tell you about my podcast co-host Neil's agency called NP Digital. And they work with a whole host of global companies or global organizations. Also, Neil has SEO tools such as Ubersuggest and AnswerThePublic. All you have to do is go to npdigital.com/neil. digital.com to learn more and we'll see you on the other side. Dude, speaking of people, I had this thought in mind too, because I'm debating people on my team right now. And so there's always a trade-off when you make a decision, right? Like the Thomas Sowell quote is, there are no solutions, only trade-offs. So I accept that. But there are some people that believe that there is an explicit trade-off between hiring top talent versus scaling. Now, my examples, and I actually want to hear from you because there was a period of hypergrowth that you guys had, right? Over the first 7, 8 years that you've been around, right?

This will be year 8.

Yeah, year 8, right?

Not the 8th year, Or not the 7th year, 'cause the economy's been bad, but sure.

So my point of saying this is like, okay, you look at Netflix when they're scaling quickly, right? They scaled quickly, but they're always about culture, right? I've read their culture book, you know, their culture code and all that stuff. They've always been on top of hiring people. Not to say they're perfect on hiring A-players, right? But they've been on top of it. When you look at Google back in the day, it was very hard to get into Google back. It still probably is hard to get into.

Can I stop you on the Netflix thing? 'Cause there's a big misconception there.

Yeah.

You know, people go on maternity leave for Netflix and they come back and they have a whole new team, right? And they don't know anyone on their team.

Isn't that, that they move through people quickly too?

Netflix moves through people extremely quickly.

Like butter.

From people who I know who work there in recruiting and the whole philosophy was you need to work really hard, produce. The moment you stop producing, we move on and we replace you.

Yeah. So my point of saying this, and so I think we're aligned here, it's they have a, they actually have a very intense culture and they're very explicit about it.

Oh God. I thought you meant like, I haven't read the book. I thought you meant like they have a really friendly, nice culture. No, no, no, no, no.

It's like, no, these are our standards. These are our expectations, right?

And so this is my, this is one of my points.

is this, like if you have very high standards and expectations and you enforce those expectations, I don't think there's that high of a trade-off. Like you're still going to screw up on hiring no matter what, right? But if you look at Netflix hypergrowth, you can look at Amazon back in the day, Google back in the day, they had high standards. Their CEO, the DoorDash CEO, they stayed in interviewing the first 1,000 people or so. And so I don't think there's an explicit trade-off. Like let's go over you guys as an example, right? When you guys were growing very quickly, like did you just say, let's just throw people at the problem? Even though agency is very, you know, people-focused, right? Much more people-focused than like a software business. Did you trade off and say, hey, let's go ahead and accept like C and D talent?

No, but when we were hiring really fast at the beginning, we got more C and D talent and we quickly, I wouldn't say, it depends what you categorize quickly. It took us, because we were growing so fast, we couldn't just get rid of them right away, but we worked at the same time of getting rid of them and we wish we never got them in the door in the first place.

Would you say that's a mistake you guys made and then you fixed it? Now you guys are much more— so my point is like, once you set the standard, it's a lot less Cs and Ds coming in, right?

Correct. That's what we didn't have as rigorous standards coming in because we were just growing fast.

Yeah.

And when you're growing fast, you drink your own Kool-Aid, at least we did. And we're like, oh, things are going well. Yeah. Let me interview them. A few good references.

All right.

They're a good fit. Get them in. Let's grow faster. We can close more revenue. We just need more people. And we shouldn't have done that.

Yeah. So you and I, I mean, we've seen the same thing. I've seen the same thing like 4 or 5 years ago, right? And so now I've got the process by the, you know, right? And, and, and, and so like, they don't like it that I'm so involved with hiring, but like, I feel so good about it because we do this exercise called top grading where you can, you rate people like Noah's the A player, right? Uh, you know, there's A1, A2, A3, there's A potential, right? And then there's B, B players are disappointing. C players are just like fire, right? I look at this 4 or 5 years ago when I, when we did this and we had, so it was like, a lot of Bs and Cs in there. Now it's almost all As, right? And so my point of that is like, it's the standards that you set and a lot of times it comes down from the founder too. Yeah. Maybe not from you, maybe from like Mike Kamo, but yeah, because you're not as involved with people.

I'm not as involved in people. I don't do well. I love people, but I don't do well managing people. I'm very direct. In marketing, there's this guy named Salo who helps run the whole thing.

Your marketing leader. Yeah.

My marketing leader. I think my official title for the company is CMO. I'm not really the CMO.

You're just co-founder.

I'm just co-founder. And Salo is VP of marketing, but I meddle in marketing a lot, but I meddle in everything else as well when I want to meddle. And with marketing, so I was talking with Salo the other day and we have someone who's not going to come back after maternity leave. They let us know. I was like, all right, no problem. So I go to Salo and I'm like, give me a list of everything they did. And I'm like, while you're at it, give me a list of what everyone is doing within your whole department. Because we're at the end of the year, right?

Yeah.

So he's giving me a list of everything. I'm like, why isn't this done? Why isn't that done? He's like, Neil, there's a lot of other reasons on why things— I'm like, okay. I'm like, let's go back. You just sent me a list of what people are doing. And he's like, yeah. And I was like, I want you to give me a list of everything people have had as tasks. I want you to give me the timelines on when it was assigned, when it was completed, and I want the timelines in chronological order because you can't just look at when it was assigned and when it was completed. Because what ends up happening is, is they may not work on it for a while and they worked on something else, but you can see when they finished the last task. And when they did the next one and how long it took to complete. And you're just like, oh wow, this is really easy. This took a few hours. You did this in 3 days. And then you start finding the ones that have those gaps. Hey, find out what they're doing during these timeframes, what else they were doing in between. When they come back with, I wasn't doing anything else in this timeframe, this took a long time, I then try to understand why. Just like an engineer telling me add-ons reduce our speed by 40%.

Mm-hmm.

Cool. I came up with a solution in my head No joke, in 1 minute I'm like, this isn't rocket science, just get rid of add-ons, just create tons of plans and you don't have to show it to consumer because their first thought was, oh no, consumers will see it. I'm like, no, on the front end of the screen, show it as an add-on and call it an add-on. On our backend, just switch the plan. There's no difference.

Yep.

They're like, oh yeah, that works. And then you go find out. So when they don't have good reasons why, it starts making me think inefficiencies, inefficiencies, inefficiencies. And then I figure out, all right, well, what happens if I have a person who's doing things the way I like. And no matter how long you've run a company and how involved you are, you're always going to have inefficiencies and people who aren't performing, and you're going to have the overachievers as well. And you just got to figure out and decide, what do you want to do to rejigger things? Or no, more so, where do you want to spend your time? And for me right now, my CMO is spending majority of his time on software. I'm spending part of my time on software, I would break it into 3 buckets. 1/3 software, 1/3 revamping marketing right now because I have a huge opportunity to revamp marketing, and 1/3 of a time on closing deals.

And you being personally involved.

Me being personally involved. And when I say closing deals, dude, the amount of times I message Nick on how many RFPs did we get, where are RFPs coming from, and then other things like Uh, what is it called? Hey, I introduced you to this deal. What happened? Oh, they didn't follow up. Let me ping the CEO. I know the CEO. Oh, CEO didn't respond. Let me ping the CMO. CEO didn't respond after 4 or 5 days. Let me just give the CEO a call. Oh, my bad, Neil's busy. Dude, your team's not following up. What do you want to do? You're missing out on potential revenue.

So you're, you're, you're pushing it. You're not necessarily on these proposals is my point. Like you, you're not on the pitch calls.

I'm going to, Monday to meet with a potential client in person at their office. And this company spends over $1 billion a year on marketing.

You weren't that involved with pitches the past few years, right?

No, I won't be involved in the pitch. I'll be involved on trying to get it to the part where—

Just to jumpstart it a little, kick it a little bit, right?

Not the kick. The moment I can convince them that we're the right agency, you're out. I'm out. And I'm not out where from the aspect of helping the client or coming to the office or giving speeches or even working on the account. I'm out from the bureaucratic part. Hey, we now need to go through procurement and deal with legal and, you know, terms and conditions. Like, that's not me and I don't have the patience. I'll be out on that. Or if they're like, we need a 100-page deck and we need to just go over this with our executives. Like, that's not me.

Yeah. Yeah.

But I'll get back in when it comes to dealing with problems with the account or growing it, not from growing it and getting them to pay me, but growing it, like getting the client better results. Stuff that I enjoy, I'll double down. Stuff that's bureaucratic, I just don't have a tolerance for.

You know, I feel like that's a founder thing too-ish because we have similar-ish skill sets. And so I'm good at getting them excited and then I hop out. You talk to me about decks and all this stuff, I'm out, right?

Yes.

Yeah, getting them excited or pushing it forward or texting someone, like I can do that all day.

Dude, I was just in San Diego.

The Bowl?

Last week, yeah. Ever Bowl, right? My team pitched them on a phone call and it didn't go well. The email thread, I'm not going to read the whole thing because I probably shouldn't read it all, but Let's see. It's loading. Oh yeah, now it's loaded. Okay. So, so he messages my guy on my end, right? Hey Nick, sorry for the delay response for our team. We've met, but we've been scattered. I have a couple of thoughts and clarifications here and happy to discuss further so we can discuss moving forward. First, I understand you divided X amount. I'm not going to say a dollar amount. And retain into 3 buckets. I need more clarity. Second part of proposal, but you know, yada, yada. As it sits today, I'm not sure how we would be able to move forward with either of these 2 options given the cost. For us to see real ROI for spend, we would need to prove that we could increase our AUVs by over X dollars per store based on this spend and nothing else. Happy to discuss further. Maybe we can schedule a— Subsequent calls for next week.

Okay.

So I was like, all right, call up the founder. I was like, hey, let's set up a meeting in person. Call up my team. I was like, dude, with franchise-based businesses, as you know, there's portions that the franchise pays for marketing. And there's also stuff that individual stores can or can't do depending on the franchise. I was like, this is what we're going to do. I'm like, and he had his own ideas. I'm like, okay, let's meet in person. I messaged him, met up in person. I drove down there, took me—

no joke.

Yeah. In rain, drove my Honda. It was raining like crazy on Thursday. I drove there a day earlier, not this week, 'cause this is next week, but the week before. Took me 4 and a half hours to drive to San Diego from here.

Bumper to bumper?

Most of the time. Yeah. Not always, but most of the time. Uh, or most of the hours, right? Because I got a lot of miles in, but it was also raining. You know my driving skills.

Horrible.

Um, I'm pretty good. I keep quite a bit of a distance. Um, it's when I daydream and stuff like that. Yeah. But like, I'm steady. I put— the Honda Odyssey has this lane departure notification that stays and it kind of adjusts the steering wheel.

Does it stop you from hitting the car too?

Uh-huh. It gives you brake notifications. And I also put it on cruise control. So I was in the right lane, uh, think about around 40, 45, miles, and then you can put the distance between you and the car ahead of you. So it slows down automatically, but I had my foot close to the brake pedal at all times. And it was just, the visibility was terrible. So it's 4.5 hours driving there, meeting Friday morning, 1 hour. The only time I could get a meeting, I had a 30-minute overlap. I told Jeff, my buddy who owns the company, I was like, dude, I can't be there for part of the call. My call ended 15 minutes earlier. I missed 15 minutes. My team's already pitching, going through a deck.

They're in person.

In person. Yeah, yeah, yeah. 2 people showed up from my team. By the time I got there, it was only like 15 minutes left, so I missed half of it. And then the remaining 30 minutes was just discussion. It ended up, I was just like going through it, the pricing and plans. They had questions like, no this, yes this, and I was just tearing it apart in person. I'm like, let's go forward. Jeff and I had a handshake. He's like, start December 1st. Sounds good. I'm like, we're not going to get contracts signed by them? He's like, dude, we've known each other for over 10 years. Do we need a contract? Tells his right-hand man, he's like, December 1st, good? I'm like, good, my team's good. I'm like, cool, let's start. Let's go.

Yeah. Yeah. Was the juice worth the squeeze for the 4 hours going down there and the pitch?

ROI-wise?

Was the deal, yeah, ROI-wise?

For us? No, it doesn't move the needle.

Yeah.

But you know what? Every little bit adds up and—

It's the habit.

It's the habit. You nailed it. Because if my team doesn't see that I'm willing to do whatever for deals, They're not going to.

Yep. They look at the leader from the top. If Elon is willing to sleep in the office and work as hard as he is, then other people, his message is other people should. So by the way, like, so that's, that's a good story. Like it, you have to set the example as a leader. Um, so anyway, that is it for today, guys. Please don't forget to rate, review, subscribe, and we'll see you next time.