How hiring & firing is secretly costing you millions

We're doing another office hours today, and this topic is one of my favorite topics. It's all about building early stage startup teams. It's for anybody who's considering starting a company or has already started a company at the earliest stages and knows how hard it is and is struggling with all kinds of things. So we're going to talk about everything from hiring to firing today and anything in between of that. So let's dive right in.

All right, you have asked me the these questions and I'm going to answer them. We're about to pivot and we're going to need to fire close to half our team. Do you have any tips to keep team morale high with remaining employees? I have pivoted more times than I want to admit. I've seen pivots more times than I can explain, and I've answered this question quite a bit. Just tell the damn truth. That's it. Just tell the damn truth. We are this business now. We need to change to this business, this other business, or this other thing next. And these are the people that need to be on the team to help us do that. These other people can't be on the team to help us do that for these reasons. But we love you all and we're going to do the best to support all of you through this transition. So I think the stepping back from my, like, kind of reactive response is this. Find a way to do the right thing for everyone. Find a way to believe you are doing the right thing for everyone and get as many of the team members, one's leaving, one's staying, to understand how you believe this is the right thing to do. How much financial information should we share with employees? We want to be transparent with our team, but we don't want people to have to worry about the company's financials or their own financial security. On the flip side, we also don't want people to see our revenue and ask for higher pay. Any tips for how much information we should share with our employees? So my gripe here is that you're talking about transparency, you're talking about financials, and then you're saying that you don't share revenue with your team and you're thinking it's going to hurt the company if you share revenue with your team. But revenue is such a fundamental driver of a business, and if you're afraid of what employees are going to think when they know how much revenue the company is making, I'm almost wanting to ask you, who knows and who doesn't know and what's making you fearful of this? So, as with a lot of the Q and A, I have more questions than answers. But in terms of tips, I fundamentally believe if your team doesn't know your revenue, are they really part of your team? What's the biggest hiring mistake you've ever made? The biggest mistakes on hiring for me have always landed on not pushing hard enough when I thought that. That that person would be a good fit for our company, and then losing out on the opportunity to work with them. This has manifested for me in ways where many years later, I end up working with that person, which means that it was probably would have been great if I would have put extra effort, made a bigger offer, or fought, so to speak, to have that person join my company. Next question. What's the biggest firing mistake you've ever made? This is literally the mistake that everyone makes, and I haven't met a manager who hasn't made this mistake. So the biggest firing mistake we all make is not letting go of the person fast enough. And we come up with all kinds of excuses of why we shouldn't, and they're all wrong. Because the second that person's gone, there's, like, a level of relief that happens, not just for you, but the entire organization. Usually, if you do it correctly, the next one's related. Have you ever fired someone and regretted it? The very short answer is, hell, no. No. And the reason for that is, back to what I said. What is the biggest firing mistake? You fire too slowly. I've never fired someone and regretted it, and I don't think I ever will. But I'm also someone who's willing to own the decision. So if you own the decision, you're not gonna look back at a decision like that where you fired someone. At least that's my take on it. Next question. What is one thing you do while hiring that you think everyone should do? There are things that I find really valuable that a lot of people tend to skip or feel uncomfortable about doing, and that one thing is reference checks. I don't think you can understand someone and the nuances of someone unless you figure out how to do really good reference checks. If you have or want a tip around this, there is a interviewing method that I love to death called the who method. I especially love it for hiring executives. But there's a book on it, a bunch of resources I've seen on it, and it's a very great methodology, very robust, very thorough, to help you make sure that your hires are more likely to succeed than not. And they have really good material on how to do reference checks, what questions to ask, and how to get out the nuggets that you're looking for when you do a reference check. Have you ever hired someone and then realized you're paying them too much and what did you do about it? I've never hired someone and realized I'm paying them too much. The root cause of a problem like that that someone would have is, is that they didn't do any homework on the hire, mapping to the skill set and then the ranges for that hire in terms of how much you should be paying them. But if you do find yourself in a situation where you're paying someone too much, I think it's very, very hard, almost impossible to lower their pay. But there are some strategies such as you lower their pay and you provide a bonus for them to reach the level that they were at or even surpass it. What's your favorite interview question? What are the 10 things you're great at? And that question leads to so many insights in a very short period of time about the human being you're in front of. I can't even tell you how many insights you can get from that. But even the simple truth of do they need to Write down all 10 before they talk to you about it, which you can give them time to do with this interview process and there's no judgment on it, or are they able to rapidly tell you, do they run out of things after five or six? So there's just a lot of interesting insights on how they think about things that you get from that. But more importantly, those 10 things can really help you define how this person thinks about themselves and honestly, what they think they're great at. Is it bad forum to recruit slash poach engineers from other startups? I will give you one really interesting response to this. If your culture is one where poaching from other startups and the people that would hop like that are matching with your culture, by all means you should do that, but you should really think about it from a cultural standpoint. I will give you one example, but I will not mention any names. But if you did some googling, you could probably figure out all these names. Back in the day there was a big rivalry between two companies. They were copying each other, they were stealing each other's customers. One of them was way more aggressive than the other about doing it and they ended up hiring very high level executives and many other people from the other company. And the reason it worked is because the culture at One of the companies was really fitting for bringing on people that would want to switch. And the dynamic worked for that company that was poaching aggressively poaching. But they weren't just poaching the employees, they were poaching the customers too. Because the way they looked at it is we have this product, we have, there's this competitor, they have our customers, those are our customers. Why aren't they our customers? That was like the kind of attitude and vibe you got from that company. They're like, look, these customers are sitting there and why aren't they ours? And so they just had this like, I don't want to say growth at all costs because that's not an accurate way to say it, but they had this fundamental core belief that they were better and that any customer of any alternative or competitor should be theirs. I rarely see a company that is that aggressive and that internalized around this concept. So anyway, the two companies were Lyft and Uber. And I'll leave it to you to guess which one was which. Now we're on an experimental round and it's called Heaton's Hot Takes. So I'm going to give my opinion an agree or disagree and do my best to be one or the other on these statements about recruiting, hiring and firing. So I'm going to jump right in. You should hire slow and fire fast. I disagree. Ideally you should hire fast and fire fast too. I think this whole idea of hiring slow slows you down. But do I mean that you should hire like willy nilly and hire everyone that shows up the door? No, I mean that you should create a recruiting process that enables you to hire as fast as possible, not slowly. Why would you want to optimize for hiring slowly if you could optimize for hiring fast and really well, an in person startup will always win against a remote team. There is no way I can agree with this because I've been running remote teams, but the nuances are not lost on me. So this is a hard disagree with a lot of caveats. I believe that we are used to in person work where there is a but in a seat and you can see that person in that seat working and that construct is sort of plaguing us because that's what managers have become so used to that they can't think of the alternative. And so the real problem here isn't that a remote team will win against an in person team or vice versa. It is that we just don't have enough systems in place and understanding as human beings. Of how to work remotely. If you think about the technology that we use today to work remotely, the fact that I'm on Riverside right now and recording this and that, you can see it at any time, and all these wonderful things that we now take for granted, these things didn't exist before when all the management principles and the organizational principles were first created. So we really need to rethink these systems. All that being said, and even the fact that I've been running remote teams for 20 plus years and advised some of the largest remote companies on the planet, I believe that there is magic in person too. Work trials are a great way to evaluate people before hiring them full time. I agree, but that's not the only way. And I think that's where like you hear some, you know, hyper growth startup founder talking about the way they do crazy work trials in two weeks and this and that. Yeah, cool, that works for you, great. But does that mean you're poor at evaluating people? Without that, the answer is usually yes. So what does that really mean? Are you going to have to like be able to scale your strategy of work trials for every department, every team, as your company grows? I don't think you can scale that. So yes, it's a cute way to build an early stage team. I think it, there are a lot of benefits to it, but I'm going to call it cute because it doesn't scale. And so yes, I agree, in an ideal scenario you do work trials with everyone you can, but at the end of the day, that's not legit possible unless you're building a small team because at some point this rule is going to break for you. And that's what I worry about. Companies that are stuck on the work trial model, I love it, I think it's great. But there are, there are not even downsides there. It's not scalable. If you tell me you're not trying to scale like that and you are doing work trials, hey, kudos to you. But if you are trying to scale a team or trying to convert to this model, I would think really hard about why and I would think really hard about your, the way you evaluate individuals. Because that's really what we're talking about. Hiring offshore talent is a great way to scale, slash, build a team. Yeah, I agree, but I have one gripe here. Why are we calling it offshore talent? It's human beings and they exist everywhere. They're all over the world. What's offshore? What's the shore? What are we talking about? Are we talking about America and offshore of America because America is not the whole world. So I can rant on this and like it really bugs me, but it's because of the word. And yes, I will nitpick words, especially on hot takes, but like man, why do we call it offshore talent? Let's call it hiring. Global talent is a great way to scale and build a team, but offshore? Terrible word. That's a wrap on recruiting, hiring, firing, all that good stuff. One of my favorite topics and one of the most important topics for a business, especially early stage startups. Apply for a future episode to join at Heaton Show. H I T e n S H o w if you made it this far, we'd love to hear from you, but I'm going to make it worth your time. You may have noticed that we're not running any ads on the Heaton show at the moment, so instead we wanted to give shout outs to startups in our audience. That means you. It's really easy to apply. Just go to Heaton Show Startup Shout out S h o u t o u t and I will pick from those applicants on a few companies to shout out on the next episode. The show is produced by Supermix. Thanks for joining.