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October 17, 2011

I watched Moneyball last night.  Fun movie, but as is usually the case, the book was better.

I did enjoy watching their depiction of the old school scouts talking about the different players they were evaluating. Hilarious stuff:

“A guy with an {unattractive} girlfriend has no confidence”

“You’re gonna be a superstar because you’ve got a great face”

Sounds absurd, I know.  But is it really that different compared to what happens every day when interviews are conducted or even when VC’s evaluate entrepreneurs?

We end up making snap judgements about people and decide in a 30 minute conversation or presentation that “I like that guy!”.  We sometimes spend a bunch of unstructured time with people “getting to know them” over meals or drinks.  We think that if we just are in the presence a bit more in more casual settings, we can either get them to say something revealing or we just get a better feel of what it’s like to be around them.

It’s amazing how much people evaluation is driven by gut.  And to some extent, it has to be.  But I think that leads to some laziness about evaluating what almost everyone says is the most important factor of any business.

Another problem with going with your gut is that we are prone to confirmation bias.  When things line up with your expectations, you are quick to mentally score one in the “win” column and say to ourselves “yep, I knew that person was a  winner immediately.”  When things go wrong, it’s easy to think “yep, I was always worried about X or Y with that person.”  But the reality is that you probably had things you liked and didn’t like, but emphasize the ones that correlate with the outcome when you reflect in retrospect.  This leads to more confirmatory “data” in our heads, which only give us more confidence in using out gut in future personnel decisions.

Does this sound familiar?  I think if we are honest, it probably does for many people.  I’m definitely still in the early part of my learning curve on this.  But there are a couple principles that I’ve picked up from things I’ve read and tried that I think could be helpful.  A lot of these principles are drawn from the academic research of Geoff Smart who actually wrote a paper on “Management Assessment Methods in Venture Capital”.  In a Moneyball-esque approach, Geoff actually looked at the evaluation methods of VC’s in selecting entrepreneurs, and tried to tie that back to the ultimate outcomes of the companies.

  1. Know What You Are Looking For.  Seriously, just take 10 minutes and write this down before you start your process.  This sounds simple.  If you were going to buy a house, you might take a step back and think about what attributes you are looking for, what characteristics are important to you, and then evaluate potential purchases against those factors.  But with people, that rarely happens.  Sometimes, there is a job description of some sort written with a “qualifications” section, but most of them end up being super generic with qualities like “self starter”, “highly motivated”, “collaborative”, or other random stuff that you hope every employee has.  Instead, think about the 2-3 qualities that really really matter – the qualities where you’d sacrifice deficiencies in other areas to get someone really exceptional.  And remember that these qualities change for specific roles, specific types of businesses, or even for the same business but in different times or contexts.
  2. Drill down on the stuff you care about. Once you know what you are looking for, be tenacious about drilling down into those qualities.  Go deep. Control the interview, don’t let it be a meandering chat.  If you really are looking for someone who is exceptional at X, don’t be satisfied with a bullet on the resume that says they can do X. Don’t be satisfied with one nice story about doing X well.  Get 3, 4, 5, or more specific examples about these qualities.  Write them down so that you can follow up later.
  3. Be Maniacal About References.  This goes without saying, but happens shockingly less frequently than it should.  Again, we often have so much confidence in our judgement of people that we end up looking for references that are likely to be easy, do one or two, then call it a day. My partner David wrote a good post on due diligence calls, so I won’t belabor the point here.  What I’d add is that the better that you’ve done #1 and #2, the more value you can get your of your reference calls and the easier you can figure out if the other person is BS-ing you. That’s why it pays to go deep and to be diligent about keeping track of details.  Do you really want someone who tells you about heroic accomplishments in “running” a project when their boss later tells you that they were just executing on a straightforward playbook within the company?  Oh, final point – being maniacal actually doesn’t mean that you are looking for perfection.  Good people sometimes rub others the wrong way.  But if you really know what you are looking for, you can more easily make sense of bad feedback and balance that against the positives.
  4. Move Fast. Both in hiring and in firing. Seriously – more coffee meetings or drinks at the bar isn’t going to change things very much.  And in a ridiculously competitive environment for talent, agility is a great asset and differentiator.  I really believe that you can do effective hiring and people evaluation if you focus and just do the work.  No need to drag things along.  Same thing with firing too.  It needs to happen quickly and decisively.  I was extremely impressed with a first-time CEO of a portfolio company a few weeks back when he reported to his investors that he had let go of a key contributor to the team.  The team is super small, so every lost person is a big deal, and this person had a great background on paper.  But the CEO knew that he wasn’t working, and let him go. No long deliberations with the board or advisors.  Maybe a little with other team members, but it was swift and decisive and professional.

For further reading – check out Geoff Smart’s book and also this great blog post by Paul English at Kayak.

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