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

0:00Typically, 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 saying that people have in business. But you usually notice big milestones from like a million to 10, 10 to 100, 100, call it a half a billion or a billion. 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 and you'll quickly know who's in it and we'll 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 coastless i'll let you finish in a sec but 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 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 uh 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 don'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 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 yeah 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 two three billion they're they're north of 10 billion dollars so they're a good size company yeah and we're talking back and forth he's like just humor here like let's go through i'm like dude i promise you i'm not gonna end up taking this yeah and i also said two i'm not the right fit uh-huh so they're like he started asking me like why don't you think you're the right fit i'm like let's take money aside he's like 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 quit yeah and i just want to go back to yeah being my own boss yeah because i have no one who can tell me to be yourself i can be myself and i don't have to deal with like it's like sergey brin yeah i'm a much smaller company but still if sergey brin didn't like anything at google he'd say something you go deal with this i'm gonna do whatever i want yeah he doesn't care about a budget or what someone says dharmesh probably same deal probably same deal so yeah 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 one of the questions he asked 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 there are 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 a lot of hours but when he asked about that tough moment yeah and i was the site like that i really had to grind it on for sure i'm like 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.

4:33I'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, 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.

5:03And 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 whatever, 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 talk about your experience. You got that design firm, right? The creative firm. How did that work out? Founder still there? Founder still here. And done with Earnout.

5:31No 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. When we bought the company, though, one of our leaders, 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 happening, growing revenue, bringing hunting and bringing his own business.

6:15So 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. But they had everything that we were lacking in the three countries that they were dominating and we kept going against them in those three countries, Malaysia, Singapore, and Hong Kong. yeah, those three countries. And when we were dealing with them, the first thing we knew was 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.

7:02The deal already closed. But my team already met with them in person. I was talking with the founders for probably six months to a year before no more probably a year before the deal closed yeah actually closer to a year got to know him and i quickly realized that they're great people they're just not a similar mentality so if they're people like we need more people we need more people uh 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.

7:41This 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 you're not 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 the 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.

8:36I think the point we're getting at here is sometimes if the founder wants to say there's a good cultural fit, you keep them, right? Sometimes it's because 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 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 uh he was checked out for a while but where's that 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 it's very short let's just uh do this much quicker and just pull off the band-aid and screw it but um the rebel house acquisition uh 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 uh mick from our uh 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 did how they i want to tweak not to see change The company was pretty fine-tuned, but I just wanted to make a more operationally grown-up.

10:23And then we made those tweaks, and the company started growing faster. 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 tradeoff between hiring top talent versus scaling. Now, my examples, and I actually want to hear from you because there was a period of hyper growth that you guys had, right, over the first seven, eight years that you've been around, right?

10:56This will be year eight. Yeah, year eight, right? Not the eighth year or not the seventh year because the economy has 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 eight 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.

11:20Can I stop you on the Netflix thing? Because 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.

11:46They actually have a very intense culture and they're very explicit. Oh God. I thought you meant like, I haven't read the book. I thought you meant like they have a really friendly, nice, good culture. It's like, no, these are our standards. These are our expectations, right? And so this is my point is this. If you have very high standards of expectations and you enforce those expectations, I don't think there's that high of a trade-off. You're still going to screw up on hiring no matter what, right? But if you look at Netflix, hyper growth, you can look at Amazon back in the day, Google back in the day.

12:12They had high standards. Their CEO, the DoorDash CEO, they stayed in interviewing the first thousand people or so. And so I don't think there's an explicit tradeoff. Let's go over you guys as an example. When you guys were growing very quickly, did you just say, let's just throw people at the problem? Even though agency is very people-focused, much more people-focused than a software business, did you trade off and say, hey, let's go ahead and accept C &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.

12:48It 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. But 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 C's and D's coming in, right? Correct. That's my point. We didn't have as rigorous standards coming in because we're just growing fast. Yeah. And when you're growing fast, you drink your own Kool-Aid at least weed and we're like, oh, things are going well.

13:18Yeah, 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 four or five years ago, right? And so now I've got the process by the, you know, right? 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? You know, there's A1, A2, A3, there's A potential, right?

13:45And then there's B, B players are disappointing. C players are just like fire, right? I look at this four or five years ago when we did this and we had, 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 Camo, 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.

14:19Your 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 about 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 alright 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 right 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 he's like 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 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.

15:32Because you can't just look at when it was assigned and when it was completed, because what ends up happening is they may not have worked 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 three days. And then you start finding the ones that have those gaps. Hey, find out what they're doing during these timeframes with what else they were doing in between. When they come back with, I wasn't doing anything else in this timeframe.

16:06This took a long time. I then try to understand why. Just like an engineer telling me, add-ons reduce our speed by 40%. Cool. I came up with a solution in my head. No joke. In one 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 the 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 back on just back end just switch the plan there's no difference yeah 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's if I have a person who is doing things the way I like?

16:50And no matter how long you've run a company and how involved you are, you're always going to have inefficiencies in 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 camo is spending majority of his time on software i'm spending part of my time on software i would break it into three buckets one-third software one-third revamping marketing right now because i have a huge opportunity to revamp marketing and one-third of a time uh on closing deals and uh you being personally involved me being personally involved yeah and when i say closing deals dude the amount of times i message Nick on how many RFPs did we get?

17:41Where are RFPs coming from? And then other things like, 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 four or five days. Let me just give the CEO a call. Oh, my bad. Neil is busy. Dude, your team's not following up. What do you want to do? You're missing out on potential So you're pushing it. You're not necessarily on these proposals is my point. You're not on the pitch calls. I'm going to Monday to meet with a potential client in person at their office.

18:18And this company spends over a billion dollars 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 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 yeah and i'm not out where from the aspect of helping the client or come 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.

19:02Or if they're like, we need a hundred page deck and we need to just go over this with their executives. Like that's not me. Yeah, 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.

19:33I'm out, right? Yes. But 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 the 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. If you've ever built a website, you know how tough it can be to keep a strong design while ensuring site performance is fast. That's where Framer comes in, and it totally changes the game. Framer is the design-first, no-code website builder that lets anyone ship a production-ready site in minutes.

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22:17So, he messages my guy on my end, right? Hey, Nick, sorry for the delay. Response to 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. It retained into three buckets. I need more clarity. Second part of the 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 two 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.

23:00Have you discussed further? Maybe we can schedule 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 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 uh the franchise I was like this is what we're gonna do I'm like and he had his own ideas I'm like okay let's meet in person I messaged gym met up in person i drove down there took me by yourself yeah in rain drove my honda it was raining like crazy on thursday i drove there a day earlier not this week because it's the week before yeah took me four 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 yeah uh or most of the hours yeah right because i got a lot of miles in non-bumper but it was also raining you know my driving skills Oh, horrible.

24:03I'm pretty good. I keep quite a bit of a distance. It's when I daydream and stuff like that. Yeah, yeah, yeah. I do love business. But like I'm steady. 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. Yeah. And I also put it on cruise control. So I was in the right lane, 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.

24:30and it was just the visibility was terrible so it's four and a half hours driving there meeting friday morning one 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 i can't be there for part of the call my call under 15 minutes earlier i missed 15 minutes my team's already pitching going through a deck they're in person in person yeah uh two 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 yeah and then the remaining 30 minutes was just discussion it ended up i was just like going through 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 yeah jeff and i had a handshake he's like start december 1st sounds good i'm like we're not gonna get contracts on by them he's like dude we've known each other for over 10 years do we need a contract tells his you know his right hand man he's like december 1st good i'm like good my team's good.

25:26I'm like, cool. Let's start. Let's go. Yeah. Yeah. Was the juice worth the squeeze for the four hours going down there and the pitch? ROI wise? 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.

26:03Like it, you have to set the example as a leader. So anyway, that is it for today, guys. Please don't forget to rate, review, subscribe, and we'll see you next time.