Your Hiring Strategy Is Broken (Here's Why)

0:00Question for you. So what percent, and you might not know this, but what percent of people for MPDigital right now of new hires are sourced versus coming through a job ad? i have no idea uh i'll tell you this i do know this interesting fact okay so we were going we're recruiting some people right now for some of our tools uh uber says and answer the public so then mike starts hitting up our recruiting team or someone on our team i don't know who it was and they were just like hey i need help with these roles and they're like we don't have the time and Mike's like, what do you mean we don't have the time?

0:39They're like, we're already overwhelmed. We have like 48 open roles right now that we're working on. And he's like, oh, so then Mike just started doing it himself and started recruiting. But with that many open roles, there's no way that it's being filled by network. I'm assuming a lot of it is just going out there and recruiting. But on the flip side, I was talking to my CEO about an internal role for our organization. So we're in, I think, 28 countries. I don't know all of them by heart, but let's call it 28 countries that we classify internally. For marketing, I think we use a little bit less.

1:17I know we have people in like 35 or something like that, countries. But we're in, call it 28 countries. We have, at this point, a good amount of global clients that pay us for different regions. Some of those clients, we communicate all together and we're doing one cohesive plan. Some of those clients were not because they split up their marketing by region and each person has their own say and they want their own team and they want to do whatever they want, right? So we had to mold and adapt to the organizations. But we were thinking about hiring one person whose job is to work with all the big organizations we have and their only job would be to land and expand.

2:01So if you're a company like McDonald's, who we don't work with, but I'm going to use them as an example because we don't work with them. their job would be like, oh, we have Brazil here and we have Europe here. We used to work with McDonald's. We want to go and network with the people at McDonald's and try to get the relationships for the rest of Europe, then get them from North America, then get them from Canada and work with them for not just a cohesive strategy, but more so work with them to sell within the company and more of a global role who not just builds relationships with clients, but also is in sales.

2:37So when we have roles like that, that are more, you need someone who's just really good high level. You're talking executive level. Yeah, high level is a bad term. Executive level is the correct terminology for that. When we're looking for someone who's executive level, like those roles, we tend to pull them from our network. We tend not to do recruiting for it because we just see too much failure. Because even if you're using recruiting, whether it's executive level or low level, no matter how good you are, you're not going to have 100 % success rate. Maybe three out of five or four out of five work out if you're lucky.

3:11With the executive roles, we don't like ratios like that. So we really try to go within our network if it's super important. Because imagine hiring someone to deal with all our existing customers and cross-sell and up-sell. You hire a wrong person. Not only may you not generate any revenue, and not only are you paying this person, which is a cost, but no, even worse. if the person sucks, they can ruin your relationship with your biggest clients and then they can cost you a ton of money. Yeah. I look at the time, the time lost as, because imagine having the right person, you would have compounded, you would have started to compound and the money you make long-term, it's just, it's a bad higher cost.

3:54What at least, at least I think it's like two times their salary or something like that. But I look at the time investment as like, if you find the right person, like Mike Olickson, for example, right? It's working pretty quickly. But imagine if you wasted a year, you wouldn't waste a year, but imagine if you wasted a year with that CEO that wasn't working out. Yeah, it would be expensive. But it's not just the time loss of the compounding effect. Imagine they're dealing with a book of business that's$60 million and they ruined the relationship with a third and you now lost$20 million of revenue.

4:23Forget the compounding effect, you just lost$20 million of revenue. I think the acute pain, the stab in the side is like you lose the revenue, right? But long-term you lose a lot more too, because that year, like imagine all the bad relationships or the bad hires that they made too. So it starts to eat you like a cancer. Right. Um, so the reason, so going back to this question, the reason why I'm asking you this question, I was messaging one of our friends this morning. Um, and so I, I do agree, like the best people you're going to find like 95 % or so are going to be sourced. Right. And that's always been my philosophy, but for lower level roles, what percent of people do you think are being, you being sourced from either being sourced or job ads for a lower level.

5:00Yeah, let's say it's a director or something like that. Yeah. Just estimate. Director or higher or director and lower? Director or lower.

5:14Maybe. It's easier if I do one level below a director. That's fine. If I do one level below a director, I would guess that we're probably recruiting like 70, 80 % of them. Yeah. If it's director and higher, My guess is when you say recruiting job ads, job ads, HR, following out with people. If I say it's director and hire, my guess is we try to use our internal network for at least 70 percent, 60, 70 percent. Yeah. So that's that's always been my philosophy, right? Like you got a source like that's that ratio seems right. But I was thinking about it this weekend. I was like, OK, the team is like strapped right for and then our recruiting is pushing.

5:54but they're strapped for talent right now. And I'm like, well, recently we spent not a lot of money on LinkedIn ads. We spent$2 ,500 and we got two people that are kind of mid-level, I would say, right? And those two people seem to be working out. I'm like, why don't we just spend more on ads? And so I was really annoyed at just like hearing about how like, oh, you know, we're overwhelmed and this and that on the record. So I just like threw up a bunch of job ads over the weekend. And all of a sudden, some are even director level too. These are the people that have actually the two promotions at two different companies.

6:24I was like, oh, we're actually talking to some amazing people. And it's not even costing us a lot of money. And so all that to say is I was really against turning on job ads. But from what we're seeing so far, I don't think you're going to find the COO type or the executive types or even SVP types. But it's worth it. And our mutual friend that I was talking to this morning, they actually have the LinkedIn version that shows you who's open to jobs. And it shows you the entire network. You're probably paying for that too. And the funny thing is he shows me screenshots of who's looking at my company too.

6:53So, yeah. Anyway. When we go and look to acquire a company, we look to see how many of their employees are looking for a new job. Yeah. Because if you start, like, there was a company that we saw in Europe. Yeah. And no joke, I think it was like 70-something percent of their employees were open to work and looking for a new role. 70 percent. 70 plus percent. Okay, what's your bar for this? Our bar? Yeah, your bar, like what percent is too much? So our general rule of thumb is we want less than 10 % of the people working in a company open to like looking for a new job. Yep. Yep. Which is interesting because before when it was a shit show five years ago, right?

7:39Four or five years ago. So many people were looking, right? This time it's less than 10%. Yeah. Yeah. And the reason this is an important metric, people like saying like, oh, look at our employee retention numbers. They're really good. And we see that data. So that company that we're looking at that had that high percentage, we told them. And they said, no, no, no, this isn't accurate. Look at our employees right now and look how long they've been with us. So we verified the data. And they were correct. Their employees actually have a long tenure. but if a lot of your employees are looking for a new job it means something's wrong yeah okay and a lot of them may have a high tenure because they suck and they can't find jobs in other places true so we don't just like taking someone's data and seeing how long their employees are there for we actually like looking at who's looking for a new job because if enough people are it tells you that either if the numbers are low or the retention of the company is good that means that they're probably not good and they can't find jobs but it usually also means there's something wrong with the company culturally for that many people to look for a new job it's just they're not sharing it and you're not going to find out you know so that's why I say culture is like a it's a 60 day moving average so you can't say we had a good culture last year or two years ago it really is what have you done in the last 60 days and how are you behaving right now and that is a good microcosm of how your culture is right now.

9:06Culture is a very recent thing. By the way, I asked Perplexity this morning. I was walking back from the gym, just this question, like what percent of talent is sourced by marketing agencies versus using job ads? And how about B2B SaaS, right? And so job ads basically generate the majority of applications of 40, 50 % of hires in many markets. This is not just for agency. Agency account for only a single digit share of total applications and even a smaller share of hires overall. In B2B SaaS, agencies are used less often. I think it's like for senior and niche GTM engineering hires. So that's what it is at a high level.

9:40But I think your metric is good. 70%, if you're talking director plus, should be sourced. Yeah, if we're talking executive level, probably all of it, almost all of it. For executives, we try to source all of it. It doesn't always work that way for us when we're expanding to other countries because sometimes you don't know. But dude, I remember we acquired a company in Southeast Asia called Search Guru. I think this was like a year ago or something like that, maybe a little bit more than a year ago. And I ended up going down there, met up with the founders. We put someone in place from our end to go and run that.

10:20It was someone that we did not quote unquote get within our network and we ended up hiring them and no joke i meet them i talked to him for 10 minutes i tell the person who's leading up the whole region apac i'm like they won't work yeah why uh so when i was like hey this company that we bought there were certain individuals within the organization that i saw that had that needed some improvement and what i mean by needed improvement like when we're in client networking they decided to play ping pong instead of uh talking with potential customers and i don't think it was ping pong but some other game like that some office game so that really irks me i'm like that's a no-go with me so then i go up to all the leader was doing that not the leader employees employees interesting so then And this person that we hired, they're like, oh, we need to coddle them.

11:19And I'm like, no go. They're like, if you just rip off the bandage and you're too harsh, it's going to be a culture shock. It's going to create too many problems. And then I'm like, this is a no go. I get that. But they're being too nice instead of just fixing. And that day, if you have someone paying you, forget about culture or anything else. Your job is to do best for that customer. You need to change whatever you need to for that customer to make sure they're extremely satisfied. And we did eventually end up ripping the bandage and whoever didn't like that philosophy did not exist. You know what I would say?

11:59Or did not stay with the organization. My key takeaway from this, listening to Neil's story. So when I worked at WPromote, I remember there was a period of time where the CEO walked by and I was actually playing one of the cornhole. So we had like cornhole and like all these like Google given like things, right in the office. and then people would just do it in the middle of the day, things that you didn't like. And I never understood why we had that. In my mind, I'm like, why would I ever do that? But hey, if everyone's doing it, I'm going to do it too, right? So I remember a period of time, I was like drinking like a soda or something and I was playing Cornhole and he walked right by, but he was like down with it, right?

12:27I'm like, okay, that's him. I would never, I don't think I'd do that at my org. And when I had the office in downtown, we never had like games like that, right? And so I think what you're saying though, is like, this is how you run things and this is how it is. I don't think what we're saying is like right or wrong, lifestyle. I'm a big believer that I want to work with amazing individuals who are just obsessed about their work. And I was talking with a startup yesterday and they're going to go public. This startup is not paying me. This startup has a lot of issues with their marketing. So I'm talking with the founder.

13:04I myself couldn't help but not dig through their website and send a ton of notes of what's wrong and what needs to be fixed. And then when I get a slow response, what do I do? I go call the founder and then I'm like, hey, this needs to be fixed. Who do I need to talk to to get this fixed? I'm so obsessed about having their marketing flows and conversions optimized that I can't stop even though they're not paying me. So much so, I started texting the team and the founders and some of the people in marketing. I'm like, can you please send me data on your existing pricing pages and your flows and what you test and what converted.

13:44And then I'm dissecting and they're telling me the numbers. I'm like, this doesn't add up. If you get X amount of signups and this is the conversion rate and you're telling me this is your LTV, your revenue would be higher by like three, four X and what it currently is. Something's off. I'm like, I need your real conversion numbers and it needs to be accurate so I can tell you what changes to make because the changes you're telling me that you made that decrease your conversion don't seem right. And I think you actually got a data problem because your numbers aren't adding up. Yeah. And that's obsessive personality.

14:13We both have it, at least when it comes to work. Yeah. I want people who love what they do. It's okay. When I was 25 years old and I told Neil that a girl broke my heart, he just stared at me. Anyway, he just went back to talk about work. Yeah, that sounds all right. Yeah. Now I'm a little bit better. Just a little bit. Yeah. It's okay. We get better over time. No, actually, I'm a lot better now because I want to hear the story. Yeah, yeah, yeah. Yeah, you like the stories now for your entertainment. So let me finish on this recruiter piece and we'll move on here. So smart recruiter technology benchmark shows referrals account for 16 % of hires in tech, okay?

14:52129 % above global average. And then this is interesting to me because I think if you're in San Francisco, you're running like an AI company or something like that. I think the bar for your talent is way higher. and the competition for engineers is way higher too, right? And you need best of the best and you've raised all this money. And so I actually think my opinion when you're a service heavy business, what ends up happening is because people are the business, people start to cut corners. That's what I've seen. And I've seen like with these agencies, they hire so quickly, but then the, I posted something recently, I got a nice graph.

15:29I don't know if you saw this, but every B player you hire, it's like you think you can afford to hire B players, But you can't because by the time if you hire like 100 B players, OK, you actually have decreased your output by 100 percent. OK, yes, that's what it is. And I have a graph for this and I think you would actually like it. But this actually leads to one of my points here before I pull up that graph. Let me ask you a question here. Would you rather have a hundred million dollar services business versus a one million dollar software business? I'm going to give you a little more context here.

15:57OK, so let's say one business is in the we were talking about this the other week. Let's say it's in the home health niche, right? Or in the nursing home niche, okay? For$100 million? Yeah, it's doing$100 million a year, okay? So you get to choose this business, right? Which a lot of it is subsidies from the government, okay? Is it profitable? It's profitable, okay? A little bit or a lot? A little bit, a little bit. Because the margins on this type of business is like three to 5%. So$100 million only produces like three to five million in profit? Yeah, yeah, yeah, yeah. Okay, okay. But also keep in mind, it's government subsidies.

16:29We talked about like the 10 grand a month, right? Remember that? Yes, where you get paid to take care of parents and stuff like that. Is it that specific business that you want me to compare to the$1 million software business? Yes, yes. So would you rather have that business, right? You're cash flowing right now. You have a lot of it's coming from government subsidies. Or would you rather have a software business that just hit a million in ARR that is, yeah, you get to choose. You've been talking about launching a business for years. You've got the skills, the ideas, the edge. But no product sells itself if it doesn't exist.

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19:04That's framer.com, promo code MS, framer.com, promo code MS. Rules and restrictions may apply. How old is a software business? A year and a half. Two years. Two years. So I just want to clarify this for everyone listening because they probably don't fully grasp what that$100 million business is. The$100 million business that Eric's talking about neither him or I do this just for clarification, but there's businesses out there in the United States where they helped you get paid by the government for you to take care of your parents. So if your parents don't have any assets like homes or anything like that, and they have low income and they already live with you, their government pays you money.

19:44So what a lot of people do, and this exists in the Indian community as well, which I'm ashamed of, um you know we my my family doesn't do it but what people are doing is these people who are already doing well their parents are you know have lived here for a bit they're taking care of their parents anyways and they would have and they don't need help from the government but because the government offers subsidies they're just abusing it and getting free money i believe those kind of businesses are going away and the reason i say that is a lot of it is scam based versus they actually need the government subsidy.

20:25I do agree that there are people who are helping other elderly people that need taken care of and they can't afford it. And the person getting paid barely has money and it's, you know, helping people out for those people. I think it's great, but a lot of people are making money from this and that a hundred million dollar business. It's a lot of sham clientele and scammy clientele where they don't need the money and They're just taking free handouts from the government. So I don't like that business and I would not do it. If it was purely legitimate and it was only for people who are needing it and is running at 5%, I would take that 5 % margin business because that's 5 million a year over the million dollar software business.

21:06It's been around for a year and a half. Just do the fact that if it is legitimate, you can sell that business. And that$5 million profit business, you probably can get maybe 15 million bucks for. 20 max. Yep. But to Neil's point, what we're saying is, would you rather go with something that compounds that's legit, or would you rather go with a hustle, right? That can go away at any time once the government takes away the subsidies and they're paying attention to those subsidies now. Yeah. And in general and speaking, Eric and I, even if it was a billion dollars, we don't like the hustle type of businesses, not just because it can't go or not just because it's probably going to go away over time, but because you feel slimy.

21:43Business is not just about making money. You want to market a product, run a business that you're passionate about, that you love, not something that's slimy because it's only going to last so long. You know what's funny? We did a podcast like two years ago. I was like, the purpose of business is to help your customers. And Neil's like, the purpose of the business is to make money. Yes. But okay, let me go back to the graph here. It is to make money. I believe all businesses should end up making money. But if you don't love what you're doing, it's not worth it. what if it's a what if it's like a drug you're a drug business you're a drug lord it's too unethical or i'll give you an example a publicly traded company hit me up to be the cmo okay whether you want to consider that biz owning a business or being part of a business massive organization i would have got paid a nice lump sum to go to new york city they would have paid for um a home a really nice home by central park and i'm not talking about like a two three million dollar home or five million dollar home my upfront fee would have paid for no recent depends within a few years yeah okay and i with stock compensation and everything and performance i should at least hit eight figures a year so call it let's call it 10 million bucks i'm just rounding, I'm throwing out a number, but most of it was all stock compensation.

23:08Even the upfront, it was stock grants, but then I would use my own money to buy the home, but it was a way to pay for the home. You're following me, right? And I would have to stay there for a certain amount of time. The money wasn't worth dealing with the internal politics and bureaucracy. Forget that already have something that makes money. And it's just, I personally wouldn't be happy working somewhere. Even if my current team can maintain my current business and grow it, then in theory, I'd be making money from both places. I wouldn't be happy dealing with bureaucracy. I do agree doing a business or doing marketing, it's about growth and making money.

23:47But if you're truly going to be miserable, it's not worth it. And plus your deal, not to give details, but Neil's deal is better. He gets to work on what he wants to work on. And the thing is, if you go work for that company too, you stop the compounding on your business. You slow down the growth significantly. Correct. Yeah. So, okay. I want to come back to this thing real quick here. And then I want to talk about, I was talking to our, my YouTube team strategy team. I was like, hey, what's wrong with this channel, right? Because the reality is Noah's sitting here. Maybe Noah's nice about this, but I'm like, there are a lot of good moments that we talk about, right?

24:19And I'm like, how are these good moments, whether it's you talking or me talking, how are they not making it, right? So I do want to do like a live audit on how we would attack organic social and where, how, how I think that also applies to paid media. But let me just show you this over here. So I'm patting myself on the back here with this tweet. Okay. So I just said here, look, if you think about B players, right, let's say an A player is one unit. Okay. Let's say a 90 % higher still an A player is 0.9 units. You following? Okay. An 80 % higher is 0.8 units. Okay. What is a unit? Like units of value.

24:51Like unit of value. Let's say like if I'm a B player, I'm 0.8, right? Just 80%, right? So, but if your company is designed to run on 90 % higher, so like A minus players, right? Every B player you hire creates a dilution multiplier of 0.8 divided by 0.9, which is 0.88, okay? So what ends up happening here is if you have this ratio, if you have five B players, it ends up being 0.56 units, okay? And then if you hire 20 B players, it's 0.09, meaning that you've decreased your expected output by 91%, okay? And then Gemini actually put together this nice little graph over here, okay? And it's just the compounding decay of organizational output.

25:28So if one is like 0.88, it's not that bad, right? But you're like, oh, I think I can get away with that. Yeah, yeah, yeah. And what happens, you have the Bozo explosion. And I literally had the Bozo explosion five years ago, okay? And it's really hard, very hard to recover from this. Very hard. It's really hard. Very hard. I've done it very hard. You just got to cut. Yeah. So you really gotta cut that's where we're gonna end because I really need to pee so goodbye guys