Hiring for Insurance, or Potential?

http://cowmanauction.com/auctions/page/3/ The “job description” has achieved gospel status in the modern corporation, from startups to large multinationals. It lists tasks, responsibilities, competencies, skills, and anything else the hiring organization, through the hiring manager and HR specialist eyes, thinks is important to help filter and select candidates for a job. I refer to this hiring strategy, jokingly, as “we need someone who did exactly this job, successfully, for a competitor, at a reduced salary” philosophy.

What this really means is hiring with an insurance mindset, with the objective of minimizing risk, and trying to find the “best candidate” that matches an accepted template for the job.

And it works – most of the time. When the company objective is to be in the middle of the pack, run-of-the-mill, business-as-usual… you know, well-run but mediocre.

At the other end of the spectrum is the hiring of recent university/college graduates, where hiring for potential is a given – nobody expects “4 years of industry experience” from a new grad. Even though the insurance mindset creeps in again in the form of “what were your marks” filter question.

Nothing wrong with this hiring strategy – it helps filter out the unqualified, the over qualified, makes it very clear what are the expectations for the job, all good. A whole recruiting industry and related web sites support the approach – how else can you do it when you need to hire new staff? Word-of-mouth works only at small scale, and your friends, relatives, and neighbors have only a limited number of daughters, sons and brothers-in-law. And I am happy the system exists, it helped me hire over a thousand people during my career, from analyzing over 10,000 resumes/CVs.

The problems with this approach start to appear when hiring for startups, where creativity, resilience, independent thinking, ability to learn quickly, are of crucial importance. Where it is almost impossible to find someone who did exactly the same thing previously. Experience still matters, learning on the job has its limits even for quick learners, but a startup team member that will help the company succeed need to be selected like a new grad – someone smart who we believe can do a great job in a yet-to-be-defined business in a company that changes almost every day.

Venture capitalists are trained to assess risks, and one of the risk-reduction measures is “do you have an experienced team that knows what needs to be done”. But I caution against using this yardstick literally…

How do you estimate if a genius software engineer can be a good CEO? How about the industry visionary, can he be a great CEO? Your existing business development executive, can he be your CEO? The successful entrepreneur from the payments industry, can he transfer his skills to an e-commerce/marketplace startup? Can the sales executive that succeeded with enterprise software startups excel at an alternative lending company? Can the enterprise software guru adapt to startup agility? And it goes on, and on… Fortunately (for candidates), hiring in a startup needs to be the right combination of hiring for insurance and hiring for potential, and a lot of people have proven their tremendous potential in a startup environment.

My view, if you want to know your true potential, join a startup this week.