Editor’s note: Joe Procopio is the founder of teachingstartup.com and the COO of IoT/Beer startup Precision Fermentation. Joe has a long entrepreneurial history in the Triangle that includes Spiffy, Automated Insights, and ExitEvent. This is post 2 of 3 for the Hiring Series which is part of Teaching Startup. The series is published on Tuesday.

RESEARCH TRIANGLE PARK – I’m not breaking any news by telling you that finding good people is the number one differentiator between success and failure in startup. Any repeat entrepreneur would tell you that. Any investor would tell you that. Your mom would tell you that. But like most startup advice, everyone shouts “team! team! team!” and no one brings up caveats like “budget! market! poachers!”

In other words, to succeed in startup, you not only have to land the best talent, but you have to land and keep the best talent at the most value. Here’s how you do that, with four secrets no one else might tell you.

Define “Best”

The definition gets misconstrued all the time. “Best” doesn’t mean the smartest or the most experienced. It can mean those things, but they’re not even in the top three.

Photo courtesy of Joe Procopio

Joe Procopio

Here’s that:

  1. They’re in love with our problem and our solution. The best person for the job is the one who is the most fanatical about the problem, can’t stop thinking about it, would do it as a hobby if it wasn’t their job. They also believe in our solution, totally, without any empirical evidence to prove it’s the right solution.
  2. They’re willing to do whatever it takes to make our solution happen. They’ll stay up nights and work weekends, not because the problem isn’t solved, but because it can be solved.
  3. They make everyone around them better. They’re not in it for the fame or the glory, sometimes not even for the money. They’re here to make something bigger than themselves.

Not long ago, I was trying to make a decision to hire one of two candidates. One had 20 years of highly-celebrated experience, the other did some minor data-wrangling during the day and was a waiter at night. The former often seemed confused as to why we were trying to disrupt our chosen industry. The latter emailed me every couple of days after the interview with new suggestions to solve our problem.

I hired the latter.

Now that we know who we’re after, we have to find them, and we have to get them cheap.

Value Beats Everything

When I worked in the sports industry, I learned quickly that in sports, the teams that consistently do well aren’t always the top spenders. They’re the teams who find the diamond in the later rounds of the draft, or the discarded veteran who can be a complementary piece, or the rare superstar who isn’t trying to sign the next record-breaking contract.

When we’re looking for value, especially outside of the founding and executive teams, here’s the first crazy secret:

We don’t want to hire the top 5%.

Once we get above the 95% curve, the returns begin to diminish dramatically. In fact, I’ve never seen a “dream team” of top performers that wasn’t willing to sacrifice a lot of money and ego to work together on a specific project.

Furthermore, not only is that top 5% going to be expensive, they’re going to be sought after. We’re constantly going to be fighting off potential poachers until someone throws enough money at them to make staying with us seem stupid. Even to us.

Find Your Family

Our ideal candidate is someone who is seeking some kind of career existential change. They’re looking to get out of the corporate world, or switch industries, or take on new duties, or just feel less like a cog in a machine.

The way to bring these people aboard is with transparency and honesty. Chances are they’re not looking for the perfect job or a windfall payday, they’re looking for change, growth, and even family. Sell them that instead of paycheck, options, and Beer Friday.

When I left one of the startups I helped build, three years after we sold, my next logical step was to take a CEO role to turn around a struggling company or to start something new on my own again.

After a few months of taking meetings, I wound up at the first place I looked at, which was neither a struggling company nor my own thing. The company I went to had the right role to fill, I got to work with someone I could learn from, but most of all, in all those months of searching for my next thing, I couldn’t stop thinking about the challenge of that first thing.

They didn’t get me with money or title or autonomy, they got me with challenge, opportunity, and honesty.

To Keep Them, Coach Them Up

Every startup ends up with an A team and a B team. No matter where we set our bar for talent, no matter our budget or our stage, we’re going to have top performers and middle performers. Here’s another crazy secret:

Our success will hinge on our B team, not our A team.

I see this mistake happen all the time, leaders who are constantly focused on their top performers while letting their middle performers fend for themselves. They don’t necessarily put their top folks on pedestals or hang employee-of-the-month pictures, but they give the top players all the opportunity, they seek input from only their inner circle, they excuse mistakes with a “hitters gotta swing” shrug, and worst of all, they bury their middle performers in the mundane with low expectations, then wonder why those folks either fall off or leave outright.

Crazy secret number three: It should be the other way around.

This is true across all business, but especially in startup, the key to success is a deep bench. Let the top performers find their own paths to success, and instead focus on coaching up the middle performers, because these are the folks who are going to stick around when our top performers get poached.

And Now, the Bad News

Every founder, executive, and manager has the same recurring nightmare. We come in one morning and get a message that our top performer needs a quick five minutes with us ASAP. We already know before we close the conference room door — they found another position. An opportunity of a lifetime. They’re out. Do we want two more weeks from them? Because they’re cool if we don’t.

It’s too late to reverse that decision. It was probably too late six months ago.

So let’s roll back six months and figure out where we went wrong. There are dozens of reasons why someone will leave, but it usually boils down to one of these:

  1. We hired the wrong person. We didn’t follow through on our top traits for value, and went with someone we hoped we could change and make them fall in love with us.
  2. They stopped being a KPI. In other words, we let revenue or margins or pipeline or some other metric trump the satisfaction of this employee.
  3. There’s a bad actor somewhere. A lot of times, this gets overlooked. You’d be amazed how one bad team player can drive out several good team players if left unchecked.
  4. They matriculated.

Yeah, that last one is a killer. Here’s the final crazy secret: Most of the time, we’ve only got three years max with our best people. Whether they came to us as top performers or we coached them up, the returns will start to diminish on both sides after three years, even in the best cases.

Like all problems, this can be crippling unless we plan for it, and we should. We need to set the expectation that in three years, our top performers should either be doing something completely different with us or they’ll be out the door. And I’m not just talking a title change or a heaping of more responsibility, I’m talking about a complete overhaul of their day to day.

I’d say we need to plan for this about 80% of the time. In 10% of cases, we’ll get someone who is just so awesome that they make it past the three-year mark for four, six, even 10 years of top performance. The other 10%, they’ll go into hiding, content with the status quo, and begin the inevitable descent to bottom performer.

The solution here is two-fold, and neither is happy. We need to let the walkers walk. I’ve never seen a situation where a counter-offer winds up working. We’re either falling for a bluff or that same person will wind up taking another, better offer within a year.

Even more difficult though, we need to actively lift up or weed out our bottom performers. I said before, every company has an A team and a B team, but eventually some of those fall to a C team, and we can’t have that. This could wind up taking all of our focus, so we need to set time and resource limits to bring them back to the B team, but we can’t wait too long before dropping the hammer, as hard as that is to do.

About the author

Joe Procopio is the founder of teachingstartup.com and the COO of IoT/Beer startup Precision Fermentation. Joe has a long entrepreneurial history in the Triangle that includes Spiffy, Automated Insights, and ExitEvent. More info at joeprocopio.com.