How to Hire | Carta

How to Hire

Author: Henry Ward
Read time: 10 minutes
Published date: 1 January 2016

Carta CEO, Henry Ward, shares how he filled positions and hires talented employees. We hope this is helpful to other CEOs struggling with hiring.

Below is an excerpt from a talk I gave at the Carta Town Hall in November 2015. I hope it is helpful to other CEOs struggling with hiring.

TLDR

Hiring principles:

  1. Hiring means we failed to execute and need help
  2. Startup employee effectiveness follows a power law
  3. False positives are ok; false negatives are not
  4. Culture is defined by who we hire

Hiring heuristics:

  1. Hire for strength vs lack of weakness
  2. Hire for trajectory vs experience
  3. Hire doers vs tellers
  4. Hire learners vs experts
  5. Hire different vs similar
  6. Always pass on ego

Hi everyone. As you know, I have opened 27 new headcount for department heads to fill by end of year. If they succeed our headcount will be 74 in January. Of our 74 employees, 37% will have been at Carta less than three months and 79% less than one year.

Many of you will be interviewing and hiring over the next couple of months. How do we hire quickly and create a better company (and culture) than we have today? That is the challenge we face now. To that end, I’d like to offer you a set of hiring principles and heuristics to guide your decisions.

Hiring principles

1. Hiring means we failed to execute and need help

First, let me quell a misconception. Hiring is not a consequence of success. Revenue and customers are. Hiring is a consequence of our failure to create enough leverage (see Carta 101) to grow on our own. It means we need outside help. The perfect business is a computer plugged into the internet. Starting with me, every human thereafter is overhead. And we are increasing overhead by 50%.

I want to repeat this point. We are increasing overhead by 50% because we failed to execute. It is not something to be proud of. It is humbling to go back to the labor market, hat-in-hand, asking for help. We did this when we hired you. We asked each of you to help us. You did not need us. There are plenty of great jobs. But we needed you. And thank goodness you came. We wouldn’t be here without you. But each of you was hired because the team before you failed to execute without you. And this is still true today.

2. Employee effectiveness is a power law

Much like startup performance follows a power law, so do startup employees. The most effective employees create 20x more leverage than an average employee. This is not true in an efficiency company — the best employees might work 2x faster than their peers. But in a high-leverage startup like ours, the effectiveness gap between employees can be multiple orders of magnitude.

Our minds find it easier to think in terms of efficiency and normal distributions than leverage and power law distributions. So we mentally squash the employee power law curve into a normal distribution curve. We underestimate the most effective employees and overestimate the ineffective ones.

Conversely, we should dramatically expand the responsibility of 20x performers. Most don’t and rationalize limiting their most effective employees by saying:

In startup hiring there are few shades of gray. Most employees are great. Some are not. There are surprisingly few in between.

3. False positives are ok; false negatives are not

A False Positive (FP) is when we hire somebody who doesn’t work out (i.e. we falsely believed they would be great). A False Negative (FN) is when we did not hire somebody who would have been great. Hiring efficacy is measured by a low False Positive and False Negative rate. A perfect hiring team would never hire somebody that didn’t work out and never pass on somebody that would have been great.

The problem arises in measurement. It is easy to know False Positives but impossible to know False Negatives (i.e. we know if we made a bad hire but we know nothing about those we passed on). This, and a reluctance to fire, is why companies focus on reducing False Positives — it is their only measurement. The phrase "Hire slow, fire fast." comes from this asymmetry. Companies hire slow because they fear False Positives.

We should not be afraid of False Positives. We can quickly fix a False Positive hiring decision. However, we should be afraid of False Negatives. We can never fix a False Negative mistake. And the cost is unknown and uncapped. Facebook passed on Brian Acton (WhatsApp co-founder) and it cost $8B and a board seat.

There are dozens of employees at Carta I describe as saying “I don’t know how we would have gotten here without them.” Most were controversial hires. I’ll pick on Eric — a classic 20x hire. It is hard to imagine this today, but the majority of people who interviewed him did not want to hire him. Today his nickname is The Oracle. Eric is not unique. I can count at least a dozen more examples.

It sucks to let people go. I hope we get better at not hiring False Positives. But False Positives is the only way we learn. We learn nothing from False Negatives. And there is a huge risk we miss out on a 20x employee. The way we get better at hiring is to hire, learn, and improve. Do not be afraid of hiring False Positives. Give people chances. Be afraid of missing the 20x employee.

For those of you questioning the morality of fast iteration of new hires please consider the alternative: we deny people opportunity for fear they won’t succeed or we keep people in roles where they won’t be successful. This creates walls around (and within) organizations. Let’s welcome those who want to join us. Let’s give them as many opportunities as we can. And let’s quickly tell them if they will have more opportunity elsewhere. As long as we do it helpfully and respectfully (which we always will), helping people sort themselves into and out of Carta is good for all involved.

4. Culture-contributors are better than culture-fitters

When Carta was a company of one, me, our culture was “my culture”. My culture was quickly replaced by the culture of the first ten employees. I couldn’t stop it if I tried — I was outnumbered 10 to 1. Today, the 37 of you that joined us since have vastly outnumbered the first ten. And thank goodness! Our culture today is far better than it was when we were ten and infinitely better than when it was just me.

Because of Built to Last, good corporate culture is considered static and decided early in a company’s life. For these companies, hiring means selecting people who fit the existing culture and keeping out those who don’t. Hiring is gatekeeping. If culture is a Venn diagram and each circle is an employee’s contribution, then gatekeeping is preserving the intersection of those circles.

Hiring heuristics

So how do we find these Helpful, 20x, Positive Positive, Culture Contributors? It is hard. Very hard. But I can offer a few interviewing and hiring tips that I hope will help:

1. Hire for strength vs lack of weakness

Most companies hire by consensus and committee. In a committee of N, each positive vote is worth 1/N of a hiring decision. However, one negative vote will reject a candidate. No matter how strong a voter’s conviction, their vote will never count more than 1/N. Conversely, the slightest negative view will kill a hire. Consensus optimizes for employees with the fewest objections (least weaknesses). It works well to reduce False Positives but creates many False Negatives.

For that reason, hiring at Carta is not a democracy. We do not vote. The hiring manager makes the decision. However, we have an interview team help the hiring manager triangulate a good decision. They help by looking for and discovering strengths. The single purpose of an interviewing team is to answer the question, “what is this candidate amazing at?”

2. Hire for trajectory vs experience

It is important to note that Trajectory and Experience are not opposites. Trajectory is the first (and second) derivative of Experience. Most candidates have both and both are important. But Trajectory is far more valuable. Our job is not to hire for Experience. That’s what everyone else does. Our job is to hire people whose Trajectory will explode when they join Carta, pulling us along with them.

3. Hire doers vs tellers

The best predictor of a successful new hire at Carta is if they like to get their hands dirty. Whether it is writing code, building spreadsheets, calling customers, or stocking the fridge. This is true at every level. Our senior managers are hands-on, care about details, and are not afraid to roll up their sleeves. They don’t last long otherwise.

4. Hire learners vs experts

This doesn’t mean expertise isn’t important. We are a company of specialists, not generalists. Each of us is an expert, or becoming an expert, in our domain. You cannot be successful at Carta without being an expert at something.

However, the velocity of change at Carta is so high that static expertise quickly becomes obsolete. To survive and grow we must be a learning organization. And that means we need people who are awesome at learning. As Paul Graham says, “When experts are wrong it is often because they are experts on an earlier version of the world.”

5. Hire different vs similar

In our short history, our best hires were very Different from the team that hired them. They don’t seem Different now because they expanded our culture. They changed what Different looked like.

6. Always pass on ego

For most of this talk I have talked about signals to hire. I’ll conclude with a signal to not hire. Confidence and ego are opposites. Modesty and humility are traits of the strong. Ego and arrogance is a disease of the weak and insecure. The truly confident don’t need people to know they are great. They are happy to know it themselves. And the truly Great use their greatness to make those around them greater.

Always pass on ego. Always.

Good luck That’s all I have. Good luck with your hiring.