Hiring is critical for a company's success: it ensures you have the right people to execute on your mission. Unfortunately, even the best companies hire a "good" employee only about 50% of the time and a truly remarkable employee less than 10% of the time. I can't say I figured out the optimal recipe for success, but by the end of my time at Divvy, I truly felt that I was working side by side with the best individuals of my career. In this post, I discuss the process we settled on for hiring after years of refinement.

I break hiring down into a few areas: 

  • Pre-hiring: Do you actually need to hire someone?
  • Interviewing: What worked and what didn't work.
  • Compensation: What my philosophy was.
  • Executive Hiring: I think hiring executives is a different beast, and will share what worked for me.

Pre-hiring

Whenever a manager came to me and said "I need additional headcount," my immediate reaction was frustration. There were two situations for hiring: first, on the positive side, there was a new area we wanted to invest in, or second, on the negative side, teams weren't scaling. For the first scenario, this would be uncontroversial. If we added a product or decided to build out a new team, this was a positive development, and we would of course need new teammates to scale it. However, for the second scenario, the conversations were frustrating for a few reasons.

First, we tracked operational metrics to determine how we scaled, so if we were growing way out of sync with our headcount, I knew this and would proactively align on increasing headcount versus plan. However, in most cases we were on track with our operational metrics (for example, in Divvy's case, total home count). This indicated to me not that we needed to hire, but that something wasn't scaling and it was putting pressure on the team. As folks who worked with me know, this would usually trigger me jumping into the specific functional area, doing the job, and understanding why the team wasn't scaling. I think folks internally referred to this as "Adena's eye of Sauron." It wasn't a good thing when I showed up at your team's daily standup. Many times it boiled down to two areas:

1. The team wasn't trained and therefore wasn't performing optimally.

2. The team didn't have the right tooling or infrastructure to scale with volume.

The answer wasn't to throw more bodies at the problem, but instead was to solve the underlying issue: train your team and install the right infrastructure. I imagine many hiring managers at Divvy hated this response, and to this day I remember how painful those conversations were. However, my philosophy was clear: truly think through whether hiring an additional person will solve the underlying issue or if the real problem lies elsewhere.

Once you feel certain that additional headcount is needed, there is a second layer of checks that need to happen. The hiring manager needs to confirm that they have properly scoped out the role and know what success will look like for the individual. Too many times I've seen hiring managers without onboarding materials, goals, and a plan on how to make the new hire successful. Hiring managers look at the new hire as making their lives easier, rather than the reality, which is that a new hire is a person you need to invest in, train, and support.

Interviewing

Interviewing at Divvy consisted of:

  • Phone Screen: Initial screen with the hiring manager or someone on our people team to ensure the candidate understood the role and could be a good potential fit.
  • Hiring Manager Screen: If the hiring manager didn't do the phone screen, they would definitively speak to the candidate next.
  • Second Screen: The hiring manager would pass the candidate onto a second colleague who would confirm that the candidate is a good fit for the role. This confirms the hiring manager's judgment.
  • Full Interview Panel: During this day, the candidate would meet with no fewer than 3 individuals (typically 5) and every candidate had to do a case in front of a panel. From this panel, everyone would meet on a Zoom and give a thumbs up or down (on the count of 3) so everyone had to give a firm yes or no. We'd then debrief for a half hour and give the hiring manager feedback.
  • References: At least 2 back-channel references.


Every interviewer rated the candidate from 1 to 4: 1 was a strong no, 2 was a weak no, 3 was a weak yes, 4 was a strong yes. The idea was that there was no middle ground; you had to pick a yes or no. The manager had the final say, but if everyone said no, and the manager still went with the candidate, and they turned out to be a poor hire, that would clearly impact the manager from hiring in the future.

Everyone had to do a case interview with no exceptions. I personally tried to review as many of the cases as possible to see the actual work output of the candidate.

During my time at Divvy, there were periods when I required being the final interviewer for all hires. This stopped when we got to around 75 employees and I was asked to stop by some of our executives. Truthfully, I shouldn't have listened. I think the CEO or founder interviewing every individual is crucial well beyond 75 employees. Whether the stopping point is 500 or 1000 employees, I don't know. But I think when the CEO or founder does a final interview it forces the manager to really think hard about whether the candidate is truly exceptional.

Finally, references are the most important thing. Mathematically this makes sense. Even if you spend 15 hours with a candidate (which is a lot), this translates to 2 days of working with them! Any former colleague, manager, or report should give you more insight after working with them for years! The way I do reference checks is:

  • I take a job from their past, let's say senior accountant, and note the years.
  • I then go on LinkedIn and find the VP accounting or the controller who was at that company during those years.
  • I cold LinkedIn message and say "We're thinking of hiring X candidate, you ran their team during that time, can we hop on a quick call?" Almost everyone responds, and if they don't, that is also a sign.


When talking to the references I ask very specific questions:

  • On a scale of 1 to 10, 10 being the best individual you've hired and 1 being the worst, how would you rate the individual?
  • You are a founder hiring your first [X] individuals: do you hire this person? (can be altered to hiring your first X individuals on a certain team)
  • On a scale of 1 to 10, 10 being the highest, how well do they spike on skill set [X]?


I also reason with the person: I'm going to be managing this individual, and if they aren't a good fit, it is going to waste their time and mine. So realistically, how good would person X be at doing Y job? Does it play to their strength?

If the answer to the reference check isn't a resounding "they are amazing," I pass.

As a quick aside, I remember doing a reference check for an executive candidate. I was speaking with their former manager and could sense a little hesitancy. They tried to cover it up and would say "the individual is great," but I could sense something was off. I asked directly: I can sense you are hesitant, and this isn't going to be good for me or person X if it doesn't work out. What are you holding back? After asking this, the reference blurted out "person X is good, just a B player." I had been searching for this executive for almost 9 months and felt desperate, so I hired them anyway. The reference was right, the executive was a B player, and I wasted more time and energy onboarding, realizing, and letting the individual go than I would have if I just waited and hired the right person. References are only useful if you actually take the feedback.

Compensation

I had a really formulaic approach to compensation, which might have seemed rigid, but to me, it ensured that if compensation ever got out, I could 100% stand behind the fairness of everyone's salary. We paid everyone at the 75th percentile for cash and 50th percentile for equity, based on averages across a few data sources (Option Impact, Pave data, basically anything we could find). That was sorted into L1 through 6 and by function. I'll do another blog post that goes into detail on the mechanics of compensation.

However, the important thing to note: we did not negotiate compensation. Everyone hired at similar times, levels and functions got paid the same amount. We let a small trade-off exist for cash versus equity, but that was offered to everyone, allowing people to decide what they needed for their lifestyle. However, the total comp was the same.

I often received pushback on this, and would have managers say the new hire won't take the role unless we match another offer's comp. In these cases I'd personally get on the phone and explain the philosophy to the potential hire. I wanted everyone to come in at equal footing. Your comp shouldn't be determined by how hard you negotiated upfront, but instead by how hard you worked while at Divvy. If you crush it, there was a formulaic ladder that would get you massive comp increases. If you didn't, you wouldn't get comp increases. I also could provide the data that showed that we were paying at the 75th percentile for cash and 50th percentile for equity.

Most candidates loved this policy, and appreciated the fairness and transparency. It set the tone for our culture early on: we didn't play favorites, there wasn't politics, we were a meritocracy. I may have lost fewer than 5 candidates because of our comp philosophy (and hired well over 400), and truthfully those individuals we lost likely weren't a good fit.

Executive Hiring

This might be an unpopular opinion, but my experience led me to believe that successful executive hires always came from either an internal promotion or from my network. I never hired an executive through a recruiter that ended up working out well. I think the reason for this makes sense in retrospect. If someone is coming through a recruiter, they are open to taking another company call when things get tough or there is the opportunity for more money. When someone comes from my network, usually it is because they are genuinely interested in the industry or company and the person referring them can speak to their character. Even better if you can pull over someone who you've worked with in the past and know they are excellent.

The second way I've successfully hired executives is through internal promotions. These individuals have already proven they are hard-working, and are willing to stick with the company through hard times. They have inherent company knowledge and can usually hit the ground running on day 1.

While I don't think this heuristic works when hiring for all roles, there will realistically be around 3 to 5 executives at any time, and having the best executives can change the trajectory of a company. A bad executive can derail your company for a year (6 months during the ramp, 3 months to let them go, and 3 months to rehire).

Lessons

In summary, my lessons for making a strong hire are: (1) make sure you truly need to hire, (2) always give a (challenging) case interview, (3) push hard on references and always back-channel, (4) be transparent and fair on compensation, and (5) for executives, promote internally or hire someone from your network. In retrospect, these seem pretty basic. However, when scaling really quickly, you'll see that processes break down and shortcuts are taken. The temptation to hire quickly increases, and it will be during those times that staying firm to whatever hiring principles you set out really matters.