Five reasons why start-up recruitment models are better

Small and medium-sized businesses often attempt to emulate their billionaire corporate cousins. Start-ups, on the other hand, become successful precisely because they have radically diverged from traditional people management models, argues Leigh Stewart.

Between 1999 and 2009, 50 per cent of Fortune 500 companies disappeared, but their top-down management models didn’t. Remember Enron? They had the ‘smartest people in the room’, who eventually cleaned out the company, people’s savings and retirement funds. If anything, it demonstrated the astounding limitations of IQ-based recruitment theory, but it also contained valuable clues to the 2007 iceberg looming ahead.

But there once was a start-up called Google that has sustained the growth and success of its original aim to singlehandedly ‘organise the world’s information and make it universally accessible and useful’. Now, try to imagine a world without their search engine, Youtube, Maps, Gmail… not to mention all those files you have saved to Google Drive. None of this would have been possible without Larry Page and Sergey Brin’s uncompromising expectations on staffing when they created Google from their college dorm room.

Google has gone on to become one of the world’s most innovative and staff-friendly companies. Start-ups like Airbnb and Uber have become giants that are carving out ever-growing market shares in their respective industries. Here are five reasons why start-up recruitment models are better for small businesses.

1. The purpose motive

‘I want to put a ding in the universe’

Steve Jobs

How many times have you felt insignificant or stifled by your company? It’s the reason I’ve turned down jobs and quit others; I don’t like being plankton in the company pond, sinking under the weight of a manager who doesn’t know what they are doing, or is too busy on their Facebook page to care.

People don’t come first in low-freedom top-down management models. Luckily, start-ups don’t have the funding or time to compartmentalise decision-making or earmark people for management positions; this is their first competitive advantage. By nature, these small businesses must be scrappy to survive, putting talent and innovation first.

‘Autonomy, mastery and purpose lead to better employee performance’

Daniel Pink, New York Times best-selling author on motivation and performance

People are the key to success, which is why the best business plan will fall apart if a team doesn’t believe in it or their founders. Research has shown time and time again that humans are inspired by a ‘purpose motive’ which is probably why many start-up hires are willing to take a pay cut. The irony is that most of us fail to find this sense of purpose at work, where we spend most of our waking hours.

2. Freedom is a human right

Political dictatorships have a limited lifespan and high mortality rates. We know they don’t work and we don’t agree with them. In companies, command and control management models are also destructive. By restricting the freedom of our employees, it means that we failed in our original recruitment target: to hire skilled people that will bring ideas and value to the business, not blindly execute orders.

‘Employees with the right to choose when, where and how to work have higher levels of satisfaction, innovation and performance’

Gensler 2013 Workplace Survey

Business is an evolutionary beast that only works if we hire the right people and give them a chance to perform. People who follow orders appeal to the ego, but don’t add value to our work. They don’t challenge the status quo or get ahead of the curve.

Exceptional staff don’t withstand restrictive work environments for long. I mean, what’s the point in having the skills to do a better job, if you’re the only one pulling in that direction?

3. Training and super-brains don’t guarantee success

There’s an obvious flaw in this freedom theory; it would be naïve to posit that all employees are all brilliant and management are ogres. We all have a secret list of people that couldn’t look after a pot plant, let alone a key customer. But even if they are a relic of past recruitment, they are our problem today.

‘Academic achievement doesn’t predict job performance beyond 2–3 years after graduating’

Research by Google in 2010, reported by Laszlo Bock’s ‘Work Rules!’

Even with the best intentions, most new companies don’t cultivate talent from the onset and then spend money on training. A common fault in businesses today is that we still think we can ‘fix’ weak performance, especially when it’s expensive and hard to fire someone. But the financial reality is condemning: don’t train – hire!

Research by CEB, a best practice insight and technology company, shows that businesses spent more on training than recruitment. And yet, there is no proof that training sustainably modifies the behaviour or success of employees, unless you are reading a brochure of a training company.

The reality is that talented employees come with a built-in personal development mechanism, as well as curiosity and the desire to improve. No amount of training can teach somebody these traits.

‘Intelligence and technical skills only predict 25 per cent of success’

Research on mindset and success, Shawn Anchor, CEO of Good Think Inc.

Its also been shown that a top degree from a leading university actually only influences a person’s success for two to three years after graduating. Maybe this research wasn’t published when Enron was in business. Their IQ-based recruitment model ended up turning the company into a corporate slot machine for their outstanding academic hires. So if training is a waste of money, and hiring super–brains isn’t a solution, what is one to do?

4. Experience is only part of the package

The world is changing faster than we can quantify as individuals but expertise is often a static notion fixed in time. Forty years ago, logistics managers had telephones, calculators and typewriters, maybe even one computer. And yet, these guys engineered the globalisation of trade. But where are they now?

Like with any industry, the experienced guys who had the desire and humility to investigate new inventions and software pushed companies forward and stayed at the top of their game. The rise of the internet didn’t leave much room for the others.

‘Experience is more strongly correlated to performance for low-complexity jobs’

Research by American Psychological Association 

Expertise deserves respect, when it comes with humility and conscientiousness, because experience is evaluated in years, but awareness of change and ability to adapt are traits of character. Simply put, a person who cares will work their ass off to stay ahead of the curve and find sustainable long-term solutions.

5. Groups hire people, not managers

At Tranio, we have the same constraints as other small businesses, including limited funding and a less-than-perfect recruitment model. At the moment, we have more inbound referrals than sales managers and it restricts our growth.

For every ten candidates, maybe one has potential, but most of them have doctored their CV and come in totally unprepared for the interview. Had our sales director pushed on alone, she would have probably given up and hired the next person who showed an ounce of skill; luckily she didn’t. Instead, she extended the recruitment panel to our managing partner and myself (news and research editor).

‘Groups performed better than individuals in experiments conducted by Princeton academics’

Are two heads better than one? An experimental analysis of group vs. individual decision–making, 2009.

Starting a business requires humility too because small companies thrive when they recognise their failings and work hard to do better. Recruitment works the same way. Go back to the start and review how, why and who hired. Was the interview structured? Did the candidate successfully demonstrate actual competence in a hands-on task? Who/how many people interviewed him?

These are vital questions in the era of mega-companies and metadata; we have become the victims of ourselves and computers. Humans have something called ‘confirmation bias’ and software algorithms are inherently flawed. People make a subconscious decision within a few seconds of meeting a candidate and computers make decisions based on an equation designed to identify specific traits. These vices are tantamount to recruitment failure.

Hiring good people is slow but we believe that stronger overall growth is better than a short spurt, followed by frustration, attrition and training expenses. After all, would we spend all this time on recruitment if we didn’t believe in our company? Probably not.

Think back to the 2007 meltdown in the States. When people started defaulting on their variable interest mortgages, did the subprime mortgage (junk) bonds crash too? No. That took another few months, during which investment banks happily continued to push them while insuring themselves against the imminent failure of the system. In short, employees and executives actively betted against their own companies to serve their own interests. Had the banks placed more importance on a combination of talent and ethics, start-up recruitment wouldn’t be such a novel concept today.

Leigh Stewart is international real estate editor for Tranio.

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