Among the many interesting things that I get to examine in my Consulting Practice, one of the most fascinating is the differing cultures that are created within Software and Technology companies. Much of a company’s culture flows from the attitudes of the founders of the company. But the culture really consists largely of the people who are employed by make up the company. A company’s culture is a living, changing concept that is controlled by these employees in aggregate—from the CEO all the way down to the “worker bees”. I believe that culture plays a huge role in the company’s success or failure in the long run. For this reason, as well as many other obvious ones, there is probably nothing more important to a high tech company’s long-term success, than hiring and retaining employees.

So what’s the best way to hire “the best” and motivate and retain them for the long haul? That’s the $64,000 question. There are many paths to success, and even many ways of accomplishing the same goal. I will present one path and lay out my “best practices” in hiring and retention.

Hire Slowly
This is a major part of my hiring philosophy, and one that I must credit my time at HP for teaching me. When I worked at HP our hiring process was very thorough and deliberate. Employees weren’t simply chosen by a manager filling out his or her staff. A major part of the interviewing process was “chemistry interviews” with potential peers and other managers. While a company thrives with a diversity of styles and opinions, it is also very important that a prospective employee be a “fit” in the culture. It’s good for the candidate as well; they should have a good idea of what they are getting into, should they join the organization.

Another aspect of “hire slowly” that I will credit to my HP experience is to limit your growth in headcount, to a fraction of your revenue growth. This isn’t a hard and fast rule. When you are a startup, there are no revenues—and there must be employees! But this practice, if used as a general rule, puts a governor on exuberant hiring, which often quickly needs to be undone—at great financial and emotional cost to the company. Many times hiring accelerates just at the peak of the revenue growth curve—right before a downturn. I’ve always been a proponent of expanding “program spending” first to support business expansion—hire permanently only when you are more certain that your financial resources and revenue levels will support it.

Fire Slowly
This is another basic tenet of mine. It’s by far the best to hire properly up front, so that you don’t have to fire. In all companies, however, there comes a time when this becomes necessary. It may be layoffs due to a business downturn, or someone who isn’t pulling her weight in their present role.

I believe strongly that if you’ve hired someone, you’ve received a commitment from them, and you owe them a commitment in return. Now that’s not guaranteed lifetime employment, mind you! But it is important to do your best to treat them fairly. If it’s a layoff, don’t pull the trigger until you’re sure it’s necessary, and then give them all of the outplacement assistance and severance benefits that you can afford. If it’s someone that is under-performing in their present position, first think how you can remedy the situation without firing. Will additional training or an inside mentor make a difference? Is there another role within the organization, where they may be better suited to contribute? It is imperative to consider all possibilities before using termination as a last resort.

There are exceptions to my “Fire Slowly” advice. Bad attitudes, disruptive personalities and general disloyalty have no place, and are poisonous to a culture. Address these cases quickly, and let them know where they stand—including the consequences without a quick change of behavior. If you don’t see sincere change in a short time period, do what must be done quickly, and move on.

Don’t treat employees like fixed assets—they’re not furniture
In my “Hire Slowly, Fire Slowly” advice above, some of you may have been thinking that I’m a bleeding heart. Trust me; my advice comes strictly from the perspective of optimizing a business. The things I recommend can be done entirely for self-serving reasons as a manager. If you feel good because you’ve done the right thing—that’s an added bonus.

In my experience, if you treat people with respect, consideration and loyalty, you are most often rewarded in kind. Organizations that treat their employees as their biggest asset, to be protected and nurtured, usually have a workforce that will run through the wall for them. What could be more important to the success of a business?

I’ve worked in organizations that treat all assets the same—like items on the balance sheet. Anything that is fully depreciated or is excess due to current business levels, was simply disposed of. It didn’t matter if that asset was branch office furniture, or Sally, the clerk in Accounting. It should be intuitively obvious—but what a great way NOT to build morale among your employees! If you treat people like furniture, you will get the initiative, loyalty and energy of a desk chair in return. Why would you expect anything different? Remember, there are survivors left behind, and they know what you did. They will have no reason to feel that their fate will ultimately be any different.

I find this to be the single-most stupid management practice, a relic from a bygone era, which unfortunately is still in widespread practice. It amazes me how often I see this in practice—I consider it an attribute of managers who have risen above their level of competence.

Match Temperament and Personality to the Job
In job advertising and position specifications, you will see much effort devoted to attracting people with experience and technical skills which match well with the requirements of a particular position. Much less thought is given to “softer” aspects, which often mean the difference between success and failure.

That sales rep you’ve just hired may have been great in a big, well-known organization, “farming” a major account. Does he have the drive and perseverance to be as successful, now that he will be “hunting” new accounts, for a company with little track record and an unknown brand?

The new technical support rep has five years of experience in software applications similar to yours—but does he have the temperament to deal with anxious and angry customers, 8 hours per day?

Look past the obvious and pay attention to the more mundane attributes which may differentiate between success and failure.

Treat everyone fairly—not necessarily the same
One of the areas I think managers often make a mistake, is to have a firm set of rules that apply to all equally, at all times. I believe that to optimize an organization’s performance, you must manage people as individuals. Different people respond in a dramatically different manner to the same stimuli. An employee with one type of personality may respond to an independent assignment with pride that you’ve showed such confidence in them. Their colleague, with a different personality, may treat the same assignment as a sign of neglect and lack of caring about them. Each of these people may be equally capable, but how you manage them will greatly affect their ultimate performance. This area is where managers really earn their money, in my opinion. Figure out how to get the most out of every single employee, while maintaining an overall environment that still appears equitable, and fair to everyone as a whole.

Tie compensation to the long term success of the company
I want all of my employees to think like owners. So give everyone stock options—that’s my strong advice. If that isn’t desirable or practical for some reason, figure out a reasonable proxy to try to get the same results. Utilize Profit sharing programs based not only on short term results, but long term as well. It’s important to get everyone to share your goal—which is building the long term value of the company. If your compensation looks like that of a King, and theirs looks like that of a serf—it won’t happen. Cut everyone in on a piece of the pie, and your slice will end up much bigger in the end.

Build teamwork with group goals & incentives
Just as it’s important to tie everyone to your long term goal for the company, it’s also important to tie people to each other. I’ve seen many cultures which are very collaborative, where everyone is pulling in the same direction. There are organizations which have the greatest chance of success—the whole ends up being bigger than the individual parts. But all too often, even in early stage tech companies, I see companies where the employees seem to be fighting each other in an attempt to get ahead. They are expending energy fighting over the biggest piece of a still small pie, rather than using that same energy to expand the pie for everyone. Cutting everyone in with stock options helps. But I also recommend that part of each employee’s incentive compensation be based upon their internal team reaching its objectives—not just the achievement of individual goals. I find this really helps create greater teamwork, and ultimately a higher value company.

Hold employees accountable—but with compassion
Finally, the sum of it all is that I don’t recommend a country club environment, where no one is responsible for their actions. On the contrary, I recommend that you do your best to attract high performers, give them the tools to do their jobs, and hold them accountable for their actions. But do it with respect, helping them in every way that you can. And above all, treat them with compassion.

That’s my take on hiring and retaining employees for high tech companies—what’s yours? Post a comment or drop me a note by email.

Follow Phil Morettini and Morettini on Management via Twitter, Facebook, LinkedIn, RSS, or the PJM Consulting Quarterly Newsletter. Contact Phil directly at info@pjmconsult.com

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