Hiring and Retaining High Tech Employees

Among the many interesting things to examine in the management of software and hardware businesses, one of the most fascinating is the differing cultures that are created within these tech companies. Much of a company’s culture flows from the attitudes of the founders of the company. But even a bigger factor in a company’s culture is defined largely by the people who are employed by the company. A company’s culture is a living, changing concept that is controlled by these employees in aggregate. This includes the CEO all the way down to the “worker bees”. I believe that culture plays a huge role in a 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 tech company’s long-term success than outstanding hiring and employee retention.

So what’s the optimal 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 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 my time at HP heavily influenced. Back then at Hewlett Packard, 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 as well as other managers. Companies thrive with a diversity of styles and opinions. However, it is also very important that a prospective employee be a basic “fit” in the culture. This extensive interview process isn’t just good for the company, it’s good for the candidate as well.  Prospective employees need to have a good idea of what they are getting into should they join the organization.

Another aspect of the “hire slowly” credo that I first learned from my HP experience is that it can help to limit your growth in headcount. At HP, we limited headcount growth to some fraction of your business unit’s revenue growth. This approach isn’t a hard and fast rule. When you are a startup, there are no revenues—and there must be employees! And of course, sometimes it really is important to ramp up fast, even in excess of your revenue growth rate.

But this practice, if used as a general rule, puts a governor on exuberant, fast hiring. This type of hiring often quickly needs to be undone, at the 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 ongoing financial resources and revenue levels will support it.

Fire Slowly

This is the other bookend of “Hire Slowly” and another basic company culture tenet of mine. It’s by far best to hire properly upfront so that you don’t have to fire at all! In all companies, however, there comes a time when this sadly becomes necessary. It may be layoffs due to a business downturn. Or someone who isn’t pulling his/her weight. Sometimes someone is miscast currently, and you can’t find the employee a more appropriate 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. Then give them all of the outplacement assistance and severance benefits that you can afford.

If it’s someone who is underperforming in their present position, first think about 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? In my opinion, it is imperative to consider all possibilities before using termination as a last resort. That’s because not doing so damages your “contract” with your employees, reducing overall employee retention. If you damage that contract it will negatively affect your corporate culture, the consequences of which I’ll discuss further below.

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

Basic decency is key

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 on employee retention can be justified 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? Employee retention is critical if you have the right people.

Don’t treat employees like disposable assets—they’re not furniture

I’ve worked in organizations that treat all assets–human or otherwise– the same. Like items on the balance sheet. Anything that is fully depreciated or is “excess” due to current business conditions 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 usually get the initiative, loyalty, and energy of a desk chair in return. Why would you expect anything different? And don’t think just because you’ve laid off those folks the effects walk out the door with them.  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 approach to be the single most stupid management practice I’ve witnessed. It’s a relic from a bygone era, but unfortunately, it is still in widespread practice. It amazes me how often I see this, even in the usually forward-thinking tech industry. When I do see this, I consider it an attribute of managers who have risen above their level of competence. Now I understand that layoffs are sometimes necessary as a last resort due to extreme business conditions. That’s not what I’m referring to here.

Employee Retention: 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 that match well with the requirements of a particular position. Much less thought is given to “softer” aspects such as cultural fit, attitude, and perseverance. These attributes 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 in YOUR company? Now that he will be “hunting” new accounts, for a company with little to no 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?

I encourage you to look past the obvious and pay attention to the more mundane attributes which may differentiate between success and failure.

Employee Retention: Treat everyone fairly—but not necessarily the same

One of the areas I think managers often make an honest 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 dramatically different manners to the same stimuli.

An employee with one type of personality may respond to a highly independent assignment with pride that you’ve shown 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.

Employee Retention: Tie compensation to long-term company success

I want all of my employees to think like owners. So give everyone stock options, if possible. That’s my strongest advice in this area. 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—this won’t happen. Try to cut everyone in on a piece of the pie–no matter how small. Your slice will almost certainly 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 goals 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. These are organizations that 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 what is still a small pie. This replaces 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. Consider team goals as well as 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: 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. Be understanding about things outside of their control. And above all, treat them with compassion.

That’s my take on hiring and employee retention for software and hardware companies. What’s yours? Post a comment or drop me a note by email.

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