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One of the most important parts of building an awesome culture is, in Good To Great author Jim Collins’ words, to “get the right people on the bus, the wrong people off the bus, and the right people in the right seats.”  In this post, I’m going to focus on how to “get the right people on the bus” by hiring for values in addition to skills and experience. While on the face of it this may seem rather obvious, most companies don’t put enough attention on figuring out exactly who are the ‘right people’ to let on their ‘bus’.

In the case of startups and emerging companies, too often founders who have been successful enough to grow their teams beyond the first 10 – 20 people find themselves dreading going to work in the morning because they don’t like the environment in their own company! They find their days consumed by dealing with interpersonal conflict and complaints, and longing for those early days when they really liked everyone, and things just seemed to work.

CEOs and executives are usually (though not always) clear on the skills and experience that they’re looking for in the person that they’re hiring.  What they fail to do is fully consider what they’re looking for in terms of a candidate’s values, which is the key to ensuring that the person fits with the existing (and/or desired) culture, and will help to continue to maintain that culture as the company grows. Even those executives that are aware of the importance of culture fit in hiring don’t always understand how to assess whether a candidate shares the company’s values. Others do a good job of assessing culture fit, but are then unwilling to say no to a highly skilled candidate who doesn’t fit the culture.

Here are five key steps to hiring for values:

1. Get clear on your company’s values AND the observable behaviors that embody those values.
2. Design interview questions for each of these values and behaviors.
3. Observe candidates’ behaviors for values alignment.
4. Listen for values alignment in the questions candidates ask.
5. Rigorously refuse to hire anyone who does not share ALL of the company’s core values.

Let’s take a look at each of these steps.

1. Get clear on your company’s values AND the observable behaviors that embody those values.

In my previous article, How To Define Your Company’s Values, I outline the steps to discovering and documenting your company’s values and behaviors that form the core of your culture. With the company’s values in mind, you may even want to define specific values-based behaviors for a given role or group within the company, in addition to the general behaviors that all team members are expected to exhibit. Until you’re clear about what makes up the DNA of your culture, it is very difficult to consistently ensure that you’re hiring people who share that DNA and align with your culture.

Once you’ve clearly defined your company’s culture, you’ll want to take every opportunity to ‘show your culture’ to candidates. This will give them a chance to self-select in or out of your hiring process. Facebook’s VP of HR Lori Goler recommends using strong, even polarizing language that is specifically designed to repel people who are not a good fit.  One of the things they say in describing the job to candidates is “We expect you to have an impact on your very first day.”  The right candidates are energized by this idea, while the wrong ones will likely find this overwhelming or offensive.

Zappos makes sure that their application forms and job descriptions, rather than being boiler plate language, are written in a fun, playful way that reflects their culture of ‘fun and a little weirdness’. Their job applications ask questions like “If you could be a superhero which one would you be and why?” The right candidates will have fun going through the process, while the wrong ones may opt out.  Here are a few of the requirements listed in their description of an open UX Designer job:

You are more flexible than an Olympic gymnast and able to shift gears faster than this years’ Daytona 500 winner.

You believe that Jared Spool would easily win a UX celebrity grudge-match with Jakob Nielsen — figuratively speaking, of course!

You are so into online shopping and ecommerce that you have completely forgotten where your local shopping mall is.

Do your job descriptions reflect your culture? Or do they sound more like this:

You will work across a range of products and employ various design and UX methodologies. You will develop and execute UX Plans as an integral part of design and development processes. Your ability to manage several features across a common experience is essential. The ideal candidate possesses experience working closely with product teams and can easily insert herself/himself into the development process to deliver professional quality UX. A strong candidate will have a solid background in user-centric and scenario-focused design methodologies, as well as a knowledge and practice of usability studies. Good communication, presentation and negotiation skills are critical along with a passion to deliver designs and comps of the utmost quality…

2. Design interview questions for each of these values and behaviors.

Once you have clearly stated values and behavioral expectations for your current team members, it’s important to design your hiring process to assess whether the candidates you’re interviewing share these values and have a history of exhibiting the associated behaviors that are part of what makes your company successful. In addition to the questions and tests designed to assess candidate’s skills, design at least one question for each value (and ideally one for each of the behaviors that you’ve determined as the way that value is best exhibited in your company).

One of the best ways to assess culture fit is to design questions that ask for specific examples of past behavior that align with how the candidate will be expected to behave to be successful at your company. Most rational, reasonably bright people will spend some time researching your company before the interview. If your website or company materials mention your values and culture (and there are many good reasons why they should), the candidate will likely know what you want to hear in response to questions around values and culture. Questions like “What do you look for in a company’s culture or working environment?” or even “What values are important to you in a company you work for?” are too easily gamed. Instead, make sure to design values-based interview questions that ask the person to give specific examples of past behavior.

Here are some examples:

Company Value(s) Question Facebook Entrepreneur, Hacker, Speed Give us an example of a time when you had to move fast on a product without having full understanding of the data or knowledge of exactly what you were working on? Facebook Doer, Try New Things Give us an example of a time when you built something different than what was already there just because you were just trying to make it better? Zappos Create Fun and a Little Weirdness. On a scale of 1 – 10, how weird are you? Zappos Create Fun and a Little Weirdness. If you could be a superhero which one would you be and why? You can’t pick superman, batman, or spiderman. Zappos Be Adventurous, Creative, and Open-Minded Give me an example from your previous job(s) where you had to think and act outside the box. Zappos Be Adventurous, Creative, and Open-Minded Would you say you are more or less creative than the average person? Can you give me an example? Zappos Be Adventurous, Creative, and Open-Minded What’s an example of a risk you took in a previous job? What was the outcome? Zappos Pursue Growth & Learning What was the best mistake you made on the job? Why was it the best? Zappos Pursue Growth & Learning What was one of your biggest failure(s) career-wise and how would you handle it now? Zappos Build a Positive Team and Family Spirit Tell me about a time you recognized a problem/area to improve that was outside of your job duties and solved [it] without being asked to. What was it? How did you do it? Sample Creativity Tell me about a time you were especially creative in solving a lingering problem. Sample Accountability Tell me about a time when you took responsibility for a failure. Sample Accomplishment Describe how you set your goals for last year and how you measured your work.  Did you achieve your goals?  If not, why not?

 

(Sources: Delivering Happiness by Tony Hsieh; Unleashed Talent conference – Assessing Culture and Role Fit Panel with Lori Goler, Facebook, Christa Foley, Zappos and Mike Morell, Riviera Partners; OSU Behavioral Interviewing Guide)

When the candidates answer your values-based questions, make sure to listen for (1) their response to just being asked the question, (2) the content of their answer, and (3) how easily (or not) it is for them to answer the question.

For example, in the case of Zappos’s question “On a scale of 1 – 10, how weird are you?” they’re not just looking for people with a particular weirdness rating. What they’re listening for is whether the candidates is amused by the question and able to have fun with it, or if they’re put off or annoyed by it. When Facebook asks candidates to “give examples of a time when you built something different than what was already there just because you were just trying to make it better,” they want to see if candidates can spout off loads of examples, or if they’re struggling to come up with one or two.

I’d recommend that you conduct values interviews separately from skills interviews and by different interviewers to (1) make sure that the values questions don’t get lost amidst the skills interview, and (2) avoid the temptation of managers who are desperate to fill a needed role to ignore values misalignment so they can get the job done.  Often, the HR or more senior level interviewers will conduct the values interview while the candidate’s potential future manager and/or peers will conduct the skills interviews. In general, it’s important to make sure that each interviewer understands their role in the interviewing process, and what they’re trying to get out of the interview. Too often, all the interviewers ask the same questions and end up getting the same surface-level information about the candidate.

3. Observe candidates’ behaviors for values alignment.

Another way to assess values is by observing candidates behaviors and how they interact with the people they meet throughout the process. Some companies will ask candidates to engage in certain exercises or challenges to see how they behave, or put them in situations that closely simulate the working environment. At Grand Circle Travel (a $600mm international tour operator), they put candidates in a group interview, in which multiple candidates interview for various open jobs at the same time. They give the candidates a variety of unique and quirky challenges (such as a ‘raw-egg drop exercise’) they have to do together to observe how candidates behave and interact with each other.

At Facebook, every engineer hired goes through ‘Engineering Bootcamp’, no matter how senior they are. The reactions of senior-level candidates to being told that they’ll have to go through Bootcamp can often provide cues as to whether they are a good fit with Facebook’s hacker/doer culture.

Zappos will take candidates on a tour of their open, loud, chaotic offices and look to see if candidates are excited or terrified about what they see. Many companies will ask a candidate to join the team they’d be working with for lunch or dinner. This can be a great part of the assessment process, as long as team members know the specific behaviors they should be paying attention to in order to gauge whether the candidate shares the company’s values. The more clear that current team members are about those values and behaviors, the easier it will be for them to make that assessment.

4. Listen for values alignment in the questions candidates ask.

The questions candidates ask can be as telling as the answers they give. Facebook has an extremely flat hierarchical structure reflecting their culture of entrepreneurship, hacking and getting stuff done. Lori Goler, Facebook’s VP of HR, shared that if candidates (even for senior positions) ask questions about the budget or headcount, she immediately knows that they are not a fit for Facebook’s culture.

Make sure to give candidates a chance to ask questions, and, in addition to actually answer them, try to really notice the kind of questions that they’re asking and think about the values that underly them.

5. Rigorously refuse to hire anyone who does not share ALL of the company’s core values.

Once you’ve gone to the trouble of assessing whether a candidate’s values align with your company’s values, have the courage, selflessness and commitment to NOT hire them if their values are not aligned with the companies. You’ll be doing yourself AND them a huge favor.

Hiring for culture is truly an investment – it will likely take a lot more effort and time to find a candidate that not only has the skills and experience required to do the job, but also shares the company’s values. But when you compare this investment to the upside of having happy, motivated employees who enjoy coming to work everyday, and the increased retention and productivity in your business, you’ll find it’s an investment worth making.

Pepperdine has a new study out that attempts to shed some light on the clubby, shadowy world of private finance. Researchers polled experts in lending, mezzanine capital, private equity, venture capital and private businesses themselves. Not a big shock, but things don’t look pretty, especially in the venture capital world.

A lot of the stats weren’t surprising. According to VCs, there’s been a 65% decrease in up-rounds (where a company gets a bigger valuation) in the last six months and more than 60% of those polled expect a longer wait for an exit. Similarly, the bulk of the companies getting funding are still California-based.

There does seem to be some shifts on where the money is going. After Northern California and Southern California the biggest area of investment geographically was in international companies. And investors said they intend to invest more in cleantech than software going forward. This is a big reversal, as software has long been the dominant category for venture deals, but it’s unknown whether software has lost favor, or whether it’s just become so pervasive that it doesn’t really hold together as a category anymore.

But it’s when you look between the survey of VCs and the survey of private businesses that things start to get ugly. The businesses, it seems, vastly over-estimate their ability to raise funds. 41% of them feel that they qualify for venture capital funding. Meanwhile, the VCs surveyed indicated that their firms are only doing a few deals every six months and go through one hundred business plans to close one deal. Clearly, the rate of acceptance isn’t anything like 41%, says researcher John K. Paglia, Pepperdiine’s Denney Academic Chair and Associate Professor of Finance.

A few more stats make that picture look worse. Researchers divided the portfolio companies into six stages and startups are still operating a loss in each of the first four. Those categories represent roughly 84% of all portfolio companies. That means the vast majority of privately held companies are still very dependent on venture money to stay in business. And investors aren’t necessarily keen on their prospects. Respondents deemed between 12%-16% of companies generating revenues to be essentially “worthless” and deemed 20%-26% of their pre-revenue investments to be “worthless.” Ouch.

Add to this that 72.7% of VCs said they had a decreased appetite for risk and that more than half of those polled expect their firms to do between zero and three deals in the next year and you start to get the feeling things are going to get a lot worse for private companies, in aggregate, before they get better.

Of course life isn’t that much better for the VCs: Sixty percent of them say their own prospects for raising new funds have declined over the last six months and 41% said they aren’t planning on even attempting it in 2010.

Long term, shake-outs are good for the industry, Paglia notes. Once valuations finish falling, worthless companies are closed or sold at a loss and venture firms that can’t raise another fund hang it up, venture capital will be a much healthier industry on the rise. The big question is just how long that reset takes.