The most important thing you can do to build a great startup culture

I often get asked by entrepreneurs, "what is the most important thing that I can do to build a great culture?". My answer, "recruiting". Recruiting has to be a top-three priority for any CEO, for any size organization. But as a startup, it is the difference between life and death.

When Brant and I started Bazaarvoice, we wanted to get the team right from the beginning. We were obessive about that, and it paid huge dividends later on. If there was ever a secret to Bazaarvoice's success in those early days, both culturally and performance wise, it was that we obsessed about recruiting and also constantly debated how we would create a great culture (more on this second point in a later post). Brant and I came up with a process for recruiting that was so obvious in hindsight but yet is so rarely done.

Many executives, especially experienced ones, believe that their gut instinct on people is what matters most. For those executives, I recommend you read the bookEgonomics because you are dead wrong. You must test those that you want to hire. Many candidates will say that there are passionate about joining your company. But they don't know that. No one knows if they are truly passionate about joining your cause until they experience it. It is all romance in the beginning. For example, I may have thought I'm passionate about learning to play guitar like David Gilmour of Pink Floyd when I see him play and he makes the guitar sing (and I've had this thought as a teenager) but then I tried guitar lessons and I quickly realized it is not for me. Now let's compare that with how badly I wanted to get into The Wharton School to earn my MBA. At the time, Wharton's MBA program was ranked #1 in the country for the past six years. It was very intimidating to apply and face potential rejection. So I prepared for two months - studying for the GMAT, writing and rewriting my essays (which Debra would critique and often tell me to start over). And I got in - and it changed my life.

So given this background, at Coremetrics I suggested to one of our VPs that they test their candidates. They shrugged it off and said they trust their instincts and it was too competitive of a job market to "slow the process down" (this is a very common excuse, by the way). I didn't know better at the time and they were much older and "experienced" than I was, so I let them run with that plan. But they were wrong 50% of the time - meaning that around 50% of the time after the person they hired had been on the job for six months either they left on their own because they realized that they weren't a great fit or they were fired for lack of performance. The answer to this? "It's all a numbers game", I was told - and not just by that executive but by other CEOs. How sad. Meanwhile it is embarassing to you, the person that didn't work out, and to your entire company. It is disruptive to your culture and your performance (think about the opportunity cost alone). Startups are very hard. The last thing you want is constant turnover and an attitude of "it's all a numbers game" - like it is a factory or something. These are people. It is their livelihood. And it is yours.

So, the simple process Brant and I came up with is "the test". The first person to join me and Brant at Bazaarvoice, Paul Rogers, our first VP of Engineering and now theCTO at WhaleShark Media, was indeed the first person to go through "the test". The way it worked is simple. When we got to our finalists after 5-8 interviews and everyone was ready to hire them, we would call them up - typically on a Friday - and say, "congratulations, everyone at Bazaarvoice that you interviewed with wants to hire you" - and we would let that soak in. As Bazaarvoice became known for culture, thatreally soaked in - it was like a badge of honor to get to that point as we were know as one of the hardest companies to get a job with and also as one of the best performing. But then we would 'drop the hammer' and say, "there is just one more thing we need you to do as part of this process". And that was the test. Similar to me trying guitar lessons to see if the passion "stuck", we wanted them to get a small taste of what the job would be like. For example, for a Sales Director candidate, we would continue and say, "we need you to come in on Monday and present to us like we are a prospect". This was exceptionally hard for a candidate to prepare for in the early days because our company was in sealth-mode, as I wrote about in this post. It would "ruin" the candidates weekend as they spent 8-16 hours preparing. I put "ruin" in quotes because it wasn't nearly as bad as either one of us making the wrong decision about their candidacy at Bazaarvoice - again, we wanted to avoid the embarassment, impact to our culture, and lost opportunity cost. If you step back for a moment and think about it, spending 8-16 hours is nothing for a job that could both a) transform your personal wealth and b) fulfill your soul - your calling in life. During the presentation, we would interrupt the sales candidates, push them hard on items like pricing (which they couldn't possibly know at this point), and essentially act out a tough prospect environment to see how they would react. We knew how to sell ourselves - and it is important that when a candidate is being tested other, proven - in that area - team members are in the room to critique them.

The test was much harder for executives, and our recruiters really groaned when we got to this point - it is, after all, harder to find that right executive versus the right sales person. For their test, I told executive candidates, "I need you to present your 100-day plan to the executive team - what you plan to accomplish at Bazaarvoice in your first 100 days". I remember when one of our executive candidates called me from Spain, where he was on vacation at the time, and said, "you weren't specific about something - I assume it is okay if I ask my peers and potential team members what they think is most important for me to accomplish and what the company's biggest current priorities are". Bingo! I replied, "congratulations - you passed IQ test number one, which is to assume that all resources are available to you and even when constraints are forced upon you, find a way". He laughed and then spent around 50-60 hours preparing for his presentation, and it was one of the best in Bazaarvoice's history. It was not unusual for an executive candidate to spend 40 hours preparing for this. What was unusual is when they didn't prepare at all. For example, I had some CFO candidates who literally didn't pass IQ test number one and presented a very generic "here is the job of a CFO" presentation. Clearly they didn't have the passion to prepare. But even worse, they didn't have the collaborative gene, which is essential to perform in a startup environment where resources - and your very existence as a company - are so limited. Even worse than that, some would say when they faced the rejection, "but you didn't tell me I should prepare that way". I was very direct in my reply to that, and I hope that I helped them succeed in their career later. Life is too short to not live your passion… we spend more waking time at work than doing anything else.

What were the results? Well, we were wrong about new team members a lot less than Coremetrics. Around 10-20% of the time instead of around 50% of the time. And our sales defied gravity as compared to most startups in Austin. And in seven years, we built a public company worth around $700 million today. And, as importantly, our process helped keep the best people at Bazaarvoice. Around 50% of our new team members came from referrals. When I asked new people why they joined Bazaarvoice, "the people" was always one of their top three answers. When I asked people why they stayed at Bazaarvoice, "the people" was always one of their top three ansers too. Bazaarvoice became an elite kind of club - a badge of honor to get through that "brutal" recruiting process, not unlike what I saw (or felt myself) at Wharton with other recently admitted students. And momentum begets momentum. This is true on the recruiting front, just like it is true in any area (fundraising, sales, culture, a winning spirit and results, etc).

What made me write this post today is that I was recently texting with the CEO of a company I recently backed and have agreed to be the CEO's primary mentor. We were texting about recruiting, and I encouraged him to "spend a tremendous amount of time recruiting your first 50 people because they will set the tone - both culturally and performance wise - for your next 450". I don't need to tell him about the test, though, because he lived it at Bazaarvoice.

By the way, it put a smile on my face that as I wrote most of this post last night our daughter was practicing guitar in the same room. But she is doing much better than I did at that after two years of working at it (versus my feeble two-week attempt)!