CHAPTER

3

VALUE FIT OVER CAPABILITIES

Find the Right People, Not the Best People¹

Zappos is in the enviable position of having more than 100 job applicants for every position it fills.² Hiring the right person, however, can take months if not years at the e-commerce apparel firm. Its new screening process begins with people joining an online community called Zappos Insiders. Those who sign up are assigned “company ambassadors” to help determine if they should pursue a job with the company.³ These employees interact digitally with potential applicants, answering questions about the firm and its culture. The ambassadors also meet, when helpful, with people in restaurants, bars, and company social events near its Las Vegas headquarters. The next stage is a formal interview with the hiring manager and members of his or her team. The goal of these meetings is to assess a candidate’s capabilities in relation to an open job. Those who pass this test then have another interview, conducted by the firm’s human resources staff, to determine if they fit the unique culture of Zappos. These interviews are not done by the hiring manager because Zappos is leery of the “halo effect,” which occurs when a candidate’s technical capabilities are so strong that similar strengths are assumed in other, nonrelated, areas (such as one’s values). The decision to hire someone is based 50 percent on a candidate’s capabilities and 50 percent on his or her fit to the culture. The company refuses to hire those who have great resumes if they don’t value what the firm values. They do this even knowing that taking time to find the right people, rejecting those who are highly capable but a poor cultural fit, doesn’t pay off in the near term—that having open positions takes a toll in meeting the firm’s near-term performance targets.⁴ They value their culture more than achieving their quarterly targets.

Zappos uses specific questions to assess each applicant’s fit to its culture. At least one interview question is asked for each of the firm’s 10 values.⁵ One set of questions, for example, focuses on the ability of potential hires to “wow” others through their service to them. Zappos is built on a belief in extraordinary customer service and wants to ensure that new hires bring that orientation with them. Questions in this area include “What’s the best work-related compliment you’ve ever received?” and “What’s something that you did at work that maybe no one else knew about but you are very proud of?” A different set of questions probes if a potential hire can “create fun and a little weirdness” (another core value of the firm). Applicants are asked to rate how weird they are on a scale from 1 to 10 and then describe something they recently did that was weird. Zappos believes that work should be fun and that weird people are simply more fun to be around. Not many companies would assess a candidate’s weirdness, but Zappos is serious about the need for a fun work environment. Zappos also uses other data to assess candidates. For instance, it observes how candidates interact with people when they make their initial visits to its company building. Those who act in ways that contradict the firm’s values are rejected. There are cases where highly qualified applicants were rejected because they were rude to the company shuttle bus driver who picked them up at the airport on their arrival.

Those who make it through the hiring gauntlet at Zappos are then required to complete a rigorous four-week training program, much of which focuses on understanding and living the firm’s values. The training also includes a stint taking customer orders in the firm’s call center. The firm’s new-hire training is required for its most senior as well as its most junior people—there are no exceptions. In one case, the firm took a year and a half to locate the right person to fill a senior role. The firm then fired the individual just weeks after his arrival. He made the mistake of believing that an orientation program was optional. He was terminated after arriving late for two sessions. He indicated, on his way out, that he didn’t understand the firm’s seriousness in regard to its cultural values.⁶ After the training, the company then makes what it calls The Offer. Each new hire is asked if he or she wants to quit the firm and be paid to do so. The company only wants to keep those who are “all in.” The Offer has increased over time and now equals $2,000.⁷ Zappos indicates that only 2 percent of its new hires take the offer, but the impact on the 98 percent who remain is significant in affirming their commitment to the company. They walk away from a payout to stay with the firm.

The stronger and more unique the culture of a firm or team, the more important fit becomes.⁸ This is one reason that firms such as Zappos and Patagonia initially hired only friends of the founders. Cutting-edge firms are passionate about their beliefs and have particular ways of operating—and, as a result, they can be less welcoming of those who don’t share their world view. Patagonia, for example, looks to hire people who are actively involved in sports such as climbing and surfing (so-called dirt bags). People who prefer to sit indoors and watch TV, or those who don’t care about the environment, will feel out of place at Patagonia. The firm’s founder notes, “This is a unique culture, extremely unique. Not everyone fits here. I’ve found that rather than bring in businessmen and teach them to be dirt bags, it’s easier to teach dirt bags to do business.”⁹ Patagonia believes technical and professional skills can be taught—but a passion for the outdoors is innate and thus part of the firm’s selection criteria. Cutting-edge firms would rather hire, if forced to do so, people who are “A’s” in regard to cultural fit and “B’s” in regard to their talent.¹⁰

A leader’s job, in large part, is hiring and motivating the right people for a particular task. The ability to assess the capabilities of individuals and then determine how they will work together to produce a desired outcome is more of an art than a science. That said, I find in my consulting work that the skill of assessing talent varies widely among leaders. Some leaders are simply much better than others at assessing people’s current capabilities and their future growth potential. Leaders also vary in their ability to assess how people will work together, how they will gel, when working together within a team. Think of any great endeavor and the critical element of staffing it with talented individuals who can collectively deliver what is needed. If a leader fails at this task, efforts to make a group or team more effective “downstream” are likely to fall short. The lesson from cutting-edge firms and teams is that cultural fit must be a key factor in making their hiring decisions. Leaders also need to create formal and informal practices that increase the likelihood that managers at all levels will do the same in making their hiring decisions.

Arguing that cultural fit is essential raises the question of how to define culture. The simplest definition is that culture is “the way things are done around here.” Each firm has particular patterns of thinking and behavior, which develop over time as a firm overcomes challenges in its efforts to survive and grow. However, as the scholar Ed Schein notes, these patterns of behavior are more complicated than the routines within a company. They derive from deeper-level assumptions, particularly in regard to what is needed for the group to be successful. Netflix, for example, is a culture that believes in the primacy of talent—that is, the firm believes that the company or team with the best talent will produce the best results and win in the marketplace. This may appear self-evident, but other firms, with different cultures, hold different assumptions. For example, some believe that the company with the most robust processes or the best technology will deliver the best results.

There are several risks when resumes become more important than cultural fit. The first is that those who don’t fully buy into a firm’s mission and way of operating are in most cases less likely to give their all to make their company or team successful. As a result, the upside of having individuals and teams who are “all in” is lost or at least diminished. This need is a challenge, in particular, as a firm grows and hires hundreds if not thousands of employees. They need to have people on hand to manage the growth, to meet near-term demands, and thus the screening filters can become less disciplined. There is also more demand on a firm’s leader’s time as a result of growth, and vetting candidates can easily become less important.

A second, more extreme, risk is that those who don’t fit a firm’s culture become toxic to that culture. Most of the attention goes to hiring those who are embodiments of a firm’s culture, but in some cases, the impact of those who are at odds with a culture have a greater impact.¹¹ For example, Zappos strives to create an optimistic work environment where people believe in the company’s goal of increasing the level of happiness in the world. Those who are cynical, perhaps believing that happiness is an inappropriate or unrealistic goal for a business, can influence others through what academics call emotional contagion. This possibility is supported by research that indicates how a toxic employee can have a negative impact by infecting others with their attitudes as well as their behaviors.¹² A final risk is that people who don’t fit a firm’s culture are more likely to hire others who also don’t fit the culture. They are also more likely to tolerate behaviors in others, once hired, that are at odds with the firm’s cultural values and norms. Hiring the wrong person, then, is more than making a bad decision about one individual—hiring a bad fit puts the larger culture at risk.

A final risk is that those at odds with a firm’s culture will not be able to get things done within that culture. New hires sometimes fail because they either don’t understand how their new culture works or understand it but devalue it. This does not mean that a newcomer needs to blindly follow what others expect or blindly accept the status quo. It does, however, mean that an awareness of a group’s culture is essential to working effectively within that culture. A highly visible case of cultural failure occurred at Nike years ago when it appointed an outsider to be its new CEO. William Perez had worked in his previous firm for more than 20 years and came into his new job with an impressive set of skills. He lasted, however, only 18 months with Nike, in part because adjusting to its strong culture was too great a leap. Those who reported to him never rallied behind him, and he remained an outsider in their eyes despite being the CEO of the company.¹³ The same challenges hold true for new hires at all levels within a firm. Cultural fit is a key to influencing others and getting them to work with you in a collaborative manner. Even those brought into a company or team as “change agents” are often on the losing end of the culture dynamic—they fail because they don’t understand how to operate within the culture they are striving to change.

Cultural fit is particularly important when staffing initial positions within a company or team. The tone set by early members of a group impacts subsequent hires and, as a result, has a disproportionate influence on the group’s emerging culture. Therefore, great care is needed in selecting a group’s first hires, ensuring that these individuals fully embody what leaders want to see in their groups. Brian Chesky, the founder and CEO of Airbnb, took a great deal of time to hire his firm’s first employee. He spent five months reviewing thousands of resumes and conducting hundreds of interviews before making an offer to the engineer. He explained why he took so much care in making that hiring decision:

Some people ask why did you spend so much time on hiring your first engineer. I think bringing in your first engineer is like bringing in a DNA chip to the company . . . if we’re successful, there were going to be a thousand people just like him or her in that company. . . . There was something much more long-term and much more enduring which was, do I want to work with one hundred thousand more people like this?¹⁴

Chesky didn’t do this for just the first employee. He hired the first 300 employees of the firm—screening the applicants and conducting the interviews. He was looking for those he described as missionaries—people who believed in the firm’s mission. One question he asked to identify this trait was, “If you had just ten years to live, would you take this job?” The importance of hiring those who believe in Airbnb and its higher purpose is expressed in the comment of one employee regarding the firm’s culture:

Airbnb really doesn’t hire people unless they are passionate about the product, its implications and its future. You can be off the charts in terms of brains, experience and technical skills, but if you come off as blasé about what we do, you won’t get hired. I think that really distinguishes us from other companies and ensures that we’re all invested in the company’s future, not just financially.¹⁵

The former human resources leader of Netflix noted how her firm, as well, placed great emphasis on hiring “true believers” in the formative stages of the company: “Here’s what you want in your first 100 employees: the best talent you can afford, who work hard and believe . . . The belief part can actually outdo the other two. It’s more than passion. . . . People need to believe.”¹⁶

There are potential downsides of being too focused on hiring those who are a cultural fit. A team that values cultural fit over experience or capabilities may fail to hire or promote necessary talent. The result is a company of people who work well together, people who collectively share a set of values, but don’t collectively have the skill needed for their company or team to win in the marketplace. Most firms, cutting-edge groups included, look for a threshold level of capability before cultural fit is considered in the hiring or promotional process. The question, however, is, what does a group do when it needs someone who is far above threshold in talent—perhaps even world class in a particular area that is critical to a firm’s success (such as finance or logistics)? The easy answer is to hire people who are both world class and a good cultural fit. In reality, such people are difficult to find. The question then becomes, what level of compromise is acceptable in regard to talent or culture? Cutting-edge firms, as noted, are less likely to compromise on the cultural side, in contrast to more conventional firms, which are more likely to compromise on the cultural side. These firms may not even view cultural fit as a factor in making their hiring decisions, or they may rationalize a candidate’s poor cultural fit because the capabilities of that individual are so impressive.

Another risk in valuing fit over experience is that a firm or team can become monolithic in hiring only those who fit a particular style. Culture fit, if not determined skillfully, can screen out people who don’t fit a narrow definition of what each firm views as a model employee. All things being equal, differences among team members in a group or team enhance the ability to manage complex challenges.¹⁷ The way cutting-edge firms deal with the risk of being too homogenous is to ensure that their people are first committed to the firm’s purpose and core set of values. Then they embrace differences in background, thinking, and style. Pixar is particularly notable for its willingness to take risks on people who are different than others within the company. In particular, it goes out of its way to bring in people who don’t know the “Pixar Way.” The goal is to deliberately hire those who will challenge the status quo within the firm and, as a result, make the firm stronger. The director Andrew Stanton, for example, had not touched a computer when he was hired to direct the computer-animated film Finding Nemo. Stanton, however, believed in the core values of Pixar—with the most important being the centrality of great storytelling and the need to develop a cohesive team. With those core beliefs, he could bring into the company new ideas and recommendations.

An emphasis on culture also requires removing those who, once hired, turn out to be a bad fit. Pixar, for example, hires highly talented and creative people—but they must have an ability to work in a team environment. This doesn’t mean that people are any less intense or less open in expressing their points of view. In fact, Pixar wants strong-willed people who will challenge the status quo. Teamwork, however, requires that they work well with others, in their own team and with those in other teams, in the very complicated and challenging process of making an animated film. The firm’s CEO noted:

[At Pixar] there is very high tolerance for eccentricity, very creative, and to the point where some [of our people] are strange . . . but there are a small number of people who are socially dysfunctional [and] very creative—we get rid of them. If we don’t have a healthy group then it isn’t going to work. There is this illusion that this person is creative and has all this stuff, well the fact is there are literally thousands of ideas involved in putting something like this together.¹⁸

The first task in hiring for fit, hiring the right person, is determining what you stand for as a company or team. Most large firms have a set of values that define their ideal cultures. Go to their websites and you will see their values listed. All good. All nicely worded. These values, however, often fall short on several fronts. The first is that many firms develop a set of values that are so general that they have no real impact on people or their behavior within a firm. You find, for instance, many companies that value integrity and teamwork. But what company or leader doesn’t want integrity and teamwork? For values to be meaningful, they need to fit the specific mission of a company and have an idiosyncratic bent to them. There needs to be some authentic edge to the values that are essential in realizing the firm’s purpose and values. The notion of “dirt bags,” for instance, uniquely fits the history and mission of Patagonia. It’s that firm’s fingerprint—no other company strives to hire and retain dirt bags.

A second mistake is to develop a long list of values that cover everything that could possibly be important to a company or group.¹⁹ The result is a set of values that people either don’t remember or don’t use to guide their behavior (as there are simply too many to follow). The problem is that people have difficulty internalizing many values and, more importantly, choosing between these values when conflicts arise. For example, a firm suggests that delivering results is an imperative but so is delighting customers. These two values are often synergistic, but there are cases where they conflict (for example, when meeting a customer’s request will cost so much that it hurts the group’s ability to deliver profit). Which has priority? Organizations that hire talented people expect them to make the right call in this situation. However, too much ambiguity causes problems because different people and teams will focus on one value more than the other. A researcher at the University of Pennsylvania, Andrew Carton, studied this problem in hospital settings.²⁰ He found that the performance of a hospital improved if the leadership articulated a clear vision for his or her organization. The key variable, however, was having fewer organizational values (no more than four) and then ranking those values from most to least important. In so doing, the leaders gave people the context they needed to make decisions when conflict among values arose.

Another, related, problem occurs when a group’s values are often defined at such a high level that people don’t know what they look like in action. Values should be defined in terms of expected behavior—defined in both positive terms (you should do this) and negative terms (you should not do this). Teamwork is a common value—but what does it mean in a particular firm at a behavioral level? Pixar, for example, tells its people that anyone in any group can talk to anyone in another group if he or she has a question or idea. No need to go up the hierarchy for approval to do so. In this case, teamwork means communicating across group boundaries in an open and direct manner (“talk to anyone you like without permission to do so”). Each company, and in some cases each team, needs to define its “vital few” values in specific behavioral terms that give people a clear sense of what is expected of them.

A third mistake in regard to values is the failure to link them to a firm’s objectives and work practices. For example, a firm may indicate that it values customer service above all else but it has no objectives linked to customer service and no way to measure the customer service it provides. Or it fails to link its hiring, promotion, and reward practices to the value it places on customer service. In these cases, the firm’s values are aspirational, with no follow through to make them come alive within a company. Each of the cutting-edge firms in this book has carefully determined how to link its values to the rewards it offers its employees and, in the negative, the consequences if people violate those values. In this respect, cutting-edge firms are more likely to reward and punish based on how people perform in regard to their values. It is not only a matter of people and teams delivering results—how those results are delivered is just as important.

A final mistake, and perhaps the most damaging, is for a company to articulate its values and then work in a manner that violates them. That is, they espouse one set of cultural beliefs but act on a different set of beliefs. They may, for example, say that talent is all important but then invest little time or money in attracting or developing talent.²¹ A well-known example of a conflict between espoused versus actual values is the energy company Enron. The company, no longer in existence, had a set of values that included integrity. It claimed to work with customers openly and honestly. It then acted in a manner that set the benchmark for unethical behavior in defrauding its customers. Less extreme but more common are firms that promote people who behave in ways that are at odds with the values they embrace. For instance, a firm talks about the importance of results and then promotes someone who repeatedly fails to deliver on his or her performance targets. Or a firm says that it values teamwork and then promotes someone who has delivered results but in a manner that is anything other than collaborative (hoarding information from other groups, failing to share resources, or undermining colleagues who are viewed as competitors, for example).

Valuing fit over experience in the hiring and promoting of people requires a clear awareness of the single most important quality needed in those who work for a company. A range of cultural values may be important, but one should take priority. For example, Patagonia has gone through various cycles during its history in hiring people. It started by bringing into the firm friends of the founder—people who were like him in their beliefs and lifestyle. As the company grew, it increasingly looked for people with more traditional business backgrounds and specialized skills (what the founder calls the MBA types). After a number of these people failed in their roles, the firm went back to its roots. It looked for people who were closer to its original hires in being outdoor types with a commitment to environmental causes. As noted in the last Chapter, the commitment to the firm’s central beliefs should be deeply felt—an obsession. Those who work for Whole Foods need to love natural food. Those who work for Pixar need to love storytelling. Those who work for Zappos must love serving others. A major benefit of being a purpose-driven firm or group is that you know what you are looking for in new hires and attract like-minded people. Whole Foods, for example, looks for people who are committed to improving others’ well-being through food. The firm has a clear identity, and this allows it to attract those who value what it values. The firm’s CEO notes,

Increasingly, the talent is finding its way to us. We don’t tend to lose people, and in my conversations with Team Members, when I ask, Why did you come to Whole Foods? They say, I did my research, and I want to be in a company that has values. I want to be part of something larger than myself.²²

In this respect, the cutting-edge firms and teams are looking for people who are pursuing something beyond paychecks or the advancement of their careers. They are missionaries who believe in the cause to which the company is dedicated.

There are two additional traits that are important to ensure a good cultural fit. As noted in Chapter 1, cutting-edge teams want people who push the extremes on both results and relationships. Each company has its own way of operationalizing results and relationships, but the goal is the same. Pixar, for example, looks for an ability to deliver results by asking potential hires to describe one thing at which they excelled in the past. It can be work related or more personal (such as a hobby or sport far removed from Pixar’s business). The goal is to find individuals who have reached a high level of excellence in an area of interest to them—believing that those who have done so, who know what excellence feels like, will also do so in their work at Pixar. The firm wants those who have experienced excellence and know what it takes to achieve mastery in any given area. At Airbnb, the founders pursue a similar line of thinking in asking potential hires to describe something they have done in their past that is exceptional. That firm’s CEO notes that in his interview process he looks for people who are dreamers that make things happen. He says,

I also ask people to summarize their life in three minutes. I’m trying to figure out the formative decisions and experiences that influenced who you are as a person. Once I figure that out, I’m trying to understand the two or three most remarkable things you’ve ever done in your life. Because if you’ve never done anything remarkable in your life until this point, you probably never will.²³

There are many ways to screen for those who can build relationships. Greg Brenneman, chairman of CCMP Capital, uses what some call the airplane test. He asks himself after interviewing a candidate,

If I were to get on an airplane with this guy or gal, would I want to fly across the Atlantic with them? Are they nice people to be with? Do you want to be with them? Because I find that people that don’t relate well to anybody, from owners or board members to peers to direct reports to folks that actually work for a living in the trenches, they don’t succeed very well. You can usually tell that by asking, “What do you enjoy doing? What do you do as a hobby?” And ask a few questions to the people that work around them, and you get a pretty good sense pretty quickly.²⁴

A different version of this interview screen is the “copy machine” test. In this case, you ask yourself if a potential hire is someone you wouldn’t want to see in the hallway if you happen to be working late in the night. You are tired and don’t have time to deal with someone who is difficult to interact with—someone you don’t really want to see when you are trying to complete a difficult task.²⁵

Other firms, such as Zappos, take a more direct approach in assessing a candidate’s ability to build relationships. They ask potential hires, “Do you feel you are a better individual contributor or a better team player? Which do you prefer?” “When was a time you ‘took one for the team’ even though it wasn’t your responsibility?”²⁶ Other firms may pose questions about past successes, screening for self-glorifying responses. They may look, in particular, for applicants who describe accomplishments in terms of a group’s achievements (versus a more self-centered achievement). When someone’s description of his or her greatest accomplishment starts with “I did this” or “My results were . . . ,” it can be a red flag—a sign that the person is overly self-centered. Other firms probe the person’s ability to build lasting relationships. Alan, founder and chief executive of the technology firm Pegasystems, is a leader who understands the importance of relationships in organizational performance. He takes the following approach in assessing the relationship capabilities of a potential hire:

One question I’ve found to be extremely powerful as a predictor of how well people will do in customer-facing roles is to ask for specific names of people they’ve worked with as those people moved between companies or roles. . . . And I’m really quite specific, and I ask them if it would be O.K. to talk to those folks. A lot of people don’t have those sorts of relationships. I find that to be a really useful predictor of whether they are relationship-oriented, which I think is important not just for dealing with customers—it’s important for dealing with people inside the firm as well.²⁷

The key is to find those who can partner with others to produce what is needed and, more generally, help build a sense of community with the company or team. One of my clients, for instance, believes that self-awareness is essential if people are to work well together. He asks each interviewee to summarize the conversation that he had with them in the interview. More specifically, he says to the interviewee at the end of the meeting, “I am going home tonight and will tell my wife about my interview with you today. What do you think I will say to her?” His goal is to assess how well the person is reading his or her impact on others versus seeing only what he or she wants to see. The assumption in asking this question is that a more self-aware person, one who “reads” the interview and interviewee accurately, will have greater success in building relationships with others in the firm.

Cutting-edge firms and teams, then, look for fit on three attributes in making their hiring decisions:

1. Belief in the Firm’s Higher Purpose: Is the person “all in” in his or her support of the firm’s core purpose? Does he or she have the necessary passion if not obsession regarding the firm’s reason for being?

2. Ability to Deliver Results: Does the person have the drive, temperament, and skill needed to deliver necessary results at the highest level?

3. Ability to Build Relationships: Does the person have the drive and temperament needed to develop close working relationships with his or her team members and with those in other teams?

Each firm or team needs to determine how to screen applicants for each of these three attributes, which will vary depending on the firm and how it defines success in each area. An additional complication is that the process is not simply identifying individuals with these necessary skills and traits. It also requires an assessment of how each individual’s traits will mesh with others in a specific team—that is, how people in a group will interact to produce a desired outcome. The level of teamwork required, of course, varies with each task, but most complex endeavors involve working with others to achieve a desired outcome. Hiring people, then, is not just hiring them into a position as individuals. It is hiring them into a team with a number of other people with a diverse set of capabilities, values, and styles. Those making a hiring decision need to assess how well the various members of a team will work together.

Viewing cultural fit in this manner means that team members must complement each other, must develop the right chemistry, if the value of the team is to be fully realized. This doesn’t mean, however, that members are clones of each other. For example, the degree of focus on results and relationships needs to be the right mix within a team to produce optimal outcomes. In particular, a group that is heavily results oriented will benefit from having some members who are more relationship focused. Inversely, a group that is heavily relationship based will benefit from adding those who are more task focused. In this way, the group is more likely to have a necessary level of both attributes. Members, including a team leader, who bring a different focus in regard to results and relationships bring something that may be lacking–versus simply reinforcing or replicating what already exists within the team.²⁸ This benefit, however, is undermined if the person doesn’t value or have threshold skills in both results and relationships. In that case, the person will most likely be rejected by the team because he or she doesn’t possess the basic cultural traits needed to be successful in that particular group and firm.

TAKEAWAYS