A Limited Interest Article on Employer Value Prop and Hiring

Fair warning: I'm pretty sure this stuff is boring to most people

Note: I’m pretty sure there’s at least some stuff in this article that’s interesting to a general audience, but it’s pretty firmly aimed at talking generally about hiring/recruiting, and mostly in terms of tech-world stuff. If that’s the kind of thing that’s very boring to you, this article will be very boring to you.

People who are interested in this specific topic (i.e start-up world stuff, growth) might do well to go check out Srivatsan Venkatesan’s just-launched growth blog here. I’m probably not going to talk about this kind of stuff very often, Srivatsan presumably will, and he knows more about it than I do.

When a person plans a start-up, they do a certain amount of wishful thinking; If consumer uptake of product X proceeds at rate Y, they will be able to get more funding, further accelerate growth, and make hundreds of millions of dollars. This vast wealth then allows them a 40-square-foot Bay Area room to live in, complete with a reasonable 60k salary for a person who busses in from beyond Oakland to powerwash the hobo-poop from their door.

The cruel rug-pull comes not in product-market fit or technical feasibility but from a more banal and overlooked direction. To build a software product, it turns out you need engineers, and our hypothetical startup guy eventually gets slapped in the face with the reality that hiring an engineer is a trick that most people can’t pull off.

In a complex way, this is because software engineers make a lot of money. If you are trying to hire money-motivated engineers, this is a problem simply because you probably can’t consistently outbid Google, Uber and the other big boys - they have a huge appetite for talent and are (almost) always hiring at (almost always) higher rates than you are likely to be able to afford/want to pay.

Counterintuitively, It’s also a problem if you are trying to hire an engineer who makes so much money that he isn’t money motivated - say a 22-year-old kid with no significant expenses beyond rent who makes low-six-figures money fresh out of college with every expectation of moving to low-mid sixes in the next five years. When this kid asks you why he should work at your company, he isn’t thinking about money; he already has more of that than he can spend.

This is where people doing employee value prop work enter the picture. If you want to hire that money-motivated engineer, you need someone making the case that your job opening offers him a kind of eventual income potential that he won’t get at a Google. If you want to hire a young person who already makes more money than he needs and knows it, you have to be willing to talk to him about the things he does care about.

I’ve done some employee value prop work - it’s part of my day job, and one of the parts I actually enjoy. I’ve talked to tons of applicants and I hang out with tech people, and I’ve learned a lot about how people talk about their companies, how potential employees hear that kind of communication, and how companies hire.

There’s a “liar’s version” of everything you want to say

Silicon Valley tech-job job descriptions go through cycles and different things go in and out of vogue. In the past, these trends have encompassed anything from nap rooms in the office to razor-scooter riding to free snacks to eat while you get company-sponsored guided meditation sessions. In the bay area, this stuff catches on quickly; if people hear that a company managed to hire a top-shelf engineer by offering in-house shoe accessories, a week later every office in the entire bay area will have free designer shoelace stands in the break room.

One more recent and far-reaching example of these trends was unlimited time off, the general idea being that you’d be more likely to hire an engineer if he knew he could intersperse his 115-hour two-week sprints with enough vacation time that he wouldn’t have a stress-related psychotic break at the ripe old age of 24.

This is now slowly falling out of favor, mostly because it’s stopped working; having unlimited time off used to be a big bump to recruiting efforts, and now it barely makes a dent. Part of the reason for that is that it’s much less rare to see it now - people tune it out. But a bigger part is that for every company that offered unlimited time off in an honest way, there was another company lying about it.

The dark side of unlimited paid time off is that it’s only as good as your ability to actually use it, and a lot of companies intentionally or unintentionally just aren’t set up to let people take significant amounts of time off. So Bob goes to his boss and mentions he’d like to use a couple weeks of his time off, and gets something like this:

I mean, yeah, you have unlimited time off. But that’s built around your ability to keep up with your workload, and I think we both know that you are attached to too many projects that need your input to be out of office for that long right now.

Sometimes this is true both in fact and in sentiment, and Bob can take the time off later. But there’s an awful lot of Bobs who face down the end of every work-year knowing they took less than two weeks time off, and in a strict “takes vacations” sense have a worse job than a janitor. In other companies, they might be paid for accrued but unused vacation time, but unlimited time off doesn’t accrue; there is no number the less lucky Bobs can point to as a quantified debt that needs to be repaid.

Applicants get wise to this kind of thing. Are you representing that you have a can-do, fast-moving culture? Everyone who applies knows that’s sometimes code for “We work you until you literally die”. Do you have a culture of personal ownership of projects leading to personally owned impact and acclaim? People know that sometimes means “we leave you on your own without resources to perhaps drown”.

The takeaway here is that people are right to be cautious, even if your particular version of these things is genuine and beneficial. If you want your perks to draw people in, you have to somehow work around that caution and convince them that what you offer is the “good universe” version - the one they actually benefit from. This takes us to the next section:

Liabilities are the next big thing

In accounting, a liability is (approximately, leave me alone accountants) a debt that needs to be repaid in the future. In accounting, you have to keep track of these; if you issue a financial report, you generally have to acknowledge them. If the debts are called, you have to pay them back. They are a solid, acknowledged obligation of sorts.

With that (probably inaccurate, don’t email me, accountants) definition in mind, consider the following variation on unlimited time off, which I’ve simulated based on several job ads I’ve seen:

Our company offers unlimited time off, and we consider it important that you actually use it. We have a promise and expectation that you take a minimum of four weeks off a year - if you look like you aren’t going to, expect your manager to force the issue.

Right now, this is the believable version of unlimited time off - it’s the one people suspect is going to actually result in them working in a culture where taking time off isn’t a big, difficult ordeal. Now consider this description of a fragment of company culture:

We are looking for someone who exercises real ownership over their projects and can work independently to bring about quantifiable results. But we don’t expect you to do that without help - you aren’t expected to bear the blame if your project doesn’t move forward as the result of a lack of resources, help, or because roadblocks other people put up in your way.

Our pledge to you is that we create the kind of environment where you have the freedom to do your work in the way that makes the most sense as well as the help you need to bring your projects home. Keep notes. If you find you can’t work effectively in our environment, tell us so we can fix it.

What both these things have in common is company-held liability. They have concrete bits employees can point to if they need to show that promises aren’t being kept, worded in ways difficult for the company to weasel out of with precise-wording games when it’s their turn to be held to account.

Not every company is willing to level the playing field like this, but if you aren’t prepared to put some skin in the game here, don’t be surprised when people accurately interpret that as a losing situation for them and fail to apply as a result. There’s an increasing amount of places that are adopting this already; it’s not like the applicant won’t have choices.

A certain amount of people don’t give two shits about your company mission and that’s actually fine

I had a conversation with a chief-of-staff type person a while back which, when paraphrased to protect the innocent, resulted in the following story:

I wanted to hire the guy, but as part of my conversation with him I had to mention that he shouldn’t bring up salary at all until the later stages of the application. I told him to talk about it with me, but not with anyone else he spoke to until he was almost to the offer-letter stage.

Both the applicant and me were from backgrounds where we understood that good pay was both important and sometimes failed to materialize at the end of application processes. Everyone else in the company knew that on some level, but had bought into a “our mission is important and we want mission-based-buy-in” narrative as well, and saw people asking about money as an indication they wouldn’t go on to do good work.

Some car dealerships take your ID away from you as soon as they can - they say they can’t let you on the lot to see cars without some level of collateral, or some other rationale why it’s reasonable. They need those rationales to distract you from the real reason they want your ID: You won’t be able to leave without it, and it’s much easier to make you wait around when leaving means asking for it and having to convince a trained salesman to go get it for you. The longer you wait, the more committed you are to the process - whether you like it or not.

You know who knows about this trick, even if they never experienced the car version of it? Pretty much every person who has ever looked for a job in the US. And they are so very, very sick of it.

The people who are doing the whole “we want mission commitment, so we don’t talk about pay” thing can be broadly split into two groups: those who really don’t get that people care about how much money they make, and people who fully know that but are actively exploiting is a disparity in power to push people into a disadvantageous position. Applicants who have been around the block a few times are going to assume you are the latter because it’s safer for them, and probably true anyway.

Given the justified doubt most applicants hold about why you are obscuring important information, a decision to obscure pay levels when there is a choice to reveal them (sometimes there isn’t, more on this later) is often actively dumb. A company is usually looking to hire someone competent; they want a person who thinks about things deeply and turns those thoughts into efficacy. That kind of person is incredibly likely to know the value of both their work and their time and is surprisingly often willing to say “oh, I just won’t apply then” when it seems like you are wasting both.

I’m not entirely without sympathy here. It’s actively hard to tell how good some types of workers are before you have a couple of conversations with them, which means that in jobs that have a lot of pay variance based on competence (like engineers), it’s hard to pin down an exact amount you might want to pay them.

The solution here is to publish pay ranges and make that explicit - let people know how you classify your engineers based on skill, and give them an idea how much you pay in each range so they at least have a ballpark. If you don’t know how to do that, figure it out.

But for the love of good, please stop pretending like people shouldn’t care about money - they should, and for the exact same reason you wouldn’t accept it if they revealed they didn’t want to work very hard. I know some of you are saying something like “But our mission!” here, but stop; it’s bullshit. You are an employer. You are asking someone to do work. Tell them what you are willing to pay for it.

The man who figures out the false negative problem will rule the world

Dan Luu (who is a surprisingly nice guy who thinks about stuff really hard) sometimes talks about the dangers of false negatives in hiring processes:

Dan Luu @altluu

@munificentbob @danluu I agree that companies are trying to filter out people who are difficult to work with and/or cause problems for the org but, IMO, filters at the large companies I've worked for seem pretty ineffective at achieving their goals while filtering out a lot of people who would be good.

I can’t find his better Tweets explaining it, but the basic concept goes like this: Every hire you make has a chance of being a false positive - i.e. someone bad who causes some level of damage who you eventually have to fire. When this happens, it’s obvious; they do bad work or cause workforce morale problems in some way, and you get rid of them. Companies are used to this and have ways of dealing with it.

False negatives are much more subtle. A false negative is an applicant who you should have hired, but didn’t. Maybe they flubbed the living hell out of an important question despite knowing the answer to it, or were having a bad day when you interviewed them. Maybe it’s something more insidious, like not hiring a person because they are honest about pay demands, like I mentioned above.

When that happens, a company misses out on benefit, even if they never realize that’s the case. They are now forever weaker and slower than they should have been, but in a way that’s invisible to them; from their viewpoint, there was just some guy who they interviewed who didn’t make it, and that happens about ten times a week.

This can also happen surprisingly early in a process, like when a hiring manager says “Well, my experience is that we are just better off without people who would have a problem with X; if people aren’t applying because the job description says X, then I’m glad - that’s just self-filtering.”. In this case, the false negative is even more invisible - not only did the good worker not end up getting hired, but the company managed to not give themselves a chance to make that decision at all.

Not only does this weaken companies, but it makes every aspect of recruiting more expensive. Do you normally have to interview 20 people to hire one? A false negative rate of 5% is robbing you of an extra employee you could have had for “free” every time you run that 20-interview cycle. Are you losing out on, say, $100,000 a month’s worth of progress because you are understaffed? A high false negative rate is making that worse.

So why not solve this? It’s partially because all the risks are real and all the solutions are hard. New hires take a lot of manager time to get situated, so managers are reluctant to approve hires if they aren’t extra-super-sure, which increases the false negative rate. Some companies are overly-afraid of overhiring and are afraid of firing without an awful lot of just cause.

These visible, obvious downsides are potentially serious things that people really want to avoid. When you go to explain to a hiring manager that they are being too picky, they justifiably point out that you are asking them to be less careful, then point at that big list of real risks, and the conversation stalls.

If you want to counter that, you need solutions, but what are they? You would need to start by quantifying false negative rates and identifying individual false-negative applicants so you could adjust processes to avoid those mistakes, but how do you do that? Yeah, Bob might have ended up in a good position at a better/bigger more desirable company than yours after you rejected him, but that doesn’t tell you a lot about how he’s doing there or how he would have done in your presumably different working environment. Most publically observable direct indicators you can think of are like that - there isn’t enough context to draw real data from.

So you need probably need indirect indicators, like doing a ton of surveys over a long period of time that you can then analyze against direct indicators like longevity at new companies and pay increases over time. But how do you get rejected applicants to fill out those surveys?

At some point, someone smarter than me is going to figure out this problem in a way that lets people improve their false negative rates a few percentage points, productize it, and make enough money to buy the statue of liberty. For now, though, consider this:

1. I caution you not to ignore the possibility you are rejecting people for counter-productive reasons; it’s easy to overlook, but it’s probably the biggest unaddressed problem in hiring.

2. The people you are trying to hire care about your false negative rate. Right or wrong, they wouldn’t usually apply to your company if they didn’t think they could do good work there, good candidates included. The more you show you’ve thought about this problem and take action to protect them from it, the more confident any particular individual is going to be that applying with you isn’t a waste of time.

3. If you have steps that are likely to cause false negatives but that you feel you can’t get rid of, front-load them in the hiring process. If you are going to prioritize false-positive protectiveness over false-negative minimalization, then the least you can do is get it out of the way in the phone screener and not a month into the conversation.
   
   Once you’ve figured out how to do this, tell people you do it - tell them the steps you’ve taken that show you value their time.

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Like I said at the top, I’m aware this isn’t the most interesting article in the world for most people. And I don’t only mean “it’s boring for people who aren’t involved in hiring”. I suspect most people who are in hiring find it boring as well, or I wouldn’t see so many company job pages that treat compensation as an afterthought, or that don’t take as much as a paragraph to describe company hiring processes.

I had a conversation with a consultant once who had done some work quantifying what benefit well-funded startups was attributable to a “good hire” over the course if their first year, and his eventual estimate was something like $50,000-$100,000. At the same time, I’ve talked to a friend before about offering a service that goes to a new company, helps them work out the kind of internal culture they want and are willing to commit to, and then helps them communicate that and other aspects of their company to applicants in a reasonably comprehensive way. For us to do this well, we’d probably have to charge about $50,000-$150,000 per job, and get 5-10 jobs a year doing it.

We’ve never done this. Could we make a tool for companies that would let them get an extra needed hire a year? Yup. we just aren’t sure enough that we could get that much work. Despite the abundance of companies that have trouble hiring good people, there just aren’t that many who care about it enough to respect the people they are trying to hire and give them a full picture of who they are and what they want to do.

If you are a hirer, this is worth thinking about. It’s not just a matter of efficacy (although that’s in play here). It’s also oddly a sort of moral thing. I don’t think you can read an article like this without getting a sense that I’m sort of sour grapes about the whole subject; that’s an accurate impression because I’ve been burned by incomplete or dishonest company communications so many times that now I do work to try to stop it from happening to others.

You probably don’t want to be the kind of person who misses out on good applications or makes the application harder on people than it needs to be, but avoiding both of those negatives takes effort. Do the work.

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