This Is How to Reduce Employee Turnover and Hire Top-Performers
Turnover at tech companies is very high.
In fact, at ten top tech companies ranging from Facebook and Google to Airbnb and Uber, the average tenure is between 1 to 2 years. Similarly, in software, the quarterly turnover rate was over 22% in 2017, significantly higher than other industries also seeing an uptick in job creation like semiconductors (15%) and medical devices (17%).
These high turnover rates are really, really expensive and hamper all-around company productivity.
So why is turnover so high in tech?
To start, increased demand coupled with a supply shortage in software engineering and sales roles drives hiring competition, creating an employee’s market.
Employees can command higher salaries by job-hopping than they can by staying in one place, and when work becomes tedious or uninteresting, there are better options at other companies within reach.
Since many companies no longer invest in real pension plans, career pathing, or meaningful raises, employees in turn don’t feel the same loyalty to them that previous generations did.
Then, there’s the tech company culture problem. According to a study from the Kapor Center for Social Impact, nearly 40% of “tech leavers” — individuals who left the tech industry altogether — did so after experiencing unfairness and mistreatment related to their gender or racial/ethnic identity.
To improve retention, tech companies have to make serious changes, from creating more opportunities for career growth to closing the wage gap and combating inappropriate conduct.
But this change all starts with one core practice: hiring.
The secret to lower turnover, healthier cultures, and more innovative workplaces is a streamlined, systemized hiring processes that privileges top-performing candidates with matching values and motivations.
The problem is that developing a hiring process is often neglected because companies are so pressed for time and resources that they feel a need to get bodies in seats as quickly as possible.
With this short-term view, they throw strategic planning out the window, and start interviewing candidates according to inconsistent processes and with a firm reliance on gut reactions.
Here’s the thing: that approach is a recipe for high turnover. The right people don’t get hired, which creates big problems down the road.
With a systematic, evidence-based approach, however, companies can hire better and faster by focusing on the first-minute, upfront work, and then letting the streamlined process do the work.
Defining the Right Roles
The most important step in hiring the right people is defining and designing the right roles. This is the most strategic part of your process, and should always be tied back to your overall goals for the business.
Break out your board deck, strategic plan, business model, and/or target metrics, and think about them in terms of people.
Understand the how, what, and why of each objective, and then start defining what kind of problems need to be solved, systems put in place, and strategies executed. Patterns should begin to emerge, so that clusters of objectives can be categorized into buckets like product, sales, customer success, engineering, marketing, and more.
This is also the time to gather information about the role. Talk to staff members in similar positions, allow other team members with expertise or applicable experience to weigh in, and reach out to peers who have hired to meet similar objectives.
Now that those buckets exist, start looking at the objectives and the elements needed to satisfy them in terms of competencies.
Competencies are the knowledge, skills, domain expertise, and functional capabilities required to get a job done. During your defining process, you will need to understand which competencies should be matched to specific roles to achieve your objectives.
Once you define these competencies, record them immediately. You will need to refer to them constantly to make sure you stay on track and hire the right people.
However, the appropriate competencies are only half of what defines each role. A star performer with every skill in the world may quit or be fired after two weeks because their values don’t match yours or the company’s.
Often when we talk about “culture fit,” we really mean “values match.” Your company doesn’t just have the word “integrity” up on the wall; the behaviors that are expected, incentivized, and rewarded are all tied to integrity because it drives better performance in your business.
If you wanted to, you could even tie integrity back to the health of your business. It might boil down to the number of customers who chose you over a competitor because of your high ethical standards or spotless legal record in an industry known attracting lawsuits.
It’s important to write out what your values are and list examples of key behaviors tied to them that everyone in the company is either already enacting or trying to enact. Otherwise, when you hire for “culture fit,” you may fall into the trap of hiring for general agreeableness or individual affinity, which are not performance indicators or in line with more clearly defined values.
While the combination of competencies and values will be different across the roles you hire, the main attribute you will need in any new hire is the same. Ray Dalio frames this attribute as the primary driver of success in Principles.
“The ability to objectively self-assess, including one’s own weaknesses, is the most influential factor in whether a person succeeds, and a healthy organization is one in which people compete not so much against each other as against the ways in which their lower-level selves get in the way. Your goal should be to hire people who understand this, equip them with the tools and the information they need to flourish in their jobs, and not micromanage them.”
Hire people who are self-aware, self-motivated, and willing to steer their own growth, and then give them the resources they need to chart their own courses.
Those who can will be top-performers; those can’t should not stay with your organization.
Creating a Measurement System
“Principles aren’t principles when you pick and choose when you’re going to follow them.” –Chidi Anagonye, The Good Place
Here’s where the hiring process always falls apart.
You put the upfront work into defining a role, creating a representative job description, and getting your team on the same page. And then you post that job description, ask for referrals, and start interviewing candidates as quickly as possible without any measurement system in place.
Think about it practically. Say you interview twenty people, and of those twenty, you have four team members interview ten. How do you keep your evaluations straight? How do you choose the right person with the competencies and values needed to succeed?
This is really hard without a system for tracking and scoring your candidates, and if you wing it, you’re more likely to fall victim to biases and hire people you like over people who are genuinely the best for your company.
Even if you’re extremely good at keeping all these factors straight in your head and staying objective, are you confident your team members are, too?
Avoid bias, confusion, conflict, and hiring the wrong candidates with one tool: the scorecard.
There are a million ways to make a scorecard, but at its core it’s a simple tracking and ranking tool where you create categories, assign them numerical values on a scale, and record notes to justify your scores.
Here’s a very rough example of a scorecard:
Your scorecard should capture the competencies and values you’re looking for in a hire, and you should implement it uniformly across the hiring process. This will eliminate ambiguity, and also keep you organized.
Always privilege performance and success in your measurement methodology.
When you create the scorecard, be truthful about whether it will allow you to capture what Julia McGovern defines as the three qualities associated with success in a job: “ability to successfully perform the tasks associated with the position, attitudes that inspire them to rise above the expectations of the job, and compatibility with a company’s culture.”
Building a Strong Pipeline
Finding candidates is one of the toughest parts of hiring, and deserves an entire guiding framework of its own. However, there are a few things to keep in mind when creating your pipeline.
For every role, shoot for a wide funnel with at least 100 prospects.
You can pull these from a wide breadth of sources, including internal referrals, LinkedIn or other online recruiting databases, passive recruiting, external recommendations from trusted peers, job applications (but typically only for more junior candidates), community groups with access to relevant networks, and even social platforms like AngelList, Twitter, Meetup, and GitHub where you might be forming relationships with prospects through larger engagement campaigns. You may also work with a talent acquisition firm to build this pipeline quickly and leave you more time for the interviewing process.
Once you have 100 prospects, do a pulse check to make sure that at least on paper they match your competencies and values. Then use your scorecard to stack-rank candidates and get down to the 10 to 20 that move into the interviewing process.
Now that you know what you’re hiring for and have a system for scoring candidates based on those desired competencies and values, it’s time to conduct interviews.
Now the hiring process will feel faster (especially after the first few hires), both because you will nail how to define roles and use the same scorecard template over and over (albeit with tweaks around competencies), and because everyone on your team will have a clear, repeatable interviewing process to follow.
You should conduct three types of interviews before you have top-choice candidates enter “the final audition,” which is defined in the next section. These break down into:
· Phone Screen
· Career History Review
· Values Match
Across these three interviews, you and your team must always use the scorecard and log responses faithfully. My recommendation is to always add 10 to 15 minutes to the time blocked for the interview to give yourself time to fill it out.
Remember, you should be using the same questions for every candidate. This not only standardizes the process, but eliminates bias. When you like people, you tend to give them softball questions and even leading questions.
In fact, for each interview you conduct, beware of two sinister psychological traps: “the halo effect” and the “horn effect.”
The halo effect refers to attributing positive traits to people who feel affinity with or seem like you. A candidate who dresses and speaks like you and supports your favorite team may seem like she has leadership tendencies. Use your guiding questions and scorecard to determine if those tendencies are actually there.
Inversely, the horn effect involves unfairly judging someone who is different. An expert coder with an adaptable mindset and openness to new ideas who would otherwise seem like an ideal match may come off as less than capable because of an off-kilter outfit or death metal tattoos. Fight your own bias and ask consistently if this person has what it takes to make the company better.
But what should you even ask in these interviews, and who should be conducting them to begin with?
The Phone Screen is an initial check on the 10 to 20 candidates who made it through the top of the funnel because of their profiles on paper. A recruiter or member of your HR team can conduct this, though in smaller companies, a hiring manager is also appropriate.
The call should last between 15 to 20 minutes, and cover the absolute basics to confirm that this person is indeed interested in the role and they are what they say they are online or in a resume.
Here are some sample questions.
· Why did you take my phone call?
· What are your core responsibilities currently?
· What other roles have you had?
· How have they compared to your most recent role?
· What kind of career do you want to build for yourself? How are you doing it?
· Why would you leave your current job (or why did you leave your last job)?
· Why are you interested in this job?
· What do you hope to get out of this job?
· What do you hope to contribute in this job?
· If we make it through this process together, who are going to be your references? Why?
· What questions do you have for me?
Fill out your scorecard based on their answers. It’s preferable to keep notes during the interview process to keep your scorecard as accurate as possible.
Career History Review
The Career History Review is exactly what it sounds like — a deep dive into a candidate’s full career. For less experienced candidates, this may be a life history that takes you back to high school. For very experienced candidates, Jeff Hyman in Recruit Rockstars recommends you focus on the last ten years.
In general, the ten-year rule makes sense because it allows you to get a sense of past performance, behaviors, and experiences more directly tied to the present.
A common misconception is that who you were in your youth is also who you are twenty years later. That’s not true — personality is malleable and has been scientifically proven to change with time. Limiting your time frame will give you a more accurate picture of who will be working with you.
The final decision-maker, usually the hiring manager, should always conduct this interview alone and allocate 60 to 90 minutes (including time for scorecarding). The longer interviews are worthwhile because ideally only 5 to 7 candidates make it to this stage.
Your goal is to get a true and accurate picture of this person’s work history, so structure your questions that way.
Ask roughly the same questions for the every role they’ve had over the last ten years, even if that role was “student” or “stay-at-home parent.”
Jeff Hyman’s Recruit Rockstars lays out a collection of questions to use for this type of interview, many of which I’ve woven into my own tried-and-true questions below:
· What questions do you have for me?
· What was the start and end date of your role?
· Why did you choose this role?
· When you first started, how was the role defined?
· What did you inherit when you came on board? (i.e. leads, information, a robust codebase, etc.)
· Who did you report to and who reported to you?
· What was your biggest accomplishment?
· How did you achieve this accomplishment?
· Tell me about a time you failed.
· Why did you fail?
· If you could redo that experience and turn failure into success, how would you?
· What were the biggest challenges in your role?
· How did you overcome (or not overcome) those challenges?
· Tell me about your team. What was the dynamic and how did you work together?
· What did you love about your role?
· What did you hate about your role?
· How was your compensation structured?
· If I called your manager right now and asked about you, what would he/she say?
· If I called your direct report right now and asked about you, what would he/she say?
· Why did you choose to leave/ are you choosing to leave this role?
· What didn’t I ask that you wish I had?
It’s important to remember that the level of polish here is not what counts.
Many top-performing employees aren’t good interviewers because they haven’t had to interview or are in roles that don’t require this type of interaction.
Instead, focus on how genuine they are, and how both their strengths and weaknesses map onto the role you’ve defined.
If candidates make it through the Career History interview, they should enter the Values Match phase where they are measured against their alignment with company values.
Ideally, they should interview with 3–4 people. These should be a combination of folks from the team they will join and peers in different departments. On smaller teams, the hiring manager should also conduct this interview. Interviews should last between 45 to 60 minutes.
Comparing scorecard notes will reveal how the candidate behaves when faced with different types of people at different stages in their careers.
The questions for this can be more customized to the company’s values. If organization is key, you may ask how they went about their last closet clean-out or how they sort all of their desktop clutter. If understanding the technology landscape is essentially, you might ask if they had a magic wand, which tech company would become a client and why.
With that said, you should ask the same questions consistently across the 3 to 4 interviewers. It’s okay if you sound like Stepford Wives — this will telegraph a strong message about the company’s values and expectations.
Questions to ask include:
· What questions do you have for me?
· How do you define X value? (This should be one your core company values).
· Tell me about a time you demonstrated that value.
· What job did you absolutely love and why?
· What job did you absolutely hate and why?
· Who was the best manager you ever had?
· Who was the worst manager you ever had?
· What energizes you?
· What drains you?
· What is your life philosophy?
· What do people say when they talk about you?
· What is the hardest skill you ever taught yourself and why did you do it?
· How would you teach me something new right now?
· What is something you could genuinely give a TED Talk about? Give me the 2-minute version.
· For what in your life do you feel most grateful?
· What did I ask that you wish I had?
For more questions, here’s a list of 230 that you can pick and choose from to create your own customized list of standard questions for each interview.
The Final Audition
After your Career History and Values Match interviews, you should have narrowed your list down to 2 to 3 candidates. These are your top choices, the best of the absolute best.
To gauge who is truly going to deliver the best results for your company, have them go through the Final Audition (a name I stole from HR-tech company Jellyvision).
Sometimes called a test or project interview, this is an interview in which candidates conduct an in-the-field assignment or complete a project to show they can do the work.
Who from your team is part of this audition process is entirely determined by how you design it, so be thoughtful about what you assign.
You can structure your audition however you like, but make sure it’s not onerous or will take weeks to complete. Preferably, it should be representative of the work the candidate will be expected to perform. This should give you a sense of the candidate’s competencies, while giving the candidate a better understanding of the role.
Do not feel tempted to give potential superstars enjoyable, fun projects that represent less than 1% of the kind of work the job requires, though. This will not set expectations appropriately.
As Tracey Maylett and Matthew Wride explain in The Employee Experience:
“Difficult, challenging, and even exhausting work can be engaging if you create a framework that understands and meets people’s expectations and rewards their contribution.”
Expectations get set in the interview process, so don’t hide flaws or challenges.
Once the audition is complete, schedule a final interview for anywhere between 30 and 90 minutes depending on what you assigned to give the candidate a chance to present the project or debrief on a live experience.
Delivering the News
Never leave candidates hanging. When you make a decision, call your desired hire and deliver the offer.
Ideally, the hiring manager should call them — not a recruiter or someone else on the team — and congratulate them. This establishes an important personal connection necessary for working together and allows for a better gauge on the candidate’s decision-making process.
The call should be made before an offer letter is sent, and the hiring manager should be crystal clear about why the candidate has been chosen, what is being offered, and how this will breed major success on both sides. The call should also touch on any ambiguities, doubts, or questions the candidate has so they can be addressed in an offer letter later. Don’t leave room for miscommunication.
Once the desired hire has accepted, let “back-up” candidates off the hook as quickly as possible. To be clear, if from the interviews you know a candidate doesn’t have a chance, even if the top choice declines, call immediately to give them the chance to pursue other opportunities.
In tight races, a front-runner may inch ahead by a small margin, leaving the second-place contender as an excellent option, too. Even so, if that front-runner accepts, it’s your responsibility to call and discuss the decision with the candidate.
Have an honest, candid conversation that delivers satisfactory closure. Avoid vague reasons like “We don’t think your background is right.” This will kill your reputation in the market because the candidate will talk about their frustratingly vague conversation with you.
Be kind, attentive, and truthful, and leave on as good terms as possible. You may end up hiring this person for something later, so don’t close the door on yourself for future opportunities.
If you skipped over the whole of this guide to hiring, let me leave you with the one secret to attracting and retaining the best people: don’t just hire to fill your office.
As Ray Dalio writes in Principles:
“Don’t hire people just to fit the first job they will do; hire people you want to share your life with.”
Tech companies aren’t retaining talent because they aren’t hiring people they want to build long-lasting relationships with, and so when they join the team, they aren’t treated that way. No wonder they don’t feel loyal.
Don’t make this mistake. Hire partners with whom you want to build your future.