Monthly Archives: March 2009

amazon’s customer service is awesome

My Kindle broke over the weekend. Not sure what happened, there were just 1,000 lines going across the screen.

So I call customer service yesterday. I got a service rep in under 30 seconds. He was great. understood my problem immediately and, without hesitation, he told me he was shipping me a new kindle and I could send back the broken one.

I got the replacement Kindle today and all is good.

Thank you Amazon!

Why hiring is paradoxically harder in a downturn

Noise goes up but the quality stays the same

Hiring is always hard.  The hardest thing to do at a company is the recruiting and hiring.  It was really hard when the economy was doing well.  Paradoxically, for certain industries (especially those reliant on innovation such as those in the tech space), it's even harder when times are tough.

That's right … hiring in tough economic times can actually be much harder than when times are good.   In a downturn, the amount of resumes from C-Players massively increases while the amount of resumes from A-Players probably remains the same. 

Never settle

First, let's assume you've already bought into the "When Good Isn’t Good Enough" philosophy of always trying to hire A-players because they are just so much more productive than B-players (an 'A-Player' by definition is incredibly productive and smart and  has that 'it', that rockstar-esque factor that makes everyone want to work with her).  That means you won’t settle for people who are good but instead hold out for people that are great.

Great people – the A-Players – are a very different breed from the good (B-Players) and mediocre (C-Players).  Great people are more likely to be employed with a company since a great person is often over 3 times as productive as a good person.  Joel Spolsky argues in Smart & Gets Things Done that an A-player is anywhere from 5-10 times as productive. Joel looked at coursework data from a Yale computer science class and found that the fastest students finished their workload as much as ten times faster than the slowest students (average was 3-4 times faster).

Image001

Spolsky, Joel. Smart & Get Things Done. Berkeley, CA: Apress, 2007. p 6.

The (Un)Employed A-Player

In troubled economic times, anyone can get laid off, but a disproportionate number of layoffs tend to fall on C-players.  This is because they are the lowest performing people in a company and there generally are more C-players at a company than any other caliber.  Note that this isn’t always true, as evidenced with Yahoo!, a company that has recently experienced many layoffs but doesn’t have many C-players.  In Yahoo!’s case, majority of the lay-offs fell on B-players and even some A-players.  Yahoo! is an exception and is an exceptional company — most large companies, however, are chock-full of C-players.

A smart company would (or should) never lay off a great person unless her/his job function is eliminated.  For instance, if a smart company had to lay off one of two software engineers with one being great and other being good, it will very likely lay off the good engineer and retain the great one (and might even give the great person a raise).  Again, this is the logic that smart companies should follow.  Then again, there are many dim-witted companies that lay off their great people for odd reasons and so you’ll find some great people out of those laid off.       

Where to find that A-player

Some A-players are less likely to be looking to jump ship during tough times due to a risk adverse profile, security, financial reasons, or other reasons.  They are happy where they are and more likely to hunker-down in tough times.  On the flipside there are A-players that are MORE likely to leave.  Tough times often paint companies into a corner and force them into maintenance mode rather than continuing to innovate.  Great players love to innovate and usually NEED to innovate.  It’s usually very hard to keep these type of A-players caged-up and thus this presents a big opportunity for recruiting.

For instance, in the past it was really hard to hire great software engineers out of financial behemoths like Goldman Sachs, Morgan Stanley, and JP Morgan Chase.  These companies have outstanding people and pay these people really well (often 50% above the salary at a tech company).  Nowadays, even if these people have not been laid off, the great people are going to be leaving in droves.  Why?  Because in the next two years, it is really doubtful they will be doing anything remotely innovative.  Instead they will be maintaining current systems due to the understaffed and underfunded technology departments.  No fun there so expect a big exodus out of these companies.

It’s also worth noting that great people are often first to leave sinking ships.  They don’t feel they need to stick around for a severance because they are confident they can always get another job.

How to deal with the paradox

Let’s face it, these great, A-Player type people are just really hard to find.  Let’s say for sake of argument that A-players make up 1% of the population that could do the job, B-players are 19%, and C-players comprise the other 80%.  It’s uncertain if these percentages are accurate, but there definitely are more C-Players than B-players and more B-players than A-players.  Now if people find out you are hiring (through a Craigslist ad, posted on careers page, etc.), it probably means you are going to get a massive influx of resumes from C-players.  Many of these resumes will be indistinguishable from those of A-players (it’s always hard to distinguish on paper).  Which means the amount of noise (aka undesirable hires) will likely increase.  Which means more work sifting through these resumes and talking to many more people.  

It’s important to screen for great people in order to turn the volume down on all the noise.

Unfortunately, it is really hard to tell the difference between an A-player, B-player, or C-player just from a resume.  Which means you need to engage with candidates and therefore you’ll have far more candidates to deal with given this economic climate.  My guess – for a standard job announcement, you’ll have three times the number of C-players applying, twice the number of B-players, and the same number of A-players.   Wow…your noise level has just massively increased!

Image003

At Rapleaf for instance, we have a written one-hour technical interview as the first screen for resumes we like.  Last year, our pass-rate for the test was 17% … meaning 17% of the candidates passed the written interview and moved on to a second round (a live chat with a Rapleaf engineer).  Today our pass rate is about 6-8%.  Our noise level has really increased.

One way to decrease the noise level (and thereby increase the amount of quality) is to specifically target candidates rather than to post a job ad.  I would suggest targeting a company you think has great people, call into that company, and try convincing the talent to meet with you.  I know if I was based in Manhattan and was recruiting software engineers, I’d be calling on the people in the top banks.  While not everyone at a top bank is a great player, your ratio of great-to-good is going to go up substantially (assuming they haven’t already left). 

Of course, not every position is harder to hire in this downtown.  It is easier to find great people whose industries have been totally decimated by this recession.  You're in luck if you are looking to hire investment bankers, corporate lawyers, construction workers, or people in manufacturing.

This downturn looks to affect us all for the next couple years, so be sure to fill your company with only A-players and thereby creating your own A-Team.

Image005

Special thanks to Vivek Sodera for his help and edits.

the economics of restarants in SF

The economy takes funny turns.  Niall Kennedy was telling me that he had a discussion with a successful restaurant owner in San Francisco.  Their table utilization is flat from one year ago (not down as would be expected) but their average dollar per patron is down significantly.  People are ordering cheaper items, sharing more, buying cheaper wines (or getting glasses rather than bottles), and skipping dessert. 

Also very interesting … people are taking longer to eat.   Probably that's because they skipped buying tickets to the show and don’t have to rush off.   Instead, the restaurant is their major form of entertainment that night.

more at Niall's blog

kindle idea — push web articles to my device

We all get tons of links to articles forwarded to us by friends, coworkers, partners, etc. and some of these articles are really important. many are really long. Few are urgent.

If you are into time management, you probably put these links in a separate folder that you occasionally read through and you come back to later (I usually do most of my reading on Sunday).

What would be even better is a button on the web site to send the article to my Kindle. That way I can time-shift and place-shift my reading. This would especially be interesting for longer articles we get forwarded to us.

Then ideally these articles would appear in my “Articles” folder in on my Kindle. And I’m happy to pay 10-25 cents for the service.

picking the right VC to work with

If you are one of the lucky companies that manages to raise venture capital in this market, here are a few tips in picking the right VC to work with.

Make sure their fund is at its lifecycle where you want to be

Most venture capital funds get fully invested over 4-5 years. After that there is only room in the fund for follow-on capital. If you are an early stage investment, you want to make sure that you are raising money from a new fund. That way you have time to build your business and won’t experience as many end-of-fund pressures.

If you are getting money from a fund that is nearing the end of its life-cycle, you might be forced to sell the company earlier than you had planned (as the partners may want to try to wind down the fund 7 years after its inception). Alternatively, a secondary fund may buy the fund that invested in your company and you’ll now have to build a relationship with a whole new set of investors (this is becoming increasingly common).

Make sure the partner is not going to get canned — you might wind up with a partner you don’t like

Often you choose a fund not because you like the fund, but because you like the partner. And since you are likely going to have close relationship with the partner for many years, it is really important that you like, respect, and get along with this person. It is also important that they add value to board meetings, company strategy, etc.

Nowadays, with funds likely pairing back the number of partners, it is also important that you choose someone that isn’t going to be booted out of the partnership. If that happens, the venture capital firm will assign another partner to your company and you may not have a say as to who it is. So you should spend time understanding the partner and their portfolio companies. Is this someone who is backing other companies that are likely to be winners? Is this someone that has done well in the past but has had no winners recently and might be asked (or choose) to retire?

These are some of the things to consider if you are one of the lucky companies to raise venture capital these days. Good luck.