Peer Effect
Best way to scale? Your peers have the answers.
This is the podcast for scaleup founders looking for insightful, actionable wisdom from some of the best operators around. Each week we’ll explore one secret that other founders and experts are using right now and how to implement it.
It’s practical wisdom to build the company AND life you want. Hosted by renowned founder coach and advisor James Johnson.
You’ve survived to £1m, now let’s scale to £10m+.
Peer Effect
Mastering Hiring & Building Teams that Thrive, with Akbar Karenga
What is the true cost of a bad hire for your company?
In this episode, we’re joined by Akbar Karenga, founder of Maarusi, a talent and people consultancy driven by his passion for diversity, equity and inclusion.
Akbar is an expert in high-stakes hiring and shares powerful tips for founders who need to hire fast without skipping steps.
Together, we discuss:
• The key difference between hiring to grow versus hiring to simply keep up.
• When to bring in pro recruiters and how to create an effective, unbiased hiring process.
• The hidden financial and cultural costs of a bad hire—and how to avoid them.
Connect with Akbar Karenga on LinkedIn for more hiring strategies and insights.
More from James:
Connect with James on LinkedIn or at peer-effect.com
So my first role out of university was hiring for Red Bull Racing Formula One team. So recruitment super, super focused on getting success there, Then moved more into HR centric roles over my career. With the Global Remit I was looking after 21 countries and then moved to London to do that for 30 countries. And then there was a hard pause around five, six years ago where I started super focusing on startups and since then I've helped scale 54 startups.
Speaker 2:Wow. So it's fair to say that, when it comes to scaling, you've learned a thing or two.
Speaker 1:I've done a lot of mistakes and I'm getting back collecting them and saying don't do what I did 14 startups ago in that context awesome, well, I think.
Speaker 2:So good time to jump into the main question, which is, if there's one thing that you'd share with scale up founders, what is it?
Speaker 1:um molly graham's quote about giving away your legos. Um, when you are an early, super early stage founder, you are sales, you are marketing, you're potentially products and engineering and all of that. You have to be everything for the business. And there's always the dark arts of where you say, oh, we'll get back to you, but actually you're technically customer service as well and you've got all these accounts as you begin to scale your business. There should be large chunks of your business that you find out about on that weekly meeting. You have got an amazing person who is has more talent than you in that vertical, has more time potentially and is able to be less distracted. So being able to give away your legos and realize that, hey, I'm not having all the pieces, I'm building a larger, bigger thing than when I had those six or seven pieces.
Speaker 2:I knew all the colors and all the shapes it's a really nice way of looking at every like. It's probably like they've they've got more talent and more time, like it's a good combination, because often I think sometimes it's fantastic, oh, I might have the talent edge. But even if you've got the talent edge, you won't have the time.
Speaker 1:Yeah, you know that classic. Do you really want that to be your problem? Like for six, seven hours of the day, can you say the only emails you respond will be about that subject. You need to be either an absolute savants in that vertical or maybe you're being distracted. You're going to drop some other parts of the ball. So I've seen product centric or marketing centric founders think but I'm a marketer, I'm absolutely amazing, but I'm like, but technically you also have to sign all those docus-signs. Actually, every time you're on a call and you're not in a meeting with investors, potentially in this race the overall business is going to be coming down. So focus and time plus talent, invariably your first couple of hires and who they start hiring are large multipliers of the success of a scale-up large multipliers of the success of a scale-on.
Speaker 2:So one thing you've been very involved with is finding those new Lego pieces. I think quite scary for founders when you're giving away that piece of Lego. You're giving away that control and if you're trying to find someone that is more talented than you, maybe in a space that you don't know, what are the things that you've found really helped founders find the right Lego pieces for them.
Speaker 1:So I'm a bit of a sports geek and one of the sports I follow is NFL. There's a person in each team that's shelf scouts and they're called Breaking your Own Tendencies. So they look at all the video over the last couple of months that they've done and realize, oh, we play, we do this thing every time we need to install something that they quote like breaks our own tendencies. And that's when you're hiring people. Give yourself a pause and say, what can I do to break my own tendencies? Because then that's a really exciting space.
Speaker 1:When you're having those meetings, when you're thinking of those ideas, somebody who just comes at it from a different perspective than you If the best idea always wins and you're having two different ideas, that's amazing because you're paying for somebody's time and their ideas and their effort. What would you want to do? Pay yourself for ideas you already had? Where do you look for these people? How do you assess being super aware of? Actually, what am I like? Um, amazing relationships. Um, I built friendships and partners. Not all two people are very similar, that's you think of every stand-up comedian. They do like the mother-in-law joke or the wife husband joke, because it's like they're different to me, but we're compatible. So that's what I'd say. First of all, find somebody who's different from a different perspective, and there's tactics that can literally let you attract and assess somebody who's a little bit different from you okay, there's a tendency to to look for people that are similar to us, like I'm.
Speaker 2:Often. This with a whole unconscious bias thing comes in how would? How do you go about self-scouting and like practically how, how would you self-scout in these situations?
Speaker 1:uh, if your your week is basically a series of rooms that you're invited into the living room, the gym, everything like that, your whatsapp groups, those are little rooms, okay, so whenever I'm looking for somebody to hire, I'm going to ask in those rooms but, where else can I be spreading the word of my opportunity, of what I'm building outside of those rooms?
Speaker 1:so that's one there. So you're in the open. Next, because that helps. Uh, stop confirmation bias, like you've seen so many times in pitch decks. Oh, this is a total addressable market, this is the serviceable market. Get out of there. So that's point one.
Speaker 1:Then, just like how you'd run a SAS qualifying qualification process, write down what you need. What is an ISP? How do you know whether they are or are not? Through, I say, observable behaviors. So, for example, um, I, I want a really smart person. So that means I need somebody from said university. So that is a understandable way to get certain about somebody's quote-unquote intellect. But actually, is that based on a verifiable metric? So Schmidt and Hunter is a meta-analysis of 85 years of research on what matters in a CV and assessment process.
Speaker 1:They looked at it, naturally. So handwriting and number of years of post-18 education are just as effective at deciding if somebody's right for a role or not. That's a little bit scary, okay, but then there are matrices are also right at the bottom and also scarily enough. Number of years of experience, so, but then what's up at the top three is something called a work sample task. So can you replicate what they would actually be doing in their day-to-day work? Look for that in the context that is natural to the role.
Speaker 1:So, for example, we always have oh, give a presentation and then tell us your 30, 30, 60 and 90 day plan now for your new cmo, who you're potentially going to give maybe even like a double figure equity offer to. Is that actually what you're going to be doing day to day? Actually, are they going to be managing up to you? And, uh, no, a lot of time will be hands-on agency management. Um, actually, from discrete information that they're going to know in company, they're going to have to make guesses and shots. Okay, replicate that, as opposed to them repitching their CV to you at the final stage. Those are a couple of steps Shrink and Hummer, using loans and also getting into rooms where you're not usually invited to spread the word about your opportunity I realize I do the work sample.
Speaker 2:It feels you've almost got to figure out what the job is first and figure out what. There's a lot of thought that goes into like what is this person going to do, which often people don't do enough of before doing. I just need a head of marketing. What, what type of head of marketing do you need? What are they going to do? Is it ahead of marketing such as quite a lot of scoping to be done, but then that helps you design a test around what they're doing to execute rather than how good they are at managing you so we, so I.
Speaker 1:I I'm not going to toot my own, but I'm a likeable person. Also, most founders are also charismatic and that means when they're trying to mirror match on what type of personality it's the convincer, it's the extrovert. That would be like oh you know, we hire for enthusiasm. But actually, if there are type A and type B personalities, if there's introverts and extroverts, I think you, as a scaling founder, should take money from everyone. So, having that motive, what does the role actually entail doing in their day-to-day? And maybe there are some, maybe more medium-term um goals that or behaviors that they need to show. Let's do that as opposed to. I have a nice warm, fuzzy feeling about them because we got on yeah, it's that.
Speaker 2:It's that awful thing. Oh, I knew in the first 30 seconds uh thing. It's like what you really knew is that someone triggered your unconscious bias hard and from that point on you soft-saped the interview and just handled it so differently which no one was ever say oh my God, I knew that vendor was the one, or that supplier or service is going to be perfect for my company.
Speaker 1:No, you take the call, you decess it. You'd look at the SNAs. You'd be super boring about picking an ERP system.
Speaker 2:I think people think they're a good judge of character, but if you did treat it like it was an ERP system, which you maybe got a little bit less excited about, how would you go about doing it?
Speaker 1:So back to Schmidt and Hunter's study is having standardized processes. So ask the same questions again and again, write them down and again write them down. Uh, one of the things also scale up founders potentially do if you're making a group decision is you need to speak last in an assessment or when you're making a group decision, because people will always revert back to the highest paid, most important person in a meeting for a decision. So, being able to be stumped, okay, well, what do we think as a team? Okay, cool, you're not trying to build consensus, you're trying to form a decision and most of the people will turn to you. What do you think, boss? Who should we hire? Oh, actually they were a seven, but actually, because you said that thing, actually I think they're a five. So get the first nuggets of insight from your team and then you can add your piece to it.
Speaker 2:And you said five and seven. Would you recommend actually having some form of scorecard for hires so that there's some objective criteria? Are you putting numbers against it?
Speaker 1:Yes. So I like a one to five and take out three. Don't have people hedge. I have people some people do like one thumbs up, two thumbs up, or one thumb down, two thumbs down, just to let people stick their neck out on the line. And also you, because this is it's a summative assessment. They ever pass or fail to get onto a seat at your company assessment. They ever pass or fail to get onto a seat at your company.
Speaker 1:Um, these so work from the rubric back to the role. So you said it was really difficult, uh, for example, to be like you need to know what the role is, and most people start off with, okay, let's do job title, let's think broad strategy. But if you're, uh, I've hired good, how many account executives across my career? So many times people say, okay, quota attainment is what we need. Okay, or convincing skills, okay, cool. Well, actually, do you, unless you're going to be hiring in market for that very specific thing that you're already selling? Actually, it's research skills. It's actually conscientiousness around a process. It's potentially, potentially okay. Uh, how to say no to bad deals. So those are the three things that you'd ask for stories for them to demonstrate, and it's okay. I saw several examples of that.
Speaker 2:That's a five out of five so for you this sort of one to five, no three. Is that as an overall score, or is that against certain characteristics? So let's say you've identified that role and it's kind of we really need these three things. Would you put a score per characteristic or just overall?
Speaker 1:yeah. So that example with an account executive in a sas business, I'd split. So one score for each of those um coincidences, and then that gives you kind of a nuanced conversation about no, maybe two candidates have the same score, but across what? So then you'd ask yourself okay, well, a lot of our leads are marketing qualified and that's why I think a lot of money will be coming from in the next six months. So this person, although they have similar scores, way more strength in terms of running a predefined process. Well, it could be a different reason why you choose those close cases between two different people.
Speaker 2:When you get to the scaling phase, particularly in sort of a good market, there's a sense of oh, I don't have time, I just need to hire people, I don't have time to do this. This sounds like there's quite a lot of planning and preparation for doing this hiring process. I imagine you had that pushback from founders before. What would you say to them?
Speaker 1:If we look at the number one line item at a company, it's staff. But there are very few businesses who call themselves scale-ups or have VC or some sort of alternative financing that are not beholden to the ideas of their people. So I'm I'm always going to struggle to be like what are you doing right now? That is not. It is as important as the payroll investment that you're going to make into somebody. So so there's a company called Enborder, e-n and Enborder and they tracked okay, how much does it cost a business regarding a bad hire or bad onboarding?
Speaker 1:You take the starting salary and you times that by 2.3. That's the cost in-year for a bad hire. That's to recruit, that's to close, that's to onboard, that's to pay, that's to off, that's to close, that's to onboard, that's to pay, that's to off board and then find somebody again. So that's a big ticket item. If you are in a hours billable environment across all of your team, all of your stuff, to go through that and not go right, that's expensive it's something that you can do quickly, isn't it hiring you can, you could, you can just tick it off your list and go.
Speaker 2:Brilliant, I've got someone in. But is that really success? Success is not having them in day one.
Speaker 1:Success having them in day 90 or day 180, when you're confident that you know that they're the right hire I think, uh, there are always sometimes in a business where you do need to engineer for speed, but you need to have certainty about something that means that you can make less than ideal decisions. So, for example, right now you already have product market fit and you are losing money every time you do not hire an SDR. Every time you do not hire an SDR, all your investors are like we've given you a shed load of money. Why are you not using this to market in XYZ when you don't have a growth marketer? You have certainty of products or you have certainty of need from partners and investors.
Speaker 1:Okay, then move quickly, but you haven't solved what. You might have solved a recruitment problem, but maybe you've just nudged it down the line. Now you have a onboarding problem, a coaching problem. Maybe you have a created a bottlenecking team in terms of misalignment. So your energy doesn't disappear, it just converts. It's a law of physics. So you usually move that along to a different thing that you're going to have to solve later.
Speaker 1:But I did. This doesn't have to be something that's arduous that you need to do also. Just back to what I said about giving away your legos why are you sure you should be solving this. There's a whole community of hr and recruitment and talent professionals who can come in fractionally. You can come in on a contract um, definitely be able to do this.
Speaker 1:My one piece of advice when people do that, though, is don't go back to the founder circles exclusively for these type of recommendations, because again it's back to the rooms that you're invited into. Um, well, us founders, and founder generally, we're a very unusual breed of people. Uh, maybe going to places for more established businesses, or, uh, people from a different country or context can maybe just get. Oh, so that's how I would grow. That I saw that specifically when I was looking after portfolio 30 startups and founders factory just before covid I come in, and then what I saw in a portfolio-wide level, across seed and series A businesses, was that the different reactions to change and how you'd hire and retain and policy and everything like that.
Speaker 2:There's a difference between rigor and speed, so it sounds like just could do something rigorously and put the thought in doesn't mean it has taken a long time. But also, just because you're taking a long time and umming and ahhing about doesn't necessarily mean you're being rigorous and doing the right thing.
Speaker 1:It's from what you can know, and I use that epistemology of what do you know. So that's why I go back to facts studies, what matters in a profile, what matters in a decision, away from the 264 volumes of cognitive bias, as much as you can, and I'm not going to know everything. Perfect is the enemy of good, so it's just like, from what I know, there's a risk to it completely. So don't be paralyzed by a decision, but also aim to have your decisions as much based on facts based, empirical data for a large payroll decision.
Speaker 2:It sounds like we're saying that hiring is very important, which I don't think is a radical statement. It accounts for most of your P&L. It certainly accounts for the way you spend your money. When you fundraise, there's a temptation to rush it and do it fast, but actually you can do it rigorously. You don't have to do it yourself. There are professionals out there that will help you do this and bring all this knowledge with them. But it's just acknowledging that you really want to set yourself up for success by doing the thinking around what the role is, who you need from it, run a process that is based on best practice, not on sort of historical habit, and it doesn't have to be slow. It's just you don't want to rush it and you don't want to skip steps. What, from your side, what you've seen, is a good success rate on hiring.
Speaker 1:from what you've seen, is a good success rate on hiring. So churn rate is obviously across a period, how many people stay and that comes as a number there, the highest I've seen. It depends on industry, but there was one startup I was involved in. They hired 94 people in one year and only five people left in that year.
Speaker 2:That's a really high number. I mean, that's saying like over nine out of ten hires worked out. Do you think more than five should have left, because sometimes you can have a low churn rate because you're not making the decision to exit, and so I'm just wondering what is a sort of a number out of ten out of five that you should be getting right over half like six months?
Speaker 1:See, that's, I think, why you raise a really good point, because there's the cumulative element of it and also in the scaling business. Back to Molly Graham. She was the CEO of Facebook when it was 200 people and then, when they were, I think she was the cio still, so it was okay. Giving away an ed is. Maybe there are people who that wasn't for them, they had to leave. Or there are people who are passionate about different stages of business, or I mean, how many? Uh, if you look at your engineering team now for the last five years, the top three programming languages change every five to six years, so you needed to refresh that already so I wouldn't say aim for a static number, um, but it's across your growth, across a business who's staying, that you wanted to keep.
Speaker 1:Basically, yeah, um. One way to actually do this is maybe not track all who's coming, who's going, how happy are the people here already? So, um, turn the mps score back on your team it's called an emps and track them. So if a really good um, a really good consumer product has to try aim north of plus 50 on an net promoter score, I've, but then a good employer, you should aim for plus 20, and I've been so that that we may be more there, because that captures sentiment, confidence in the people that you're hiring. People want to stay, people think they're in the right place, and then the churn figure will be the churn figure um over. Since covid, we've had scaling up, scaling down by debt financing, we've had all these bridges and stuff like that. So your headcount number and your churn rates.
Speaker 2:We've had three black events in a row yeah, basically, and actually one thing I used to look at was less about the absolute churn rate but more like as cohorts, like we look at it on a graph like average length of service and just see where people are spiking. I just think that people leaving before six months is probably okay because you're like there's something wrong with the hire no, it's too high, this probably hiring is not right, but like I think it's okay. You will have almost no churn six months to two years, three years, and then we just acknowledge that maybe it spikes again because people, people stay in companies, less skills change etc. But particularly having like lots around sort of the year to two year mark feels like maybe there's a cultural you said a really interesting point, uh, about you're always interviewing, um so for position.
Speaker 1:It's like the ramp-ups period for staff is where you're like, this is where we know, so it's understandable if there is a churn right there, for sure. Um. Same thing when you're one year mark and beyond. It's like they now introduce themselves when they're in their pub with their friends this is what I do and now they get repeat business when if then, uh, they get that anniversary ticker on linkedin, all that stuff there. So then there's an establishment piece that you know forming and norming elements in some of the L&D piece, but I'm sure you've got amazing guests who'll speak about that in the future. But good point regarding that aspect of knowing whether your team is doing well in terms of recruitment and keeping.
Speaker 2:Well, I think this has been so useful. I think for like fans, it's like just really dive into practical bits of like what what good hiring looks like, but it doesn't look like where you can go, looking for people that get out of some of those rooms, maybe change your processes, put the rigor in up front and, and when you get that stage, find people that can bring you these skills so that you can give them that lego brick and go you, you do this bit. I've got I've got enough on my plate.
