Hooked on Talent Density - Issue 45

Talent wins games; teamwork and intelligence win championships - Michael Jordan

Listen up, Founders! Your company's talent density —the ratio of phenomenal vs great or good talent on your team—is constantly in flux. Every hire you make moves the density trend line up or down, raising or lowering your company's collective bar, with compounded effects over time. We won’t geek out on the math aspect of this concept right now (see resources below for more). Our mission today is to convince you that, regardless of how you measure it, you MUST NOT compromise your hiring bar.  

What's Going On?

Hiring with a talent-density mindset isn't about filling seats; it's about assembling a dream team, one mighty hire at a time, to deliver your vision, one backbreaking milestone at a time.  But hiring is hard, and humans are imperfect, so getting it right requires extreme alignment on what phenomenal looks like for your company at this moment in time to get your company to the next milestone.

Why Does it Matter?

Adding a phenomenal hire is like Red Bull; it gives you wings. Top talent attracts more top talent, creating a cycle where great people want to join your team because they know they’ll be working with other high-caliber individuals they perceive as better than them in some aspect, people they can collaborate with and learn from. The 10x rule suggests hiring five phenomenal people who can do the work of 50 average ones, which is crucial for startups that need individuals who can figure things out quickly with minimal oversight. But let’s not forget that another important benefit of a lean, high-performing team is that it burns less cash and puts more equity into the hands of the few who drive the company's success.  

Adding below-the-bar hires will drag your company's velocity and trajectory, cash, and reputation (even a small accumulation of below-the-bar hires can repel great talent from wanting to join you). Compounding the consequences, average and bad hires tend to multiply quickly.  One below-the-bar hire leads to two more, then three...over time, diluting the quality of your team and dragging down the collective IQ and EQ.  All of this means you lose an edge to win the startup game.  

What Do Others Think?

Talent Density is the quality and density of skills, capabilities, and performance you have in your company - Josh Bersin

Reed Hastings, the co-founder and chairman of Netflix, nailed it when he said, "Do not tolerate brilliant jerks. The cost to teamwork is too high."

“A successful talent density strategy is an exercise in organizational alignment. The idea of only hiring the very best and keeping the headcount lean is attractive to leaders. Still, many companies fail to first invest in building culture and processes that enable high-performing teams. For talent density to work, companies need to be able to put the right people in the right seats to work effectively - that means having leadership set a clear direction and create a collaborative environment. When those pieces are missing, and the organization lacks alignment, it creates a culture of competition and burnout that's unsustainable for teams, no matter how talented they are. Even superstars need to be set up for success.” Christina Forney, VP of Product at Uplevel

What Do We Think?

Every hire WILL change your company's trajectory. Nothing you create, sell, or improve will matter if you don't have a high ratio of performers and collaborators on your team to make it all work and grow. If you don't believe this, you might as well hang up your spurs.

However, striving for talent density is not an edict to hire only experienced, fancy-pedigree people, to filter the talent pool to only people “who look or think like us" or to lower the bar for someone who is “a jerk, but the smartest person we know.” It's about bringing together people from various career stages, business sectors, customer orientations, cultures, and skill mixes who can do the work the business needs now and do their best in that business environment.  We agree with Christina Forney when she says, "When done well, talent density is a magical thing - but more often than not, it is used as an excuse to avoid the hard work of clarity and alignment and instead creates a competitive environment within the workplace - rather than a collaborative one. You can have a brilliant superstar at your company, but if they aren't in the right seat, or the problems you need to solve aren't aligned with their skills, it's a waste of money and their talents."

Take Action

1. Define High Standards: You can't keep the bar high if you don't define it in the first place. Establish your hiring principles and decision-making process. Decide who you hire (your bar, what great looks like, what not-so-great looks like) and how you hire (your process, assessment methods, and what tradeoffs you’re willing to make for imperfect candidates). Remember, all humans are imperfect, so it's essential to consider tradeoffs.

2. Raise the Collective Bar with Every Hire: Focus on hiring individuals for their skill sets and ability to immediately contribute to specific business needs. Look for people with the agility to adapt and thrive in your startup’s environment.  

3. Hire to an Absolute Bar: Never settle for a candidate who doesn’t meet your standards. If you meet ten people, don’t hire the best of the ten unless that person meets your absolute criteria. Maintain consistency in your hiring standards to ensure high talent density.

4. Always Be Recruiting and Testing Your Bar: Maintain a proactive approach to recruiting. Continuously seek out and engage with potential candidates, even when you’re not actively hiring. Build a wish list of people you’d love to hire when the time is right. This ongoing process helps you understand what phenomenal talent looks like and holds your team to higher standards.

5. Leverage Data and Learning Loops: Data-driven hiring reduces bias by relying on measurable criteria rather than subjective impressions. Use structured interviews, standardized assessments, and performance metrics to ensure that decisions are based on objective data rather than gut feelings or unconscious biases. Continuously gather and analyze recruitment process data to identify improvement areas, refine hiring strategies, and make informed adjustments.

Tools, Resources, Events

How to Create Talent Density - Josh Bersin. “Talent density is easy to understand but hard to implement because it gets to the point of defining performance, selecting people to hire, deciding who gets promoted, deciding who works on what project, and distributing pay.”
Talent Density at Netflix - How Netflix invented and operationalized the concept of talent density.
Talent Density at Coinbase  - LJ Brock, CPO at Coinbase. “We ask whether each candidate will raise the team average before making an offer. We cast a wide net to attract candidates from every background, focusing on skill and culture alignment. We actively coach and develop. Unremarkable performance gets a generous severance package.”
Hooked on Paying Down Talent Debt - The definition of insanity is doing the same thing repeatedly, thinking you’ll get a different result.
Hooked on Hiring for the Now -  "We'll just sort this out later." - the common refrain of many first-time founders.
Hooked on Meeting the Bar - Long before you became a founder, other hiring cultures shaped how you think about the weight of this decision and who ultimately owns it.

---

About Madrona
Madrona is a venture capital firm that helps entrepreneurs build companies of consequence.
Hooked, by Madrona is a series about startup talent, careers, and founder stories, interpreted by a curious and skeptical VC + playbooks, tools and templates…and other stuff company builders need to know about how to hire.
Who creates Hooked?
The Talent Team @ Madrona Venture Group
Shannon Anderson, Talent Director
Audra Aulabaugh, Company Builder and Talent Partner
Matt Witt, Company Builder and Talent Partner