Recruiting and Hiring Tips - How to Hire The Best Employees in Fintech and Finance

A Story of HR Gone Wrong

I’m going to start with a story of HR gone wrong and then dissect it as a mini case study. To expound upon the many lessons and failures I’ve had in running the business, a year or two ago, we had an HR director. Here’s what happened:

• She took it upon herself (because she didn’t have enough work—I know this, but she doesn’t) to do a salary analysis.

• She had overhired—six people in her department for a 100-person company. Six people in HR! Can you imagine?

• She used up a lot of company resources (3-5 employees) for 90 days to do this study.

• The result? She determined that:

  • 20-25% of the company was overpaid.

  • 20-25% of the company was underpaid.

  • 50% of the company was paid appropriately.

Her conclusion?

• If someone was overpaid, they’d stay at that salary (no pay cuts).

• If someone was adequately paid, they’d stay where they were.

• If someone was underpaid, she’d email them and say, “Hey, you just got a raise. Congratulations!”

This may have been the single stupidest thing I’ve ever seen someone do in my entire life.

Why This Was a Terrible Decision

Let me break down why this was a terrible idea:

1. Wasted Resources: She used company resources (probably $100,000 of payroll) to create a solution that just paid out more money from the company—my wallet, my bank account.

2. No Value Added: People who got raises had no explanation for why they were getting paid more.

3. No Long-Term Benefit: If I wanted to, I could’ve just said, “Sorry, she was wrong,” and rolled back the raises.

4. Cost to the Company: This whole thing probably cost me $600,000 in profit—more than she was going to get paid for years.

This is where, if you’re a manager in a bigger company or you report directly to the CEO or owner, you have to understand this

The Ideal Role of HR

Yesterday, at our quarterly meeting, our current HR director was giving her position on what she believed her value to the company was. I ended up giving a talk about this in general. Here’s what I wrote down because I think it’s really important:

1. Your Job Is Not to Make Employees Happy

• As an owner, manager, or HR director, your job is not to make employees happy.

• Employees are responsible for their own happiness.

  • There are people in Auschwitz who wrote books about how they were happy.

  • There are people in America (top 1% of earners) who are miserable and depressed.

• Your job is to find people who have a positive inclination and fit the culture to retain and attract talent.

2. Employees Are Not Your Customers

• Your customer is the company.

• The company has three stakeholders:

  1. Shareholders (the people who own the company).

  2. Customers (the people who pay the company).

  3. Employees (the people who run the company).

• If you have an HR director who puts employees first, you get decisions like the one I just described—paying out profit for no value.

3. The Goal of a Company

• To grow, a company needs profit.

• Profit allows the company to weather storms, reinvest in new product lines, legal defense, etc.

• When you overpay for no value, you put the company in a bad position.

4. Value vs. Price

• The goal of the company is to pay as little as possible for the highest amount of value.

  • If you’re an investor, you want to buy the most valuable company for the least amount of money.

  • The bigger the discrepancy between price and value, the better.

• The HR director’s mistake was turning good deals into bad deals by overpaying for no reason.

Operations vs. Core Value Drivers

During the meeting, our HR director pushed back on the idea that I value marketing, sales, and product more than operations. Here’s why I do:

What Is Operations?

• Everything that is non-core to the value of the company:

  • IT.

  • HR.

  • Finance.

  • Legal.

• These are things that must happen to keep the company running but are not core value drivers for revenue or customers.

Core Value Drivers

• Marketing: Brings revenue in.

• Product: Delivers value that is exchanged for money.

• Sales: Sells the value.

When I put operations first in the past, the company started going down. I had to jump back in and refocus on marketing, sales, and product. Operations should support and enable these core functions.

The Value of Star Employees

If you have a star salesperson who sells three times more than a normal salesperson, losing them could cost the company half its sales. If they ask for a 10-20% raise, it’s worth it to retain them.

On the other hand, if you have an amazing customer service person, ask yourself: “If this person disappeared tomorrow, how much less would the company make?” If the answer is “not much,” then their value is lower.

How HR Provides Value

HR provides value by:

1. Protecting the Company:

   • When people come to you saying, “I want to hire someone,” your first answer should be “No. Show me why your team is overworked.”

   • Many people don’t work as hard as they think they do.

2. Recruiting the Best Talent:

   • The value of the company is based on the value of the people.

   • Good HR is about finding, developing, and retaining talent.

3. Solving Real Problems:

   • The only reason to increase pay is if you can’t attract or retain talent.

   • If you’re not having issues with attrition or recruitment, you’re paying fine.

Final Thoughts

• Making employees happy is not your job. It’s their responsibility.

• Your customer is the company, not the employees.

• Pay based on value: The goal is to pay as little as possible for the most value.

• Think like an owner: Protect the company, and you’ll move up in your career.

If you’re an HR manager or a manager who hires and argues for compensation, take this to heart. You work for the company, and your responsibility is to protect it. If you can think like an owner, you’ll be more valuable to your company.