00:22:16 · David Senra, Luca Ferrari
[00:22:16] S0: And the interesting part is that [00:22:17] S1: you just said, how many companies do you own right now? We bought a little over 50 businesses over time. [00:22:24] S0: But you could see, if you own 50 businesses, there's multiple different ways. You're a conglomerate. The hiring could be pushed down to the actual individual company level, and you're like, no, no, this is so important. And the talk I had Almost all matters. I was going say, maybe the most important, so you just said it's almost all that matters, it is the most important. So I'm going to centralize this. Are you also then the centralization allows you to kind of take the insights that you learn from one of the 50 and disperse it to the other ones? Is that what happens?
00:22:51 · Luca Ferrari
[00:22:51] S1: I firmly believe that in business entrepreneurship, the number one thing is called it a strategy, meaning what we're trying to do, how and why do we think it's going to work. That is, if you have a terrible strategy, you can have, you know, the best team, they're not going go anywhere. But once you have a strategy that makes sense, the team is almost all that matters. I'd say the team and the culture, is like the rules of how we engage with one another, it's basically almost all that matters. And so I don't think there's over investing in creating a great team within vision. We try to be generous in our time and resources when it comes to that. So why centralizing hiring and parting ways with people? I think there are plenty of good reasons for it. One is that team managers. By the way, most companies, let's say you run a team of 10 people. Most companies you'd be deciding, maybe there's a budget, you know you can hire two people, but once that's in place, you'd be deciding who gets hired. Probably HR will screen CVEs and send you and maybe pre interview a bunch of people and send you maybe five candidates, and then you pick the one you prefer. End of story. We think that system is bad for a few reasons. First of all, hiring managers, meaning that that person who runs the team have almost all the wrong incentives in hiring. For instance, they probably don't want to work late or on the weekends. They feel they need help. So they will try to fill the position as quickly as possible. I'm sure they will not hire someone who they think is a net negative for the team, but as long as they find someone who they think can get the job done somehow, they'll probably get that person. Obviously, a far sighted, ambitious organization, you don't wanna have you don't wanna hire the first person who's adequate. You wanna hire someone who can be amazing over time. So first, bad incentive. The second problem, and it's connected to that is if you are running the team, probably most people, although they would be willing to coach if it comes down to it, they would much rather hire someone who's already fully mature and competent. So they, again, they can either do other stuff or world class. If you leave it to a hiring manager to decide they'll favor very experienced candidates over green, immature, but potentially much, over time, much better contributors.
00:25:17 · David Senra
[00:25:17] S0: I like that you identified the incentive misalignment that you find in typical companies. What's the incentive structure for your hiring managers in your company then?
00:25:25 · Luca Ferrari
[00:25:25] S1: Well, there's none just trust, so they don't have any bonuses, any variable pay. We just tell them, we trust them to build the best organizations they possibly can, and then that's it. And we find that if we hire people who are intrinsically motivated, and who like the project and you work with them and you're deserving of their friendship and admiration, then they will do their very best to achieve the common goals. In fact, we find that setting highly specific concrete objectives to which career progression or pay are tied almost invariably leads to bad outcomes or inferior outcomes. Meaning maybe people will occasionally try a little bit harder in the short term, but then there's all sorts of deviations from what would be optimal holistically for the company, and that's instead optimal for specifically checking the boxes of that particular incentive system you created. And so we just tell them, we trust you to create the best teams you can. So hire well, part ways with... Hopefully, we don't need to part ways with a lot of people, but when it's necessary, please do that. Let's talk if you need help. Let's discuss. But but ultimately, it's as simple as that. And by the way, it's... It shouldn't come as a shock. I mean, most of us, I think, when we worked in projects where we thought we were doing incredibly well and everybody was pushing in the same direction, how frequently were there super mechanistic KPIs with our pay tied to it? I've never seen it. I mean, generally in startups, for example, yes, there's a broader idea if we do really well, maybe our equity will be worth more, but it's highly indirect and ambiguous and when and how much. People work hard and try their best because they feel a sense of ownership, they like working with one another, they care about the project. So we try to recreate that same setup. We give them full trust in leading hiring. And by the way, because this is centralized, they also have a much bigger sample and much better information, both in terms of what's available out there and what works and what doesn't. Again, you're a hiring manager in a team of 10, it's probably bigger than most teams. At best, you're gonna hire three people a year. I don't I'm just making it up. Something like that. It's not a huge sample to learn from. And and you... You're not focused on it. So you...
00:27:40 · Luca Ferrari
You're not gonna wake up in the morning thinking, can I be a better interviewer? Obviously. Like, it's not it's not your core problem. For our centralized talent team, that's all they do. There is no professional pride other than we're good at this. They do it at scale, so they have massive sample size, and they get to see what kind of talent we can attract across all different roles and positions. Therefore, they're much better positioned to understand whether someone is the right hire for a particular role, because they've seen what's coming in time across the board. And so they know they're better positioned to know, Okay, if we wait a little bit longer, just statistically speaking, we're likely or are we not likely to find someone who can be even better? So they have all sorts of advantages in terms of their focus, their informational sample that supports their decision making, and also this efficiency that they are hiring for a particular role, but nothing prevents them from picking from other pipelines potentially and swapping as needed. Again, maybe someone applied as a product manager, but they see that they could actually be amazing as a growth manager. They can easily make the swap because they are looking at the entire thing, not just that particular...
00:28:53 · David Senra
[00:28:53] S0: I really love your insight. It's like, well, if you're running the team and you feel the pain, you might just take the first candidate that comes along. But your whole thing is like, we know our strategy works, so now we're just gonna spend all of our time on talent. The conclusion you just shared here reminds me of Brad Jacobs, who was on this show last year. He says... He has a great maxim where he's like, an empty seat is less damaging than a poor fit. Oh, yeah. He was just like, I'll leave the position empty. Like, it's gonna be painful, but it's gonna be not... It's gonna be way worse than if we hire the wrong person. And he'll just leave it indefinitely till they find the right person. It's very similar to what you're saying.