Episode: How to Create a Company People Are Begging to Join
Michael Hyatt: Hi, I’m Michael Hyatt.
Megan Hyatt Miller: And I’m Megan Hyatt Miller.
Michael: And this is Lead to Win, our weekly podcast to help you win at work and succeed at life. In this episode, we’re going to talk about a vital subject for every business leader: how to recruit and retain world-class talent. The reason that’s important is because your company is going to rise and fall on the talent you hire.
Megan: As leaders, we have the vision for where we want our company to go, but without the right people on the bus, we’re never going to get there, because we can’t do it by ourselves. We’re counting on our team to execute on our vision, so it’s imperative that we attract and retain the very, very best talent. Nothing will undermine your vision like B– and C-level players.
Michael: The truth is… This may sound like we’re bragging, but we’ve had great success in hiring A-level players, world-class players. Our clients have recognized it. Our industry has recognized it. We’re going to talk in this episode about exactly how you become the kind of company people are begging to join. We’ve brought Larry into this conversation to lead us through it. Larry, welcome.
Megan: Hey, Larry.
Larry Wilson: Hey, guys. I have a question. Our hiring process is exceedingly thorough. Other places I’ve worked, I’ve been hired for, frankly, positions with more responsibility and not had nearly the close examination from a variety of angles that we have here and that all new hires go through. Can you tell me why you are so thorough in your hiring process?
Megan: Yeah. We take the culture of our company really seriously. We feel like we’re stewards of it. We feel like we’re responsible to our current team to continue to make it better. Every time you add a new team member, the chemistry is going to change, positively or negatively. I know I personally feel a great responsibility to ensure that the people we’re adding to the team are a positive addition and to make sure they’re set up for success. We want to put people in roles they’re naturally hardwired to win at, because we’re looking for a long-term win-win relationship.
Michael: I think so often people are considered in isolation from the culture or from the team, and they’re simply asking if they are qualified, if they have the right experience, and all that. Where we spend the majority of our time is in the fit and how it is creating an overall image or experience for all of the employees so that we all feel good about what we’re working in and we can work and bring to the company our best gifts every day.
Larry: Can you give me a snapshot? Has there been a hire you were able to make…? Maybe it took a little longer than you hoped because the process is very thorough. Give me a success story on how this works.
Megan: Well, we actually just did it. We’ve had several this year, but the most recent one is that we just hired a new CFO. His name is Jarrod. He has completed his first week. He is now in the middle of his second week. We already feel like he has been with us for months. The fit there is just… I would say it’s in our top five all-time greatest fits. Just immediately, right off the bat, knowing it’s the right thing.
What’s amazing is not only did he have exactly the right skills and experience to do this job in an amazing way, but the cultural fit, who he is personality-wise, just all of the things that make up who he is, are totally in alignment with who we are as an organization. Probably the most rewarding part of that has been to see the reaction of our team.
When you do this well and when it works, what happens is your team will come to you with a ton of enthusiasm for the person you just hired, and that’s really what you’re looking for. You want them to be as impressed as you were in the interview process once that person is onboard. It has been really fun to see, and I think we’re only getting started with Jarrod.
Michael: I would agree with that totally.
Larry: We are looking at why your company can stand out and why people will want to join your company. We’re starting with level one, which you guys have put as the lowest level, and that is a competitive salary. Why is that the lowest reason a person would join your company?
Megan: Well, it’s the most basic. This is kind of like breathing. You have to meet the basic salary requirements that someone is going to have when they’re looking for a new position or when you’re trying to recruit them away from a current position. There are other things that are far more complicated and really can set you apart competitively that we’re going to get into in a little bit, but money does matter.
The most basic question you’re trying to answer when you’re talking about a job is “Does it meet my financial needs and goals?” So, for us, last year we went through an extensive compensation study that we commissioned with a consultant. Our goal with that was to position ourselves above the market, which we are. Every person will have to answer that themselves, kind of what their strategy is. Do they want to be on the high end or middle or low?
Larry: Could you just pause right there and give me some reasons why you, as a company, would want to put yourself in one of those strata?
Megan: Well, the easiest one is why you’d want to be above the average. It just sets you apart. It’s one more way people can differentiate your company and the opportunity to work there from another opportunity they’re considering. You want people not to be in a position where they’re wondering if they’re making what they’re worth, where they’re really being compensated in a way that they don’t need to look elsewhere.
Michael: I would also add to that I want to pay people enough that they can live on, where they’re not having to take second jobs or they’re not having to do freelance work to try to make ends meet. If that is a problem in the company, I want to know from those people who are struggling with that, but I think we’ve gone to great lengths to make sure what we’re paying is above market. We did a salary survey with… How many different companies did we do that with?
Megan: Well, we did it at several different levels. We had a general one that we took public data from, and then we also commissioned a custom one where I think we had seven different companies.
Michael: So, seven kind of peer companies, companies that are in our space, to try to assess what they were paying similar positions, because we wanted to be above the market on this.
Larry: It sounds like you’re saying that paying a bit above market rate on salaries actually makes you more profitable.
Megan: Right. Well, part of the reason you’re paying above market is for retention, so people are not going to jump to go somewhere else because they can make 5 percent more, for example. The cost of losing an employee and having to replace them is likely much greater than the small percentage more you’d pay to be competitive and retain them.
Michael: One of the things I want to say about salaries, too, is that a lot of companies lead with this and kind of end with this, and a lot of employees only consider this. They need to look at total compensation of which salary is only one component. That’s why it’s our level one. We’re going to get into some other levels that are also important, but it’s kind of like the baseline. In the past, when I’ve worked for other people and gone to look for a job, that’s kind of the first thing you look at, because I don’t care how good your health benefits are. If the salary can’t afford me to pay my bills, none of the rest really matters.
Larry: So, if I’m in a business and I’m not sure whether I’m competitive or not, can you give me one tip to get started in finding out how to structure my salary?
Megan: Probably the best advice I could give is to consider hiring a consultant. There may be resources for hiring industry-relevant consultants in trade organizations or other industry associations you may be a part of. You could also do this informally. Larry, you mentioned before we started that you have done this informally in a ministry context with other peer contacts in your area. That can be great. There are a lot of factors to consider, including where you’re located and your industry, the size of your team, things like that. This is probably not something you’re going to have expertise on yourself, and Department of Labor statistics are notoriously unreliable. That’s something to be aware of too.
Michael: We did hire a consultant, and that’s the way we got around it. Honestly, it wasn’t that expensive, and then we have that data and it’s going to serve us for several years.
Larry: So, how to create a company people are begging to join. One level at which you can attract people is through a competitive salary. Level two: incentivized bonuses. Tell me a little bit about that.
Megan: You can create a bonus program to incentivize certain behavior you want to drive. In our case, our bonus plans are related to our profit. That’s the thing we’re interested in driving and getting everyone’s focus on. It allows you to get everybody on the same side of the table as you are as the owner. You want people thinking about the things you’re thinking about as the owner instead of a whole bunch of concerns and interests. It’s a way to get the team aligned around a certain set of priorities that matter the most to the business.
This is important to say: we do not only bonus our sales team or our executive team; in other words, just people who are directly contributing to the profitability of our company. Every single person in our company has a bonus plan, and that’s intentional. We want everybody thinking about the contribution they can make, either directly to supporting our profitability or to supporting someone who directly supports profitability, whether that’s the person they report to or someone on another team. We’re all working together in the same direction to accomplish the same goal.
Michael: And you want everybody to have a stake in the outcome. The way I want it, as a business owner…if I win, I want everybody else to win. As Megan said, I want us sitting on the same side of the table, all thinking like owners, so that we either win together or lose together, but we’re in this together.
Larry: Can you define some terms for me? I’ve heard some of this bonus jargon out there. What is a no-cap bonus?
Megan: A no-cap bonus means you have a certain opportunity you’re offered. For example, a common structure would be a percentage of salary, so, there’s some percentage of your salary, maybe 10 or 15 or 20 percent, that you’re eligible for receiving if you hit whatever the target is for revenue or profit or whatever the benchmark is. A no-cap bonus means that continues to go up. You continue to be able to earn as the company exceeds the target, which is great, because you really don’t want people to stop performing at the point that they hit the target. You want them to keep going.
Michael: My conviction about that came out of a situation where I had maxed out my bonus one year, and the owner was having some regret about having to pay me a lot of money. I said, “Well, think of it this way. It was because I drove the profitability that you also got your biggest paycheck ever, and I don’t think you want to throttle that back with a cap. You don’t want me to stop because I can’t make any more money. You want me to keep going. Right?” He said, “Yeah. Absolutely.” It totally reframed it for him and changed his mind, and I felt like that as a business owner as well. I never want people to lay down their oars and stop rowing. I want people to be in it with me right till the end.
Larry: Talk about a referral bonus. That’s a different kind of bonus, a different kind of opportunity.
Megan: This is a new thing we’ve started doing. What we’ve found is the best hires we make, generally speaking (I would say this is probably 75 to 80 percent of the time), come from internal referrals. So it’s a friend or an acquaintance of someone who is already on our team.
Larry: They’re really pre-screening.
Michael: Good people attract good people.
Megan: Right. We thought, “How could we incentivize that and get more of what’s already working?” So we give a bonus to people for referring someone to our team who we end up hiring.
Michael: That’s a cash bonus, too. They get a part of it when the person starts, and then they get a part after they pass their one-year anniversary. It works great for everybody. Our team was very excited about this.
Larry: What about the non-cash… I don’t even know if we would call them bonuses.
Michael: Perks, sometimes they’re called.
Larry: Yeah. We get a company trip or other kinds of opportunities that people may be given that are just different than a little something extra in your paycheck. What’s the value of those, and how do you decide when, where, how to give those kinds of perks?
Michael: I’ve seen that used a lot with sales contests, for example. I think they can be very effective. First of all, it injects an element of fun into your business and some friendly competition. I think that can be good, and you can make this really fun and really simple. It’s kind of amazing what people will do for a reward that’s not worth that much. It could even be a tee shirt or something, but just to say they won. Some people respond to that better than others.
Megan: We haven’t really done that very much. We’ve done trips and other gifts and things like that, but not really with the intention of driving results. It has been more a part of our benefits package.
Larry: Do you think you should ever offer sort of a flat bonus, like everybody gets $500 at Christmas?
Megan: If it’s a gift. I would think of that as a gift, not a bonus.
Michael: I would too.
Megan: Any kind of bonus needs to be for the purpose of incentivizing behavior you want to drive so that you’re ultimately driving results. Otherwise, let it be a gift, which is fine. We certainly give gifts to our team members, but we don’t call it a bonus.
Michael: Again, I want something that’s going to drive performance. If you’re guaranteeing it, that’s not really going to drive performance.
Larry: Let’s say I don’t have any bonus structure now in my company.
Michael: Well, I would put into place a bonus that’s based on the results you’re trying to create. If it’s like us, if it’s all-around profitability… By the way, I think that’s usually the best one. Some companies do something that’s based on revenue and profitability because they’re trying to grow the size of the business. Regardless, whatever it is, I would get very clear on what it is you’re trying to achieve and then what you’re willing to pay to make that happen.
In other words, how much of that growth, how much of that profitability am I willing to share with the team if I could better guarantee…? It’s like an insurance policy. If I could better guarantee the result by incentivizing people to work together to make it happen, how much of that am I willing to give away? Then you have to kind of divide it by tiers. Tier one people may be your executives. Tier two may be the people in leadership. Tier three may be people who are at a management level below that, and then maybe everybody else.
You can get as complex or as simple as you want on that, but usually, there are people who have a bigger impact on that result you’re trying to create and other people who have less of an impact on it, so you have to scale the bonus appropriately. Once you get it set up, it’s a whole lot easier to administer it after that, but getting it set up the first time is usually the most difficult.
Megan: By the way, if you have a little bit larger company or you’re a little farther down the road, an excellent resource we’re actually working with right now is a company called VisionLink. VisionLink creates both short- and long-term compensation plans. It’s fairly robust and would not be the right solution if you were a solopreneur or just starting out with a couple of employees, but if you need something that’s really well thought out on either both the short- and long-term side of things, they are excellent. We couldn’t say enough good things about our experience working with them.
Michael: Oh my gosh. That has been one of the best professional experiences I’ve ever had.
Megan: They have a modeling tool, for example, that enables you to create reports for your team member on their proprietary platform that shows what their earning potential is over time, which is another great retention strategy.
Larry: So, level one in attracting people to your company is a competitive salary package. Level two is incentivized bonuses. Level three: generous benefits. This is probably the forgotten area of compensation.
Megan: And hence an amazing opportunity.
Michael: That’s exactly right. Megan and I were sitting in a hotel in Toronto where we were doing some planning after a conference we had attended, and we said, “Look. If we’re going to accomplish the goals we want to accomplish as a company, we’re going to need some amazing talent. How could we create a company…?” Almost like we think of creating a sales page to attract customers that would make it so compelling that people would be begging to get into the company.
We said, “If we were going to create a sales page like that that was for our ‘Careers’ page…” By the way, you can see what we came up with, because it’s michaelhyatt.com/careers. We said, “What would be on that page? What would be the benefits package that would be super compelling that people just had to investigate?”
Megan: This is one of my favorite things to talk about, because I’ve seen the transformational value in the lives of our team members. For example, we have unlimited PTO.
Michael: That’s a crazy one.
Megan: That’s a crazy one, and we weren’t sure how it was going to go, but we’ve done it now for two years.
Michael: What’s PTO?
Megan: Paid time off. Most companies would offer between two and three weeks of paid time off. We have unlimited PTO, plus we have federal holidays and such that the company is already closed. We feel like people need to be in charge of their own personal margin. They need to be in charge of getting the rest they need to perform at their best. Most high-performers… I should say, caveat, this depends on you hiring well on the front end, hiring people who are self-managing, who are very responsible and self-regulated, but if they are, then giving them the freedom to regulate around this area is fantastic.
We’ve found that people still, on average, take about three weeks off. There have not been any wild situations where people are taking 10 weeks off a year or something. And they still have to get approval. They can’t be gone for more than 10 consecutive business days at a time, but it just feels like so much freedom for people, and the autonomy that comes from that is very attractive.
Larry: I can tell you, as an employee, what you get from that is peace of mind. If I’m working hard and pushing hard (sometimes we have to do that), I know I can just take it off next week if I need to. I don’t always do it, but I can push a little bit because I have that margin coming if I need it, and if there’s a family event, I don’t even have to think about it. Of course, you have to check the calendar for company events and things that are sort of hard boundaries, but if my daughter asks me to go to a conference with her, like she did last fall, it’s like, “Absolutely. Yeah, I can get two days off. No problem.”
Michael: I was very reticent at the beginning with this, because I thought, as a business owner… It depends on the culture you come out of too. If you have a low trust of people, you think, “Oh my gosh. People are going to take advantage of me.” Sort of that scarcity mindset, that everybody is going to be going crazy. But I talked to my friend David DeWolf, a former client of ours and still a very good friend, who did this with a company of about 600 employees. I said, “Whoa! Has anybody abused it?” He said, “We’ve never had it abused.”
Megan: That’s pretty amazing.
Michael: That is pretty amazing. That gave me the confidence to pull the trigger. I will say also we’ve never had it abused. It gives people a sense of control, and, Megan, the word you used, the magic word, was autonomy. Daniel Pink in his book Drive says that’s one of three reasons that motivate employees: to have that sense of autonomy.
Megan: Another thing we do is we provide a very generous, at least by American standards, parental leave benefit. For moms we provide three months of paid maternity leave, and for dads we provide six weeks. In the US, that’s a pretty rare thing. Certainly, people are allowed to leave their jobs with the guarantee that they’ll have a job when they return, at least for mothers, but not necessarily paid.
We feel like it’s really critical that people have the time they need to spend with their families around the events of adding a new child to your family. By the way, this applies for both biological children and adopted children, so it doesn’t matter. We don’t discriminate on that point. Then when they come back to work, they’re ready to be present again, and they can feel healthy and strong and rested. I’m telling you what. That probably more than any other benefit we have, except maybe the unlimited PTO, is our biggest retention tool.
Michael: I do too. And I feel great about that, because we’re committed to families and we’re committed to family values, but this is where the rubber meets the road. You have to put your money where your mouth is as a business owner. This sets up that family for the best kind of family life, when they’ve invested in their kids at that age.
Megan: That’s right. We’re really playing the long game. When we think about PTO, when we think about parental leave… We also pay 100 percent of health care for our employees. We have a premium health care plan. All of those things are investments we’re making in the ongoing health and well-being of our team members. It’s not just about recruiting. It’s really about having alignment with our core values and creating transformation and a transformational experience over the long haul for our team members, because we want them to stay.
Michael: Probably the benefit I’m most excited about that we haven’t talked about yet is our 30-day paid sabbatical, which every employee in the company is eligible for after three years of service and then after every three years thereafter. Our people have raved about this. We don’t expect them to check in with the company while they’re gone. We don’t expect them to take calls or answer email or think about work. This is just a time for them to focus on themselves, focus on their family, rejuvenate, and then return energized. I think we all need that. Our people have loved that.
Larry: What’s the difference between a sabbatical and a vacation?
Michael: I think of a sabbatical as a longer period of time. I think it’s extremely rare for people to take more than about a week at a time, almost impossible to take two weeks in most companies, not because you wouldn’t be allowed but because I think a lot of employees just feel nervous about being gone that long. This is a time to really unplug for an entire 30-day period. The first time I experienced it, I can tell you I was really anxious as I went into that second week, like, “Man, I need to get back,” and after a few days that passed, and then I settled into it. There was a kind of release and rejuvenation I’d never experienced before.
Megan: By the way, just practically speaking, these sabbaticals happen in June and July of our company, because that’s our slowest season. As we’ve scaled and we have sometimes five or six or more people taking these, we’ve decided to put those in a certain part of the year so they’re not happening all throughout the year, which would be kind of disruptive, but we have them scheduled during our slow season.
Larry: Tell me about how this benefits the company. You can see how it benefits the employee, but if I’m a business owner, I have to be thinking, “An extra month off… That’s going to be hard to give.” How does it benefit me, a business owner?
Michael: This is a funny one. This is probably something you wouldn’t think of. I think it ensures that you build a company that’s not dependent upon any one person. This is one of the reasons as a business owner I actually do this every year, because I don’t want a company that’s 100 percent dependent upon me either. If I can be away and my company can run and continue to grow while I’m gone, that’s a really good thing.
Megan: One of the things I was thinking of, and I’ve experienced this personally. I know you have too. When people come back and they’re super rested, the contribution they’re able to make is exponentially greater than when they left. When people get burned out, when they’re tired, their creativity is at a low. When they come back, usually they’re full of ideas. They’ve had experiences that have nothing to do with work but have somehow stimulated their thinking and their creativity, and ultimately, benefit the business, and I wouldn’t want to say no to that.
Michael: Another way it benefits a business is not only is it an attraction strategy… It’s all these things put together, like the competitive salary, like the incentivized bonus, like your generous benefits, but all that adds up to a super attractive opportunity to attract the kinds of people you want, and maybe even more importantly, for reasons you suggested earlier, Megan, it’s a great retention strategy. There are people who have said to us, “If this benefit was the only thing, I wouldn’t leave the company because of this benefit. This would be too hard to replace someplace else.”
Megan: And even if they were working for themselves, they would never do that on their own.
Larry: That brings us to level four in creating a company that people are begging to join, and that is intentional culture. How is culture an attraction to people, and what do you mean by intentional?
Megan: This is my favorite of all of the levels. It’s the easiest place to be competitive because so few people do it. We all have examples in our minds, like Google, that really focus on culture and do some really creative things and have a lot of fun, but especially if you’re a smaller company, it’s much more rare. When I think about intentional culture, I think about how we intentionally foster connection between our team members, how we create an environment of fun, how we create a company that is healthy that is in congruence with our core values. Those are just some of the elements that would be a part of that.
For example, if you were to interview our team members, one of the things they would say is they’ve never worked in a company that felt healthier, where there wasn’t politics and gossip and integrity compromises at the top, where they could just trust that who we say we are is how we behave. There’s an enormous amount of relief and trust that comes from that, which is exciting for people and often very refreshing.
The other thing is that we prioritize connection with our people. We do an annual retreat, for example, at a really neat resort that’s up in East Tennessee. There’s a meeting that lasts for about two-thirds of the day, but the rest of the time is all about connection. We invite spouses to come to that, and we want people to be connected with one another. We want people to have friends within the company, to feel known, to enjoy being with other people, and to set the stage for that.
We intentionally inject fun into our company. For example, at that retreat, our icebreaker was a Nerf gun battle that nobody knew was going to happen. We had hidden Nerf guns up under the banquet tables in the room we were meeting in, and all of a sudden, you and I, Dad, pulled them out and went to town. It was an absolute blast. The photos from that are so fun.
For example, we do monthly meetings with our team and we play games. We have giant UNO and giant Jenga and Words With Friends. Heads Up! is another one of those games. We just try to have fun together. When you think about the number of hours you’re spending at work, if you can feel connected at work, if you can feel integrated in terms of values and behaviors, and if you can have fun with other people, that’s a place you never want to leave.
Larry: How do you get the confidence to say, “We’re going to intentionally goof off”? Most companies highly value productivity. Some are driven by it. If you’re in a manufacturing environment, for example, you have to produce the numbers, yet you take half of a day probably once a month for lunch and game time or interaction.
Michael: How do you put a value on teamwork? That’s the thing. And alignment and connection. These are all soft kinds of things, I suppose, but we see it manifest itself in increased productivity. We know from the science of productivity, which we’ve done a lot of work on, that people need breaks. If people don’t have breaks, if they just keep their nose to the grindstone, so to speak, there’s a limited amount of productivity you can squeeze out of people or out of systems. So when you get to that point, you just have to say trying to squeeze another little smidgen of productivity out of these people or out of ourselves becomes, at some point, counterproductive.
I talked about it in Free to Focus, the law of 55, that once you get to about 55 hours you actually start to become less productive. There’s only a certain amount you can do. But when people are aligned, when they like the people they’re working with, here’s the thing: they’re engaged, and engagement is something you can measure and something that does have a value, and there’s nothing like working with an engaged workforce.
Larry: To build a great business you have to have a great team, and you can become that company that people are begging to work for by structuring your offering to your team at four levels. Level one: a competitive salary. Level two: incentivized bonuses. Level three: generous benefits. Level four: an intentional culture. What’s our final thought for the listeners today?
Megan: I want to encourage you, if you’re a business owner or a leader, to spend some time dreaming about what your company would have to look like if you were going to have people begging to join it, and challenge yourself to do this in reverse order. Don’t start by thinking about the salary and bonus plans. Those are the easiest to solve and, honestly, the least unique. Kind of work backward and think about that intentional culture and think about the generous benefits. Get creative. Have fun.
Like the whiteboarding session, Dad, that the two of us did in the hotel room. That was really the genesis for what we ended up with, and I don’t want to stop. I want to continue to think about this, because you can have an ability that is beyond what you would ever think to attract people you might think are out of reach if you get these couple of things nailed.
Michael: I would just add to that, one of the reasons that whiteboard exercise worked for us is we put ourselves in the shoes of prospective employees. We said, “What would attract us? What kind of company would we like to work for, and what would be an amazing work experience?” and then we created that. That’s where I think you have to start. Honestly, it’s like any other kind of sales. If you’re going to sell to your customers, you have to put yourself in their shoes, and if you’re going to sell to employees… Because you’re recruiting people, and they have the opportunity to either sign up with you or not sign up with you. So how do I create an offering that’s irresistible?
Larry: As always, guys, great advice for our listeners. Thank you so much for sharing it.
Megan: Thanks, Larry.
Michael: Thank you, Larry. And thank you guys for joining us for Lead to Win. Join us next time when we’re going to show you how to create a meeting rhythm and a structure that will actually motivate your team. Until then, lead to win.