My Moneyball Framework for Hiring
In 2002, the New York Yankees had a payroll budget of $126 million, the highest in the Major Leagues. Their first seven players cost more than the average team paid for it’s entire roster of 26 players. Being one of the richest teams, the Yankees could afford to buy anyone they wanted, simply outbidding other teams if needed. The Yankees also had better perks than other teams, i.e. being based in the most cosmopolitan city in the world. And they also had brand; kids grew up dreaming of wearing that legendary Yankees jersey.
The Yankees team payroll (far right) compared to the rest of the teams. The league average that year was $67M.
Money, perks, brand… sounds an awful lot like what attracts employees in a competitive hiring market. If you’re involved in hiring in tech right now, you’re probably competing on all these fronts, and if you’re not one of the big brands (Apple, Amazon, Microsoft, et al.) you’re probably having a hard time finding people. Yet the world keeps turning and you still need to ship your products. What do you do?
Sport and business
Hiring in business is similar to scouting in sport. There are a handful of players (employees) measured with certain statistics (qualities) that teams (companies) compete for. The players ranking highest on the important stats are most desirable, command the most money, and have the most competition for them.
In hiring, the important stats/qualities are skills and experience.
Skills: How proficient someone is at the work, and
Experience: How long someone has worked (and for which companies).
These are right and good to consider but when everyone considers the same things you get a shared value hierarchy and the result is bidding wars—which the richest teams always win.
In the early 2000s, the two main stats baseball teams cared about were batting average and runs batted in (RBIs). Scouts, the recruiters for baseball teams, ranked players based on these stats first, and other factors like personality, leadership, and marketability a distant second. This resulted in teams like the Yankees always getting the top ranked players and everyone else fighting down the list.
“If we try to play like the Yankees in here [scouting], we will lose to the Yankees out there.” ~Billy Beane
Moneyball
The Oakland A’s during the early 2000’s were a team that was suffering through this situation. In 2001, at the bottom of the payroll list, they had three of their best players poached by richer teams. Once again, they were stuck with a big talent hole and a small budget to fill it. General Manager Billy Beane knew if he didn’t find a different approach this would keep happening. Moneyball was the book and movie starring Brad Pitt (playing Billy Beane) and Jonah Hill (playing his assistant Peter Brand) about what they did and how it changed the game forever.
Their approach was to stop competing for the same players as the rich teams. Instead of using the traditional metrics (batting average and RBIs) to rank players, they used non-traditional ones like on-base percentage (OBP). OBP is a good proxy for runs, albeit a much less glamorous one because it includes walks and getting hit by pitches. They also looked for players who had injuries, which were cheaper, and could be played in positions that wouldn’t aggravate their injuries (like a catcher who couldn’t throw playing first base, which doesn’t require much throwing). There were also deals available on players whose traditional metrics were dropping and teams wanted to trade, sometimes even willing to subsidize their salaries get them off the roster. In theory, all these players could still get the job done—i.e. get on base and score runs—but because they ranked lower on the traditional metrics, they were passed on.
“I believe there’s a championship team of people that we can afford because everyone else undervalues them.” ~ Peter Brand
And it worked! In a single season, Billy Beane and Peter Brand built a team that competed with the richest in the league with a payroll 70% lower. And they weren’t just competitive, they made the playoffs and even broke the record for the longest winning streak in the league since 1906 (20 games). The 2002 Oakland A’s with the 3rd lowest payroll, won the exact same number of games as the New York Yankees who had the highest. That year, the Yankees spent $1.4 million per win and Oakland spent just $260K.
Today’s tech hiring landscape feels a lot like a Moneyball moment. Google, Apple, Amazon, et al. are the Yankees poaching the ‘best’ talent and everyone else are the Oakland A’s trying to build whatever team they can.
Teams not individuals
Individuals don’t build features, teams do.
The insight Beane and Brand had was that the focus shouldn't be on buying players, it should be on buying wins.
“People that own ball clubs think in terms of buying players. Your goal shouldn’t be to buy players, it should be to buy wins. And in order to buy wins, you need to buy runs.” ~Peter Brand
The tech equivalent of this is buying features, not people. Teams build features, not individual people, so we should be building teams that can deliver good features faster.
The prevailing thinking in the tech industry, however, still centres around individuals. It’s even in the terminology: ICs, or individual contributors. Very little attention is given to team dynamics. This is fine and even necessary for big companies that need to hire hundreds of people a month. But at a startup, with a handful of teams per department, it’s possible to be more thoughtful about assembling people that work well together. The best teams are never made up of the best individual players.
It’s when our reality becomes uncomfortable enough or unavoidable enough that we become open to breaking the status quo. For Beane, it took his three best players being sniped again. What is it for you?
Three qualities
There’s a young engineer who works with us that got me thinking about this Moneyball moment. He does good work, does it quickly, is nice to work with, etc. He doesn’t have much experience so his market value is lower than a senior dev, yet his overall value to the team is higher. How is one of the most valuable members on our team is also one of the most affordable? And how is it that we’d have overlooked him if we’d used our standard recruitment process (we found him outside of it).
I started thinking back to all the great teams I’ve worked with over the years to consider what made them great. More specifically, I was wondering if skills and experience were the most important factors. For none of them could I honestly say skills and experience mattered much. Yes, everyone had a sufficient level of skill and experience, but what actually made them great was different.
It seemed to come down to three qualities:
Personality – Every person on the team had traits like thoughtfulness and respect which made them good teammates and easy to work with. Easy to work with equals speed because there’s no energy lost to inter-personal friction. Said another way, the clashes are fully about work, not about egos. They were also open-minded (not defensive), making the group a safe place for creativity.
Excitement – Often people on these teams were excited by the project and/or their craft. Their work was more than a paycheck so they brought extra curiosity and initiative. When the work is interesting in itself, it shows.
Ambition – Here I define ambition as a connection to a person’s larger life narrative. People who see as job as a learning stepping stone to bigger things, or appreciate the flexible work hours because they have a family, bring more energy each day because they understand there’s something uniquely valuable in the job that makes their life better—something worth showing up for.
The Hiring Hierarchy
This hiring hierarchy puts Skills and Experience at the bottom of the stack.
Is there anything new here? Certainly every hiring manager would agree these three qualities are important, just like every baseball scout would agree on-base percentage (OBP) is important. What’s new is the ordering. In this hierarchy, personality, excitement, and ambition are at the top of the list. Why? Because for big companies they’re at the bottom and competing away from where big companies swim is usually a good strategy. More importantly, these qualities are hard to change. Good luck changing someone’s personality or making them more ambitious—what you hire is what you get. Skills and experience, on the other hand, are fully in a company’s control through training and time on the job.
Skills can be taught more easily than virtues can be developed.
If you’re with me this far, you should be seeing the insight and the opportunity. Building a great team doesn’t require All Stars (insight), and therefore it’s possible to find the people you need with the budget you have, without competing directly with the giants in your industry (opportunity).
Operationalizing this is the next challenge. The goal for operationalizing anything is making it repeatable—i.e. anyone on your hiring teams can identify these qualities in candidates. How you do this will depend on company culture, hiring team size, and factors like your capacility to train people. It’s not in the scope of this post to get into those details.
Conclusion
In any competitive game, a playbook naturally emerges. In hiring, the playbook says to find the best people as measured by skills and experience and compete for them on salary, perks, and brand.
As long as everyone in the game feels they have a shot at winning regularly (i.e. the game is fair) the playbook stays the same. But when wins become hard to come by, some teams start to write their own playbooks. With hiring in the tech industry, it feels like a new playbook is needed.