Episode 23: How to Hire Exceptional People
Joe and Ryan get candid as they discuss their approach to hiring a great team.
Start Transcript:
Joe Muratore:
I would say a significant portion of our team right now is in what I would think of as a pretty high income bracket. We pay well and I remember the first time we had someone come in, who cost $150,000 a year. It was a little bit of sticker shock but this person was incredible. Just incredible. And prior to that, we'd hired maybe B+ people and payed a B+ salary, but what we found was we looked at each other and said, "Let's do this." And that person's still with us today. Several years later, they're a leader in the organization. Their pay has grown significantly from where they started and we rely on them in this organization. They're a delight to work with.
Speaker 3:
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Ryan Swehla:
So, today we're going to talk about how to hire exceptional people. And I guess we should start by saying what is our version of exceptional people?
Joe Muratore:
Yeah.
Ryan Swehla:
Which seems self evident but it really isn't. For us, we've talked a little bit about core values but exceptional people absolutely starts with core values. It starts with people that exhibit honesty and integrity, extreme ownership, caring, humble [crosstalk 00:01:29].
Joe Muratore:
Positive.
Ryan Swehla:
Excellence and execution. And if they don't exhibit those characteristics, we can stop there, because they have to gel with our organization.
Joe Muratore:
Absolutely. So, I would say, often I walk into a room and start the conversation and you can spot someone who's a 10. The way they carry themselves, the way they approach life, the way they answer questions, it stands out. What we often say, "We are only willing to hire 10's." I don't know exactly that means other than we hire A+ people.
Ryan Swehla:
Another way I like to say is it has to be a hell yeah.
Joe Muratore:
Yeah.
Ryan Swehla:
It's either a hell yeah [crosstalk 00:02:09] or a no. That's it.
Joe Muratore:
Yeah.
Ryan Swehla:
And I was talking to a candidate recently where it has to be a hell yeah for them too.
Joe Muratore:
Absolutely.
Ryan Swehla:
If this is a moderate fit or a stepping stone or whatever the case may be for them, it's not going to be a good long term fit so, we need to mutually say, "This is a hell yeah."
Joe Muratore:
I often look for the feeling inside this is, "I can't believe we could work with this person."
Ryan Swehla:
Yeah.
Joe Muratore:
But this person elevates the organization. When they come into a meeting, everyone else is going to look around and be like, [crosstalk 00:02:47].
Ryan Swehla:
"I better bring my A game."
Joe Muratore:
"I need to bring my game because of this person". And that's a self-fulfilling prophecy that as you add incredible people, the very, very best people you can find, the whole organization's elevated and everyone ups their game, my game-
Ryan Swehla:
And going back to that idea of Mindshare or Mastermind rather. This idea that someone who brings a new competence or a high level of competence in a specific area, we now as an organization collectively have that knowledge and to be able to go into an interview and talk with someone about their area of expertise and be dazzled because saying back to the idea of feeling privileged to work with exceptional people, being an interview and saying, "Wow, this person knows a lot more about their area of expertise than I can or will know."
Joe Muratore:
Yeah. I would say a significant portion of our team right now is in what I would think of as a pretty high income bracket. We pay well and I remember the first time we had someone come in, they cost $150,000 a year. And it was a little bit of sticker shock but this person was incredible. Just incredible. And prior to that, we'd hired maybe B+ people and paid a B+ salary. But what we found was we looked at each other and said, "Let's do this." And that person's still with us today. Several years later, they're a leader in the organization. Their pay has grown significantly from where they started and we rely on them in this organization. They are a delight to work with.
Ryan Swehla:
And I think one of the big takeaways for me from that experience was we did this gut check and we said, "Okay, are we ready to do this?" And we said, "This is more competence or a higher level than we think we need right now, but we think we might need that." But the real eye opener was once they started coming to work here and unlocking all of this additional knowledge, wisdom, expertise. And that was the pivot for us I think when we realized that we need to be finding lots and lots of those people because we don't even... I guess that's the awareness's we didn't even know what we could benefit from out of a relationship like that.
Joe Muratore:
Yeah. It changed the whole organization. I mean, now I'm highly motivated by doing a large enough volume of business to be able to hire world class people throughout the organization at all the detailed levels that it takes to operate with excellent results with incredible people and that's been an absolute joy. I mean, since that person we've hired, I don't know, 6, 7, 8, 9, 10 in that...
Ryan Swehla:
Well compensated people.
Joe Muratore:
Well compensated people that just blow our minds almost every day, which lets us be better and makes for a great place for them to work.
Ryan Swehla:
Absolutely. So let's talk a little bit about how we do that.
Joe Muratore:
Yeah.
Ryan Swehla:
We've talked a little bit about why we do that and actually... Sorry, I'm going to back up a little bit. One other area that has become a part of who we are is this Netflix idea of a talent dense organization. And this idea that I don't come to work because my business has foosball tables or they have masseuses, those are all nice perks. Great, if they do, great if they don't. I come to work because I have stunning colleagues.
Joe Muratore:
The quote is "Stunning colleagues are better than a foosball table." Absolutely. It's a joy to work with A people. To be in a meeting where people are coming up with incredible ideas and have the experience to back it up. I mean, that makes this an exciting place to work.
Ryan Swehla:
Yeah. I want to constantly be challenged to raise the level of challenge in our organization so that people like that continually find challenge. In a sense, it's an undertaking because if you bring on someone who does fine in their role, they're not going to expect much. They'll do their role and there's not a lot of expectation but man, you bring on a rock star and there's mutual expectation but it goes both ways in the sense that we need to continue to up our game as an organization to bring that challenge and that fulfillment in their careers as well.
Joe Muratore:
Yeah. What I really enjoy is having rock stars in niche positions not just a rockstar generalist, like "I've been in business 25 years and I've done this." But no, no, "I did charging stations at apartments at this complex, this complex, this complex." "Really? How do you..." "Well, we ran into this pitfall, we dealt with this or in finance or accounting." To have absolute niche incredible rockstar people is incredible. Especially when you're around a table and there's no piece that's going to fall through the cracks.
Ryan Swehla:
Yeah.
Joe Muratore:
There's competence in that room with everything that you're going to undertake. I love that part.
Ryan Swehla:
So now let's talk a little bit about how we do that.
Joe Muratore:
Right.
Ryan Swehla:
And this is an interesting thing because we're based here in Modesto, California and to our knowledge, we're the only investment manager in the Central Valley, seven and a half million people. And with that, the skill sets that we need are very niche skill sets.
Joe Muratore:
Right.
Ryan Swehla:
So it's not easy, but I think it starts and how it has started with us is by having a strong pipeline of candidates.
Joe Muratore:
Well, I suspect we are increasingly, or maybe we already have, or we're getting close to having the best team within 100 miles? 50 miles?
Ryan Swehla:
Easily.
Joe Muratore:
I mean, Sacramento to Fresno because our staff draws from Sacramento, Stockton, Fresno. I mean, it draws from this 7 million [crosstalk 00:09:03].
Ryan Swehla:
East Bay area.
Joe Muratore:
Yeah. East bay. But we're getting the best people from those areas who often are approaching us. They see these videos or they know people that are a part of our company now and they want to be a part of what we're creating and we find that a lot of times, those are our best candidates when they've already decided in some way that this might be a great fit for them and they want to bring their talents and do the best work at their lifetimes at this company. Those are the people that we want to work with and those are the people we love working with.
Ryan Swehla:
Well, and for those people to find out about our company, it's a conscious effort, I guess you could say. Initially, we thought of things like these podcasts as ways for the broader community to get to know us, know our investment strategy, that sort of thing. But one of the things we've realized is that opportunity and capital are not our biggest constraints. Our biggest constraint is having exceptional people, because we won't settle for a seven or a not a hell yeah. It needs to be someone who blows our hair back, so to speak because that's what we've come to appreciate and [crosstalk 00:10:23].
Joe Muratore:
Well it's who we are, it's our ethos, it's who we are.
Ryan Swehla:
Yeah. And with that, we've recognized that we need to be putting ourselves out there as a company, as a culture so that people have a better understanding of our culture and it becomes a first filter for people to understand how we operate, who we are and if that's the kind of environment that they will thrive in.
Joe Muratore:
And this is why culture and mission and values are worth a lot of money.
Ryan Swehla:
Yeah.
Joe Muratore:
And also make our environment a great place to work. If talent is our biggest constraint, then anything that puts a drag on talent is killing the organization.
Ryan Swehla:
Yeah.
Joe Muratore:
So the fact that we have a clear mission statement that we love and that really makes sense to us and that we've lived by for four or five years now. And we have core values that we've talked about in other episodes and you can see that are really important to us that we actually live by, that we bonus around, that we grade our people by. Those things make our company a great place to work. They reduce organizational friction and they help us draw the best talent pool in our region.
Ryan Swehla:
In business development or in marketing, you'll often hear people talk about that your existing customer is your best source of new opportunity. What's interesting is you can take that same analogy to employee development and to your pipeline of strong candidates of employment, because if you have a culture and an environment that people are thriving in, that they're enjoying, they end up becoming your spokesperson for the company.
Joe Muratore:
Yeah.
Ryan Swehla:
And I think of a couple in instances or several instances, really where our employees end up being the spokesperson that gets these exceptional candidates interested in applying.
Joe Muratore:
Yeah. I often think about the idea of empowering people. We're a pretty flat organization and I'll speak to the group I lead, but I work and I know you do too, is I work really hard to have them making decisions. It doesn't work well when someone, a couple layers down, comes up and says, "Hey, what do you think of this? What do you think about this?" And they have to go through that whole buy-in process. When we hire 10s and what I say to them is, "You are here to be a decision maker." That's the hard work. Decision making takes guts and courage and research and a plan and a reputation. It takes all these things. And that's why we bring great people in the organization so they can make decisions. And especially when someone's made four or five great decisions in a row, it's really easy to give them runway and latitude and trust and if you hire for character and culture and competence, there's less organizational friction about worrying about each decision because people bring into the organization the ability to make great decisions.
Ryan Swehla:
Another tip I was just thinking about for hiring exceptional candidates is be prepared for them. I've often heard it said that luck is when preparedness meets opportunity.
Joe Muratore:
Yeah.
Ryan Swehla:
And the same applies for the employment world as well. We have on several occasions hired for roles that we knew we would need or competences that we knew we would grow into. And it may not have been the exact moment that we needed that, but we were focused on where we're going versus what do I need right now? And that takes some internal fortitude because it does mean at times hiring someone earlier than you need, because that's when that person, that 10 or that hell yeah is available.
Joe Muratore:
Yeah. Well, we're in that process right now. We've hired a couple of 10s that are really going to help us with this year of growth and the opportunity in front of us, but you have to ha you have to lead with talent. You have to lead with value. This is where it comes to entrepreneurship and to partnership, but you can't have the opportunity on the table and the right people at the right time. My experience, and I think our experience is you often have to lead with the talent and then the opportunity comes and that does take a gut check. Finding the right people requires you have to always be hiring. At this point we are always hiring. In fact, I think we've hired three or four in the last, I don't know, month or two.
Ryan Swehla:
Yeah.
Joe Muratore:
But the point being is, you don't know when great people are going to want to enter the organization and you have to always be ready and there are times when a person's come and they're an absolute 10 and we're not quite ready for them, but we still hired them because we saw where that could be and that's worked well for us.
Joe Muratore:
But to be clear, we've hired through referrals. We've hired through employment agencies. We've approached candidates. We've emailed 50 people on LinkedIn. I mean, we have been scrappy to get to the talent group that we have now. As we get bigger increasingly we get more inbound leads. But to get there you have to put in the work. Maybe you can talk to that, I know you've sent a lot of LinkedIn emails in your life.
Ryan Swehla:
Well, it just goes back to you get what you invest.
Joe Muratore:
Yeah.
Ryan Swehla:
And one thing that we've recognized is that having stellar, stunning colleagues is an important aspect of how we operate and that takes work. And I can think of a couple roles that we're hiring for right now and instead of having people that we're sooner than we need, it's the opposite problem where we can't find that hell yeah or that 10. And having the fortitude, even though our organization needs it, we need that relief if we can't find that right candidate, it costs too much to bring on someone who isn't everything that we need or they don't have a cultural alignment with our core values.
Joe Muratore:
Yeah. But I look at our team now and we are batting way above our weight class.
Ryan Swehla:
Yeah.
Joe Muratore:
I think of our VP of finance who managed a $3 billion portfolio before us. Much, much bigger than us currently. I think of our VP operations who managed 70 employees in a $900 million organization. I mean, much bigger than us. I think of our team, one guy led $150 million farming operation. One gal was in charge of 3000 apartments and 59 employees. What's the common thread here is there's a group of extremely talented people that have bought in on where we're going and decided to get on, as Jim says, to get on the rocket ship, to be a part of what we're creating here and that creates a tremendous amount of joy for all of us.
Ryan Swehla:
Absolutely. We're in business because we enjoy doing what we're doing. Certainly there are benefits of it if we are successful, we have financial rewards, but we spend the majority of our life in this thing that we call business. And the last thing that I want to do personally, is go into a work environment that is a drag on my energy.
Joe Muratore:
Yeah.
Ryan Swehla:
And there's probably a middle road, which is, it's not a drag on your energy but it's fine, but what we found is that if we go into that environment where we come in and we're constantly challenged and we are forced to bring our A game because that's what everybody else is bringing, it's even more rewarding.
Joe Muratore:
Yeah. Well, there's the other side of this, which is I think, of the last 15 years and there's been, I don't more than at least a dozen times I've had to sit in on a layoff or helping us or someone out of the organization and that's difficult, maybe not an enjoyable thing to talk about, but you cannot build a grade A culture, without having always having people doing their very best, the Netflix book says something like we support excellence and acceptable gets a generous severance.
Ryan Swehla:
Yeah. Average gets a generous severance.
Joe Muratore:
And I don't know how to say that other than to say that we've ushered people out of the organization, very politely and praising them and giving them a severance and a bonus because they're no longer the right fit for the organization. And they're no longer able to bring the A game that propels this forward and that's a difficult thing to talk about, but an organization can't grow and flourish without pruning and that's a key idea.
Ryan Swehla:
Yeah. And it paves the way for us to be able to continue to bring on just best in class people. You think of the person that you had to let go and how challenging that is for the organization, for that person, everything. But then if you also pause and think of all of those other, A players or people that have a strong fit with our culture, and they're having to work with someone who doesn't and it's a drag. It's a drag on culture. It's a drag on energy. So it's not fun and it's challenging every single time, but we also view it as our duty to our exceptional, stunning colleagues to make those hard decisions.
Joe Muratore:
And I think that none of the people we have let go... I think if you spoke to any of them... I'm hopeful. I believe most of them would say, "I respect those guys. They were right to work with."
Ryan Swehla:
"They treated me right."
Joe Muratore:
"They treated me right." Nobody was just pushed to the side. It was respectful and thoughtful and caring. And people who have entered our organization, there's a love there. There's a this is a beautiful thing and we care about those people so... But we care enough to also prune.
Ryan Swehla:
Yeah, absolutely so...
Joe Muratore:
One last idea I think we should leave on is that business runs on the rails of trust. Both team members and owners, clients, investors, we all have to trust each other or trust is what makes the thing work and when trust is violated, the whole organization suffers. So to have a great place, to have a great company with great team members, a thriving company, you have to build and lead with trust.
Ryan Swehla:
Thank you for listening to Durable Value an investors podcast, where we demystify commercial real estate with safe, sound investments strategies to help you balance your portfolio. If you enjoyed this podcast, be sure to rate it on iTunes or wherever you get your podcasts. To learn more, visit graceadapartners.com where you'll find more information, investors, tools, case studies, and more. This podcast is hosted by Joe Muratore and Ryan Swehla. It's produced, edited and mixed by Melodic with intro music by Ian Post. Thanks again for listening. And we'll see you next time.