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Episode 43: How to hire your very first employee

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All Xero Gravity episodes

Hosted by Elizabeth Ü

When Fortune tabs you as the #5 Best Workplace in Retail for 2015, you’re on to something good.

It all starts with hiring people who share your vision and passion. Who’ve experienced what does and doesn’t work in business, have a strong sense of themselves, and know what brings them joy.

Motorcycle revhead Anthony Bucci, co-founder and CEO of online motorcycle retailer, RevZilla, has been using a hiring practice called Top Grading. On Xero Gravity #43, he’ll share how this method helps you see themes and patterns in the interview process, to give you a strong sense of what potential employees bring to the table.

Tune in and you’ll hear Anthony break down the entire Top Grading process, what Zappos taught him, and what Navy Seal training, “fire in motion” and RevZilla’s “beer test” have to do with it all.

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Episode transcript

Host:     Elizabeth Ü [EÜ]
Guest: Anthony Bucci [AB]

 

EÜ: Hi everyone. I’m Elizabeth Ü, and this is Xero Gravity.

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Guest soundbite

“So many companies will settle for the brilliant jerk.”

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EÜ: That’s Anthony Bucci. Anthony is a technology developer turned entrepreneur. He’s the definition of a rev head and has been obsessed with motorcycles since 2004. Anthony is the co-founder and CEO of motorcycle e-commerce business, RevZilla. Last year RevZilla was named one of the top 50 places to work in America in Fortune. In talking with Anthony I was blown away by how passionate he is about the hiring process and how grueling a process it is for RevZilla. He has so many helpful tips for companies that are hiring, ranging from top grading to not leading the witness, to knowing when to say no.

So, on the one hand, no brilliant jerks, and on the other he says you need to resist the urge to hire a great team that doesn’t necessarily perform. My favorite story Anthony shares is how he creates a performance culture that passes the beer test.

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Guest soundbite
“What ends up happening is that no one can lie for four hours.”

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EÜ: So we’ll have all that and more, coming up on Xero Gravity right
after this.

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EÜ: So Anthony, we know a little bit about your professional background, but tell us a bit more about what you’re doing when you’re not CEO of RevZilla.

AB: Oh my gosh, you made it sound so glamorous [laughs]. So when I am not here in the office or at home working or in the evening at home working, because it kind of never ends, I actually have a budding family.

So I’m in my mid 30s, and I have multiples on my resume. My wife and I have four children right now, and my fifth actually due here, gosh, any minute in the next week.

EÜ: Oh wow!

AB: So that will be my last, but yeah: aspiring father, aspiring good husband and aspiring leader of the business. Or that’s the kind of, outside of golf every once in awhile, it kind of fills all the hours.

EÜ: And obviously you’re a bit of a motorcycle head. So when did that obsession start?

AB: Right around the time that we were starting the business, quite honestly. So my background is in e-commerce and technology and I do have a lot of diverse interests, you know. Jokingly, I don’t get to spend that much time on them anymore. So RevZilla came about because I was working on the digital side bringing all these great brands to their first e‑commerce experiences, and then I decided I wanted to buy a Ducati because my parents told me I couldn’t until I was an adult.

So I wanted it until I was an adult, and when our business started, I was looking for really cool helmets and jackets and realized that there was no — there was no RevZilla in this space. I mean, that’s the honest-to-god truth. So I’d been riding for almost a decade at this point — total blast, but yeah, I got into the sport at around 26.

EÜ: And how did you come up with the name RevZilla?

AB: We were drinking. No. Actually [laughing] it’s funny. So my co‑founder Matt and I were roommates; founded the business together. We had a bunch of really bad working titles that I will not mention, that we just hated. There were placeholders and Matt actually came up with MotoZilla, and we tried everything we could to buy MotoZilla from the guy that had it.

It was a school project. It was for charity. We kept upping our bid. This guy was just sitting on it. It was a parked domain, and finally he, yeah. I called him one day and he said, “I will not sell you this domain, I’m starting a motorcycle parts accessory and apparel website. Leave me alone.” And Matt and I went out. We were single guys in our mid 20’s. We went out that Friday night, and after a cheesesteak at 4am standing in the kitchen probably drinking water, so we’d alleviate our hangovers for the next day, I said, “What about Rev, what about RevZilla?”

You know, the Zilla’s good and we don’t want to be motorcycle gear dot com. We didn’t want to be discount clothes at motorcycle gear dot com. We wanted a name that we could assign an emotional value to, or that could become our brand, and that’s really, so we always joke: I was the Rev and Matt was the Zilla and then Nick our partner— it wasn’t a dot com until he joined the party.

EÜ: Well, we all know that owning your own business involves a lot of sweat, blood and tears. So what was one of the key challenges that you faced as a business owner, and how did you overcome it?

AB: So, it’s really interesting, the key challenges that we faced — I mean, we were cashflow positive in 90 days. So one of the main…

EÜ: Wow!

AB: …challenges — yeah. So one of the main challenges that most businesses face, you know, they they spend time and in a lot of cases other people’s money, to try to find product market fit and then grow and be, you know, pre-revenue to revenue, to profitability.

So for us, I mean, we weren’t paying ourselves. We were living together. We were slowly experiencing a little profitability for a long time, but the business could pay its phone bill, it’s hosting bill and it’s rent for the store that we had to have, by way of the distributor agreements. This was within 90 days of launching the site in November of ’07. So I’d say for us, once you get past that hump the biggest challenge has been the scale factor, trying to realize how to scale a business that’s grown this fast. So we went from zero to over a hundred million in sales in eight years bootstrapped, capitalizing the business without taking any outside investment and then building teams.

We started the business as makers, and we’re also all technology guys that could build platforms and could build experiences. Then you have to learn how to manage. Then you have to learn how to hire. Then you have to learn how to plan. Now we have to learn how to be executives which is, you know, balancing it.

We can go up and down the org chart because we’ve done all the different jobs, to really get focused. And I would say, in the last two to three years, we’ve really gotten good at saying no and planning and optimizing our days and our productivity, but then forcing ourselves to understand the time-value equation of perfect versus imperfect and not shipped versus imperfect and shipped.

EÜ: And what was the turning point for you and RevZilla? When did you know that you were onto something?

AB: So, we did 1.8 million in revenue in our first year and in the second year we did 3.6 million in revenue. And while they sound like big numbers, when you boil it down to third party margin, not selling your own brands in retail, it’s not big profits. But we knew we were onto something. Those first two years, I mean, they felt like a decade. Really the third year, the third year for us, you know, going into 2008, nine, 10, I guess it would have been the fourth year, which is 2011, that was the year we went from about seven million in sales to 20 million, 21 million in sales, in revenue.

That year it grew 180%, and that was the year where, you know, we went from a team of less than 10 to a team of 30 people. Revenues tripled — we knew we were outgrowing our space. We needed to annex more of the building that we were in and we said, “Oh my gosh, we have to build a process and team. This can’t be, you know, eight guys with no windows working in this warehouse doing this.” Even though we were successful, that’s when we really thought, “Oh my gosh.”

When you’re starting out you look at it and you just pick round numbers and you say, “What does a five million dollar or a 10 million dollar or 20 million dollar business feel like in run rate.” At 20 million it was holy crap, this rocket ship is flying and we have a big opportunity here. I would say for me, that was the year where we knew that we had a tiger by the tail.

EÜ: And you evolved into such a mature company. Is there a particular person or event in your past that you feel really brought you to this point?

AB: Voltron, right? So that’s the short answer. Voltron is the person who’s helped us, and let me elaborate on that. So if you remember, right, pop culture reference: Voltron from the ‘70s and ‘80s was the amalgamation of all the robots powered by humans that formed one super robot, that could then, you know, tackle the biggest challenges.

You know, our running joke internally is that Matt, Nick and I have done a phenomenal job of growing together, staying really close friends, checking our egos at the door. So ultimately, on the biggest, most life-changing business opportunities, business threats — the things where you’d ultimately assemble the super friends and the C team and another — the C suite in another company, you know, that’s our Voltron.

EÜ: That’s great. That’s great. And I’m totally picturing this three-headed robot now.

AB: No. One head. You form up right. We shared; we’ve joined forces. One head.

EÜ: That’s even better. So in one sentence, what’s the greatest piece of advice someone has given you?

AB: So the best piece of advice I’ve ever been given, and I got it at a really young age, from my dad: it was the answer’s always no, unless you ask and there’s a million forms of that, you know, you miss 100% of the shots you don’t take, you know, yada, yada, yada, right? We’ve heard that, but to me it signified don’t be afraid to take risks, and don’t be afraid to put it out there, and give yourself a chance to get lucky. I embrace that. That’s my personality. I like to flip over rocks and look for shiny objects.

I consider myself a lucky person, but you look at that: it’s being prepared and being open to new opportunities, and I think that’s really shaped who I am and also I think it big time shaped the value that I bring to the table with RevZilla. That I look for the next big thing, I think huge, I play in the clouds, and Matt and Nick are amazing at pumping the brakes, pulling me back down, being amazing pragmatists, you know, to foil you know, we balance each other out.

EÜ: That’s great that you can do that for each other. Well, let’s dig a little deeper into this episode’s theme, which is of course how to hire your first employee. So first up, can you tell us the story of RevZilla’s first hire?

AB: So, RevZilla’s first full-time hire. We had some people doing some part-time work, but the first time hire was over a year into the business. We founded November of 2007. We made our first hire probably in December of 2008, and it was for a customer service person. A person to, at that point, we were answering every phone call, every email, every inquiry from a customer. And we said, “This needs to scale,” because ultimately we have a good idea of what we need to do here to support e-commerce, right? And these are transactions, where’s my order I want to place or return?

So we hired a gentleman from the industry — great guy — worked at one of our competitors and, you know, our hiring process was we met him, we knew he rode a motorcycle, and we thought he seemed reasonable and could answer the phone. So that led us to our first FTE.

EÜ: And what lesson did you learn from making that first hire?

AB: So, it was interesting. From making that first hire — when you’re that small, you know, I can, hindsight’s 20/20 — I would say the first 10 hires were very similar for us. It was, you know: in a company that small, you need nine people who can do anything and one person who can sell anything.

I was the guy who could sell anything. The other nine people were Matt and Nick, who were building and process and product and technology every day, and all the people we hired after that were kind of, they had different backgrounds, but they were motorcycle enthusiasts, and they could do a lot of different things. Whether a project or to serve customers, and through that process, though going from one to many, and that first level of scale, we did really quickly learn about how much culture fit mattered. I would say for those first few hires, that was the big takeaway that we learnt from that.

EÜ: At what point in your business did you know that you had to hire more people? What did that point look like?

AB: Oh my gosh, when there’s not enough hours in the day or the week to sleep. There were two reasons, right? You hire for scale or you hire for specialization and capability. For us from the early goings, we were the specialists.

So our background was the e-commerce and technology and consumer experiences. For us it was trying to figure out — you know, there’s that old analogy — fire in motion. You’re moving forward when you’re building, and then you launch the site, and as soon as you get traction, the fire, which is, imagine the troops firing the weapons, is the enemy forces coming in that are stopping you from moving forward. And that’s the operational support of the business.

So the balance of fire in motion, as soon as you realize that you’re stuck in the day to day and you’re no longer building and iterating and moving things forward, that’s when you very clearly know that if we’re not doing what we and only we can do, which is for me, it was build content and open vendors and develop relationships. For Matt it was build process and operations, and for Nick it was developing technology.

As soon as we looked around the room and we realized none of us were doing the thing that we’re the best at, we immediately needed to scale pieces off our plate that we knew. Anything that wasn’t those things, we needed to figure out how to get them off our plate as fast as possible, and it sounds so easy now, but that took us years to figure out. How ruthless we really needed to do about, and relentless about saying no more often, and focusing and scaling.

EÜ: And so what other challenges did you experience when you were hiring those first few times, or those first 10 hires that you said were very similar?

AB: That not everybody plays well in the sandbox, and not everybody has a similar world view or values the same things that we value, and not everybody has the same work ethic. I know, you know, those things are basics, but we homed in really early. I will just say that we read the the Zappos book 2008, 2009. It talked about company and cultural fit and a utopian society of people who want to do their best work every day, and god bless Tony Hsieh, but we brought in and we looked at it and we said can we do that, can we really define. We didn’t define our core values probably until 2000, I want to say 10 or 11, formally. But can we start to mine and build a process to find more people like us that will build bridges, be communicators, you know, want to build, find enjoyment in the same things that we do, but then also come to work. And you’re energized by the change and energized by the fact that it’s a building and growing organization, and we had to figure out the big lesson was — after a handful of mis-hires — how do you figure out, you know, some were six-figure hires that we got completely wrong.

Where was our process failing us? I mean, that was the big thing. So you go from 10 to 20 to 30 people and then all of a sudden now you’re really seeing where you have outlier cases, where you’ve mis-hired based on skill or based on fit, and how much it costs you. That was the big lesson for us: that we are now, I mean, I evangelize this to anyone who will listen internally — and we actually do a lot of training as a management team, and we’re only getting better at that — is how critical is it that the revenue doesn’t matter. The cost of the mis-hire for team progress — all things considered: business opportunity cost and impact, you know, the right fit and the right skillset — is paramount. We have to be insane about getting the right people on the bus.

So that’s the big takeaway: that even nine years later sticks with me. We realized it was broken, we developed a process to kind of fix it but not enough. I would say that my big grip, when I look outside of RevZilla, I think that not as many companies view the urgency. They’ll put the urgency ahead of finding the patience when it comes to the people. And if you’re patient with the people, man, is it amazing: amazingly easier to steer that ship.

EÜ: Now that you’ve reached over 200 employees, what is your formula for foolproof hiring? Because clearly you’ve figured something out.

AB: I would say there’s no such thing as foolproof, right? So you can only strive to get better at it. I would say the average, you know, we’ve looked at a lot of stats supporting this. The average company, you know, might hire an A for a role maybe 20 or 30% of the time. I think we’re closer to that. I want to say that 60 to 70% range and our turnover is super low. So turnover last year was only 12%. We’re retaining and growing our best hires. I mean, more people leave RevZilla because we ask them to leave than leave (themselves) because, you know, they’re not connected with what we’re doing here.

So the foolproof methodology, not for retention but for acquisition of the new hire is a pretty insanely rigorous hiring process — almost to where it sends the message to the candidate that we’re almost pushing them to fail. Almost like seal training right. So if somebody wants to go to seal camp and different levels for different roles, what happens is you have these people who come in and they’re the A players. And they’re so energized by the fact it’s like, oh, really, you’re putting these barriers in front of me to show me how badly I want to be here? And then they sort of think, well, if it’s like this for everybody I have to get on this team. What is happening is that people that aren’t a right fit or are scared, they fall. People self-select out.

We actually employ top grading which is kind of an interesting hiring framework. And then for more senior hires we’ll actually ask them to do a, I won’t call it a business plan but I’ll call it a 90-day integration plan: here are your goals and how are you going to achieve them? I mean that’s for potentially director level up. So it’s kind of, you know, people talk about speed. Time kills money, time kills all deals. We agree with that. So it’s always trying to find the balance of how quickly we need to move to keep someone engaged but knowing that they have to check all our boxes.

We’ve gotten all the way to the end of the process. We’ve sat down with somebody for the four-hour Top Grading interview, which is an interesting thing. And halfway through the interview you start to see a pattern: how they have an issue with authority or their story didn’t line up in the previous interviews, or they ultimately are taking more credit for some aspect of a job that they previously had, where they had really exposure versus experience. And there’s blood in the water and that’s where you really lean and you really push, and you’ll know that at the end of that it’s like I have spent 20 hours interviewing this candidate, and it got all the way to the end of our process and people say, “Doesn’t that bum you out that they folded at that last step?” And I said, “Honestly, nothing’s worse.” It would be 10 times more costly for this business if that person, by the 90-day mark, we are all wringing our hands knowing they weren’t the right person, they couldn’t do the job, we stopped our search and now we have to start over.

I would rather fail now after 20 hours of investment up front, than have 800 hours of investment to get to the point of, you know, ultimately hiring the right person. Because you restarted everything, and you had the institutional cost of the cultural ramifications of having someone big come in that people got excited about, but then ultimately flamed out. That’s terrible.

EÜ: Right. I mean, you’re really talking about pushing your employees, and I understand you also have a beer test. So I’m wondering what that means [laughs] and at what point of the process that comes in? At what point do you know that it’s the right person?

AB: So, it’s a couple of different fronts. So, I would say that, you know, I consider our culture a performance culture that passes the beer test. So the beer test is easy: That’s the plays nicely with others, is a good human being, operates with respect. I mean, these are all really basic things, but so many companies will settle for the brilliant jerk and say, “Man, I know what that person could do, and I know they’re kind of a jerk, but man, if we could just get that capability on the bus we’ve been looking for, for so long, we have to make that hire. Right?” So that’s an easy one because everybody knows what a jerk looks like and feels like to work with. The flipside of that coin is the performance piece, and that is the piece that takes up the bulk of the Top Grading career: the whole process, which is, did they work on a team that accomplished that or did they do that themselves?

We’re also nuts about reference checking. So it’s the entire ecosystem of knowing we get it right first, before we even open the wreck, doing our best to clearly quantify what are the goals, and what’s the impact that they need to have. And review that scope with the candidate, but then ultimately, really using an iterative process and multiple people, (not interviewing together), to try to drill down and understand if a person really has that experience, and that can be sample work in tech or digital marketing. I mean, people do a skills assessment that’s different depending on the function they’re interviewing for. Yeah. So I mean it’s multiple steps of proving experience versus exposure, you know, outside of the cultural fit, and that’s what ultimately, we call them juggernauts. They have the work ethic and typically the skill, and then they have the attitude which allows them to be, you know, team players in a fast moving, fast changing environment.

EÜ: This is so great. I’m really appreciating everything that you’re sharing with us, and so many excellent takeaways here. So can you tell us a little bit more about top grading?

AB: Yeah. It’s completely insane at first blush. I’m really happy to dive in because we were exposed to it in 2010 when Matt and I, so Matt’s my cofounder and COO, and I always joke that I’m Maverick and he’s Iceman because our superpowers are different, and just our world view’s different. So it’s a great yin and yang for he and I, but we sat down after we made three bad hires in a row and we followed the process that we learnt in our previous life.

I was involved a little bit in hiring in my last role. I worked closely with managers and built small teams when I was early in my career, and you have to know who to follow and where to find it, but we realized that we weren’t mining for the right thing. So we weren’t being stringent enough and we weren’t testing people. And we were finding ourselves interviewing together and being too optimistic and leading the witness, and projecting our biases on them versus being stringent and objective the way that we needed to. So we ultimately had a friend who was a fellow business owner, another young guy.

He was further up the mountain than we were here in Philadelphia and we saw him speak at a conference, and he talked about top grading, which is this hiring framework developed by a guy in Chicago. So if you picked up the top-grading book it’s about 600 pages long, and what you’re going to find is it’s a bit of a sales pitch because this guy wants you to go to Chicago and take his classes. So don’t do that because you can find other people who are skilled in teaching Top Grading that can come and do half a day — but Matt and I flew out. Our friend basically told us, he said listen, it’s all about talent.

We agreed and he said this framework basically allows you to have a more filtered process. That the Top Grading interview is, this your life four-hour sit down with someone where you basically, in chronological order, start from high school, then go to college and start with their first job and walk through every single job, every single manager, every single role. What worked, what didn’t, what made them happy, what made them sad, how they rated themselves. Did they see that they had the ability for growth? And basically you do that, and it’s called about 15 minutes per job over a four-hour span, depending on the breadth of the hirers experience. And what it ends up doing is it allows you to see themes and patterns on their attitude: what makes them happy, what lights them up, are they introspective, are they self-aware, do they have a strong work ethic, do they work well on teams, did Mummy and Daddy cover all their costs and they had to figure out, you know, how to be a functioning adult once they were in the real world, or did they bootstrap it and their first job was when they were 10 years old. You see all these things that paint a picture, not only of what work someone’s done, but really who they are. And what ends up happening is that no one can lie for four hours. So when everybody has an hour interview through the process, a phone screen, an hour interview, a competency interview about the skills assessment — you have these chunks where somebody can look at their notes, look at their resume, focus on their best self in these time-boxed elements leading up to that final Top Grading interview. And the Top Grading interview is your last chance as an employer for them to prove they are who they say they are. And I said it earlier and I don’t want to seem glib about it, but no one can lie for four hours.

So after four hours what you’re asking in a very structured series of questions, you end up seeing who someone really is. You end up actually being able to kind of sniff out any BS in the story they told you on what they really did, versus what they said they did. And when somebody does it with flying colors, you know I mean, 1% of candidates we see are going to get to that stage. Because it’s ultimately the last stage before reference checks and offer, but nothing feels better than when you go through a top grading and you know that going into it you’re like, if this person passes this we are going to hire them, this is going to be awesome, and they fail it and you know, oh my gosh — I just dodged the biggest bullet. So it is the cornerstone of that process.

EÜ: Right, right. So what do you think is the main misconception that people have about hiring, that needs to be debunked?

AB: That a team of people that are great, that all get along, are just fine. Everybody needs to be measured objectively and everybody needs to be able to do the work. You can’t have cultural fit without performance. I think the big thing would be if you look at Amazon’s culture, they would say that you can have performance without culture. I mean, we’re so gladiatorial. I think the big myth is that if you have teams and teams of brilliant jerks, it just becomes fiefdoms and politics and as great as those people are, it’s completely stifling. So I think you can have your cake and eat it too, if you’re willing to be patient and put in the extra work to make sure people can play in the sandbox and do the work. I think that’s our superpower in the universe outside of tech marketing, media, all the things we do well. We’ve hired really well and I think that’s why RevZilla has an amazing team. That’s why we’ve won in our space.

EÜ: Awesome. We’re going to finish up with our quick five questions for which we need five quick answers. Are you ready?

AB: Absolutely!

EÜ: What business book or idea made the biggest impact on your life?

AB: Tough question. Okay. First answer is “What Got You Here Won’t Get You There,” by Marshall Goldsmith.

EÜ: What’s the one thing you can’t live without?

EÜ: Right now it’s cappuccinos from Starbucks [laughing]. My days are long.

EÜ: The most useful app on your phone right now?

AB: WorkFlowy. I’m fanatical about my to do list.

EÜ: In one sentence, what’s the greatest lesson you’ve learnt throughout your small business journey?

AB: It all can’t be perfect, and you have to take your hands off the wheel. I’m a maximizer, so for me that’s really hard, but everything goes better when I realize when to say that’s enough and let’s make a decision.

EÜ: I really hope you don’t do that when you’re riding your motorcycles [laughing]. Sorry. What skill do you want to enhance in 2016?

AB: Planning — flat out.

EÜ: Well, what a great conversation Anthony. Thanks so much for joining us on the show.

AB: What a blast. I had a lot of fun. You asked great questions. Thank you so much.

 

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EÜ: That was Anthony Bucci, co-founder and CEO of RevZilla. I understand that RevZilla is hiring, so if you’re interested check out RevZilla.com/careers. Just be prepared for a four-hour interview and a beer test if you want to get through that process.

Thank you for listening to Xero Gravity. Make sure you join us next Wednesday, because we’ll be talking to Mark “Payroll” Pinard from Xero. Mark will be sharing his stories and insights about payroll, including what products are available and how to find the best fit for your business.

So don’t Miss that one. We’ll catch you then!

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