Edu: Talent Density – Mediocre Performers, Mediocre Outcomes

Yaniv: I guess it starts with that Steve Jobs quote, which I use probably a bit too often when he says, I don't hire smart people so that I can tell 'em what to do. I hire smart people so they can tell me what to do.  And that is like, when you think about it, it's a bit like, duh. it seems like such an obvious statement, but the question is, how do you create a culture where those smart people do tell you what to do, where they do give you that feedback where they feel safe? I'm Yaniv.

Henry Innis: And I'm Henry.

Yaniv: Wait, what? Chris's voice is still cactus and while he sorts things out, we have a number of guest hosts joining me on the. Starting with the inimitable, Henry Inness. Welcome Henry. Thanks for coming on. Please tell our audience a little bit about yourself.

Henry Innis: I'm Henry Innis. I am the CEO of Mutton X, marketing attribution, slash growth analytics start in Sydney.

Yaniv: Fantastic. thanks for coming on, Henry. In today's episode, we're going to talk about high performance company culture, and in particular, how high talent density, which is a term that I think originated at Netflix, is such an important ingredient in company performance.

We're going to go into our personal experiences quite a lot, both you and me, Henry, but we're going to do it in a bit of a structured way. So at the beginning we're going to talk about what talent density is and why it's important. So really setting the scene

Once I hope we've convinced you about the. Of talent density. What we're going to do is a bit more of a step by step guide the ingredients that are necessary for a talent dense organization, and how to actually implement those things. first of all, how do you spot and hire great talent?

Of all, how do you actually compensate people? In a high talent density organization. Talented people are in high demand. How do you make sure they stay with your organization?

After that, we're going to talk about culture, and how culture contributes to not only retaining. Your best people, but to getting the most out of them. And this is really the core aspect of leadership that we need to talk about. And finally, we'll talk about the very important topic that's often glossed over because it's, the least pleasant one, which is how do you deal with low performers?

So with that, Henry, let's jump in from the top and talk about why is talent density so important.

I think one really important thing to realize is talent density is not a property of any individual. One of the counterintuitive things that we really want you to take away from this episode is imagine a team of 10 talented people.

That team will outperform a team of 30, even if that team of 30 contains those 10 talented people within it. So there's, this non-linearity. By diluting effectively your talented people with less talented people, and thereby decreasing the talent density, you will actually get a lower performing organization overall and not just lower performing, but less productive.

Now, why is that? Why is talent density, this, magic thing? are all sorts of organizational dynamics that a talent dense organization benefits from. So the first thing that you get is this far greater degree of trust, right? If everybody is talented. They can trust each other to get work done. That means that there is less kind of micromanagement, less looking over each other's shoulders, fewer gaps in execution, and that comes straight to your kind of efficiency bottom line.

The greatest gift you can give talented, motivated people is the opportunity to work with other talented, motivated people.

And because of that, what you'll find is that a talent dense organization is one where the people are more motivated, more energetic, enjoy working together more. It's a pleasure for these people to work in this way. And so having this team of, Fantastic people, each of whom is really good at their job, creates this virtuous cycle. of motivation of energy, of joy, of collaboration, and that is the magic of having a talent dense organization.

Henry Innis: I think it's often underestimated how important environment is to talent density and how, to your point, it's not just about the individual, but it's about the environment that you're setting up to make that individual effective in what they do.

I've seen people. perform completely differently even at Mu x. where the way that they were managed or the way that they were interacting or, the environment that was around them, set them up to perform completely differently.

Yaniv: I guess sometimes the term talent sort of nearly implies that it's innate to who you are.

Like you got it or you don't. there's an element of this, I'm not a subscriber to, you know, you can teach anyone to do anything. I think that's demonstrably nonsense, but, talent itself is contextual. Having high talent density is about a lot more than simply hiring the right people and throwing them in a room or virtual room and saying, go be talented. You need to foster that talent.

You need to create a culture that supports and enables and empowers that talent.

So maybe just to create a bit of contrast. We've talked about talent density, what it is, why it's valuable, But why is it so important? What happens? you don't have talent density, and Henry, you, talked just before we started recording about how you've made these mistakes and you've gone through this journey.

So maybe share a little bit about what it looks like when the talent density is absent.

Henry Innis: Well, so early on in Mutton X, prior to us raising any sort of capital Our entire environment, I suppose, was a complete mess. I think our management culture and our management style was, let's just push, push, push, push, push. And whilst I think tempo's really important, what that did is it created a culture of fear where the information flow was really poor. We were really just trying to get stuff done as quickly as possible without much consideration as to why and what we were doing. On top of that, we would hire very specialist roles into specialist areas So you had specialists who couldn't provide a wider perspective as to whether we were solving a problem the right way, alongside a culture of poor information flow.

The flow on effect to that culture of poor information flow was pretty simple. One, our ability to forecast what would happen was really, really poor. So our ability to plan as a management team basically eroded really, really quickly. Two people were just less happy. and I'd say our teams work harder today than they ever have. But people working nine to five back then were far less happy, found far less purpose at work and things like that. And then the third kind of element I think was we started to make a lot of bad decisions at different elements of the organization cause of that poor information flow . cause we never created space for people to thrive in areas of ownership as well.

So I say this as an example of how we didn't just get it wrong from a people perspective in the types of people that we had in the business, because The environment we set up didn't drive autonomy and it didn't drive good decision making. So even if I put an amazing person into that environment, there was very, very little that they would've been able to do, to thrive.

I could have put the best engineer into that environment and they wouldn't have lasted three months.

Yaniv: What you have to realize in a less talent dense organization is that your talented people are in effect compensating for having to work with less talented people. And that reduce. Their efficiency. So removing that inefficiency straightaway makes your talented people more effective. there's the aspect of a lower communication overhead, so you may have seen those, pictures on LinkedIn where you talk about, if, if there are two people working together, there's only.

One communication relationship between those two people with three people, it's three relationships. By the time you have 10 people, it's 45 relationships, and this is quadratic. So basically the number of relationships, communication channels that need to be managed grows as the square. of the number of people in the organization.

So smaller organizations are, by definition, more efficient. if you. Optimize for a small organization and you still wanna get a lot done, then you need talented people there. And then those people in that small, dense organization will benefit from those lower communication overheads.

Henry Innis: So from our perspective, the only way was. To hire people intentionally who would raise the talent bar and do that in two ways.

One, hire people who understood things from a first principle's perspective a lot more as to what we were trying to do. having generalists there who can understand how the different components work together to create a solution is far more important than having someone who can just tighten one of the screws, as it were. And the second element was to create very clear areas of ownership and autonomy where we could set a clear standard against outcomes and what we wanted that person to impact alongside, give them really clear context as to how they were contributing to the overall business and the overall business's performance.

Our quality of decision making across the organization has dramatically lifted. And as that quality of decision making has lifted across everybody, the types of people who now want to work with us because they understand what we're trying to do, what we're trying to achieve is also greatly improved. We now have, for the first time people being referred to us constantly by our engineering team, which is, probably a barometer of a good talent density culture is, if you are getting a good rate of referrals on, people. And so I suppose it's a long-winded explanation, but the things that I really see here as important are environment, creating a sense of ownership, creating a sense of very clear standards around what that ownership means so that you can then, communicate really clearly with the individuals within that ecosystem as to what they're contributing and where you'd like them to be.

Yaniv: Just emphasize, you know, you, talked about, the people and then the context or the environment in which you've put them.

And, I like to think of myself as a systems thinker, as someone, who's taken my engineering background and, tried to apply it To organizations, which are systems of people. I guess the point is, if you want to create a high performing system, Imagine you're trying to make a racing car, You need high quality componentry. Absolutely. But you also need to put it together the right way. If you get all the best components and you kind of put them together, shittily, those components will not be able to perform well.

Having good people is great. Putting good people into a bad environment, they will not be able to show you what they're capable of. And so there is this very much, this element of organizational design and of cultural design that goes into this. If you actually want to have a high performing organization and you need to sequence this carefully, right? Or it doesn't really work.

Henry Innis: How do you think about attracting high performers Cause I feel that's, the big elephant in the room as well, right? You've. identified that you need to attract awesome people. You've identified you need to have the organization designed in the right way, but how do we actually attract the high performers to an organization?

Yaniv: So I think this is the crux of it. And when I look at high performing organizations or low talent density organizations, what I say is feedback loops. I see either vicious cycles that drag you further down or virtuous cycles that lift you up. You know, there's this saying that A is higher A's and Bs, higher Cs, and I think there's an element of that there.

So I think there are a few tactical things you do to attract and retain high performers. But I will tell you that the number one way to attract and retain high performers is to place them in a high talent density environment. People who are true high performers, they have a drive to be part of a successful team.

And that's not necessarily about generating financial outcomes, it's about being able to work really well together. That's what they want. They don't want to carry people who are not as good as them. They want peers who they can respect, who they can learn from. So if you have that high talent density and then in good faith you can speak out and, you know, maybe come on podcasts for example, like, start to build an employer brand around having high talent density, that is the number one thing you can do.

And if you are not authentic about that, then you will start to lose people. The best performers. wanna work somewhere where they believe in the work that they're doing, that it means something to them.

And so I think this is very much a role of leadership, especially at a startup of the founder of the ceo, to share that vision, that mission that people can get behind, and to communicate that really clearly. How have you dealt with that, Henry?

Henry Innis: Whenever we are interviewing people we look for mission fit and excitement around the problem whether or not you can see them getting enamored with the problem. I think there's, two aspects to this. One, smart people like to solve hard problems. you've got to put a really compelling problem space together.

A compelling problem space isn't building another widget on the internet. A compelling problem space is a clear why, what value you are delivering to the world and how that can make impact at scale. So I think people really gravitate to those sorts of missions what they don't gravitate towards is we want to build this cool, fun app that we want 10,000 people to use, or something like that.

So that's element one. I think the gravity of the mission and the gravity of the problem space is really important. the second important part is how that person can contribute to that mission, because mission alignment, the key is in the second word, you've got to explain to that person how they can contribute to the problem space and how you see them playing a role.

To make them feel a part of your team, how they would interact with your team and also just make them feel a part of and able to visualize themselves solving the problem. really smart people gravitate to problem spaces. They just naturally do. And like, every single that we've interviewed that's come into the team has gotten excited about our problem space. that to me is the most powerful draw, around mission alignment, aligning the person to the problem space.

A huge green flag for me is when someone can deeply understand, this is the problem I set out to solve. This was the drivers of that problem. This is why I thought these were the right steps to take.

And then this is the solution I built. that to me is an amazing flag of someone who's a, deep first principles thinker, and it can be sometimes really hard to tease that out in an interview process as well. I don't feel a lot of interview processes are.

Yaniv: No.

Henry Innis: Conducive to bringing that out and to creating, that sort of environment where you, you naturally get that outta people.

But the one thing I'll say is that if you see that in an interview process and you are in an early stage startup, it should be one of the greenest of the green flags. That that person is the right kind of person to operate within a startup above and beyond whether or not they've been in, another startup or something like that.

First principles thinking is the ingredient, I believe to amazing operators and startups.

Yaniv: There was this, software engineering blog that was very popular in the mid two thousands, I think it's still around, called Joel on software. And he talked a lot about, interviewing engineers. But I actually think this applies to every role, which is he said, ultimately you only need to ask yourself two questions when you're interviewing someone.

Are they smart and do they get things done? you need both. Otherwise it's an no hire, in a sense, it's a very simple bar, right? You need to hire people who are smart and that they get things done. surprisingly, both of those are fairly rare, even a bit rarer in combination.

But, for that role, you figure out, you know, what does smart and get things done look like? And then you hire people like that. That's the filter that you really want.

Henry Innis: it's one of those ones that sounds Easy, but it's hard. to do.

Right.

Yaniv: Simple but hard.

Henry Innis: Simple but hard.

Yaniv: And Henry, you also mentioned like CVS and looking at, people's history of tenure as, a kind of signal when you're hiring.

Henry Innis: Yeah. I've got a bit of a watch out around. cvs that jump around a lot and there can be lots of good reasons as to why someone has moved around a lot. just want to caveat this by saying it's one of these hypotheses that's always worth testing out and trying to understand, if you see that happening, it's good to understand why that person has moved around a lot.

And just make sure you have a deep understanding of the why. The reason I think someone jumping around a lot can be a bit of a red flag on a cv. And I'm not talking like every 18 months, I'm talking like every three months just for context. is because they haven't had a chance to deeply grapple with problem spaces, and had a chance to deeply grapple with the culture of the company.

And so those are two things that I always kind of watch out for. Sometimes I meet some incredibly bright people, and, they were incredibly smart, presented incredibly well in an interview. But can't quite click in company environments

 I like to look at CVS through that lens. I generally don't pay too much attention to CVS because they're not always phenomenal indicators other than just for experience, but when someone's moved around a lot, I use that as a proxy to go, are they able to fit well and play well with other people within a team?

Are they able to contribute within a team environment to a high performing culture? And I think that's a really important thing to us is the point we kind of made at the start of this uni, it's not just about the individual contribution, it's actually about the team being a high performing team.

That high performing sporting. Reference it's so bang on. everyone's gotta play their role, everyone's gotta contribute. and someone jumping around on a cv, that's a watch out to me that they may not play well in the team.

Yaniv: Yeah, I think you're right. it's a yellow flag, like you wanna dig into it, but, you know, people do have various reasons why their CV might look like that. So it's always worth understanding why, I would never want people to stay in a toxic work environment, for example, because they wanna make sure that they don't have too many short stints on their cvs. so yeah, I'm, careful about that one, but I agree it's a, signal that's worth paying attention to.

Now let's get to the slightly hairy topic of compensation. about how you pay and reward people so that you're able to attract and retain top talent, who almost by definition have more other options, have a higher earning capacity, at other organizations

Henry Innis: so we look to pay. , but the one thing we do a lot of is salary benchmarking. So we look a lot at what the benchmarks in market are. We have a policy that we want to try to pay in the top quartiles, so we don't want to meet the middle of the market because if you pay the middle of the market, you'll get the middle of the market.

That's the reality of it. The one watch out in uni, I don't know if you've, experienced this as well, but, I always have a bit of a funny thing if someone's trying to nickel and dime me over the benchmarks and things like that. And the reason I, have that slight apprehension there, I suppose, is because I've always felt that if the person doesn't value the environment and the problem space that we're delivering, as well as the compensation, there may not be as strong alignment between, whether or not they're fully invested or whether or not they'll just Taken off for the second they see it.

So it's a real balancing act. I feel this space, you want to pay really, really well, but you also don't want to be nickel and dimed, at the very end of it.

Yaniv: I largely agree. if you get the mission alignment right, if you get the culture right, like I said, the greatest prize for high performers is working in a high talent density environment, then you don't have to rely as heavily on compensation to keep people there.

What you want to do is make them feel like they're well compensated, that you're not taking advantage of them in any way, that their skills are being recognized, but it doesn't have to be the very top offer that they could get out there because it rarely will be for the best people. There's probably always going to be someone who's able to pay more than you.

So I think that's right on the nickel and diamond. I think it was just like, oh, let's see if I can get a bit more, let's see if I can get a bit more. Always looking for a bit more pay. Yeah, that can be tiresome. I think what I appreciate in a salary negotiation is, to have an adult conversation and remove emotion from it.

people have different life circumstances. Sometimes I've negotiated with someone who said, look, my bottom line is X, which is a bit more what's been offered to them, and , these are my family commitments. I'd love to work for you. Unfortunately, I'm not able to move below this number.

And then I'm like, okay, we've had an adult conversation. I need to decide whether I'm willing to pay that number or not. And that's fine. But yes, I don't really enjoy the game playing, around compensation, when the aim is simply to give people a value that recognizes their worth on the market.

Okay, so the culture topic is a really important one. Culture is important for actually activating a high performance organization. High talent density is not enough. You also need a culture to create and maintain high performance. we talked a bit about compensation, but culture is even more important than compensation for attracting and then retaining your high perform.

Henry Innis: A hundred percent and in an area we don't look at very consciously. I, remember one of our . Data scientists sent me a pretty tough email about, some of my own behavior and how I was limiting feedback and how I was potentially creating fear around feedback within the organization and was potentially tumultuous in certain situations.

And that was one of the most powerful examples I think, of someone in the organization who is extremely talented and bright, challenging my view of the world and fundamentally I think changing the trajectory of the company. to my mind, that's what a great talent dense organization does. It doesn't just, have people doing their job super well, but it creates a culture of how do we be better?

Constantly, and I think so powerful for any organization

Yaniv: Yeah, I agree. I mean, while we're sort of sharing our own personal stories and, vulnerabilities, I think I've, had some realizations about myself over the last couple of weeks actually that encompass all this around and trust and what it means to be a, high talent, high performing organization.

I guess it starts with that Steve Jobs quote, which I use probably a bit too often when he says, I don't hire smart people so that I can tell 'em what to do. I hire smart people so they can tell me what to do. . And that is like, when you think about it, it's a bit like, duh. it seems like such an obvious statement, but the question is, how do you create a culture where those smart people do tell you what to do, where they do give you that feedback where they feel safe?

I think what it comes down to, and this is where I come to the realization about myself, is that I believe in that very much. And my default management style is that I treat people as equals. Right? I think a high talent density, environment is one in which everyone is an equal. Now, just to clarify that, that doesn't mean that you don't have management, that you don't acknowledge differences in power or differences in seniority.

What it means is that at a fundamental level, interactions between people are on the basis of. not on the basis of who has more power or who is more important, or who is smarter. I guess that's the other thing, right? I expect the people in my team to be better at things than I am.

And in that environment, when you respect each other, at least personally, I find it much easier to give that feedback, Because then you're like, oh, okay, this person's great. All I need to do is give them some feedback when I see them not doing the right thing. Oh, when I see them doing the right thing.

And it can become a very safe environment. But when you allow people into your company and you allow them to remain, who fall below that threshold of people who you can good faith, treat as equals and give to as equals, as partners in high performance, then that creates a real obstacle to having a high feedback culture because the feedback becomes less actionable.

Feedback along the lines of Be better at your job is not good feedback, is not actionable feedback.

Henry Innis: I think feedback is a real art, you know, I haven't always been great at it. And, often, I've struggled to kind of give feedback that is strongly directional against the problem rather than expressing it as frustration. my father has a really interesting saying to me, which I'm trying to listen to more lately, which is get angry at problems, not people.

And when you channel, are frustration or angry at the problem, it often allows you to get clarity, which can give you great directional feedback for people, without presenting with anger or anything like that. Cause you've kind of gotten that out elsewhere. And I know this is slightly anecdotal in terms of dovetailing the feedback, but I think when you give feedback that is talking about people, not ideas, people never react well to it.

And it also creates a culture of, I can't be myself or present myself within the organization. And I think that's a real inhibitor to. high performance cultures and, how people present. Because if people can't present, Hey, this is who I am, this is what I'm thinking about the problem, and things like that.

Even talented people who are operating from a place of fear like that are going to struggle to create the feedback loop that creates high performance cultures that lifts everybody up and makes people see problems in different ways. So I think it's a really challenging area. I mean, I've had to work so hard on feedback over the past year and I think it's for every single founder, for every single person considering startups or in startup management trying to work on and perfect the art of good communication and good feedback, I think is just absolutely crucial to scaling as well.

Yaniv: I think having that open and honest communication in every direction. we actually did an episode a couple. weeks ago about escalation, which is, a close cousin of upward feedback. And we decided to do a whole episode on it because it seems like this small thing, which is like, you know, when we have a problem, we bring it to the attention of people who can do something about it.

But actually Chris and I convinced ourselves that this is at the core of the operating system, of a high performance culture because it is how feedback from the leaves gets back to the root, right? otherwise you tend to have this much more one-directional flow of information where people in leadership positions and positions of power share lots of context, share lots of information, but they never get the context back.

They never get told what the problems are that need solving, and that's because there is no norm around it. And in the absence of that sort of norm, broader cultural and, social phenomena takeover, which is fear of bringing issues to people in positions of more power.

Henry Innis: I couldn't agree more. A big part of what we need to do when giving feedback is performance management, at times and trying to set the standard of where people should be or where we want them to be.

How do you think about that problem?

Yaniv: It's, one of those things where I think it's actually very simple and very hard. , right? I don't think there's any magic here, which is that you want to give frequent, candid, actionable, well-meaning feedback. In other words, the feedback should always be made from a position of not, wanting to vent or be angry at the person, but to help make them better at their job.

And it should happen frequently and, kind of in real time, close to the episode when it happens. So people always know where they stand. Now I'm not very good at this, so again, when I say it's, simple but not easy. that's what I mean. I understand what it looks like and, I've occasionally seen it done well, but very few people do do it well.

It becomes a lot easier when there is a broader culture of feedback and when there's a level of trust and respect between all parties, it's easier to give feedback to someone who respect and who knows that respects you, because then you are having a conversation about behaviors, not about a person's worth, Which is, I think where, where often happens, Henry is like, people feel attacked by feedback because they feel that you are attacking their identity, not that you are giving them information that will help them perform better in their role. And so if you can build that baseline level of trust between people, then it becomes a lot easier to give feedback.

And the more often you give feedback, it's a bit like writer's block. The easiest way to give more feedback is to give more feedback, right? you end up either with a virtuous cycle of more feedback or a vicious cycle of less feedback where you're like, oh, I haven't given this person feedback for six months, and now if I unleash everything I've thought about them over the last six months, it's just gonna be too much and I'm afraid to do it.

Henry Innis: I often find that writing out what I want to say before I say it is actually the most helpful way to give unemotional feedback. Because when I've been at my best, making it constructive it does take the emotion out delivery, particularly if you write down something emotionally and you can kind of hear it in your own voice, often means that you're able to look at it and go, actually, do I really want to sound like this?

One of the things I think around performance management is I keep coming back to this and I have an amazing head of engineering shout out to Dan Gooden,

Yaniv: Hi Dan.

Henry Innis: he teaches me all the time. The trick to amazing feedback is just letting it em emotionally passed through you.

And in doing so, making sure that it's just very dispassionate, but very factual and very clear. And it's really interesting that I think the more passionate we get, we feel clearer to ourselves, but often we don't feel clear to others. And it's an interesting dichotomy, I think, in the human experience, which is, as you rev yourself up, things become clearer to you.

But they become murier to others, and almost rebalancing that human instinct, to provide effective communication,

Yaniv: I couldn't agree more. it's funny, there's this saying, feedback is a gift, which it's easy to roll your eyes at it. It sounds like one of those things that, you know, gets written on a greeting card or on one of those, like inspirational posters. But if you think about it a bit deeper, it, it's actually got quite a lot of meat on the bone that's saying.

So, what do we mean by feedback is a gift, right? On the giver's side, to the point that you were making. when you give someone a gift, a good gift is thoughtful and well prepared. You choose something for someone based on what you know about them. You wrap it up nicely.

You put a ribbon on it, you write a card. I guess the point is, it's a gift in the sense that one thing that makes something a gift is the thought that went into it, not just the giving itself. and then on the recipient side is that a gift is something that should always be accepted graciously and with gratitude, you don't have to like the gift but you have to accept it graciously and with gratitude because that's the intention in which it was given.

So a gift that is well given and well received, that's what good feedback looks like.

Henry Innis: I definitely. feel like I've given out some lumps of coal in my career. I have to say if I'm to look at some more of the practical advice I've learned, cuz I, I really think the last year has probably where this has become a really important consideration and particularly as you move from being in a startup where there might be six to eight people pretty close-knit to a 30 plus organization very quickly.

These, cultural nuances become really important.

Yaniv: Mm.

Henry Innis: Having clear forums for people to check in and provide their emotional state and really communicate that well, I think is also an incredibly powerful thing, for building vulnerability and trust.

One of the things I think about cultures that we underestimate, particularly in the remote world, is, trust, Like if you want to have a really high talent density culture, there's gotta be a high portion of trust as well. having these check-ins and checking in with your team in a really open and vulnerable way, that builds a lot more trust, which I think conventionally was generated from being in the office, but I don't think it needs to be.

so it's a really interesting one as well when we're talking about, how we give feedback and how we give more of ourselves to organizations too. I think checking in and adding vulnerability to the conversation about how you might be feeling about a certain situation is incredibly powerful to help others understand your personal context on top of your professional one.

Yaniv: So we need to talk about the other side of the coin here, which is low performers and how to deal with them. And you know, the, company again, that is willing to go there is, Netflix. So we talk about hiring good people, uplifting the culture, creating good feedback. but for people who are not able to meet the performance level, what do we do about people who are underperformers, and in particular, about letting them go? Netflix, I think one of the most harsh sayings in their culture deck is adequate performance will be met with generous severance.

In other words, you're a member of a pro sports team, you either are able to play your position really well, or we will as humanely as possible. Remove you from your position. I guess I'm interested in your thoughts, Henry, like, do you go there when you've talked about uplifting your talent density, how have you that aspect of people who are simply not performing even after receiving feedback?

Henry Innis: I think it's a really hard one and it's a really thorny one. the most uncomfortable thing becoming and working as a startup founder has been honestly, conversations about people's jobs and whether or not they're gonna still be with us . I think, when you let people go, you want to do it with grace and acknowledgement of their contribution and I think a lot of the time in today's tech culture, from what I've seen is that there's a lot activity in the market where you are letting people go without an acknowledgement of their contribution, which I don't think is a great signal for both the organization and the leadership.

The second kind of thing I think as well is just because a person wasn't able to contribute at your organization doesn't mean that they couldn't contribute in another environment as well. And so one of the things we pride ourselves on is not just obviously, paying people what they're worth and things like that on the way out, but, making sure that they're given an opportunity to connect with their colleagues on the way out properly.

That we celebrate their time at Newton next. where appropriate. And then we also go, should they find the right role and things like that. Or should we know of things that are more appropriate. We actually help them to try to, meet those goals as well. And so I when you are kind of trying to let people go or Mo people on, , it's as much about kindness and understanding and empathy as it is about, keeping focused on the very functional elements of it.

And I think the culture that we're seeing emerge in technology today, and I know this is something you love talking about uni as well. the culture we're starting to see emerge is a very corporatized one. And I think probably not one that people would typically associate with how good startups should operate.

I love the Netflix example of how they, offer to move people on they give a very generous severance, what they say. Their minimum is three months. I think no matter what position someone's in or how long they've been there, that's the very minimum. and yeah, like I completely agree with you and I think that's aligned with Netflix's philosophy, whether they execute it or not.

Yaniv: It's really about being humane and treating the person with dignity as a human being who is not the right person for your specific role at your specific company in that particular context. It doesn't reduce their worth as a person. It doesn't mean that they're dead to you. It doesn't mean they didn't contribute anything.

And if you are actually create a culture where letting someone. Again, I think professional sports teams do this well, right? Like, they have a situation where people tend to peak quite young, and then eventually they become too old or they need to be moved on if they won't move on themselves.

But when that happens, it's painful. Of course it's painful, but you celebrate that person and you don't in any way diminish their contributions because you no longer feel that they are well placed for that. and again, recognize that this is not about their worth as a person, that their skills and abilities are probably better deployed elsewhere.

And exactly, to your point, how can we help them find their next gig? the thing from Netflix, actually, I'm just sounding like a total fanboy I know, but, Patty McCord, the head of people who sort of alongside Reed Hastings really, championed this was they wanted Netflix to be a good place to be from.

In other words, when you leave Netflix, whether it's. choice or otherwise, you will have learned and benefited from being there having it on your cv, it'll be a feather in your cap. It will create more opportunities for you in the future. So no matter how long you last there and whether you leave by choice, it's a good place to be from.

If you had your time over again, you would take that same deal. And I think that is actually a brilliant aspiration, when you're letting people go. But I do think it's really important to be willing to let people go if you care about having a high performing team.

Henry Innis: what do you think about when you are letting people go? how do you think about the process and how you communicate it

Yaniv: Yeah, I mean, it's something that we're still continuing to think about and refine it circular, but, my thinking is, there's a lot of, you know what I'd call HR theater that happens around letting people go, which is mostly about of. Cover your ass on a legal aspect and being seen to do the right thing by a person rather than doing the right thing by a person.

And I don't have much patience for either of those things. I think what that means, it looks like in practice when you adopt those approaches, is to have a performance improvement plan over a period with documented expectations and, making the person run, this gauntlet of performance improvement before.

Either let them go or don't let them go. I think performance improvement plans have their place, but I think they're grossly overused. the right time to use a performance improvement plan is when you genuinely believe that a person has some gaps that regular feedback hasn't been able to address.

But a focus program around performance improvement that you can get them there. In other words, you think they have a good realistic chance of they start off not meeting your talent bar and they end up in a position where they can sustainably meet your talent bar. not that they've just spiked, but they'll probably fall back a bit, but that they can sustainably meet your talent bar.

In other words, they need to have grown and changed significantly over this four to eight week period, which is how long it is specifically. That's when you use a performance improvement plan. the truth is you've already made up your mind, you think this person is not the right person For their role that a performance improvement plan is not changing, that putting people through the emotional stress, both the person themselves, and that person's manager who has to put a lot of time and energy into operating the performance improvement plan. Well, I consider that to be theater. You're doing something that looks like the right thing, but actually it's just for appearances.

You're not actually considering the person's best interests. in those cases, I think you are better off following the Netflix model giving generous severance to say, okay, you know, we've made up our minds, we've made a decision. We're gonna take ownership over that decision, but we're going to treat you with dignity and humanity on the way out.

I think it's good to have a good HR partner who understands the legal challenges and risks and helps you with them rather than make, you again, jump through a, bunch of hoops that aren't actually with the person's best interest in mind.

Henry Innis: I think performance improvement plans are all about intent, I think too often performance improvement plans are used to justify an exit and at mut next, I know for example, we have a completely different view which is aligned to yours, which is performance improvement plans are about being explicit about what we need to improve to meet the standard, but with an underlying expectation that we think you can get there.

Yaniv: Exactly. Get there and stay there.

Henry Innis: Exactly. one of the things that really upsets me, well, not upsets me, but certainly has changed the value of this as tooling is how, and I don't mean to, crap on corporate HR too much, but I might,

 How corporate HR has effectively turned pips into legal justifications change the, perception of what pips are.

Pips should be tools that both parties come into positively and actually go, we've got aligned and well understood expectations on what we need to do together to get to the stage and to the standard. Instead, what corporate HR has done is made them tools of fear and tools where people now, when they see a PIP a performance improvement plan go, oh my god, my job's at risk in a good organization, if someone is putting a performance improvement plan in front of you, that's them doing their absolute best to maintain their talent density and coaching towards that. In a poor organization, it's corporate hr ask covering, and so. it does make me incredibly frustrated that I feel that a lot of the corporatization of these elements has made the perception of them like just really poor and, completely misaligned from the intent in most cases.

Yaniv: So I just wanted to add that one final point about not just. that expected level of performance, but being able to stay there because this is one of the most common things I've seen go wrong, including on my watch. so just to simplify things, let's imagine that someone's performance is five out of 10 and you feel that the minimum expectation is eight out of 10.

So you put them through a performance improvement plan and by the end of it, they just about get to eight out of 10, they put everything in, they get to eight out of 10, and you're like, okay, great. You've passed your performance improvement plan. then a month later they're back to six or seven out of 10.

In other words, they've improved, they've briefly reached the level of expectation that, you. Holding them two and then they backlit a little bit, which is quite common after a performance improvement plan. then you're in a real pickle, right? Because sure, they've improved, you've told them they've improved, you've put them through the pip, but yet again, they're not at your bar, they're not meeting expectations.

Again, you've done something that is making your own life harder, but is ultimately even with the best of intentions, kind of cruel to the person that you've put through that. So you need to be really sure that at the end of the PIP, they will stay at a level that you are comfortable with,

Henry Innis: I couldn't agree more with that.

Yaniv: So, Henry, it's been an absolute delight, so thanks so much for joining us. before we wrap up, I'd love to give you a little bit of a chance to, tell people where they can find you on the internet, but also plug mutant X, maybe both as a, product and as a place to work.

You know, if you wanna work somewhere with high talent density,

Henry Innis: Obviously all the things that I've mentioned in, in this podcast, these are things that we've, learned and we've now started to really put into place. We are really passionate about attracting the best people in Australia to come work in a really high performing and amazing team and solve a really interesting market problem, which is marketing is the largest inefficiency and the most inefficient market in the world. How do we design the tool link to change that to be a functioning economic market? And so for us, it's really exciting and if you're interested in alignment to this kind of culture, we'd love to hear from you.

Yaniv: Fantastic. And where can people find you online if they wanna see more of your activities?

Henry Innis: www.mutenext.co. Or you can find me on Twitter or LinkedIn under Henry Innis. INNIS is my last name. And, if you want to reach out to our head of talent, Mitch King, he's always posting on LinkedIn, so, he's a great person to talk to as well.

Yaniv: Thanks Henry. Now, if you're listening to this and you've listened to more than one or two episodes and you're getting value from it, you have signed onto the startup podcast packed. What that means is, we'd like you to help spread the word and help other people find us.

 Follow rate and review us in your listening app, and give us a shout out in the social media that you're most active on, and let other people know who might be interested, about the startup podcast. It really makes a difference.

Our audience is how we grow, so we really appreciate that. Thanks for listening and thanks for coming on, Henry. It's been.

Henry Innis: Thanks.