management

What Causal Inference Can Tell Us About Hiring

One area I’ve gotten interested in lately is causal inference. For those of you not familiar, it’s a methodology that attempts to find and validate cause-effect relationships between variables. The key is that it attempts to do so using data without having to rely on controlled experiments. (For an introduction for the casual reader, I highly recommend Judea Pearl’s book The Book of Why.)

One concept I found interesting was the implications of something called a collider. A collider is a variable that is the effect of two or more variables. As a simple example, consider the following:

The way to read this diagram is that fame is a function (or effect) of money, talent, and looks. In other words, fame = f(money, talent, looks). In this example, fame is a collider relative to money, looks, and talent because they all have arrows pointing into fame.

The interesting implication from the book is the following: given that you hold the level of a collider constant, the other variables become dependent upon each other even though there is no causal influence on them.

To understand this better, let’s use an even simpler example: X + Y = Z. In this case, Z is a function of X and Y (i.e. Z = f(X,Y)), so Z is a collider with respect to X and Y:

Here’s the key point: if we fix the value of Z at some specific value (say 10, so we’re left with the relationship X + Y = 10), then X and Y become correlated. In other words, if I know the value of X (say 8), then I can infer Y (i.e. 2).

The interesting finding from causal inference is that this dynamic generalizes. Said another way, for a given level of Z, information about X automatically gives me some information about Y, even if I can’t observe Y directly.

Almost Famous

Why is this interesting? Let’s go back to our fame example. Assuming our causal model is valid, then we can say that for a given level level of fame, if we know something about their level of wealth, we can infer something about their level of looks and talent. If we simplified it down for a minute to say just include looks and talent, then we could say – for a given level of fame – we’d expect that a person who is more attractive is likely to be less talented. (Another way to think about this is if they were both attractive and talented, they’d be even more famous).

I haven’t done an analysis to verify this yet, but it’d be interesting to run an experiment. For example, look on social media for actors who have a similar level of followers (as a proxy for fame). Within that cohort, if the model is valid then you would see a spectrum ranging from the good-looking-but-hacky to the talented-but-ugly.

Counterintuitive Hiring

This finding has interesting implications in many places. Take hiring, for example. Consider, for example, a hypothesis that seniority_level = f(skill, likability). If you think both skill and likability are positively correlated to seniority level, then – for a given level of seniority – consider that the most skilled person is likely to be the one you personally like the least.

These are of course toy examples; the causal structure of real life is likely to be much more complex. But they illustrate both the power of causal analysis and the sometimes counterintuitive truths behind the way the world works.

Process Over Outcome

Consider a group that is attempting to create organizational or political change. I typically see the leaders of these groups take one of two approaches.

The first is to get a bunch of like minded people together in an attempt to “make things happen”. These types of groups mostly agree on what needs to be done. But this approach often suffers from two problems.

First, there are other groups of stakeholders who may not agree that the proposed solution is the right one. Since most situations like this require buy-in from many different stakeholders, this lack of buy-in dooms the solution to failure. Second, even when the group does have the ability to “ram through” their solution without securing broad support, their solution is often missing key perspectives or makes invalid assumptions, which render their solution ineffective.

The second approach is to bring a diverse set of stakeholders together and attempt to get alignment. This approach addresses the problems above but often runs into its own challenges. In many cases each faction has their own favored solution that they “know” is the right one; each group is just waiting to take the floor so they can explain why their solution is the one that will work. Groups may question the motives of the other groups and trust can often be strained.

The Power of Process

The power of the scientific method is that – at least nominally – scientists are not wedded to a specific “answer” but instead are aligned by their agreement on a fundamental process: they agree on a set of methods and processes for determining what is true.

It seems like this would be a better approach to change management as well. Rather than starting by trying to agree on a solution, start by getting agreement on the process by which we will arrive at a solution.

Note that in some cases this approach might mean using a different set of criteria for who is invited into the group. Perhaps it might mean splitting folks into two different groups: a content group who are experts in a given area or representatives of a given constituency, and a process group whose job it is to take the information provided by the content group and use it to inform their process.

Getting key stakeholders in each group to agree to a process achieves two things. It negates any specific emotions or biases that the group might have for or against a given outcome. And it creates psychological commitment to a process, making it more likely that they will agree to the results of the process, regardless of outcome.

This approach does have downsides. First, it requires that each party is willing to give up its “known” solution. It would be naive to think think that ego and self-interest aren’t often at play in these situations. But through a combination of reasonableness and peer-pressure (who wouldn’t want to follow a logical process to get to an answer? *wink*), perhaps these dynamics can be mitigated. Second, because the parties must first agree on a process rather than jumping straight into the content, this approach can seemingly take longer. Of course the only time measure that matters is the time to achieve the desired outcome. And I’d argue that this approach will lead to better outcomes more quickly.

Getting alignment is never easy. Nor is designing solutions that work. But it seems like focusing on process over outcome might help.

The Disney Synergy Map

Those of you who know me well know I love maps, diagrams, and systems. I also love when people combine “left-brain” and “right-brain” thinking. This is one of the reasons I love architecture: it’s engineering and art combined.

Walt Disney was a genius at this. He is obviously known for his masterful animation, storytelling, and his vision for Disneyland. But what many not appreciate is the incredible number of technical advances that he and his team pioneered to enable such art to be created. (If you haven’t seen it and are interested, the American Experience documentary on his life is fascinating).

Given this, imagine my delight when I first found this diagram that Walt created in 1957 to lay out Disney’s strategy. It was known as the “Synergy Map”:

There are so many reasons why I love this. The scope of the vision. The understanding of how the pieces fit into the whole. The brilliance of the feedback loops. And – in pure Disney Magic – the characters running around the map.

I’ve had this saved on my computer for several years now and recently had a copy printed and framed on my wall. It inspires me every time I look at it.

Org Design: People vs Roles

One of the most powerful things a company can do to be more effective is get its “communication architecture” right. This includes things like organizational design, meetings, processes, and one-on-ones: basically the things that help dictate how information flows and is shared across an organization.

Organizational design – the org chart – is one part of this. From Ben’s blog:

Think of the organizational design as the communications architecture for your company. If you want people to communicate, the best way to accomplish that is to make them report to the same manager. By contrast, the further away people are in the organizational chart, the less they will communicate. The organizational design is also the architecture for how the company communicates with the outside world. For example, you might want to organize your sales force by product to maximize communication with the relevant product groups and maximize the product competency of the sales force. If you do that, then you will do so at the expense of simplicity for customers who buy multiple products and will now have to deal with multiple sales people.

https://a16z.com/2010/08/02/taking-the-mystery-out-of-scaling-a-company/

Work Backward

When designing an org, I like to begin with the end in the mind: what I think the org structure will look like in 24 months. I start by thinking about all of the activities that will need to be done. I then I lay out all of the roles that I think will exist and – importantly – define what responsibilities that role will have and what types of activities they are likely to do. My purpose here is start from what activities the ‘organizational machine’ needs to perform and then work backward to define the roles.

For example, here’s an org chart draft I had once created for my ISA company, Base (acquired by Stride):

This image has an empty alt attribute; its file name is OrgChart_Sample-1024x262.png

People vs Roles

Now even though I had all those roles defined, I was not planning to hire all those people immediately. Instead, the important thing to realize here is that, as an organization grows, the same person can play multiple roles. For example, in the earliest days, the founder and CEO (a person) may de facto be playing many roles: the Chief Strategist, the Head of Customer Service, the Head of Marketing, and the CFO. That’s normal. Now of course that person won’t be able to play that role as deeply as a dedicated individual. But that’s OK. By clearly defining the roles in advance, you make sure that it’s clear who is responsible for every set of activities that an organization needs to do and have laid the foundations for a hiring plan into the future.

High Standards

One of my mentors, the late Eli Goldratt, had a saying about goal setting:

“If you’re not sure how to hit a target… raise the target.”

Practically, the reason this works is that raising the target eliminates possible courses of action and forces you to focus on the levers that will have the biggest impact. Philosophically however, it is a particular instance that illustrates the power of having high standards.

Having high standards for both yourself and others is pretty close to having a superpower. Yet while it sounds simple, it’s not easy. It requires stepping back and asking ‘what does true excellence look like here?’. Then, it requires both the discipline and the emotional fortitude to hold yourself and others to that higher standard.

All great leaders hold high standards. Consider the very first job that Jeff Bezos ever posted at Amazon (my emphasis):

“Well-capitalized start-up seeks extremely talented C/C++/Unix developers to help pioneer commerce on the Internet. You must have experience designing and building large and complex (yet maintainable) systems, and you should be able to do so in about one-third the time that most competent people think possible. You should have a BS, MS, or PhD in Computer Science or the equivalent. Top-notch communication skills are essential. Familiarity with web servers and HTML would be helpful but is not necessary.“

Whether it’s speed, quality, or both, great leaders hold high expectations for themselves and their teams.

Attention as the Constraint

Every system only has one to a few constraints that keep it from performing better. Sometimes this is due to an outdated or incorrect policy. Sometimes it’s due to a limited resource. Identifying and addressing the constraint in a system is the only way to meaningfully improve its performance.

Several years ago I had the (not unique, I’m sure) realization that human attention is often the constraint in many systems. Evidence for this being true is the fact that many of the most valuable businesses in the world today – Facebook, Google, Netflix, just to name a few – are valuable precisely because they’ve become highly effective in capturing, directing, and monetizing people’s attention.

Within an organization, often times the constraint is management attention: from the CEO, the executive team, the board, etc. How the CEO in particular manages her attention is one of the biggest – though far from the only – determinants of success.

I read somewhere recently that “the biggest barrier to scale at a startup isn’t capital, it’s the time & attention to design and run experiments testing the core tenets of the business.” I don’t know if I’d necessarily word it exactly like that, but I think it’s close.

Beginnings

Many people took off the past two weeks for the holidays, so today marks the beginning of the new ‘work year’. For some, it may also represent the start of a new role or even an entirely new job.

Though I’ve been working on this for some time now, today marks my official first day as Managing Director of Centinel. As such, it has me thinking a lot about beginnings and how much they can matter.

Beginnings are a unique time. Almost everything is a ‘first’: a first impression; a first policy; a first decision; a first precedent. One of my favorite eras in history to study is the founding of the United States government. From the signing of the Declaration of Independence though the drafting of the Constitution to Washington’s first administration, the Founders were keenly aware that what they said and did in those early days set the tone and character for all that was to come. As such, those early days shaped our country and its government in ways that were uniquely powerful. This is true of personal relationships, too.

The start of a new role and especially the founding of a new company is similar. Though the scale and magnitude is not likely to be as large as founding a new country, those early days nevertheless have an oversized impact on what’s to come. That’s why I believe it’s so important to think carefully about what messages and precedents are set.

Many of are thankful to be done with 2020. As we begin 2021, let’s remain mindful to start on the right foot.

Types of Work

In an organization there are many different roles that need to be filled. There are also many different ways of talking about or describing various aspects of those roles. One way I’ve come up with for talking about the type of work that different people like to do is using the analogy of building a house. For each of these different roles, you can ask how well each describes you:

  • Visionary. You see an empty field and you like thinking about what type of house should be built. You can see things where nothing exists. This role is all about the vision: a grand house with a garden, a large patio… maybe even a fountain in back. Heck, maybe everyone else thinks it should be a house, but you come along and realize what it really should be is a ten-story highrise, since in 3 years a major highway is going to run right by here and we’re going to be well positioned to capitalize on it and…. (you get the idea.)
  • Architect. OK, so we’ve agreed on a house. What’s the house going to look like? How many bedrooms? Where’s the kitchen and how’s it laid out? Is it going to flow well? How do you design it so that there’s morning light in the bedroom, that the design is naturally energy efficient, and that the minimum of material is needed? This is marrying the artistic and holistic with the practical engineering. This design looks nice, but is it technically feasible? Will it cost too much to design? Will the layout be too complex for people to walk through? This is where you get excited: taking the high level idea and creating a plan and design for translating that vision into something real.
  • Capitalist. You’ve studied the plans and now you want to know if this investment is going to make money. To do this, you know you have to run the numbers. What are the material and labor costs? What’s the expected price per square foot at sale or rental? Should we flip it or rent it? Equity or debt? What’s our expected yield? Does building that roof deck have a positive ROI? What are our assumptions? Whether it’s doing quick math in your head or preparing a detailed financial model, you know that it always comes down to ‘the money’ and keep an eye on the bottom line.
  • Promoter. So you now have the vision and plan. It’s time to secure the resources necessary: investors, the team, permits, supplies, etc. This is where you shine. You know lots of people, love talking to them, and are really good at getting people excited and involved. You’ll talk to everyone you know and everyone you meet, excitedly tell them about what you’re working on and why they should get involved, and ask them to ask all their colleagues, too. After all, who wouldn’t want to be involved in this?…
  • Closer. So the promoter has the investors and/or customers excited and got them to the table. Now it’s time to close. At the end of the day you know that money talks and that investment and revenue make or break a business. Your style might be intense or relaxed but at the end of the day you know that only one thing matters: closing the deal.
  • Conductor / General Contractor. All right, we’ve got everything we need: the vision, the blueprints, the timeline, the budget, the money, the permits, and the team. It’s time to begin construction. This is where you shine. You’re good at coordinating people, holding them accountable, keeping everyone in sync, and raising red flags should anything come up. You keep the project running on time and on budget.
  • Builder. This is where the rubber meets the road. You’ve got your plan and timing and now it’s time to execute. You get it done. Quickly and well. You’re able to stay relentlessly focused on accomplishing the task, and if things come up or break, you’re resourceful enough to figure out how to get. the. job. done. You’re practical, focused, determined, and resourceful. Brick by brick, piece by piece, you thrive on doing real work and doing it well.
  • Inspector. You like details, precision, and perfection. Sometimes, you actually like finding the mistakes and errors people make – not to make them feel bad or point blame, but because you know that it makes the end result that much better. It’s almost like a game.
  • Administrator. You love order. Making lists and checking things off them is one of the highlights of your day. In fact, sometimes you add things to your list after you’ve already done them just SO you can check them off. The files on your computer are all organized, your inbox is alway empty, and you’re generally just on top of your stuff. Crossing T’s and dotting I’s is your thing. (In fact, you’ve already noticed several typos in this post…)

When I’m interviewing people for a role I’ll often ask them to rate themselves 1-10 on each dimension, with a 5 meaning average and a 10 being world-class (for whatever they consider to be their peer group). For example, compared to my peer group, I’d rate myself a 7 Visionary, an 8 Architect, a 6 Capitalist, a 4 Promoter, a 5 Closer, a 6 Conductor, a 6 Builder, a 5 Inspector and a 6 Administrator.

How would you rate yourself?

All Types Needed

The reason I like this question is it helps get both the level of abstraction at which people enjoy working and the type of work they like to do. And the important thing here is that you really do need all roles to build the house:

  • Without the visionary what gets built is uninspired (and maybe the wrong thing altogether)
  • Without the architect what gets built will either never match the vision, won’t actually work in practice, or both.
  • Without the capitalist you may not make any money.
  • Without the promoter you won’t have all the resources you need to bring the vision to fruition, no matter how good the blueprint.
  • Without the closer the deal doesn’t actually get finished.
  • Without the conductor you will have lots of activity but quality, time, and budget will suffer.
  • Without the builder, there will be lots of talk but no action.
  • Without the inspector your building/deal is at risk of death by a thousand paper cuts.
  • Without the administrator balls can get dropped and speed and quality of execution suffers. Sometimes irreparably.

In order to be effective, an organization needs to have all types, put in the appropriate roles for them, and in the right proportions.

There are many ways of thinking about the types of people you need in an organization. This is one that I’ve found useful.

Too Much of A Good Thing (Feedback)

I recently talked about the danger of trying to add too much value. Recently while reading The Inner Game of Tennis, I came across this passage (emphasis mine):

I was beginning to learn what all good pros and students of tennis must learn: that images are better than words, showing better than telling, too much instruction worse than none, and that trying too hard often produces negative results.

W. Timothy Gallwey; the Inner Game of Tennis

I am a firm believer in providing and receiving feedback. In many environments I think people don’t get or give enough. But I do think that, in some organizational cultures or with some people, the pendulum can swing too far in the other direction. The art lies in knowing how to strike the right balance.

Traits of Great Employees & Founders

Paul Graham has another great post this month on Earnestness. You should read it in full. (It’s not long.) There were a few specific parts that caught my attention, however:

The highest compliment we can pay to founders is to describe them as “earnest.” This is not by itself a guarantee of success. You could be earnest but incapable. But when founders are both formidable (another of our words) and earnest, they’re as close to unstoppable as you get.

He goes on further:

When you call someone earnest, you’re making a statement about their motives. It means both that they’re doing something for the right reasons, and that they’re trying as hard as they can. If we imagine motives as vectors, it means both the direction and the magnitude are right. Though these are of course related: when people are doing something for the right reasons, they try harder.

Warren Buffett often says he looks for three things in people he hires: intelligence, energy, and character. Jeff Bezos says he looks for resourcefulness and an ability to make good decisions. How might we synthesize and reconcile these things? I think it probably looks something like the below:

I think the question of motives and energy is an interesting one. Some people (like my wife) tend to be high energy in general: she is able to work for long periods of time and is incapable of “relaxing” – watching TV or reading, say – for more than a few hours. In contrast, I am very lazy in general… except when the effort required aligns with something I value. For example, I value building companies and being fit. So I have no problem working for twelve hours and then running six miles. But taking 10 mins to get up from the couch to put away some groceries? Now that takes real effort.