Executing the interview

CONTESTANT:

Katie Solomon
Vice president, 
human capital
Genstar Capital

THE CHALLENGE:
ABC Capital recently closed on a new fund and has the capital and investor support to add several members to their investment team. How can they get the most out of their interviews with candidates to identify and attract top talent?

KATIE SOLOMON’S ANSWER:

I’m sure we would all nod our heads in agreement at the litany of reasons why hiring A-level players makes sense.  But you might be surprised to hear how often firms get this wrong – and how costly it is when they do:

Nearly 50% of hires are mistakes.

A typical hiring mistake costs up to 10x the annual salary of the position.

I’d argue that there are few industries in which optimizing hiring is more important than in private equity where teams are lean and a star performer can move the needle and, conversely, a poor hire can drag the team and culture down precipitously. The good news is that there are easy ways to build this muscle and make interviewing and hiring a strength for your firm.

BEFORE THE INTERVIEW

Develop a scorecard: The same rigor that we ask our portfolio companies to adopt in identifying and measuring key performance indicators (KPIs) can be applied to our internal hiring processes as well. In addition to a traditional job description, successful hiring managers often create an internal position scorecard that distills three to eight key priorities that the new hire should accomplish over the next two years – a specific and measurable vision of what success in the role would look like (e.g., “Build out a presence for our firm in the Healthcare IT vertical through X number of company meetings, cultivating a network of Y number of well-regarded operating executives, and closing a deal in the space by the end of 2014”). Accountabilities should be ordered or weighted to reflect relative importance – interviewers then assess candidates on their ability to execute on these critical priorities. The scorecard is an effective tool to bring more rigor and consistency to the process and to help interviewers calibrate across a set of common objectives, especially when there are multiple constituents involved in the interview process.

Share information in advance: The more you can arm candidates with background information on your firm, your investment approach, track record and portfolio companies, the more productive your interviews will be. In addition to a position spec, I send candidates a sanitized version of our firm’s IR deck, or if the role is sector-specific, we share more tailored presentations with an overview of our activity in a particular vertical.

Similarly, obtain as much information as possible from the candidate. For principal and partner candidates, I always ask for a deal sheet including information on all deals the individual has been actively involved in, what role they played in the deal making process (for example did they help source the deal), and what was the outcome. If there is a recruiter involved in the search, push them for a candidate letter detailing the candidate’s career history and the recruiter’s assessment. 

Finally, to complete the circle, ensure that interviewers have all the relevant context on a candidate prior to meetings. In addition to resume, deal sheet, candidate letter (where available), job description and position scorecard, for candidates in second rounds or more advanced discussions, we also provide interviewers with context on who else within the firm the candidate has already met, interview schedule for the day, an overview on strengths and areas to probe further on, thoughts on selling the candidate, whether the individual is far along with other opportunities, etc.

DURING THE INTERVIEW

Start at the beginning: Over my years working in executive search, I found that I often learned more about candidates in the first twenty minutes of an interview – talking about where they grew up, their families and early influences, how they decided where to go to college and what to study—than I do in the hours of discussion that follow. Candidates are initially surprised when I ask to start the conversation so far back and express an interest in their lives pre-career. But in addition to providing me with valuable information, starting at the beginning creates a more open and personal tone for the discussion, helps us to build a rapport, and makes candidates more forthcoming as we segue into talking about their professional lives.  

Past behavior is the best predictor of future behavior: This is the crux of behavior based interviewing. I’d imagine many of your firms employ this approach in which interviewers ask candidates to provide evidence and insights from actual past experiences, rather than from hypothetical situations. Start with open-ended questions based on the candidate’s resume: “Tell me about the accomplishment that stands out as a career highlight; describe the most difficult team project you have led; what is the most challenging experience you’ve had, how did you work through it, and what did you learn?” Think in terms of stories and use follow-up questions to probe for detail – “How did you do that? What happened next? How did others respond? What was the outcome?” The object is to gain a deep data set and to assess a candidate’s match relative to the job spec and/or position scorecard.

I generally split my time with candidates between behavioral questions and more traditional interview questions.  On the latter front, I focus on career transitions – why candidates left roles and, equally as important, how they found their next positions. A principal who has been sought out and recruited by former mentors and colleagues stands out vs. a candidate who has solely relied on recruiters as a source of new opportunities. It is also helpful to invoke the Threat of Reference Check (TORC): “When we talk to former managing partner X, what will s/he highlight as your areas for improvement?” A few key words (“when” and “will”) promote much franker assessments than “If we talked to former managing partner X, what would s/he highlight as your areas for improvement?”

Frontload the deal breakers: I’ve seen innumerable discussions break down in the eleventh hour due to obstacles that could have been elicited at the outset of the interview process: non-competes, compensation expectations, geography, willingness to travel, to name a few.  These are not always non-starters and I’ve seen firms woo candidates successfully, even in the face of these concerns, but it is better to know what you are dealing with upfront. That way, you can make an informed decision to invest—to try to sell through lower comp, get counsel involved early-on to vet a non-compete, or engage a relocation specialist to help families get comfortable with a potential move – or you can decide to part ways and focus on more viable candidates. Along similar lines, in hiring for pre-MBA associate positions, we bumped up the analytical modeling component to occur earlier in the interview process, right after first round screening interviews. In the past, we had flown candidates back to San Francisco for final round interviews and had them meet with each member of our deal team, only to see a subset of finalists ultimately fall below the bar on the final modeling test

Treat each interview as a marketing opportunity for your firm: Candidates come to an interview ready to pitch their skills.  As an employer, you have a similar mandate – to sell promising candidates on your firm. In addition to hiring the right person for the role, the goal should be for all candidates to walk away with a positive impression of your organization. The private equity community is small and intertwined and you could easily cross paths with a rejected candidate on the other side of a future deal or as a co-investor. All candidates should be treated fairly and with respect throughout the process – this includes timely (and ideally personalized) follow up if you are not moving forward. For every individual that you do hire, there are generally at least five to ten whom you’ve met and don’t hire – each of those candidates could be a potential ambassador for your firm if you manage your interview process right and take a longer-term view of building relationships.