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On Hiring: RedMonk, the A’s of the Analyst Industry?

Parts of the entry below were extracted from a RedMonk internal email discussion. James suggested that they might make for an interesting post, and given that they outline my philosophy with respect to hiring – which we’re asked about a surprising amount – I’m inclined to agree. Whether or not we’re correct is, of course, up to you, but I hope it proves to be worth the read. – sog

In the spring of my senior year at Williams, I took a class entitled the “Rise of American Business.” This was a particularly tough timeslot – late Thursday afternoons, and I’d be lying to you if I said that I didn’t skip the class to play Home Run Derby with my best friend (the kid couldn’t hit a changeup to save his life) down at the women’s softball diamond down at Cole Fields. More than once. [1]

But lest you judge Professor Dalzell harshly for his inability to motivate this poor student, let me be clear: this comparative lack of attention is an indictment of my own wandering attentions, not the quality of the material or instruction. When you only get about two weeks of spring each year (fewer at Cole Field, which is less well known for its status as the coldest place on Earth), you need to take advantage.

Over the course of the semester, we studied everything from the rise of the Carnegies and Rockefellers to the economics of Jakartan bazaars to Bill Gates’ own “The Road Ahead.” As might be expected, there were a variety of lessons imparted in that class – many of which I carry to this day. One of the most important, however, was this simple dictum: in business, if you’re not moving forward, you’re moving backwards. History, as soon became obvious, was littered with examples of businesses and entrepreneurs that grew fat and happy and ended up poor and destitute. The next Carnegie or Gates I am not, clearly, but that lesson at least I absorbed.

The analyst business – the industry we at RedMonk happen to find ourselves in – is no exception. We must continue to innovate and move ahead, or we’ll fall behind. It’s very simple.

As any business can tell you, however, it’s not actually that simple. Even giants such as Microsoft and Wal-Mart can stall, and be left desperately seeking new avenues for growth, for moving forward.

The challenge for those of us in the industry analysis business lies in its foundation – people. People are amazing resources, but they don’t happen to scale particularly well. The folks that pioneered this industry, much as they might be despised by some vendors these days, were no dummies and they saw this limitation for what it was: a throttle for growth. The response they came up with was not terribly creative, but was nonetheless responsible for at least one virtual monopoly. Simply put, the answer was to have your less scalable resources – people – output more scalable products – reports, research, best practice frameworks, you name it. Anything that can be reproduced with a copy and paste, distributed to an infinite audience with the click of a button.

This worked well for a time, and indeed there are still firms making a mint off of it – more power to them. But to me, the writing is on the wall for that revenue source. It’s difficult to compete with free even when your quality is – at least theoretically – superior (ask the Encyclopedia Brittanica). But what happens when the quality of the free content is on par with what you produce, and is available via the most popular application in the world – Google? How do you charge for content on an ongoing basis?

Opinions will differ on the subject, of course, and it should be noted that I’m not unbiased in the matter as a partner in a firm that sits solidly on the free side of the pay wall. But I think that for many industry analyst firms, the question is already or soon will be, “How do we keep moving forward?”

The answer, at least in part, will be people. What else, after all, can industry analysts produce and expect to find a market for? We’re not software houses, we’re not systems integrators. At the end of the day, we’re probably swinging back towards a people oriented business.

Logically, then, RedMonk should be hiring, and hiring like crazy. If a.) businesses must grow, and b.) analyst firms grow by hiring, then c.) RedMonk (a business), desiring to grow, needs to hire. Perfectly logical, on paper. The only problem is that I don’t happen to agree with it.

Like the bumblebee that physics say should not be able to fly, poorly designed as it is, RedMonk is growing at an acceptable pace in spite of (or, the argument could be made, because of) a very limited headcount. A large part of the success that we’ve had to date, of course, is attributable to our people: my colleagues are so good that they make up for my own middling efforts, and Anne made quite an impression on everyone while she was with us. But we’re also fueled by two important facets of our business: 1. our model and 2. our openness. The former is intentionally low margin to guarantee low barriers to adoption and as a hedge against future (and, in my view, likely) downturns in the analyst industry, and the latter has so many ancillary benefits – authority and community, to name a few – that I could spend days listing them all.

The combination of those two components has given us the ability to scale well beyond what we’d be able to under different systems, different approaches. For example, Google, in a manner of speaking, has become our primary marketing and sales channel, permitting us to skimp on traditional expenses in those categories.

But even operating without the bloat and overhead that some of our larger and better heeled competitors are saddled with, we do have limits. There’s only so much we can do. Hiring at some point is inevitable. Assuming, of course, that we continue to function as a going concern and do not use acquisition as an exit strategy.

The question then becomes how do you hire, and who do you hire? My philosophy on that subject is very simple, and largely shaped by the economic philosophies not of the businesses I studied at Williams, but the practices of baseball clubs such as the Minnesota Twins or Oakland A’s. I’m aware that Moneyball has become a veritable cliche when it comes to business strategy, and is so two years ago, but those of you that have read it will perhaps look beyond the obvious conclusion – that I’ve succumbed to terminal baseball on the brain – and recognize that the men behind these teams are highly sought after speakers to businesses worldwide, because of their approach. An approach that allows them operate efficiently on limited resources. An approach, frankly, I’d like to borrow from. The A’s and Twins are able to compete, and compete effectively, with payrolls that are a fraction of their larger, better heeled competitors (including my beloved Red Sox, regrettably).

So when I consider what I want RedMonk to be, and where I want us to go, I think not of Forrester, Gartner, or IDC. I think of the A’s and the Twins. The implications for hiring here are significant: you do not, as might be expected, go for the big name, the high profile, high visibility folks that drop you resumes (you’d be surprised at some of the folks that want to work for us, trust me). You instead try to hire the folks that will become those big names. You don’t hire the stars, you try to make the stars.

Unless you’re backed by very high margin offerings or VC dollars (read: not us), it’s very difficult to build a team with folks that already consider themselves high profile – particularly when your business is designed to be low margin and low overhead. Even if I had the money to bring in tons of bodies or superstars, I wouldn’t: it’s not so much that I lived through three consecutive organizations that overhired and then dumped people, disrupting lives, but more that it just doesn’t work.

Bringing in high priced stars hasn’t done much for the Evil Empire the past few years and wouldn’t – IMO – revolutionize our business overnight. Are there things a star could do for us? Sure. But what is their value relative to their potential lower profile replacement (think VORP, baseball folks)? Does it, put another way, make more sense to hire a less high profile resource – someone undervalued, in Moneyball terms – who can be obtained at a lower cost and still perform at a high level? Like the A’s Billy Beane – and even our own Theo Epstein – I think the answer is obvious. While hiring a star wouldn’t yield massive immediate benefits, it potentially overburdens (precipitously) our established, sustainable cost structure. An unacceptable risk, I tend to believe.

And as flattering as it is to be courted by stars, alarm bells start going off when I get resumes promising immediate revenue and client wins. If things are indeed so easy, why on earth would you share that money with us? My advice to high profile folks looking to work with us is this: if you’re convinced that there are a bunch of potential customers out there craving your advice, go get ‘em. If you can win business on your own, you’ve simultaneously kept more money in your pocket while demonstrating to us that you’ll be a asset rather than a burden on our cost structure. If you want to join the RedMonk family later on, the conversation is then much more straightforward, as you now have a track record that indicates productivity.

Beyond the numbers and profile and visibility, of course, there are questions of culture. While the sabermetricians and traditionalists can argue over the importance of “chemistry” in baseball till the end of time, I don’t see the point as particularly debatable in the context of small businesses such as ours. Each person we hire has to complement the rest of us, enhance our value to our clients, and reflect positively on our brand. I don’t care how talented you are, I’m not hiring someone I don’t want to work with. Period.

Add all of this up, and what are you left with? A hiring process that is complicated, fraught with difficult decisions, and anything but “hiring like crazy.” While I’m only one half of the hiring equation at RedMonk, that’s how I view things and how I’ll influence hiring at RedMonk as long as I have anything to say about it. For those of you craving answers as to why I’m the brake to James’ throttle, this one’s for you.

But what about you folks? How do you hire?

[1] No one is to tell my parents I skipped class.

Categories: RedMonk Miscellaneous.

  • http://www.michaeldolan.com Mike Dolan

    We hire 350,000+ people, then just shed a few thousand after any bad quarter, then hire about twice as many the next quarter… which probably adds to us missing in another quarter whereupon we then “resource action” another few thousand but then we acquire a company with a few thousand more… I don’t think our model fits :-)

    An interesting approach if you’re bringing on someone new would be to have your clients vote on their favorite candidate… you could call it Redmonk Idol (I need a break…)

  • http://spyderous.livejournal.com Donnie Berkholz

    In fact, that mysterious Swedish scientist showed that bumblebees cannot glide. They can fly just fine. =)

    BTW: Go Twins!

  • http://aqualung.typepad.com/aqualung Ric

    And how heated/robust was the internal debate? And does James understand baseball well enough, or should you have used a cricket analogy?

  • http://www.redmonk.com/jgovernor James Governor

    ric the debates between me and stephen are ongoing, continuous, and robust. I think its called creative tension. But one common thread runs through any questions on these subjects – the huge respect I have for Stephen. He may be a pain at times, and he may make calls that i disagree with, some of which are wrong and some are right, but I can’t think of anyone in the industry I would trade him for. Another reason we can disagree on things is that we’re very well aligned on the core issues.

    i do have a cunning plan though, for hypergrowth without body count. now if i can just sneak it past Stephen…

    i know the moneyball story and more pertinently i watched liverpool knock chelsea out of the champions league on tuesday. awesome performance from a team that spent less than a seventh of the amount of its cash richer competitor in the last three seasons.

    my grandfather was a rather good baseball player. He was set to join the NY Yankees, had he not smashed his shoulder while celebrating with the the other two guys that got picked for them from the minor leagues. them’s the breaks, I guess. Its why I am a natural Yankees fan, if anything, which is another reason me and Stephen will always have something to discuss from other sides of the spectrum.

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