Saltwater Leadership Principles & Hiring Process

At Saltwater we are focused on buying profitable companies. In most cases those companies have leadership teams that function well and are ready for scale with Saltwater as a partner. In other cases, we bring in new leadership to set up the organization for the next 10 years of growth.

We structure our search by focusing on three areas. At a high level, we evaluate the quality of the individual, how well they fit with the team, and the skills they bring to the business needs of the team:

• Character fit

• Culture fit

• Functional fit

Self-awareness is everything. Deep dives within each category are important and each has their own nuance based on the role, the company, and the industry you’re hiring into, but the awareness of the individual and the awareness of the company’s needs is the only place to start.

I have a strong personal and business philosophy that all potential begins with self-awareness. How can you ever improve if you don’t know where to start? In order to evolve your organization, you have to know what your organization is missing. Where can an individual double down on a strength or buoy a weakness? This challenging level of honesty about who you are as a company is required. If you’re not ready to face the music on that reality, you’re likely to not make the best possible hire. I repeat: Self-awareness is everything.

We first focus on character fit. This area is less about fit within the company and more about having strong character, period. Is this a person you want to inspire, influence, and impact you and your team as people?

Character Fit

The classic framework by Jim Collins, author of “Good to Great,” is a great place to start your understanding of what a great leader looks like. In studying his leadership levels framework, which culminates in “Level 5 leaders,” I was surprised how many of these traits fall into the character category. The simplified leadership levels Jim outlines progress as such:

Level 1 — you make high-quality contributions with your work

Level 2 — you use your knowledge and skills to help your team succeed

Level 3 — you’re able to organize a group effectively to achieve specific goals and objectives

Level 4 — you’re able to galvanize a department or organization to meet performance objectives and achieve a vision. (most leaders fall here.)

And finally…

Level 5 — you have all of the abilities needed for the other four levels, plus you have the unique blend of humility and will that’s required for true greatness

The key takeaway is that these leaders have a unique combination of fierce resolve and humility. They were the first to own up to mistakes and the last to take credit for success. At Saltwater we find that this aligns very well with the previous point around self-awareness. Nobody is perfect, and it takes a certain level of comfort with one’s self to admit where they are weak, unable, or just need help. You want a leader who can translate these personal attributes into your organization.

With Collin’s inspiration, we use these character traits as a foundation for what we’d like to see in our leadership hires.

• Humble — they know they don’t know, they want to learn, and they don’t need the credit

• Truthful — their word is everything, they identify and admit when they don’t know, and they treat consistency of their character as a top priority in life

• Disciplined — structured, in the details, has short-term follow-through paired with long-term motivation, results-oriented

• Patient — they are willing to work to do it right, they don’t need immediate gratification, and have the ability to put things calmly in context with maturity

Culture Fit

This focus area is summed up in three simple words… Team, team, team.

We start here by understanding our own cultural values. The company which we are currently recruiting for has set these values for themselves.

Honorable Operators — We operate with respect for our customers, our colleagues, our partners, ourselves, and the quality of our work. We hold the integrity of our actions on a pedestal as they serve as quality assurance for everything we put out into the world.

Gritty Allies — We’re scrappy, tenacious, and as a team, we’re determined to solve our industries’ hardest problems.

Customer Driven — The road we’re on is lit by our customers. We stay focused on raising “customer capital” and this can only be accomplished by listening closer, caring more, and serving our customers responsively.

Life-long Learners — We celebrate constant improvement and find learning to be a joy in and of itself. We push ourselves and our team members to always raise the bar and keep trying out “the new.”

Working with the team, Saltwater supported an exercise to implement the Entrepreneurs Operating System with the book Traction by Gino Wickman. It is a simple strategy to understand who you are as a business and follow simple steps to implement tools to support your scale. Our vision-setting exercise from Traction helped our teams work to articulate elements of our team’s “character” that already existed, and sprinkled in some aspiration. We believe strongly that your company’s cultural values cannot be wishful thinking, they need to be easily followable, then supported to be applied consistently. We’re very proud of the values followed here.

Now, we have to determine how to ensure they have the most impact on the company. That starts with using them actively, not just putting posters on the wall, after all, the very first cultural value at Enron, was “Integrity”.

In recruiting we start to share and reflect on these values with candidates. We assess comfort level and communication style as signs of where they resonate deeply with a candidate vs. the “oh, that’s nice” response. Do these ideas matter to you? It’s a tough question to get a clear answer on, but it’s an important one.

In our recruiting process, specifically for leadership positions, we use two main projects to evaluate and interact with a candidate. In the first one, which will feed into the second discussed in the Functional fit section below, we ask the candidate to evaluate the opportunity we have as a company. This is a blank canvas exercise, meaning they can take it wherever they want, and that’s the point. In this simple 1-2 page deliverable, we get to evaluate so much about our values. How much do they focus on the customer type? Do they discuss competition, and how? How many resources do they think an opportunity will take, and can they be default scrappy? How do they discuss elements of the market they don’t know? Were they trying to solve for the exercise or actually team themselves something for the long-term? There are infinite questions you could ask, but how you ask them and how you evaluate the unspoken or inexplicit elements of your candidate’s communication is everything about the evaluation of culture fit.

Functional Fit

When it comes to understanding functional fit you have to understand your company’s org chart — “Fit” being the keyword here. If you believe in the power of teams as strongly as we do, it really is about the structure around the leader as much as the leader themselves. You have to have clarity on not only what role or function your new hire will work within, but crucially, how does that function engage with all the others? Does your company have a functional pecking order? For example, Google engineers are clearly at the top. Apple’s heroes are the designers. Other organizations work differently, but understanding and facing the reality of yours is key to understanding the functional fit factor of a hire.

In our case, and for this example today, we’re hiring the CEO for a technology-driven business with both hardware and software components. We need someone with proven financial chops as we are managing the business to balance growth and profit, but without the luxury of forfeiting the latter. As we look to other areas of the business that need to be built out, we see a need for a strategic “go-to-market” vision — how do we position ourselves relative to our competition, and differentiate our offerings for customers? We also have a huge opportunity in improving our sales operations that are sure to support a new and promising growth channel.

So the answer is a finance-oriented, market visionary that can drive a massive sales force. Haha, wake up — trying to find that person is a fool’s errand. It’s easy to fall into the “we need one person to fix all of our problems” trap. Don’t do it. Ensure your list is prioritized and you understand the core skills that typically support performance for a given function. Prioritizing financial management and go-to-market strategy, we know that our CEO needs to be very quantitative and comfortable collecting and applying data to decision making. We’ll happily forfeit some product or marketing chops for some financial chops. We’ll keep in mind what our 2nd, 3rd, and 4th nice-to-haves will be if we can find them, but we won’t get lost in hunting for a unicorn.

Prioritize your needs. Stack rank the candidate’s functional skills. And see how the ven diagram overlaps. It’s likely the candidate leans more creative, or more analytic, and it all depends on where they fit.

The market we are hiring into is wide open with many ways to attack it. A strategic approach will require a healthy balance of creativity and awareness of market reality. The definition of strategic vision I like to use is this; How can one weave the many seemingly unrelated elements of the business environment into one plan that achieves your goals? Especially the unseen, unknown, or ‘unoccurred’ elements. What’s going to change in the future? How many steps ahead of those changes does your plan/vision stay ahead? When that’s done well it’s strategic.

Finally, there is the element that we call commercial, which is another tough one to pin down. To us, commercial could also be defined as entrepreneurial or value creator or sometimes even “salesy” — but not with the negative connotation that word can elicit. To us, commercial means that you can turn ideas into dollars. It means that you find ideas that the world needs, you have the ability to get them to market and find the people, or market, that will pay you for them and generally get them excited about the idea.

So, having a clear definition of analytical, creative, strategic, and commercial is important before you start to evaluate the candidate.

• Analytical — they enjoy the use of numbers and utilize them in decision making intuitively

• Creative — they have new ideas and perspectives to problems that others typically don’t have. They have a vision on how things “should” be, not just how they are.

• Strategic — they have an ability to understand and coordinate known, unknown, and yet to occur elements of your environment in your favor to support your business goals, and stay ahead of changes

• Commercial — they have the ability to turn ideas into money by getting others excited about the idea

For our search, we’ll prioritize analytical up to a point, to ensure the individual is appropriately capable of the financial management and data elements required. But we’ll also assess their ability to apply the data to inform the direction we take.

Process

As we work through these principles in the many conversations with the candidate we run a simple 4 round process.

Intro: It starts with intro convos, largely focused on character and getting to know the person. We like to understand the transitions in one’s career. I find that there is often more to be learned in the reasons for the transition than what was delivered in a specific role.

Learn: We move into the candidate meeting us, the team, the people, and seeing if they like how we roll. This round is also used for education about us, the company, the business, the industry, etc.

Assess: Then we go into an assessment of fit, and of potential. We want to see if they think our opportunity is exciting.

Present: Finally, we’d like to see some real work. We ask the candidate to present to us how they will run the company. What systems, processes, values, tactics will they use and what is the thinking behind them. As the leader, where will they take us? These are the four questions we use in that prompt. This could easily be delivered on day one or day thirty, but we want to experience what it will be like working through challenges before we make an offer to reduce the risk for both us and the candidate.

What is our opportunity?

How would you run the business?

What should we be worried about?

What is special about you?

In closing I’ll leave you with this… Find your own principles.

Think about the people you most admire, and the types of leaders you’d like to surround yourself with. Like a company’s cultural values, it’s important that they are unique to your organization and customized to mean something to you. Keep it simple and practical. In a classic ‘Mungerism’, Charlie says, “Actually, I think it’s pretty simple: There’s integrity’s, intelligence, experience, and dedication. That’s what human enterprises need to run well.” Whatever your strategy, or whatever your principles, it’s crucial that they are used regularly, alive, activated, and referenced often. Let them be a living, breathing, evolving document that changes as your organization changes. And above all else, they must be useful. If you’re not getting the results that this exercise implies, then change it, kill it, quit it. Hit refresh. Find something that works to attract and hire the leaders that drive the results you’d like to see.