When Your Biggest Hire Ever Is a Bust

Introduction:

This week, Jaci Russo tells David C. Barnett and Kate Morgan how the hiring of her agency’s first top-level sales person went wrong. About four months ago, when Jaci first told us about this big step, she sounded thrilled. She said her new sales chief was a delight to be around, had hit the ground running, and had already lined up at least one impressive client. Unfortunately, none of that panned out. But Jaci, who is hardly the first business owner to have an important placement go off the rails, offered to walk us through her process to see what lessons we can all learn: Were the interviews flawed? Was the onboarding effort insufficient? Was it the executive recruiting firm she used? Was it the compensation structure? Or was it the remote-work arrangement? Plus: We also discuss the mounting evidence that companies have stopped filling entry-level positions. And should that trend continue, where will owners find the next generation of leaders?

— Loren Feldman

Guests:

David C. Barnett helps people buy and sell businesses.

Kate Morgan is CEO of Boston Human Capital Partners.

And Jaci Russo is CEO of BrandRusso.

Producer:

Jess Thoubboron is founder of Blank Word.

Full Episode Transcript:

Loren Feldman:
Welcome David, Kate, and Jaci. It’s great to have all of you here. I want to start with a quick thank you to all three of you, but especially to Jaci. Three or four months ago, Jaci, you told us on the podcast that you had made a big, important hire, maybe the biggest and most important you’d ever made. This week, when I sent out an email to all of you asking if you had anything you’d like to discuss, you volunteered that we might want to talk about that hire, which did not work out precisely as you’d expected. I just want to thank you for that before I start poking my finger in your wound.

So with your permission, Jaci, I will now remind you of what you told us four months ago, shortly after this hire. So you hired a business development person. You told us you had been doing okay in terms of business development, but you needed to hire an adult, someone who has a real program that’s focused only on business development. You hired a recruiter, an expert in search, specifically in sales, and you gave this person a checklist of what you wanted. They gave you back someone who checked none of your boxes—none—but who, you told us then, was exactly the person you needed: someone who hit the ground running and was already lining up opportunities in her first three weeks. She revamped your CRM system and had just been a general delight. You mentioned that your search firm had worked with her previously and knew she’d be a great fit. Jaci, you’re still there, right?

Jaci Russo:
I am. So far, so true.

Loren Feldman:
When we talked about it, I asked you what boxes she hadn’t checked for you, and you kind of apologetically said you thought you needed some hotshot East Coast, West Coast, big city dude who would come in with all the slick talk. Instead, you hired this very nice lady from rural Georgia who was, at that point, killing it. In fact, you didn’t want to give her last name because you didn’t want anybody to poach her.

Jaci Russo:
Or first name. No names, for sure.

Loren Feldman:
I asked you if the recruiters had had to sell you on her since she didn’t check your boxes, and you said that, in your field, you’re an expert. You hope that people will take your advice. And you reminded yourself to shut up, sit down, and follow directions. And so you took the meeting with this person, and 10 minutes in, you were like, “Oh my gosh, I am so glad they matched us.” And you were off to the races. So maybe now you could bring us up to date. What has happened?

Jaci Russo:
So that is a very accurate recitation of exactly what I said four months ago, and I stand by all of it. I tell you that the firm was reputable. She came highly recommended. I had all those thoughts. I felt all those things. I really thought that this was a game-changer. She made all those changes. They were very expensive, but I supported them. And it has become an expensive lesson in a list of the expensive lessons of entrepreneurship. So, here we are starting over aganin.

Loren Feldman:
Where did it go wrong?

Jaci Russo:
So, the end unfolded in an odd way. Fast forward from the quotes you just gave. Fast forward three months, and nothing has developed. We met daily for two weeks so that I could really download everything I thought she needed to know. I made sure she had all the right resources, access to the library of all of our documents, all the things. She wanted to make some big changes, move us away from kind of what I would think of as a baby, small business CRM and move us into Salesforce, hired an integration firm, brought in Zoominfo. I mean, all the things.

So right there, I would say, is thinking about us maybe as a bigger company than we are. She had previously worked for much bigger companies, but some startups. She had some startup background, so that didn’t raise any red flags. She did walk in with somebody that she thought would be a great client. They were not in our target market. They weren’t the kind of company that we typically do business with, but she had a relationship with them. That fizzled out. But, I mean, you know, those things happen, so I’m not too worried.

Loren Feldman:
Were they not right for the same reason—because they were too big for your business?

Jaci Russo:
No, they were actually smaller than our typical client, but not a good fit, in terms of matching up our industry expertise and process. They would have benefited from us, but I realized later they were never going to get approved, budget-wise. They wanted a $500-a-month solution, and we’re not that. But no big deal.

So, first month goes by, there’s no big opportunities, but I’m still all in because it takes time. Like, who pulls this off in four weeks, right? Second month goes by, and I’m starting to think, I’m surprised. I think I would have had some meetings by now, just based on the people that I know and pulling in some relationships. I mean, the agency at this point, in two months, has probably had 10 discovery meetings and signed a new client. And so, I’m starting to wonder.

Now we’re in month three, and I’m definitely starting to say things like, “What can I do to support you? This isn’t moving as quickly as you predicted.” She wrote out a go-to-market strategy that had a very clear path forward, and we are well off that path. And so I’m starting to say: What if? And I actually was heading to London and arrived, and so she’d sent an email while I was on the plane that said, “Hey, I want to do some things differently.” And I’m thinking, “Okay.” I mean, she sees the same thing I’m saying: What’s happening up to now is not working. We’re going to make some changes. And that was this odd, like, almost fall off the cliff for the next three weeks. It was just a rapid downhill descent. It was like she lost her confidence. She was no longer organized and on top of it like she had been for three months. I honestly, at one point, was concerned that maybe something was going on with her personally. But she said no.

And I reached out to the placement person and said, “Hey, this isn’t going well. I don’t know how to fix it. I’d like your advice. Here’s what I’m seeing.” And I sent reports, some email correspondence, some thoughts. “Wow, yeah, that’s surprising. Give me a couple days to think about it.” I said, “Okay.” She came back with an incredibly thorough breakdown, step by step: “I think this needs to be different. I think maybe, try that.” I thought, “Oh, it’s great advice. Yeah, I’ve done three, four, and five, but six and seven? That’s really good advice. Okay, great. I’m gonna start working on that with her.” And then I get a two-sentence email that says, “This isn’t working out. I tender my resignation effective immediately.” And I was like, “Where did that come from?” And so here we are.

Loren Feldman:
So first of all, Kate, you run a recruiting firm. Any immediate reactions to that?

Kate Morgan:
Yeah, was it a contingency search?

Jaci Russo:
Umm, meaning?

Kate Morgan:
You paid a finder’s fee.

Jaci Russo:
Yes, I paid a finder’s fee.

Kate Morgan:
And you had three months to make it work? Because usually there’s a 90-day guarantee. Did she leave before the 90 days?

Jaci Russo:
Well, we started to realize it wasn’t going well before the 90 days. There wasn’t a time limit put on it. I didn’t go back and look at the document to see. I reached out, though, to the firm, and they were like, “This is shocking. We’ve placed her before, and it’s been a great success. We are stunned. If you will trust us, we would love to right this situation and do that work again and find somebody who’s a better fit. No charge.” So, I have no grievance with the firm. I feel like they are absolutely handling it at the level that I would if it was me.

Kate Morgan:
Yeah, no, that’s fantastic, because we hear of situations where they’ll sandbag somebody so they can assure that they’ll get the full contingency referral fee—to the point we had somebody who was relaying the story that the person wasn’t really working out, I guess. And again, the candidate had buyer’s remorse. A roundabout channel found out that they paid the candidate $1,000 to stay until the 90 days were up. The 91st day, the person gave their notice.

David Barnett:
Wow.

Jaci Russo:
Wow, that’s lowball.

David Barnett:
I think that might be—I mean, that’s a conflict of interest bordering on fraud, isn’t it?

Kate Morgan:
Yeah, well, welcome to the world of recruiting. It’s pretty shady.

Loren Feldman:
I’m not sure it’s bordering on fraud. I think it’s the definition of fraud.

Kate Morgan:
Yep, it’s dodgy, but it sounds like they were at least honorable.

Jaci Russo:
Yeah, I don’t think this is that at all. I am stunned. They are stunned. The way she started to the way she ended, it’s almost like a personality Jekyll-and-Hyde thing.

Kate Morgan:
Mhmm. But it sounds like she probably got another offer while this was all going on. For whatever reason, it was a better fit for her. So she started going down that path, leaving you high and dry.

Jaci Russo:
Maybe. I don’t have that impression. My takeaway, after many, many nights of thinking about it, is that she’s maybe been a part of a bigger team, and had the luxury of being in a crowd—you know, like that high school group project thing. And all of a sudden she’s a unicorn, and there’s only one, and all attention is on her.

And I think the pressure, I think she cracked under the pressure—not pressure I put, because I think I’m pretty laid back. And I checked with my team. I went back and re-watched all of our meeting videos, plugged them into ChatGPT. I was like, “What could I have done differently?” And ChatGPT and I think that she isn’t used to carrying the weight on her own, and it broke her.

Kate Morgan:
Yeah, we see that a lot, particularly because we’re focused on a lot of the work that we do around sales: It’s the first sales person into a company. And yeah, you’re actually looking for a very different person than most larger companies that are looking for just another account executive or sales rep.

David Barnett:
Jaci, how were you paying her?

Jaci Russo:
Salary plus commission.

David Barnett:
And what kind of salary was it? Would you say it was a low, medium, or high salary?

Jaci Russo:
I would say it was high. It took my breath away.

David Barnett:
So somebody who took on the role could have presumably lived on the salary without actually making any sales?

Jaci Russo:
Yes, unfortunately, and I did think about that at the time—and quite a while thereafter. But it was not as high as they originally wanted it to be. So my theory was, when we talked it all out, that the salary plus commission was going to be really awesome, but just the salary wasn’t quite as much. It was more than I wanted, but not as much as they wanted. And so I thought that still left enough—because I think salespeople, they’re competitive by nature. And so they need a little drive and a little push. And so I felt like we left room for that, but now I think maybe it was too big.

David Barnett:
And before this, were you the only person kind of doing sales, or has someone else filled this role before?

Jaci Russo:
Well, that’s an interesting question. So we are blessed and fortunate that we get a really nice, steady stream of inbound from thought leadership, from consulting work, from current clients, and that keeps the pipeline full enough—not as much as I’d like, but it’s steady and good. This was the goal to double our efforts so that now we had a really great two-prong approach.

Over the years, this is not the first time we’ve ever tried to hire a salesperson. We have done this, and I can tell you, this is the first time we’ve ever hired someone of this caliber, at this level, with this approach. Otherwise, it’s been friends, or somebody who’s just got laid off and they need a landing spot. I thought, “Well, maybe you can make this work.” But this is the first time we’ve hired a firm, been diligent, dedicated resources all in.

Loren Feldman:
So in looking back, Jaci, are there things that you’ve decided you would do differently the next time. For example, the issue of the checklist. You hired someone who didn’t check any of your boxes. Do you think that was a mistake, or do you think you would respond the same way to a person put forward by a firm that you were trusting?

Jaci Russo:
I am inclined to believe that my checklist is based on the rantings of a lunatic who doesn’t know better. [Laughter] And so I would not hold anyone to my checklist, because of everybody involved in this, I am the least qualified to decide. I think the search firm knows more, and the successful candidate will be smarter, better than me at their job. So I’m fine with the checklist being wrong. What I do think, though—because I have two interviews set up for next week for a replacement. And I do think that I’m going into those with eyes much wider open. I have a whole new set of questions based on my experience that I wish I had asked last time. I’m a fall hard, fall fast kind of person.

And so where, in this case, the now-gone employee, they were a good salesperson in that they sold me on them, and that was my mistake. I’m going to own a whole lot of places where there are red flags, in retrospect, that I never saw. And so I do feel like I really have to reset myself, because I’m tempted—and I know I’ll get it in check—but right now, I’m tempted to go hard in the next set of questions, and it’s going to be like a firing squad. Because it’s like, “Wait, what about this? What about this?” Because I feel so burned.

But I think I’ve got it in check. I’ve worked out a really moderate tone to my questions. It will not be as much of an inquisition, but it will be a better set than it was the first time. Because I want to know more about: Have you been in a team? Have you been the first salesperson before? Can you take this program that we have that works okay, and turn it into something that’s really for you? What are you thinking in terms of expenses, of throwing away all the money we just spent and doing it your way? So I have more questions now.

Loren Feldman:
Do you think maybe—since it sounds like this was the first time you hired a recruiting firm, especially at this level—do you think maybe you just thought you could rely on them more than was appropriate?

Jaci Russo:
Yes. Yes, absolutely. I felt like it was kind of like one of those matchmaking services where you just show up at the altar, [Laughter] and it’s a perfect fit, and you’re married for the rest of your life. Because that’s what I want. I don’t enjoy the interview process. I find that I either talk too much because I want to sell them on how great we are, or I am a better listener just to listen versus listen to ask the next question. I’m not as great an active listener in the good way. And so it’s more of a conversation than an inquisition. And so I gotta move that pendulum a little more to the middle.

Loren Feldman:
Kate, is that something you see where people kind of have to learn how to use a recruiter?

Kate Morgan:
Yeah. I mean, because our model’s a little different, we really do view ourselves as more people strategists. So we will coach our clients on how to better interview and prepare for it, particularly around sales. Because if we’re working, say, with a technical co-founder, the last thing that they’ve ever thought about doing was going into sales. So we need to really help arm them and prepare them for what they’re looking for. And a lot of default—and I caught you, David, speaking about this—was like inferring about, “Well, maybe you pay them too much money.” Well, it’s actually the challenge if you underpay the people who are super money motivated. If your sales approach is hard, if it’s a long sales process, they won’t stick around. They’re going to go do something they find easier.

So one of the best examples of response, when I was looking for a first sales hire in the U.K. for a client, I talked to this woman, and her response was that she looks at her desk like her own franchise. And that conversation I had with her was about 20 years ago, and it stuck with me, because that’s really what it is: It’s not so much about the money. It’s about the entrepreneurial spirit that salespeople have. They just don’t have, maybe, the visionary focus to launch something on their own. But you still need to have that working relationship where you can get them the lifecycle, the full understanding of how they’re approaching the potential customer. You want to have that open dialog. And entrepreneurial-minded salespeople tend to do that. They tend to enjoy it.

David Barnett:
Can I offer a bit of a thought experiment for Jaci to help her get ready for this interview process? Jaci, if you can imagine the future of your company—and let’s imagine that the revenues are 10 times bigger than they are today, so there’s some point in the future—what different roles do you think might exist in the sales department?

Kate Morgan:
That’s a good question.

Jaci Russo:
I imagine that we would, at that size, to scale like that, have to now have, in this hypothetical scenario, a team of salespeople. Because to get to that, there’s no way one person is doing it. So we’ve got three or four of them, and I would imagine there’s a more intense process around the data, because we’ll have multiple of that as well. And, yeah, the whole thing is just bigger.

David Barnett:
So you’d have sales people who are trying to make contact with prospects. And then you would have some kind of sales manager, and there would be some kind of strategy function in there too, either by the manager or maybe with some other people. And so when you hire your very first salesperson, all of those tasks still need to be done, but you don’t have a team. And so you have to figure out which of those specific roles and tasks are you going to cover, or someone else on your team right now, is going to cover. And which ones are going to be covered by the new person, right?

Because the salesperson who you hired, to your point, may have been on other teams before, where this path was well trodden and people were able to say, “This is how we approach people. This is what we say. Here are the value bites we say in the conversation. And this is how we, you know, whatever,” but a lot of that has not been established yet at all in your business. And so there’s a lot of construction that has to happen. And if there are certain aspects of those things that the future sales department would have to do that you’re not doing today, or you’re not conscious of doing today, then you have to figure out who is going to be doing those things in your new sales department. And if it’s not you doing some of those leadership roles, then it means the person you hire has to be able to do those as well.

Kate Morgan:
But David, Jaci, maybe I missed this, but it sounded like the person you hired, that’s exactly what she was bringing to the table. Just looking at all the tools that she was looking to roll out, it sort of gives you this impression that she knows how to set up a high-functioning sales process and department.

Jaci Russo:
She literally said it, and it was written on her resume that she had done that on two other occasions.

Kate Morgan:
Did you check any references?

Jaci Russo:
You know, I didn’t. I used the vouch of the placement agency. I have such a sticky thing around the reference thing. And so, you know, talk me off the ledge on this. My theory is anybody is going to give me the people who are going to say nice things about them, and so I’m going to call and those people are going to say nice things. So what are we learning? You’re not going to tell me the name and number of somebody who doesn’t say something nice about you.

David Barnett:
Here’s something to think about her experience, though, because it may absolutely be true that she did set these things up in other companies. But is it because of a plan and a strategy, or was it simply mimicry? So if she was selling widgets in one company and then moved to another up and coming company that was in a very similar or analogous industry, did she simply replicate her experience from before, and it worked in that new place? Because for you, I mean, you right now, are not doing a sales function. You’re using other marketing methods, like the thought leadership and putting yourself out there and sharing your ideas. And you’re drawing people in, and the outbound sales is a very different kind of thing.

I think you need someone who’s going to be able to figure out how they can get not only a conversation with prospects, but maybe even work to get your prospects in the line of fire of some of the other things you’re already doing—so, developing relationships and all this kind of thing. It may not be that you’re looking for someone who’s going to cold call 100 companies to try to get three meetings. It just may not be that kind of process. It may require a bit of iteration and figuring out. And I’m not saying that I know exactly who it’s going to be, but I think maybe if you think along these lines, it might help to inform some of the interview conversations you have.

Loren Feldman:
Jaci, I’m going to channel Jay Goltz here a little bit. He has gone off numerous times on this podcast about checking references. His point is that if you say to him 90 percent of the time, “It’s a waste of time,” he’ll agree with that, but that one out of 10 makes it all worthwhile. And perhaps this would have been your one out of 10. He says that there are ways to ask questions that—even if you have to read between the lines—you can get a sense. I mean, if you ask, “Would you hire this person again?” Sometimes you can feel the emotion in their voice. You know, people are inclined to say nice things, but often they don’t want to just outright lie, and you just never know what you might turn up.

Kate Morgan:
There’s a lot of techniques and questions. And Jaci, I’ll send you one of our templates that we use. Really setting up the call with the reference also helps. I joke, whenever I get a reference on the phone. I say, “Listen, chances are you had a good relationship, because I’m on my second marriage, and there’s a guy and his mom out thereI’m not going to list.” And that usually gets them to laugh about it. But then I drill down. I say, “This is our last attempt to make sure that we’re going to provide an environment where this person can be successful. So all of your answers are going to help us determine that.”

One of my favorite questions, and I usually wait to ask this towards the end, is I’ll ask the person, “What’s their most memorable experience with the person?” And that’s so telling, because I want to know, are they dialed in, and they’re talking about a work challenge that they overcame, or just how they kind of crafted a solution? And that has always been one of the most eye-opening reference questions I’ve asked.

Jaci Russo:
Interesting. Okay, I like that. I like that a lot.

Loren Feldman:
I’m curious, Jaci, are you comfortable with the move to Salesforce? I’ve been told many times that that’s kind of overkill for most small businesses, that it’s too expensive, not necessary. There are plenty of solutions that are less expensive and that work just as well for a smaller business. I wonder if that might have been a red flag.

Jaci Russo:
It definitely was, and it’s something that I’m figuring out what we’re going to do. I’m pausing thought until we hire the next person, and then, depending on what they want, that’ll determine how we handle it. I feel as though it’s a Maserati, and I just need a Honda for school drop-off. [Laughter] And so, no knock against them. They are what they are, but they are way more machine than my lead foot needs. So we’ll see how that’s going to all develop. I’m going to spend some time as we go through the process and figure out what makes sense for the next hire and a really good system for us moving forward.

I’ve always struggled with this concept, and Michael and I have talked about it extensively through these past few weeks, because I believe that this is a hireable skill. I do not think that I am the only person in the world that can sell the services of my company. I think if that was the case, we’d be the only ad agency. But there’s like 84,000 others out there, and so all of those have somebody at their place who can sell them. That means there’s somebody out there that can sell us. And I remember in the early days of our agency when we struggled with the scalability for account service, and having somebody that clients would turn to and not always need to call me. And we’ve done that. I don’t handle anything day-to-day for our clients, so I know we can do that here, too. I just have to figure out how.

Loren Feldman:
Anything else that you’re thinking about doing differently this time? Any changes to your process?

Jaci Russo:
Well, I think I’m going to ask much better questions this time, and I’m very excited about the cheat sheet, so thank you for sending that over. I am going to call references, because I think we’ve had a good conversation around that. That’s landed, and I think I’m going to do a better job of listening to them talk about their process. I’m not as detail-oriented as I wish I was sometimes, but I’m going to ask some very detail-oriented questions and ensure that I have a really good understanding of their vision of how they want to do this: Have they been in this exact spot before? Or has it just been a part of a team? Because I think that’s a big piece of this.

Loren Feldman:
Jaci, I think you told us, when you first, four months ago, told us about this hire, that not only had you used a recruiting firm, but you had other people at your company who played more prominent roles in the hiring of this person. And you were kind of the last person, the sign-off. Is that going to change?

Jaci Russo:
Oh no. We still do the peer interviews. And I have accepted full responsibility, well deserved, for making the choice. So I have empowered the rest of the team to dig deeper, have more time, ask more questions, don’t rubber-stamp it just because you think it’s what I want. And I’ve brought in one more person to the circle who clearly had some misgivings, almost from about week two or three, and so they’re in the peer circle now. They get to be a part of the peer interviews, because it turned out that their instincts were right. And so I want that thought process during the interview process, not after we’ve hired.

Kate Morgan:
You know, there’s one other thing that is a real low lift, cheap way to also make sure that you kind of understand what type of salesperson you have. If you use DISC—so we have a platform that we use, TTI, and they have a sales-specific assessment that is super, super helpful.

Jaci Russo:
Awesome. Yeah, we do Enneagram and DISC, and I didn’t see any red flags there, so I missed it.

David Barnett:
Jaci, in my own past, in my sales career, one of the models of compensation that seemed to work well at weeding out the wrong characters really fast was a model with a very low base pay but an advance against commissions. So I remember one sales job I had where it was a really tiny base. It was like 12 or 15 grand a year, but for the first number of months, they paid me a higher salary. But this was an advance against the commissions I would ultimately earn.

And over this period of sort of onboarding, I learned how to do things. I started to make sales, and then they pulled that sort of advance minimum away. But by that time, I was bringing in my own revenue from the commissions I was earning, and I was great. But what I saw is that the people who were having trouble saw that cliff coming up, and they usually pulled their own rip cord well in advance of the cliff. So there could be some different ways to offer compensation that might encourage either performance or how people self-select themselves out if they didn’t feel that they could pull it off.

Kate Morgan:
Well, it sounds like that’s pretty much what she did, right? Because, even without having a recoverable or non-recoverable draw, this person tendered their resignation, correct?

Jaci Russo:
Yep, absolutely.

Loren Feldman:
What do you think would have happened if she hadn’t?

Jaci Russo:
Well, I mean, I had requested a meeting that day so that we could talk about some discrepancies I’d seen in Salesforce in looking at the activity. It felt kind of sporadic. And so I was looking for: How do we improve, how do we make this better, what can I do to better support you? I think that eventually, either we would have gotten her process fine-tuned and she would have started being successful, or we would have let her go. But I wouldn’t have done it that day. I mean, I was in for a penny, in for a pound. I wasn’t going to cut the cord at all. I wanted to make this work.

Loren Feldman:
One other thing we haven’t discussed here is, you’re in Louisiana. She was in rural Georgia. Do you think the fact that she was working remotely might have had some impact here? And are you rethinking that at all for the next hire?

Jaci Russo:
I’m fine with remote. I think it’s good when we spend some time together, which is why we did those everyday, hour-long meetings, so we could really get to know each other and spend some quality time together. I don’t think it has to be in the same room, me personally. If that made them more comfortable, then, sure. But I would really lessen my pool of applicants if they had to live in Lafayette, Louisiana, because it’s a small town. So I’m not going to have as many people to choose from as getting to pick from the whole rest of the country,

David Barnett:
What if you did a one-week onboarding in Lafayette?

Jaci Russo:
I’d be great with that.

David Barnett:
The new hire came to your office, got to meet the team, got more of an appreciation for everything that’s happening and who does what and everything. Do you think that maybe could help set expectations or make someone feel more integrated?

Jaci Russo:
And I would be fine with that. That would be absolutely great. There was a discussion of that at the beginning, because I offered that, because I thought that would be helpful. And she didn’t feel like it was necessary, so she spent time with everybody on Zoom. And so, you know, I would hate to mandate it, because I think not everybody’s life is conducive to them just picking up and leaving for a week, but I want to do what’s going to help them be most successful.

Loren Feldman:
So did you ever meet this person in person?

Jaci Russo:
No. Only through Zoom.

Loren Feldman:
Kate, what do you think of that?

Kate Morgan:
It’s so much easier to quit a company. I’m kind of on board with David on this. I’d actually mandate that they be there for the first week. It’s just, sales is hard. It’s a grind. And if she wasn’t used to this industry, if she was coming from a different industry, she probably thought it was going to be a lot easier. And when you’re kind of out there on an island by yourself, it feels even harder.

Jaci Russo:
No, fair point.

Loren Feldman:
All right, Jaci, thank you for subjecting yourself to this. I hope we’re still friends. [Laughter]

Jaci Russo:
It sounds like a whole coaching lesson. I feel so much better prepared for my interviews next week.

Loren Feldman:
Well, again, you’re hardly the first person to experience something like this, but I appreciate your sharing it. I suspect a lot of people will benefit from the lessons you learned. I want to move on to another topic that’s somewhat related. It involves hiring.

The Wall Street Journal recently reported that AI is wrecking the job market for recent college graduates. The story talked primarily about the corporate job market and how entry-level jobs are being just taken off the board, and college graduates are having a hard time getting started. One thing that was mentioned kind of in passing is that this is creating a challenge going forward for businesses, because it disrupts the flow of people who could potentially become leaders in a business. And it’s not clear how that will happen in the future, if these entry-level positions go away. So I guess two questions, one, do you think this applies to small and mid-sized businesses as well, and any thoughts on how big an issue it is, in terms of developing leadership?

Kate Morgan:
Well, I mean, I’m excited to jump in. That’s because I’m talking to all these new grads, right? It’s tough because I think some people think, “Well, it’s got to be just because of AI.” But I think the economic conditions are also helping, in part. But we do know that the unemployment rate for earlier career individuals, it’s almost 6 percent. That’s unheard of. And if you’re dealing with Boston, we’re at 4.9-percent unemployment. The new grads are really, really feeling this. And then you’re not going to have these people moving forward. Everybody wants people to have two to three years experience, because they feel like they’ve gotten something under the belt in that time. But moving forward, how are they going to learn anything? It’s really a conundrum.

Jaci Russo:
You know, it’s interesting. I agree. I don’t think it’s primarily AI, because I don’t know enough companies that have integrated AI to take people’s roles yet. Will it eventually? Probably, but not yet. What I’ve seen for us is a shift in interns. We used to have all these super-hungry interns in college who wanted to get experience, learn the job, and be an asset with real knowledge under their belts by the time they graduated. We haven’t seen intern demand like that in five years.

Kate Morgan:
Yeah, well, we went from helicopter parents to the snowplow parents. The snowplow parents are saying, “No, don’t get jobs. Your job is to go to school.” And then they’re turning them over to me and saying, “Hey, can you help my kid?” What? They have no internships. They have nothing, and I don’t even know what direction to point them to.

Jaci Russo:
Don’t send them to me! [Laughter]

David Barnett:
But isn’t there a parallel to this time? If you dial back to the early ’90s, new grads were graduating, and there were not a lot of new positions. And the story at that time was that the Baby Boomers hadn’t started to retire, and that the corporate ladder was choked with the Baby Boom generation not yet making room for new people. So I think we’ve seen this sort of thing before.

This is a hot topic of conversation in my house, because I’ve got children who are almost 16 and 17 years old, so they’re about to make decisions about college. And so we’re talking about, “What kind of thing are you going to study that you think will be valuable in five years’ time?” It’s tough to figure that out. My opinion is that developing a toolbox of skills—you know, I have experience with this, experience with this, etc.—is going to make someone more marketable. I think the real danger out there is not necessarily for the kids or the businesses. I think it’s degree-granting institutions. I think the value of a degree is about to shrink here dramatically.

Kate Morgan:
Absolutely, we know that 40 percent of students aren’t even working in their line of education. The work in the field of their study, it’s not available. So, it’s a big waste.

Loren Feldman:
Don’t you think that’s always been somewhat the case? And do you think 40 percent is dramatically higher than it used to be?

Kate Morgan:
That’s a good question. Being a college dropout with an interior design degree, yes. [Laughter]

Loren Feldman:
There you go.

Jaci Russo:
Right there with you: a college dropout, pre-law. But my kids are four for four on business degree, works in business; chemical engineer, runs a plant; filmmaker, now English teacher; and therapist about to graduate and be a therapist.

Loren Feldman:
I think the issue of where leadership is going to come from is a very real one. I mean, I just think about some of the business models that we’re all familiar with, like think about law firms. You know, law firms just are not going to need the number of associates they used to have. It’s going to be much easier to do research. And that creates the question of: Where are partners going to come from?

Jaci, even in your business already, I suspect you could probably get by with fewer people available to create content, to create proposals, things that with the help of AI—not turning it all over to AI, but with its help—you can do more quickly than you used to be able to do. And we could just go on and on and name other industries. Kate, have you seen companies start to get concerned about this?

Kate Morgan:
No, because, unfortunately, we’re working with earlier-stage companies, and they’re living in the now. Me, personally, I look out—but I think, even when my daughter was young, I told her, “Your internships, you should almost be paying them to be an intern.” Because you’re amassing all this knowledge, and you’re learning and you’re growing. But we’re not seeing students, young people, thinking in those terms. So unless somebody is going to be willing to take a risk on somebody, we’re going to have this problem. And again, everybody’s saying, “Well, we’re not going to be looking to the future. We need to think about our EBITDA, and if that means we’re not going to hire some folks, great.”

David Barnett:
And that resilience you’re talking about is kind of what I’m thinking about when I say you want a toolbox full of tools, things that build your character and everything. You know, 100 years ago, people didn’t have all these degrees. They went to work for a company that hired them because of their attitude or their promise, and then the company trained them. And in my own business, I know that when I hire someone on my analyst team, I’m going to have to invest six months into them before they really are productive. And so that’s what makes hiring so difficult. I want to make sure I pick the right person, but then I know it’s on me to turn them into the person who I need to have them be productive on the team. And as people see less and less benefit in degrees, I think maybe we’re going to be heading back into that kind of environment. I mean, what do you think?

Kate Morgan:
Absolutely.

Loren Feldman:
All right, my thanks to David Barnett, Kate Morgan, and especially Jaci Russo.