Pay More, Hire Less

Over hundreds of people I have hired at Albert, the banking app I run, I have found a counterintuitive principle: you save money when you pay people more.

Building a successful company from scratch to scale is, at least statistically, a near impossible feat. It can only be done with exceptional people. Exceptional in their work ethic, their desire for growth through discomfort, and their clarity of thought and purpose. You must hire bright minds whose run towards difficult problems.

When you find talented, driven people, you realize that individual performance follows a log scale: an A player does 10x as much as a B player; B player 10x as much as a C player; etc. Hire fewer people, promote great ones very quickly, and pay them very well. 

This post is the fourth in a series of posts on how to transform a fast-growing, money-losing company into a profitable one, without sacrificing growth.

Buy cheap, buy twice

Hire carefully, promote quickly, and pay the best very well.

I recently wrote about replacing 5 hours of interviews with a case study, and that interviews are a terrible gauge of likelihood to succeed at a company. The post ruffled feathers on LinkedIn: "no one in there right mind would spend that kind of time for a job offer" or "the solution should not require the interviewee to carry 75% of the commitment." But it's the person surprised by rigorous interviews who demonstrates the effectiveness of the case study. 

Because the productivity of an A player is exponentially higher than a B player, hiring B players means that you need ten times as many people to do each task. This leads to a bloated, slow moving, bureaucratic organization.

As you hire more B players, costs grow quickly because you need a lot of them, leading to long-term unprofitability. Worse, mediocre talent builds brittle systems that create ongoing fire drills, inevitably on nights and weekends. This ruins morale.

In contrast, when you hire exceptional people, things get built quickly, systems run smoothly, and morale is high. Total costs go down when you hire the best people and pay them very well.

Revenue per employee at Albert

Paying in the top 5th percentile

In early 2022, we changed our approach at Albert. We decided to hire fewer people, focus on exceptional hires, and pay in the top 5th percentile of our competitors for leadership positions.