Hiring for Happiness

8/8/2019 Hiring for Happiness

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Hiring for happiness.A human resources plan for Happy, Inc.

Happyis a company with a simple goal: to make people happier. This includes its customers,partners, suppliers and employees. This abstract and lofty goal is going to be executed through anumber of companies that will each have their own focus but still contribute to the largermission. We are starting two companies initially:

Happy Music This Company is focused on becoming the most successful freemium1 musiclabel in existence. All of our artists music will be freely available to download online and they

will make money through offering premium services and products. These will include licenses totheir songs; merchandise sales, gig tickets and sponsorship deals; small collections of premiumCDs, fan-only access to premium online content and private performances. We believe thatmusic wants to be free and should be allowed to spread freely. We believe that this will create alarger, more loyal fan-base that can then be monetizedensuring that the artist is able to make afantastic living and lots of people are made happier because they get to enjoy their music.

Happy Events This Company aims to architect the most incredible and unique parties, gigsand festivals possible. We believe that when it comes to spending disposable income,experiential purchases tend to make people happier than material purchases 2.

In order for us to make our customers happy, its essential that our employees are happy too.This paper will outline 4 strategies that we intend to implement from the outset to ensure that

we can deliver on our ambitious goals. Each strategy will contain the following:

A concise outline of the strategy and how it will affect the Company. An analysis of how it will affect the employees and impact on them. A cost-benefit analysis. An appropriate Human Resources Metric.

After outlining each strategy in detail the paper will conclude by looking at:

How this will influence our relationships with our customers and suppliers.

Any relevant history or background on the strategies outlinedThis paper will available on our Company blog. The four sections will be as follows:

1. Recruitment Dreams with deadlines are important.2. Remuneration Debt makes people unhappy.3. Responsibility If you think its a good idea, go for it.4. Relationships The Company can be a family.

1. Recruitment

Dreams with deadlines are important.

Outline of the strategy

Think and Grow Rich, a motivational text by Napoleon Hill, emphasized the need for mentaldeadlines for every goal you set3. His belief is that many people say to themselves I want to berich some day whereas as very few people say to themselves I want to have a million dollars inmy savings account by 31st December 2015. Napoleon argued that having a defined goal with adefinite due date forces the sub-conscious to find solutions and avenues to turn that dream intoreality. Dreams with deadlines are therefore very important to our company culture at Happy.

We want to do two things for our employees:

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The Freemium Business Model, Fred Wilson -http://www.avc.com/a_vc/2006/03/the_freemium_bu.html2The Relative Relativity of Material and Experiential Purchases, Travis J. Carter & Thomas Gilovich3Think and Grow Rich, Napoleon Hill


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1. Help them achieve their own personal dreams. This applies even if they mightnot be the primary focus of the company. For example: want to learn to kitesurf?

Awesome, that might not be the focus of Happy Music but wed love to help an employeeachieve that goal in their free time if its going to make them happier.

2. Ask them which of our company dreams they can help us achieve. Our hope isthat all our employees want to help us in our mission to make people happier. We have aresponsibility to help them do that.

How will it affect our applicants and impact on them once theyre with us?

The strategy must be implemented in the hiring and monitoring processes. When we hiresomeone we need to fully understand what their personal goals are and when they want toachieve those by. Similarly, we want to make sure our employees understand the specific goalsof the company and when we want these to be achieved by. The monitoring side is dealt with inmore detail in section 3, which focuses on projects and Responsibility. Therefore here I willfocus on the hiring process:

No more CVs, Resumes or Cover Letters Everyone hates writing them. Everyonehates reading them. We dont want these to be part of our hiring process.

Small set of personal questions aimed to elicit unique responses Eachapplicant will be asked the following:

o Outside of your work, what else are you passionate about?o What do you dream about achieving some day? (Not work-related)o What date would you like to achieve that dream by?o How can Happy help you do that?o When have you been happiest?

Small set of company-related questions aimed at eliciting unique responses The questions will be relevant to the department. Each question also aims to get themto think carefully about whether their education or life-experience can help them in their

job. Were more interested in peoples problem-solving skills than the letters after their

name. For example:o At the moment it takes an average attendee to Happy Fest 35 minutes to get from

their car to their camping spot. How can we reduce this to 15 minutes for HappyFest 2012?

o Were hoping to have all our invoice checking and supplier-payments happen90% faster than it currently does by June 20 th 2012; can you help us achieve thisgoal

o Were trying to get 5 of our artists on the top 5 Japanese radio-stations by May 5 th2015; what would you do to try and make this happen?

As you can each dream can be measured and has a deadline. This ensures theres novagueness about what needs solving on when we think its possible to do that by.

Quick video about themselves Applicants will be asked to upload a short, 5-minute clip about themselves. Were interested in where theyre from, what they like toget up to, the people they care most about and their vision for their future.

No interviews - Thirty-minute slots put both the interviewee and interviewer into anabnormal environment unlike anything in the real world. We dont think its fair on usand we certainly dont think its fair on the applicant.

Paid training month We will carefully sift through the applicants responses to thequestions and the videos they submit to find the best batch of people we can. We willthen invite them to come and join us for a month so we can be certain that theyre going

to fit in with the culture and the team. We feel that its easy for people to put on a frontfor 30 minutes but much harder to do so over 30 days.


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Our hope is that by focusing on our applicants dreams and on how our applicants can help usrealize the companies dreams, were setting some fair expectations and doing our absolute bestto make sure our employees are happier.

Cost-benefit analysis

The hiring process were outlining is hopefully no more costly than a normal process. It stillinvolves sifting through a lot of information even if we do away with the covering letters andrsums. However, our hope is that by focusing on the applicants personal goals and how theirskill-set can help us achieve the companys goals from the outset we will be able to:

Attract & select the best candidates Improve employee satisfaction Increase employee retention

If we hire 100 people in a year with an average effective salary of $25,000 and we assume itcosts $10,000 to make a new hire; in this scenario an increase in the retention rate from 85% to95% would save us $100,000 in further hiring costs and we would gain at least another$250,000 in productivity because there would be fewer gaps in the workforce throughout the

year.

Human Resources Metric: Candidate Acceptance Rate

Once the paid training month is over it is likely that the people in charge of the potential newemployees wont want to offer everyone a job. I would hope that at least 9 out of every 10applicants who reach the training month stage are a good fit for Happy so I would like to keepthe candidate acceptance rate up above 90%.

2. Remuneration

Debt makes people unhappy.


Money and financial problems rank as the No. 1 cause of stress.4

American Psychological Association's (APA) 2009 Stress in America Report

Both the founders of Happy are students and we know how ominous debt can feel. Collegeseniors who graduated in 2009 had an average of $24,000 in student loan debt, up 6 percentfrom 20085. We want to help our employees get out of bad debt like credit-cards and shark-loans as fast as possible so they can enjoy financial freedom and start saving for their future.Therefore, once we have a strong balance sheet and a good financial outlook we are going to

offer our employees the option of selling their debt to us. We would then reduce their salary andaccelerate the rate at which they can pay everything off by cutting out the horrific interest-rates.Once we have 20 employees on this program we will be able to approach a debt-managementagency and negotiate even better rates for our employees.

4 http://ebn.benefitnews.com/news/employees-need-help-dealing-with-financial-stress-2682850-

1.html5 http://www.nytimes.com/2010/10/22/education/22debt.html


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How will it affect our employees?

Once this strategy is in place new and existing employees will notice a few differences:

Access to financial advisors All our employees will have access to a financialadvisor with whom they can confidentially share the state of their personal affairs. Thenthis advisor can use this information to put together a custom remuneration packagethat isnt just a regular wage.

Replace wages with timelines All employees who want to sign up to the program will have a percentage of their debt paid off each fortnight. So instead of getting$70,000/year they might get $23,000/ year and be debt-free in the next 4 years.

Higher real wage if they opt for debt-management - Our goal is to make thedebt-repayment option way more attractive to our employees. Therefore we will top uptheir debt repayments by 5% if they stick with the program, increasing their effectivereal income.

Mandatory Mint.com account Each employee will be asked to set up an account with Mint.com, a free personal-finance monitoring system, that will help them get amuch better insight into what they are spending their money on.

Ultimately we want our employees to be as happy as possible and we believe that by taking pro-active steps to help them be financially free our employees can focus on their work more and

make even greater contributions to the company.


Dr. E. Thomas Garman, President of the Personal Finance Employee Education Foundation andprofessor emeritus and fellow at Virginia Tech University puts it simply:

Poor employee financial literacy costs employers at least $750 in cashfor each employeeevery year6

This number is Dr. Garmans attempt to quantify the inefficiencies that arise from employeesmanaging their personal affairs poorly. A report from Financial Literacy Partners, LLC puts thecost of debt-related employee stress much higher: $15,000 per year per affected employee.7

What concerns us at Happy is how stress, unhappiness and depression can make it difficult orimpossible for someone to focus on their job. If an employee is constantly worried about payingtheir bills and knows in the back of their mind that their credit-cards and short-term loans arespiraling hopelessly out of control then theyll be performing at 50% of their potential or worse.

The cost-benefit analysis is simple:

Stressed-out, indebted employee on salary of $35,000

$35,000 salary * 50% productivity = $17,500 in value

Happy employee on salary of $20,000 + debt-management of $15,000

$20,000 salar + $15,000 debt repayments + $750 top-up on repayments + $250 extra admin

cost * 90 productivity = $32,400 in value.The productivity ratios are obviously arbitrary but they demonstrate the difference between anemployee who is happy and an employee who is nervous and scared. It only costs the companythe company an extra $1000 to reap an extra $15,000 in value.

Human Resources Metric: Employee Liquidity & Loyalty

In a recent survey of over 45,000 American workers, 71 percent of respondents said they'd findit difficult to meet their financial obligations if their paycheck were delayed for just one week 8.

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http://www.pfeef.org/press/press-releases/Employers-Waste-Money.pdf7http://www.finlitinc.com/images/Employee_Financial_Stress_is_Costing_Your_Company_A_Bundle.pdf


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We would prefer our employees cash runway to be around a month and for them to feel farmore confident about their personal financial situation. Our financial advisors would have to bereadily available to help our employees plan budgets and make better decisions with theirmoney. Our hope is that all this care is going to increase employee loyalty:

"If you help with debt the payback employers get in terms of employee loyalty can beimmeasurable"

James Bradley, information services manager at Accor9

We hope that all our employees will be grateful for the lengths were going to when it comes totheir personal wellbeing. We want our monthly anonymous surveys to show that people feelloyal to Happy and we want our retention rates to stay in the high 90s as we expand.

3. Responsibility

If you think its a good idea, go for it.

Outline of the strategyMicro-management and unnecessary layers of control creep into most organizations as theygrow. We want to maintain the fast-paced feel of a startup even if we grow our headcount to thepoint where we would be classed as a medium-sized business. Therefore Id like our staff to filltheir days working on one of three things:

1. Core stuff Employees will spend the bulk of their time working on the areas wherethey feel they can contribute the most. Our number crunchers will be analyzing all thestats and our biz-dev people will be opening up new revenue opportunities.

2. Projects We will shamelessly copy Google here with 20% of an employees time 10 tobe used working on smaller projects that could help make more people happier. Theseprojects will all be shared on our internal project-management system

(www.basecamphq.com) and other employees can chip-in, join the project or addfeedback. These projects should be in keeping with our philosophy of having dreams

with deadlines. That way a team manager can check in on all the projects and see whichones are going great and which might need some extra help or thought. Typical projectsmight include trying out new versions of the website or coming up with a system to makeour PR blasts more effective.

3. Pitches If a project needs serious budget and company-wide support then anemployee can focus on turning it into a pitch for the whole company and effectivelycreate a new startup within the company. A big project might be something like a newclub in Ibiza for the Happy brand or a chain of bars. If a pitch gets the green light thatemployee will have their core stuff taken care of by someone else so that they can focusdown on making this new idea happen.


My hope is that our employees never, ever feel patronized, belittled or small. I want them to feellike they can take control of their project and make a real difference in the company. Ifemployees feel like they can pitch a new concept to the company and make it happen then myhope is well constantly be getting great ideas and suggestions from everyone. The cultureshould feel exciting and be built upon the idea that trying stuff fast matters most. IDEO, one of

8 http://www.corporatewellnessmagazine.com/article-detail.php?issue=issue-11&article=cure-

for-employee9

http://www.personneltoday.com/articles/2006/04/25/35019/spotlight-on-employee-debt.html10 http://googleblog.blogspot.com/2006/05/googles-20-percent-time-in-action.html


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the most sought-after design consultancies in the world puts a real emphasis on rapidprototyping of ideas11. Our employees should feel like they have the opportunity to go andprototype something all the time. Whether its putting a question on a whiteboard for otherpeople to look at or coding up a new interface for one of our systems; if they think its a goodidea, they should go for it.


The greatest cost of this strategy is effectively allowing employees to take one day a week to

focus on something that they think will benefit the company. This cost is actually aninvestment. Its an investment in innovation. If we look at it that way and make someassumptions about the hit-rates of our employees personal projects the outlook is fantastic.

100 employees @ $30,000/ year average effective salary = $3,000,000 payroll

20% time allocated to new projects = $600,000 cost

Assuming the following:

5% of these projects become new business avenues generating >$10,000,000 5% of these projects become failed avenues costing $1,000,000 40% of these projects just cost the time used to explore them 50% add at least 20% more value to our operations

Based on these arbitrary numbers were looking at massive returns that are many multiples ofthe money invested in giving employees free time to explore new things. Paul Bucheit, thefounder of GMail makes an important point about Googles 20% time policy: The real value of"20%" is not the time, but rather the "license" it gives to work on things that "aren'timportant".12In this way it is hard to quantify the value of having an innovative culture that makes employeesfeel its acceptable to try lots of ideas out until they find something that works. This is not to saythat it doesnt have quantifiable results, as you can see from Googles stock price over the lastfew years:

Human Resources Metric: Employee Motivation

Each month well be popping a survey into our employees inboxes to try and take the pulse ofthe company. Our hope is that when people are asked to rate how motivated they feel from 1 to10 the vast majority of them drag the slider up towards 10. If we can keep the average about 9 ona month-to-month basis it means were doing something right. We want our employees to feellike theyre part of something and that things are moving faster because of their actions. If theyhave control of their own part of the company, however large or small, it will give them a direct

11The Art of Innovation, Tom Kelley with Jonathan Littman12 http://paulbuchheit.blogspot.com/2009/01/communicating-with-code.html


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line of sight to something theyre able to improve. All this should create a much more motivatedworkforce.

4. Relationships

The Company can be a family.


We want to encourage all of our employees to feel like theyre part of something more fun andsignificant than just a workplace. We have a few ideas for how to make Happy a very differentkind of company:

Joint living space Cook and eat meals together Go on holidays together Enjoy Happy Events together Learn new skills together

If groups of employees live, work and party together our hope is that they will love their entirelifestyle, not just their work. Happy is starting in two inherently social markets: music and

events. Therefore it will be really helpful if we have very social culture from the outset where thecompany is as much a group of mates as it is a collection of colleagues.


I imagine new employees partying with us and working on cool projects with lots of differentpeople during their first month with the team. If theyre offered a contract they can move intoone of our open-plan communes where all our artists and team-members work and play. If oneof our artists has a gig in the evening then all the team are invited to come and check them outand enjoy their performance. At the weekends well put on fun activities and pay for employeesto learn new sports like kitesurfing or go on a trip to explore a potential new venue. To get a

break from the laptops & iPhones, Happy will sponsor company-wide holidays where we all takeoff to a lodge in the hills or beach-hut somewhere beautiful without any form of connection to

the outside world. Although its corny, were trying to be a Happy Family.


As a company were planning to subsidize much of our employees day-to-day expenses becausetheyll be living in company-owned properties and eating free company meals. Providing allthese benefits wont be insignificant line items on the income statement initially but if they havethe desired effect of bringing the team together then hopefully these expenses will pale incomparison to profits the Company will go on to generate.

Human Resources Metric: Voluntary Turnover Rate

The voluntary turnover rate describes the number of people who decide to leave the companywithout being asked to. I obviously dont want to have to let anyone go but I am not nave to the

fact that recruitment is an extremely difficult thing to get right. What would really worry me is iflots of people wantedto the leave the company. If people develop lots of strong relationships inthe work place and are in love with what theyre doing then my hope is that we could keep

voluntary turnover to less than 2% of the workforce on an annualized basis.

Conclusion

How this will influence our relationships with our customers and suppliers?

Happy is on a mission. We want to make everyone happier. This will not be possible to do forevery person all of the time. Instead we want to maximize peoples happiness as much as we

can. If our employees love their work, feel they are making progress and know how best they canhelp the customers and suppliers then this can only be a net win for the company. If our call


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center staff are fired-up and enjoying their day then that will come across in the way they dealwith customers concerns. If the lovely people in our accounts department feel they are runninga tight ship and are working on a side-project that could really go far then the way they will oursuppliers will undoubtedly be better as a result.

How long has this obsession with happiness been around?

Tony Hsieh, the founder of Zappos.com, is the inspiration behind Happy. He wrote a book calledDelivering Happiness13 where he outlines his favorite theory for improving employeesatisfaction. He argued that the following 4 things were paramount:

Perceived Control Perceived Progress Connectedness Vision / Meaning (Being part of something bigger than yourself)

Our first two strategies focus on setting the expectations of new recruits and remunerating themin such a way that gives them better control over their personal finances. Our second strategy,

which focuses on giving employees responsibility, aims to give our employees the feeling ofprogress when they succeed and control of some function within the company. Our focus onrelationships in the final strategy is purely about helping our employees finding connectedness

with others at the company. Finally, we feel that the goal of the company: to make othershappier, is what keeps every single person feel like they are part of something that matters. AsGuy Kawasaki would say, we want to make meaning in our company14.

Happy is making a sincere commitment to helping people work out something that theyreusually terrible at: finding out what makes them happier.

13Delivering Happiness, Tony Hsieh14How to Change the World, Guy Kawasaki http://www.youtube.com/watch?v=lQs6IpJQWXc

Hiring for Happiness

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