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“The culture has changed a lot recently.”

“I feel like I don’t know everyone anymore.”

“We’re going through some serious growing pains.”

These comments are frequently splashed across the Glassdoor pages of startups. It’s because navigating intense growth spurts is hard. On one hand, startups need people as fast as they can find them, but for longevity and morale, they also need to find individuals who fit and add to the existing culture, instead of slowly twisting it into something that’s hardly recognizable.

There’s often an initial apprehension that comes from welcoming a lot of new hires into the fold. But there’s also something deeper. What these comments get at is the sense that there’s a certain “unscalable” spirit from a team’s earlier, scrappier days — and that each new addition represents a slow chipping away at the je ne sais quoi that forged the culture to begin with. As a leader, this can seem like an insurmountable challenge. How can you hire and scale quickly without losing the essence of your company along the way?

Enter Josh Reeves, CEO and co-founder of Gusto, the payroll, benefits and HR platform for small businesses (which was known as ZenPayroll before its thoughtful rebranding process). Earnest, thoughtful and committed to values, Reeves has been impressively intentional while guiding his team from three guys in a house in Palo Alto to over 600 employees across offices in San Francisco and Denver, all in under six years. With a culture marked by warmth, approachability and a streak of character, Gusto has managed to stay true to its values and remain rooted in its traditions as it scales. And according to Reeves, their approach to hiring is a big reason why.

Inspired by his talk at First Round’s Founders Summit, Reeves shares here how Gusto scales the unscalable parts of hiring, detailing his hiring philosophy and walking through three examples of steps Gusto takes to retain its unique culture and ensure its best traditions live on.

THE KEY TO SCALING COMPANIES STARTS WITH TEASING OUT TRADITION

Traditions are customs that develop organically — and are natural building blocks of company culture. But they don’t seem particularly scalable. Founding traditions often fall by the wayside after a certain size is reached, as few are around who remember how it was done back in the glory days. But for Reeves, traditions can be the calling card of a company, so it’s a nice touch to retain them, however only where they make sense. “If I have one tip regarding traditions, it's to not be overly prescriptive or forceful. Observe what develops naturally, and then just let it ride. They shouldn’t be something that you plan out in a very extensive way,” he says. “Traditions slowly become a part of your company’s DNA and self-reinforce over the years to become culture. And they need to be authentic. There is no formula for what the ‘right’ or ‘wrong’ traditions are. They’re different for each founding team.”

As an example, Reeves points to one of Gusto’s quirkier traditions: a “no-shoes” office. Yes, all of the 600 plus employees can be found padding around the company floors, shoeless. The entrances to their offices in Denver and San Francisco are lined with shoe cubbies, while free socks or slippers are handed out to visitors. “It all goes back to when we started the company out of a house in Palo Alto,” Reeves explains. “My two co-founders and I were raised in ‘no shoes’ households and since we were working from where we were living that kind of just carried over. When we got a real office in San Francisco, we talked about it with the team and everyone wanted to keep the tradition, so we did. And that’s continued to this day as we’ve expanded. I think it contributes to our culture because there’s this sense that you feel more at home with your shoes off. Companies can often be really sterile environments that feel nothing like your house, but at Gusto we want everyone to be comfortable and excited about spending time in the office. And on some level, it’s a subtle way to tie it back to our vision of a world where work empowers a better life and people can find community at work. But again, this is something that just happened. If we had set out trying to manufacture this policy, it probably wouldn’t have resonated or become a company tradition.”

But as Reeves found out, not everything can be retained. “Early on, the team wrote extensive bios for every new hire to send to the entire company before they arrived. While it was a cherished tradition, it was hard to maintain as we grew to hundreds of people,” he says. “Now, a longer background is shared with just the individual hiring team, but we make sure to introduce all new Gusties to the whole company at the beginning of every all hands meeting.”

For the founder starting from scratch, the first step is to identify what your values are, since they ultimately guide your traditions. “Every company goes through a process to figure out what’s authentic to them. The biggest piece of advice I could give is that values is an area where you should be bold and opinionated,” says Reeves. “Don’t try to be everything to everyone. There are many ways to build a company and there isn’t a right path or a wrong path. Follow the philosophy that’s authentic to you. During hiring, values aren’t something you should try to convince people about — they’re either aligned and on board or they’re not. At Gusto, we have a small number of core values. And if someone's not a good fit with them, it doesn’t mean they’re a bad person. It just means that they could probably do better work somewhere else. That’s why surfacing values during interviews — and having traditions during the hiring process that reflect and reinforce those values — is paramount.”

FIND AND FLEX YOUR HIRING TRADITIONS

Gusto prides itself on its hiring philosophy, and how it infuses its values and traditions into the candidate experience. “Our guiding philosophy is that hiring is really just a search for alignment,” says Reeves. “Companies don't convince people to join them, and candidates don't convince companies to hire them. Both parties are searching for alignment to figure out, ‘Can we go do something great together?’”

Specifically, Reeves believes the company and the candidate need to be aligned along three dimensions: values, motivation and skill-set. “All too often, companies tend to focus only on skills. But if you don’t spend as much time on the other areas, which are hugely important, then interviewing just devolves into pattern matching around what’s listed in the job description,” Reeves explains. “And don’t get me wrong, skills matter. You don’t want to end up with just cheerleaders in your company, so you need to make sure you’re getting the right abilities. But aligning on values and motivation is about finding out who the candidate is as a person, what they care about and if the problem we’re tackling resonates with them. And if they’re not motivated by our mission or they don’t identify with or live our values, that’s a big hiring flag for me.”

Alignment around values and motivation is what can really make or break hiring as you scale.

To center its hiring process around this quest for alignment, Gusto has used three tactics, grounded in the traditions of what they’ve done since day one, but scaled up to their current size: conducting what they call ‘watermelon interviews,’ carefully vetting every single offer through a central hiring committee and turning offer calls into celebrations.

TACTIC #1: CONDUCT WATERMELON INTERVIEWS

ORIGINAL PRACTICE: CEO interviews every candidate to evaluate fit with motivations and values.

SCALED PRACTICE: Carefully designed interview training program for employees that’s focused on values and motivations alignment, as well as a scorecard system for evaluating candidates.

While values and motivation matter in hiring, it takes work to suss them out. But Reeves has developed a particular interview style that helps bring them to the surface.

“Originally, I did this interview with every candidate that wasn’t about skills or work experience. We didn't have a name for it at first, it was just an organic thing we started doing in our hiring process, but it was always around values and motivation,” he says. “It really started as a conversation I would have with each candidate. It was very casual, and was intended to be more of an exploration of what drives someone, what excites them and what interests them. The topics we discussed were often sparked by something pretty random.”

For example, Reeves once talked with a candidate about their home kitchen renovation project. “Through that discussion I got a sense of several different things, such as how they work with others and how they make decisions. But in general, I was learning more about them as a person, and with every response I essentially just kept asking ‘Why?’ like a three-year-old does. If you do this, then eventually you get to talking about their purpose and deeper philosophy,” he says. “There's no black and white answer to these questions. I was just trying to get a window into how they think and how they collaborate. It came out of this idea that interviews shouldn’t be about grilling or persuading each other. Instead, I view them as an opportunity to talk about life, get to know each other better and understand if there’s alignment. Through my questions, I was digging to try to dust that off and uncover it.”

This process is now called the watermelon interview. That, of course, descends from another unconventional tradition. “When you join Gusto, you’re given a watermelon in your first few weeks. That’s because when we hired our first employee in the house in Palo Alto where we started the company, we happened to have a watermelon in the kitchen from our landlord, so we gave it to him as a welcome gift of sorts. And we’ve just kept doing that, so it seemed like a fitting name,” explains Reeves.

While what came to be known as the watermelon interview was a key part of building the core team at Gusto, it clearly wasn’t sustainable for Reeves to meet with every candidate. “When we got to about 50 or 60 employees, it was obvious that I couldn’t do that interview for everyone we hired,” he says. “So I chose a few other people inside the company who I knew would naturally conduct a very similar interview and I would just make sure that there was at least one of us doing this type of interview with every candidate. But that was still in the early days and we knew that this approach wouldn’t scale given our rate of growth. So when we got to about 100 people at Gusto, we decided it was time to formalize this practice, and the official watermelon program was created.”

Interviewing is a muscle — you have to train and practice to develop it.

Groom watermelon farmers.

Reeves and his team set out with the goal of crafting a world-class interview training program. But first they had to identify what it was that they were training employees to look for.

“We already had our company values, which had been a part of Gusto since the early days. But we wanted to get more input from the team, so we sent out a survey, asking Gusties to help us identify what traits made someone successful in the company. Eventually we combined these inputs and our values into what we call our four watermelon attributes: service mindset, intellectual curiosity, no ego and the ability to embrace change,” says Reeves. “These became the core filters of the watermelon interview program, along with screening for a candidate’s alignment with our mission and the problem we’re solving. These attributes aren’t universal to every company though — they’re what resonated with us. My advice to founders is to spend time identifying what matters most to you. You’ll know you’ve identified the right ones when the result is something that is authentic and opinionated.”

Next up was forming the internal watermelon interview team. Gusto identified employees to participate through peer nominations, a careful screening process, expectations-setting on the required commitment and training sessions. For startups looking to replicate Gusto’s watermelon interview program, here are the steps to follow:

The seeds of a watermelon interview

Every watermelon interview contains five parts. Here’s the process Gusto follows:

Reeves emphasizes a few critical components that separate good watermelon interviews from superb ones:

Track your harvest.

Measurement is essential, so monitor how your attempts at scaling are working. In 2017, 33 interviewers conducted 740 watermelon interviews to hire 242 new Gusties, with an 85% offer acceptance rate. “We’re now in our fourth training cohort of new watermelon interviewers, and it's definitely a program that we plan to keep in the company for many years to come,” says Reeves. “Because of the watermelon interviews, I feel that all Gusties are aligned across values and motivation. We’re always striving to get better, but having the program in place gives me confidence that we can have the same core values and philosophy at 500 people or 5,000 people as we did when we were just 5 people.”

But the real reason he knows it’s been a success? “When I do workshops with new hires, I ask them why they joined, and the watermelon interview comes up in every one. It’s not just about what Gusto is doing — they’re attracted to the way we’re building the company, it resonates with them. That’s how I know these filters on values alignment and motivation alignment have scaled — it's not me in that interview. It's dozens of other Gusties who care just as much as I do about hiring for alignment. They’ve created a community with each other, and it’s been amazing to see them sharing tips for interviewing, improving the program and helping train the new batch of watermelon interviewers each year. And that’s what’s going to help us hire the next 500 people at Gusto with the same degree of intentionality.”

TACTIC #2: CREATE A HIRING COMMITTEE TO ENSURE CONSISTENCY

ORIGINAL PRACTICE: CEO interviews every candidate to determine if an offer should be made.

SCALED PRACTICE: A hiring committee of four individuals representing each part of the company spends an hour each week reviewing and signing off on every offer.

Early stage founders are heavily involved with every single hire. They are in each interview from the beginning for obvious reasons, perhaps not even realizing that this provides a quiet undercurrent of consistency that steadies the ship. Then at a certain size, the founder’s plate gets more full, the pace of hiring picks up and suddenly it’s no longer feasible to meet with everyone.

But it’s exactly when a startup is hiring quickly that things are most likely to get out of hand, especially without a centralized body to ensure at least some level of quality control. Take the alternative. At some fast-growing companies, hiring happens at such a quick pace that managers lose track of their candidates and hires.

Gusto’s approach to growth has been strikingly different. “As we scaled, a big goal we had was to maintain consistency in hiring,” says Reeves. “There are a lot of potential unintended consequences at fast-growth businesses, where teams are growing 20%, 50% or even 100% year-over-year. But one of the biggest ones is that these companies often have a lot of first-time hiring managers. So if you don’t have a structured way to think about hiring, it’s very easy for different approaches to develop organically, and soon enough you’ll have different hiring practices or even entirely different cultures across your company, which can make things very messy.”

One way Reeves set out to avoid this was by creating a hiring committee. “This is something that many companies do, but we wanted to create our own version that was right for Gusto. For me, the purpose of the hiring committee is that check to make sure we have a holistic, consistent approach to hiring. But it also creates an opportunity to share best practices with hiring managers so they can improve,” he says. “Our committee has four people on it, each representing a different team within Gusto. We meet weekly for an hour, and go through all the offers going out. I still read through every scorecard and every offer going out at Gusto. The reason it’s still viable to do that in an hour is because the interview information is all brought together and packaged in an organized and consolidated way.”

The hiring manager and recruiter help streamline the process by creating offer packets that give an overview of the role, the background of the candidate and include the interview scorecards. But as Reeves points out, there are benefits to this outside of simply saving time for the hiring committee. “If things are done correctly, all of these materials were already created as a part of the normal interview process. For a role to be opened, the hiring manager should have a clear summary of what the new hire will do. For the hiring panel to want to make an offer, there should be a clear summary of the interviews, with a debrief to reconcile any flags. And these materials should be used to help set up an onboarding plan for the new hire if an offer is extended and the candidate accepts,” he says.

During their weekly meetings, the hiring committee spends the bulk of their time looking at the scorecards. “It’s about pattern matching, looking for consistent themes. But we’re also keeping an eye out for any flags or callouts. For example, if there was a ‘no’ recommendation on a scorecard, we want to make sure that the hiring panel discussed the flag in a debrief. Whether it’s through a team debate, a follow-on interview or a reference check, it’s important that the person who initially said ‘no’ has reconciled their response and is now okay with making an offer; otherwise the offer will not be made. This reconciliation is a key part of why we use hiring panels, instead of just having the hiring manager make the call on their own,” says Reeves.

As a testament to the rigor throughout Gusto’s interviewing process, Reeves says that most offers are approved. “We ask for deeper dives on somewhere between 3 to 5% of offers, which can lead to an additional interview or a follow-up conversation, or in some cases, an offer not being made. More broadly, I think of the hiring committee as a chance for us to look at what is and isn’t working in our hiring process, so we can give feedback to hiring managers or restructure how we’re doing things. We’re always trying to improve.”

Gusto CEO Josh Reeves

TACTIC #3: TURN OFFER CALLS INTO CELEBRATIONS

ORIGINAL PRACTICE: Entire company interviewed every candidate and joined the offer call, cheering and sharing why they were excited. Then the CEO walked candidate through the offer details 1:1.

SCALED PRACTICE: Three to four members of each hiring panel join the offer call, everyone cheers and shares anecdotes from their interviews, then the hiring manager and recruiter share offer details with the candidate.

When a team is small, every additional teammate has an outsized impact. So when a startup finds someone great after a carefully crafted process, it’s really exciting to make an offer — after all, it will potentially be a dramatic change to the team. But how can a startup maintain that level of excitement for the 501st person that an offer is extended to?

“It helps to think of hiring as a funnel. You’ve got the whole wide world at the top,” says Reeves. “Then you have all the folks that have heard about your company, those who applied for a job or the people you've sourced. Then there’s the process of winnowing down further through interviews, conversations, reference checks and work sessions, all in the name of figuring out, ‘Is this a person that we want to have join our team?’ So when you get to the end of that funnel, and you’re ready to make an offer to the candidate, you’ve probably spent hundreds of hours and had dozens of people involved, just so you can fill this role. Because of this, we’ve always viewed the act of making an offer as a celebration. It's this exciting moment where we've found someone who is aligned with our values and motivations, plus has a relevant skill-set, and now we can do something incredible together if they accept the offer.”

This zeal for making offers at Gusto stems again from their early startup days. Back when there was just five people, the entire team interviewed every person. “Since we were all working out of one room, when we did the offer call we didn't have any conference rooms to duck into,” Reeves explains. “So we all joined in on the offer call. We would cheer and celebrate because we were really excited to find someone that was connected to our mission, values and philosophy. The cheering is a small thing, but it was authentic to us and we were genuinely really jazzed. And we’ve kept feeling this way with every offer, so we’ve kept doing it.”

But it wasn’t just a cheerleading session. After the initial wave of clapping and cheering died down, each team member then took turns speaking for a few minutes about a moment from their interview that resonated with them, sharing why they were so excited to have the candidate potentially join. Then Reeves would dart into a nearby closet to have a more private conversation about the rest of the offer details.

Put some (structured) fun into your hiring panels.

So how did Gusto scale that energy? “Of course the whole company can’t keep interviewing every candidate, and joining every offer call,” says Reeves. “We set up hiring panels for each open position, but we really wanted to maintain that same warmth and excitement, so we created a deliberate structure that we felt would scale.” Here’s how startups can recreate Gusto’s scalable approach:

While this tradition sprung out of the realities of a scrappy startup without office space, Reeves feels that it’s a more universal approach that any company can adopt. “I’m a big advocate of treating offer calls as celebrations,” he says. “Because at the end of the day there are so many jobs, companies and candidates out there, so when you find a really good fit it should be genuinely exciting. Since we're hiring quite a bit these days, you’ll hear different conference rooms across Gusto explode in cheers throughout the day, and that never fails to make me smile.”

You should be stand-up-and-cheer excited about every single person you hire — so much so that you do just that.

ADVICE TO TAKE AWAY TO SCALE THE UNSCALABLE

Startups need to be more intentional about scaling their culture and maintaining rigor in their hiring processes, particularly during periods of hypergrowth. To start, think of hiring as a search for alignment, not a way to boost your team size or a chance to grill prospective employees. Remember that companies don’t convince candidates to join, and candidates don’t convince companies to hire them. It’s a search for alignment on both sides. Try turning every offer call into a celebration, using it as an opportunity to express your delight at finding a great fit — and recognize all of the work that has gone into the process to find the right candidate. Introduce spot checks to make sure that the offers going out the door meet your standards. And whether you’re hiring at five or at 5,000, be thoughtful about the core elements of your hiring philosophy, working to codify them and train others to create a shared sense of stewardship of your culture.

For the startup that’s looking ahead, Reeves offers a set of final principles to guide you on your quest to scale the unscalable parts of hiring:

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