From rags to riches: What one CEO learned from his biggest mistake

March 8, 2015, 3:00 PM UTC
Photograph by James Winegar

The Leadership Insider network is an online community where the most thoughtful and influential people in business contribute answers to timely questions about careers and leadership. Today’s answer to the question “What’s the best mistake you ever made?” is written by Ryan Smith, CEO and founder of Qualtrics.

If you’re not making mistakes, it means you’re not trying hard enough. At Qualtrics, I make sure all of our employees know it’s acceptable (and encouraged) to make mistakes. This is hard because being wrong sucks. But making mistakes means that you’re being creative, pushing the limits, and experimenting with new processes. The key is to learn from our mistakes — and learn fast.

When we started Qualtrics in my parents’ basement, we were determined to bootstrap the whole way. This kept us focused on our customers. And it meant that we had to be profitable from inception. We transformed Qualtrics from a basement startup to a billion dollar business — it’s been an incredible ride — but we made a bunch of mistakes along the way.

The biggest mistake we made was trying to do too much on our own. We didn’t recognize our own faults and we were so far behind on hiring it was scary. After building Qualtrics for 12 years we still hadn’t raised any money so, we finally decided to accept funding. It didn’t take us long to realize we hadn’t invested as fast as we should have and we waited way too long to build our team.

Qualtrics was growing very quickly and our mindset was only to hire based on what we needed at the moment. This got us nowhere and made it nearly impossible to scale the business at the rate we wanted to. Reversing the trend meant 2012 and 2013 were the hardest years of my life. I was trying to scale a business as quickly as possible, while building an executive team that should have been in place years earlier.

In reality, the biggest threat most companies face isn’t from competitors or what’s happening in their market. It’s what’s happening within their own walls, and that all begins with hiring.

Here are some key lessons I learned while restructuring my company:

Hire people that will grow with your company
At Qualtrics, the most important thing we look for in candidates is their trajectory. Have they consistently taken on more responsibilities? Did they leave a meaningful impact at their previous employer? These are both good indicators that they have a lot of runway ahead. We look for people who can grow with the business. That means hiring someone who has a strong history, not someone who can fill a slot.

Experience isn’t the only requirement
We live in a world where things move at an unbelievably fast pace, and it’s only accelerating. That means that what worked last year probably won’t work next year. People and companies that aren’t continually innovating themselves will be left behind. That’s why hiring for experience alone is a recipe for trouble, because you can’t succeed in this day and age using an old playbook. Hire people who are smart, creative, hardworking, and most importantly, fast learners who will quickly navigate unknown roads.

Dont rush to hire someone
Hiring the right people is really hard. The best people I know only get it right about 70% of the time. But the biggest mistake you can make is lowering your hiring standards because you’re in pain. I’d rather leave a critical position open for a year than fill it with the wrong person.

Read all answers to the Leadership Insider question: What’s the best mistake you ever made?

Does the perfect employee really exist? by Ryan Harwood, CEO of PureWow.

Confessions of a startup founder: What I learned from my $5K mistake by Sunil Rajaraman, Co-Founder,

How to fail (wisely) by David DeWolf, CEO and President of 3Pillar Global.

How to make the most of your mistakes by Tough Mudder CEO Will Dean

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