People problems are universal. Organizations across industries struggle to make the right hires, develop employees, empower managers, and create great company cultures. These struggles are magnified by the increasing demand and competition for top talent.
Industry research suggests that the recruiting, hiring, and onboarding costs of a new employee can be hundreds of thousands of dollars per employee for an organization. Which of course does not include the costs of disruption, severance pay, or any of the costs incurred as a result of mistakes made or opportunities missed by an employee. Annual turnover rates among U.S sales professionals are ~27%, meaning that every four years, companies will have turned over and had to retrain their entire sales organization. These costs are even more remarkable at scale. Zappos CEO Tony Hsieh famously estimated that bad hiring decisions cost his company well over $100M.
Perhaps more importantly, these costs do not take into account the impact employee turnover has on company culture. Negativity is contagious in any environment, and the workplace is no exception. According to Gallup, only 15% of employees worldwide report feeling engaged in their jobs. How do you accurately measure the impact on a business where, on average, 85% of employees do not feel engaged in their jobs? What would you do to ensure you were making the right hires the first time, and to have the peace of mind that your managers had the tools they needed to keep those employees engaged?
Over the years, numerous software platforms and assessment tools have emerged to help solve for the processes behind the people problems that companies face, but they do not address the root cause of these issues: people. Many popular tools use surveys to measure employee disengagement or help quantify the talent gaps that exist within an organization, but they do not help companies understand why, or offer any guidance on how to solve the issues that are plaguing their business.
As investors, we at GC make significant bets on people: both within our firm and at the companies in which we invest capital. As we assessed the talent strategy market, we developed a thesis about how companies could leverage technology to fundamentally improve the ability to hire, retain and nurture talent. One platform we tested was The Predictive Index. And in surveying our high-performing portfolio companies regarding the talent solutions they use, we heard the same name: The Predictive Index. This company was taking a scientific approach to understand the underlying factors that drive human behavior. They did so via their proprietary behavioral and cognitive assessments, which they use as the data collection engine to power their talent optimization SaaS platform. The results were impressive, and the insights that companies were deriving on job candidates, existing employees, managers and their organizations allowed them to optimize their talent strategies. For the first time, organizations could tie talent issues to business outcomes, and swiftly address these problems at their core.
At General Catalyst, our goal is to back visionary entrepreneurs that use technology to solve the world’s biggest problems. We are incredibly excited to announce our $50M investment into The Predictive Index to support the company in accelerating their growth and building the talent optimization category and network.
The Predictive Index was founded in 1955 by the late Arnold Daniels, a US Army WWII veteran. After serving his country, Daniels dedicated his life and his company’s mission to solving business problems through the lens of understanding individuals. After six decades of continued scientific rigor and product enhancements, The Predictive Index SaaS platform now enables businesses of all sizes to hire smarter, manage talent better, engage employees more effectively in any environment, and maintain exceptional cultures by deeply understanding employees on a personal level.
Daniel Muzquiz (l) and Mike Zani (r) of The Predictive Index
Serial entrepreneurs Mike Zani (CEO) and Daniel Muzquiz (Chairman & President) purchased The Predictive Index from the Daniels family in 2014 having been steadfast users of PI at their prior companies. Mike and Daniel have successfully built and exited multiple software and technology companies over the last several years after first meeting at HBS. While at their prior companies and using PI, they developed a clear vision for the ‘Future of Work’ and the importance of hiring better, managing people more effectively, and meaningful employee engagement in this fast-moving world. Since taking over The Predictive Index, Mike and Daniel have grown the company to 7000+ clients, 27+ million assessments delivered, and 300+ employees and certified partners.
In a time when many workplaces are quickly adapting to their industry’s evolving landscape, The Predictive Index team has created a common language for business leaders to evaluate and build their talent optimization strategy with agility and objectivity. The Predictive Index has the opportunity to be both a ubiquitous and foundational solution that companies will leverage to guarantee organizational success.
General Catalyst’s XIR Program
As a part of our investment, Holly Maloney (Managing Director, GC) and Kirk Arnold (Executive-in-Residence, GC) will join The Predictive Index Board of Directors alongside Mike and Daniel.
Scaling a company that has the potential to shift an entire industry is no easy feat, and GC’s Executives-in-Residence (XIRs) have this experience in spades. GC’s XIRs are successful entrepreneurs and executives with deep domain expertise in key technology sectors. XIRs leverage their industry knowledge and operational experience to help management teams of founder-owned businesses drive rapid growth via an active board role. Whether it’s providing customer introductions, helping with sales and business development, providing guidance on operational excellence, or closing key hires, XIRs are here ultimately to support founders in realizing the full potential of the businesses they’ve started.
As an XIR, Kirk leverages many years of experience as a CEO to support enterprise data and application software businesses. Most recently, she was the CEO of Data Intensity, a data, applications and analytics managed service provider, and led the company through its successful acquisition last year. In addition to The Predictive Index, Kirk currently serves on the boards of Ingersoll Rand and Cylance Inc., and is a lecturer at MIT Sloan School of Management where she advises a number of MIT startup teams. We could not be more excited and honored to work alongside Kirk in helping PI define the future of talent optimization.
To learn more about GC and our XIR program, please visit our website.
We’re very much looking forward to working alongside Kirk and the entire team at The Predictive Index. Welcome to the GC family!