Recessions Spur Innovation

Adversity often brings out the best in people.  Our current recession holds the potential for sparking both innovation and collective action for social change.  Many people do not realize that the Great Depression sparked enormous management innovation (see  ”Recession: The Mother of Invention?”). 

Many successful organizations started during an economic slump. Why?   Market upheavals provide rich opportunities for innovation.   Wary buyers begin looking for more cost-effective ways to meet their needs so new business models gain traction in the market.  (For that very reason, I’ve argued that search firms must innovate their way out of this recession).

Some people say a lack of venture capital money is really not a constraint to innovation.  Tim O’Reilly in an article in Forbes, sees it this way “many of the great waves of creative destruction . . . didn’t even start with the profit motive.  Rather they started with interesting problems and people who wanted to solve them . . . because exploring new ideas was fun.”   He suggests that venture capital follows innovation, not the other way around.  “The people inventing the future are doing so just because it’s fun.”

In this economy, fear of change might be the biggest danger facing your business.  So, here’s the question: are you innovating?   Are your employees showing resilience and really swinging for the fences, or just playing it safe?

Recruiting Myths: Good People Don’t Look for Jobs in a Recession

One of the many reasons I like to blog is to gleefully disagree with conventional wisdom.  I don’t know if “good people don’t look for jobs during a recession” qualifies yet as conventional wisdom, but it does meet my four criteria:  It’s widely repeated, simplistic, unexamined, and outdated.  Therefore you can gain a serious competitive advantage by challenging it.    

In every recession, a few search professionals advance the argument that “top talent does not look for jobs during economic downturns” (so presumably employers need to hire those same search firms to find the “A players”).   The concept is that in a bad market good people with good jobs become risk averse and hunker down – you practically have to dynamite them out of their chairs - and only a silver tongued headhunter with uncommon skill can recruit them away.   The theory is that good people will rarely answer ads, and mediocre recruiters (or what Josh Letourneau hilariously calls  “Big-Box Publicly Traded Candidate-Grinders”) will never be effective.  As with most conventional wisdom, this is all partly true (naturally it’s the part that’s not true that I think about).

Quite a few blog posts have been written about wooing passive candiates in a recession (Look here and here). I’ve heard variations of this argument from people I really respect in the industry (all vaguely implying that “active” candidates are somehow inferior to people who are not looking).     Finally, the cherry on top of the conventional wisdom sundae -  is the advice that you have to a pay a huge salary premium to get someone to “take a risk” on a new job – see “How Much Cash Does it Take to Steal a Passive Candidate?.   Perhaps I’ll revisit the whole “passive candiates are better than active candidates” myth in a future post, but probably not.  It definitely meets my 4 criteria for conventional wisdom – but Ronald Katz already did a brilliant job of eviscerating it in his post “What’s So Great About Passive Candidates.”  (For balance, be sure to read the comments -  the people who disagreed with him also made some decent points).

Ok, so why am I convinced that great people look for jobs in a recession?  Well mainly, because we’re talking to them every day.  Lots of them.  They are migrating to DC in droves. 

The Misplaced Loyalty of the CEO

There is a consistent theme emerging from my conversations with CEO’s lately.  Loyalty.  While many people enjoy bashing Fortune 500 CEO’s for showing no loyalty to employees – and for dumbsizing, the bigger issue for smaller organizations is too much loyalty.   I see too much loyalty to long-time employees who are not performing, and too little loyalty to everyone else who is.   Truth be told, I’m not really a fan of Jack Welch, but he did have an interesting column about misplaced loyalty in BusinessWeek.

Most business leaders really struggle with their loyalty to long-time employees who are no longer effective, and while I think loyalty in general is both admirable and good business . . . blind loyalty is not.  It is dangerous.   The context matters. 

Sometimes the person’s performance just waned over time – they “got comfortable”,  sometimes the person was simply over-promoted (Think: Peter Principle), sometimes the person took on a job that appeared similar but required different skills (Think: salesman promoted to sales manager), perhaps the most common is when a growing company simply “outgrew” one of the original employees.  

Increasingly in this recession, the problem person was a good steward of a function during normal times, but simply cannot adapt to the chaos of the current environment.   They resist change, ignore market signals and get in the way of new initiatives – doing what is comfortable and familiar, instead of what is right.

My conversations with CEO’s generally go something like this:

Is SHRM Helping You?

If you know me, you know I try to read everything I can get my hands on, and bring you the most interesting, the most insightful and the most relevant.   My clients are entrepreneurs, hiring executives and HR professionals who mostly work for small to midsize companies here in the DC metropolitan area. 

I write a monthly newsletter as well as this blog, so I’m always on the prowl for interesting material you might find useful, challenging or just fun - something worth talking about. 

Hey HR pros, you know what I almost never read?  Stuff from our professional association – The Society for Human Resource Management (SHRM).  It just never seems relevant to the issues I work on.  Has that been your experience?

In a BFO (Blinding Flash of the Obvious) Jessica Lee wrote “You Can Live Without SHRM, Trust Me… ” and then proceeded to name where she gets her information – naming many of the sources of information I value most…none of them SHRM.  (Read the post and see for yourself)

I still like going to the meetings, hearing the speakers and networking, but for professional development, I need better reading material.  So how do you stay current?  What are you reading lately?  (Besides this blog)

Search Firms Must Innovate, But Will They?

This is my third recession in the staffing business, and this one is different.  The search business has arrived at what Andy Grove would call a  ”strategic inflection point” – where the fundamentals of its’ business are about to change.   Costs simply must come down, way down.  I saw alot of search firm repositioning in the last recession – mostly tinkering with their pricing models, but not fundamentally changing  who they hire and how they deliver services. 

The largest search firms got crushed in the last recession – some laying off 40% of their staff.  Of course they got into trouble because they gorged on the dot com bubble.  But they learned their lesson, right?  Wrong.   Good times returned and then they used the same inefficient business model to gorge on the financial services bubble and surprise!  now they are now laying off again.  Note to my investment advisor:  The next time any major national search firm earns a third of their revenue from any business sector…that’s the very definition of a bubble – a whole business sector not paying enough attention to costs.

Now the blogosphere is lit up with comments about “disruptive innovation” in the recruiting world.  Most of the comments are about technology and social media, but the same market forces apply to search firms.  One of the most thoughtful is David Manaster’s ERE post – (R)evolution.  In another must-read article, John Sumser bluntly counsels that HR “should be hammering its vendors for cost reductions.  Get the same for less money.”  John refers to a brilliant article in The Economist about the flip-side of Moore’s Law:

“Suddenly there is more interest in products that…provide a particular level of performance at an ever-lower price.”

Here is the problem. 

Cold Call Recruiting = SPAM

This post will not make me popular in some circles.  Oh well, here it is.  Your recruiting budget supports spam. . . but that’s the least of your problems.  When you pay fees to old-school, traditional search firms, you are paying them to cold call.  Cold call recruiting is just another form of spam - sending unsolicited, unwanted messages to strangers.    

Full disclosure:  cold calling is how I was taught to recruit 20 years ago (I changed).    I also regularly refer work to a few high end retained search firms who I think do superb work, but they are the exception. 

But take it from an expert – cold call recruiting is phenomenally inefficient and very hard to do every day.   Therefore the salespeople who make these calls must be compensated exactly like sales professionals, or the good ones can take their mad telemarketing skills and go sell something else.   And that, ladies and gentlemen, is a primary reason why search fees are so high - it costs serious money to get people to make those calls.  (Actually , it’s only one of many, many reasons search firms are inefficient, but it’s a biggie.)

But spam is not the real problem (for you anyway).   When you hire an old-school agency to telemarket (headhunt) for you, you are not only causing more spam, but most likely, you also just made a really poor hiring decision – you hired the wrong person to do your recruiting. 

If Staffing Looks so Easy, Why is it so Difficult? (2 of 2)

This is the second post in a two part series on what is why staffing so often fails to get results.    

 

RESUME SCREENING

 

Resume screening is so dull and time consuming that it often gets treated as a clerical task assigned to a junior team member.  Junior people often lack the judgment to do much more than look for keywords or years of experience.   The lifeless Job Description is a perfect guide for this dull task.   This tedious cycle of simplistic evaluation ensures that all context is fully and completed removed from consideration of both the job and the job-seeking candidate.  By its very nature, this guarantees that every exciting, “out of the box” candidate is ruled out, without any consideration whatsoever.  

 

Next, the resumes of people with the “right” keywords and years of experience are passed to the hiring manager, who is, by definition, short-staffed and too busy to look at them.  After weeks elapse, the busy manager grabs the stack of resumes and asks himself or herself one question:  “Which of these resumes is least likely to waste my time?”  Managers vividly remember every moment wasted interviewing bad candidates, so, to avoid making that mistake again, they look for any reason NOT to see most of the resumes.  At some level, we all know that great employees often have mediocre resumes and mediocre people often have great resumes.  We certainly know that a resume is, at best, a very poor representation of a real, live, thinking, breathing human being. We know a resume cannot even attempt to represent the values, intelligence and work ethic that make someone “fit in” and contribute to an organization.  Unfortunately, the crushing pressure to “save time interviewing” completely eclipses these considerations, and we proceed to overlook about a third of the best candidates.  

 

 

INTERVIEW SCHEDULING

 

Now that the manager has selected 3 or 4 “good looking” resumes of candidates to interview, the recruiter or admin assistant tries to get them scheduled.   This is not easy of course, because the manager is short-staffed and overscheduled.  So, about a month after the job description was initially posted, candidates finally get in to see the manager for a first interview.   Of course, the best candidates who initially applied have already received offers from other firms, so they decline to even interview.  Luckily, the less desirable candidates, who are not getting job offers, are still available to interview. 

 

If Staffing Looks so Easy, Why is it so Difficult? (1 of 2)

In a tough economy, every employee really matters, otherwise they would not still be around right?   Well, not really, because most organizations do not manage performance that tightly – but we’ve already discussed that at length in previous blog posts.  So in this 2 part series, let’s talk about your critical new hires, the ones who really count extra now – the really critical new hires that still get approved despite your ”hiring freeze.”   These are hires the CEO has to approve, like when your CFO or Director of Development quits exactly when you need them most.  Hiring freeze or not, when someone absolutely essential to your future existance  quits – you are going to replace them.  And, odds are, you are going to make some big mistakes in how you hire that new person you can’t live without. 

The only reason to hire is to get business results. If you didn’t care about results, you wouldn’t need employees – so, if staffing is ultimately about getting business results, why does it so often fail to deliver them?

Tolstoy observed, “Happy families are all alike, but every unhappy family is unhappy in its own way.” Similarly, every company that becomes unhappy with staffing becomes unhappy in its own unique way. Although staffing appears to be a routine, traditional business practice on the surface, it is actually one of the most daunting and complex tasks facing today’s executives.

Why is staffing so difficult? Let’s break it down. To regularly find and select candidates who can rapidly contribute to business results, you must always succeed at all of recruiting’s critical tasks. First, you need the business acumen to clearly identify the business results you want and how you expect someone to achieve those results. Next, you must identify the precise competencies an employee requires to drive the results you expect. Next, you need to identify exactly what it would take to attract the right person to each job for the right reasons. Next, you need a recruiter who knows how to access a large pool of qualified job candidates, present your opportunity in a compelling way, generate interest, and get the right people to apply. Then, after all the candidates have been fairly evaluated for competency and cultural fit, you must narrow the field and make a job offer. If the candidate you select has not already accepted other employment and accepts your offer, (s)he can finally begin to apply his or her skills to getting the business results you expect. If along the way, you make even one misstep, you end up unhappily starting all over. It’s no wonder that so few recruiters actually measure themselves by the standard of getting specific business results from their recruiting efforts.

In reality, the situation is far worse. Almost every aspect of traditional recruiting stopped being effective over 20 years ago, but nobody seems to have noticed. Let’s review some of the most common hiring mistakes and the very understandable reasons people make them.

The Recession Survival Guide – It’s “Trade-In” Time

Ok, we’re in a recession - it’s official.  So fear and panic are evident in decision-making and mostly we see people frozen in place.  Waiting to see what happens.  And not driving results.

Do you know who in your organization will get you through the downturn?  Look around.  Your top performers are still driving results, taking on new responsibilities, trying new things, improving your current processes, cutting expenses, suggesting new ideas, challenging outdated thinking, doing work on their own time, solving problems and accepting the reality of the current market without making excuses. Anybody not doing this is just wasting your salary budget.

Sadly, most performance review systems don’t really identify the people you need most, because what it took to succeed last year is not necessarily what it takes to succeed right now.   In these turbulent times, you might need more people in one department and less in another, or you might suddenly need people with very different skills.  There is nothing like a downturn to shine a bright light on your mediocre people.   So if you can’t tell who to keep and who to cut, you might be tempted to follow the herd and implement a hiring freeze, or just be sluggish in hiring (which has the same effect).   Except here is the problem.  A hiring freeze locks in place your mediocre performers and prevents any better people from getting in.    Big mistake.  

This is the time to freeze the budget, but not the people.  It’s “Trade-In Time” – when you can finally afford to replace your underperformers with winners. 

What the CEO Wants From HR

I just got back from moderating a panel discussion for the Human Resource Association of the National Capital Area. The topic was “What CEOs Want from HR.” I love joining the local SHRM chapters, and used to be on the Board of HRA-NCA, but honestly, it’s been a while since I made it to a meeting. Lately, I’ve spent alot more time in CEO circles.

One issue that keeps emerging from my CEO forums is that entreprenuers and company CEOs put their jobs or their income on the line all the time. 

Vigilant CEOs Focus on Performance

I was recently invited to speak to three groups of local business executives who are part of the Renaissance Executive Forums. Most business owners told me their business was fine, a few told me their prospects were terrific, but without exception, every CEO had either vacant positions, or critical positions where someone was under-performing and not getting the results needed. Bottom line – this job market is still short on talent, and many employers are still hiring.

Employers in our area will have an unprecedented opportunity to “import” top performers from other parts of the country for the forseeable future – I call this The Great Talent Migration.

Flexibility as a Business Strategy

Most employees like flexibility: flexible work schedules, flexible leave, telecommuting. Now companies are increasingly adopting flexibility as a business strategy. BDO Seidman’s CEO Jack Weisbaum says, “In order to compete and grow in today’s complex, global business environment, companies have to move beyond viewing flexibility solely as a tool for talent retention or employee satisfaction and make flexibility matter to all aspects of their business.” CFO’s are seeing a bottom line benefit to using flexibility. They say it helps them stand out in the face of competition, minimize environmental issues and reduce health care costs.  Download the study here.

Executive Search – What is it Worth?

We just completed a Deputy CFO search for a nonprofit client. They liked the candidate pool so much, they actually hired 2 people – and paid us one fee. A traditional search firm would have charged at least 3 times more than we did – for just one placement. As you might imagine, saving about $70k in search fees felt pretty good to our client. Our client was thrilled, the two candidates were thrilled and we were thrilled.

My competitors in the search world are astonished that we don’t charge extra fees when our clients make multiple hires on a search. Instead we celebrate. Actually, it happens to us all the time. Our all-time record is when someone hired 4 people from a field of 8 candidates – and paid us one search fee. 

The Only Reason to Hire a Search Firm

 

The only reason to hire a search firm is to solve a business problem. Somehow, the industry seems to remember that only about a year into a recession.

In early 2002 in the midst of a recession, I was working for a global leader in the staffing industry. They were in full-out panic mode, lurching from one bad salvation plan to the next. It was a disturbingly familiar experience. A dozen years earlier I watched the recession of 1990-1991 tear apart the mid size staffing firm I worked for at that time. It wasn’t about solving problems for customers, it was about making sales, any sales.

So in the 2002 recession, I quit and started to look for a job. It went pretty well, in 3 weeks I had 5 job offers from other staffing firms, but I glumly realized they all had the same problems. Their business models did not work. They paid heavy overhead costs for brand and prestige building activities. They overpaid people for sales activities (like bringing in new searches) but very few people on staff could actually diagnose and solve business problems for customers – it was all “Oh yeah, I know a guy who knows a guy who is exactly who you need.”