Removing Bias (and Desperation) from Your Hiring Decisions

In a doomed attempt to save time, many hiring managers unwittingly make themselves both more desperate and more biased in their hiring decisions. When you prematurely narrow the number of candidates you are willing to interview, you set up the perfect storm for bias and desperation.  Here’s why.

The Washington DC metropolitan area has a great job market. As I said in The Washington Business Journal,  job seekers have the upper hand again. Mid-career professionals often receive multiple job offers and can afford to be choosy. This means that candidates who do well in their first interview with you often withdraw from consideration before you’ve even had time to schedule their second interview.

So, if you have not started your first round interviews with a field of at least six highly qualified candidates, you will probably find yourself coming down to the wire with only one viable candidate. That makes your hiring decision both simple and dangerously flawed. When you only have one person, your choice is either a) hire, or b) don’t hire. Really, the choice is a) continue doing two jobs, or b) get help from someone. So naturally most hiring managers a) decide to hire now, and b) live to regret it later.

A recent study suggests why you make better decisions by improving your frame of reference. Harvard Professor Iris Bohnet explains it this way:

“Our hunch is that the mechanism works something along the following lines: if you look at one pair of shoes, it’s hard to evaluate the quality of those shoes. You will be much more likely to go with stereotypes or heuristics or rules of thumb about shoes. But if you have several pairs of shoes available, you’re much more likely to be able to compare different attributes of the shoes.”

The Harvard study showed promising results in removing gender bias from hiring and promotion decisions, but the frame of reference principle applies equally well to other aspects of hiring, such as evaluating the competencies and cultural fit of the candidate.

Don’t set yourself up to make a bad decision. Do what it takes to assemble a robust slate of qualified candidates, you won’t regret it.

Job Market Trends in Washington DC

I was recently interviewed by Joe Coombs, the Workplace Trends and Forecasting Specialist for SHRM.   We discussed the job market, supply and demand for labor … all my favorite topics.  Read the interview here.

Did you Budget for Turnover?

As you prepare your budget for next year, you probably accounted for the cost of your new hires, but how much did you budget for replacing your current employees who quit?  Turnover is expensive.  When your current employees leave (and many of them will), have you budgeted for the full cost of replacing them? 

Before you finalize next year’s budget, be sure you think through the impact of employee turnover. Whatever level of employee turnover you have been experiencing in the past 18 months, plan for it to double as the economy improves.    Yes double. 

If you must replace 10% of your team, will you still be able to achieve your performance goals? What will it cost you when a key player leaves, and it takes you 60 or 90 days to replace them?  What will you lose in productivity while the new hire comes up to speed? What will it cost to attract someone new to the position (both in salary and recruiting costs?)

With all the turnover we are seeing in the DC job market, you should seriously consider what might happen if you lose 20 or 25% of your team … then what happens to your budget? 

If you don’t plan for turnover now, you will almost certainly find yourself behind on your performance goals, short-staffed and over budget at this time next year.

Sharp Rise in Senior Staff Turnover Reported

CEO Update recently reported on a trend we’ve been talking about all year – the spike in executive turnover at associations and nonprofit organizations across the Washington metropolitan area.   They reported that the number of open positions posted with them is ”greater than 2008, 2007, 2006 or any other year we have tracked.”

Back in January we predicted that the local job market would be a big game of musical chairs this year, driven primarily by executive turnover. 

In August we observed that top candidates were on the move in larger numbers, and that we were seeing a spike in candidates who were receiving multiple job offers.   As you may recall, on the strength of that trend we declared the recession over  (at least as a retention tool) a full month before the economists made it official on September 20th.   (Then again, in their September announcement, they said the recession actually ended in June 2009 … so just give me 15 months and I’ll predict what happened today). 

No matter how you look at the data, this is certainly a good time to look for a job if you are an association or nonprofit executive.  Not looking?  Then now might be a really good time to update your executive succession plans and rethink your retention strategies, because your best people are getting calls.

The Recession is Over … As a Retention Tool

The recession is over … well, at least as a recruiting and retention tool for employers.  If you are hiring, you can’t miss the pronounced shift in the DC job market.  This year the power is shifting back to the job seekers.   With the national economic news still looking dicey, how can this be happening?   We explain it all in our monthly client newsletter, and you can read it here.

You Can’t Always Get What You Want

Mick Jagger and Keith Richards got it right.  You can’t always get what you want.  Especially in hiring.  Especially now.

Right now (in the DC job market) candidates are gaining the upper hand.    Want proof?  Look at the number of top performers who left your firm for another job.  Next look at the number of candidates you want to hire who have multiple competing job offers – that’s the best way to measure who has the upper hand in your industry.  

So if you are like most DC employers, here is what you can expect with this market shift:

• Your perfect candidates will turn down your job offer to take some other job more often than you’d prefer.  
• More first round candidates will surprise you and decide not to proceed into the second round interviews.  
• Your new hires might even call you before their start date and tell you they accepted a counteroffer from their current employer.

What to do about it?  Like most business risks, you can “buy insurance.” 

• You buy insurance when you start with a big candidate pool of 6 or more people. 
• You buy insurance when you keep the interview process moving quickly for all the candidates and don’t prematurely lock in on just one person.
• You buy insurance when you think long and hard about making a really competitive offer to the person you want. 
• You buy insurance when you stay in touch between making the job offer and when the new hire starts. 
• You buy insurance when you make sure they feel welcomed during their first few weeks.

No, you can’t always get what you want, but if you try sometimes, you just might find you get what you need .. but just in case, buy insurance.

Hiring People Who Have a Growth Mindset

I’m cheered by a positive trend sweeping through our search work.  First, there is quite a bit more hiring going on – I always like that.   But more importantly, there is more thinking going on.  And I really like that.  Across the spectrum, we see more thought going into job definition.

During the past 18 months of cost cutting, a survivalist mentality crept into some workplaces. Some employees were gripped with a “scarcity mindset” – characterized by fear and risk aversion.  This outlook is counter to what is really needed at this point in the economy: restarting growth. Companies must refocus on growing existing customer relationships and creating new ones, revitalizing products and services, and reaching out to new markets. But to do so, they have to have the right people with the right attitudes and skills, to support these growth initiatives.  

In an article in Chief Learning Officer Magazine, authors Andrew Sobel and Guido Quelle suggest that you look for 5 key qualities in the people who will lead your growth initiatives: 

1. An aspirational mindset:  This is a belief in possibilities rather than in limitations, in the concept that growth is ideas-constrained, not resource-constrained, and that a rising tide lifts all boats. To encourage the aspirational mindset, company leaders must share an upbeat vision that powerfully engages employees. To encourage long-term, out-of-the-box thinking, they must then reinforce this behavior through the performance management system.

2. A customer bias: All companies say they are customer-centric, but most actually are not. A key driver of customer bias is the culture. What is more important: internal meetings or dealing with customers? Do your leadership team members spend large amounts of time with customers, or is their time spent focusing on internal politics? Also, does everyone in your organization receive regular, unfiltered feedback on customer satisfaction, retention, and attitudes toward your company? Without this, say Sobel and Quelle, you risk living in an insulated bubble that fosters an internal orientation.

3. The willingness to take risks: Andy Grove, former CEO of Intel, used to have a sign on his desk that read, “If you haven’t made at least one mistake today, you’re not trying hard enough.” His point was that to grow, you had to try new ideas and new approaches — only a few of which would actually pan out. In some organizations, the cultural and economic sanctions for making mistakes create a paralysis that prevents any new or creative thinking. Leadership must make it acceptable by modeling this behavior and by supporting measured risk taking through the performance and reward system.

4. A collaborative spirit: Employers need to remove the barriers that keep employees from collaborating around the things that drive revenue growth, such as key customer relationships and new product initiatives.

5. An intense curiosity: Albert Einstein once told a friend, “I have no special talents; I am merely very curious.” As adults, note Sobel and Quelle, we tend to lose our sense of curiosity and wonder, yet this is what drives much innovation. For example, in 1948, Swiss amateur mountaineer George de Mestral was going for a hike in the Alps. After his walk, he noticed his socks — and his dog — were covered in burs. Curious about how they stuck to his clothing, he examined them under a microscope and observed the tiny hooks that allowed the burs to hang onto the fabric. In 1955, he patented Velcro, now a billion-dollar industry. Stimulate curiosity by eliminating complacency and constantly encouraging your people to do things better and differently. 

If you want more on how to hire people with a growth mindset, read my previous posts on “How to Hire People Who Thrive in Downturns” and “Hiring People with Resilience.”

Affordable Job Perks

As the economy recovers and top performers start heading for the door, companies are looking for ways other than salary increases to compensate their employees.

In an article for the Wall Street Journal’s Market Watch, Ruth Mantell reports that companies project merit increases of 2.7 for 2011, compared with 2.3 for 2010 and 1.6 in 2009.  For employees at companies that are strapped for funds, Mantell writes, variations on the following rewards are a good way to hold on to top talent during  tough economic times: 

• Flexible schedules.  Flextime – allowing individuals to alter their working hours – or compressed work weeks are the most well known types of flexible schedules, but flexible schedules can be highly individualized to meet the work/life balance needs of productive employees.
• New job skills and responsibilities — Employers can teach workers new skills to reward them. Employees’ skill sets get increased with the hope that at some time, if the opportunity presents itself, they will be qualified for higher paying jobs.  Alternately, employers can reward younger workers with “stretch” assignments.  Mentoring programs also can help younger workers grow professionally.
• Career development and tuition reimbursement – Employers can pay for courses, conferences and membership to professional groups.  Employees can attend classes to help them develop new skills or work toward an advanced degree. Companies gain better-trained employees, while workers widen their skills.
• Small gestures – Small gestures can go a long way.  Reward top performers with a dinner.  Offer bigger employee discounts. Hand write a note to an employee to thank him/her for a job extra well done. “It isn’t cash,” says Bob Cartwright, founder of Intelligent Compensation, a consulting firm near Austin, Texas, “but these are the kinds of small things that help create a better environment. People are going to think twice about walking across the street to make another 25 cents an hour when they know they are working in a great environment.”

Top Performers Are on the Move

A recent study by Right Management confirms what we have been seeing across the job market – critical talent is on the move.   54% of organizations reported losing high-performing workers during the first 6 months of 2010.  We started reporting on this trend back in November of 2009, and our predictions proved accurate.

Top performers are grativating to positions that offer better career opportunities.  So while you need to pay careful attention to retaining your top people, there is another aspect to this story that is equally important.

Top candidates are becoming far more choosy in selecting their next position.   Here is the new reality of recruiting in this job market:

• More candidates will have multiple job offers – you cannot assume you are making the only job offer they will receive.
• More candidates will receive counter-offers from their current employer.  Although it is almost always a mistake to accept a counter-offer, the reality is that many employees do.
• Job offers will become more generous.  Simply offering a good job, with a financially stable company is no longer enough.  You have to make the most competitive offer you can, or you may not see your job offer accepted.   Good enough is no longer good enough to attract great people.

This is what recovery from a deep recession looks like.  Better get used to it.

Why the Right People Are Still Hard to Find

Have you tried to fill a position lately?  Were you disappointed by how few good people applied?  Many people are surprised that good candidates are not lining up around the block to apply. 

In a recent article in Human Resource Executive Online, Wharton Professor Peter Cappelli offers some insights into why it’s still difficult to find qualified workers for many positions.  He says:

“There is no shortage of people with the appropriate education credentials for any jobs I’ve seen. The skills that are in short supply are work-based skills, the kind that are only learned on the job: Experience with these vendors, knowledge of these work practices, an understanding of this industry.

A generation ago, these jobs would have always been filled from within, typically as the result of formal development programs. Now employers want to hire these people on the open market, in other words, from their competitors.

But when everyone wants to do this — poof! — such candidates are hard to find.”

I’ve mentioned before that we don’t have one big national economy, but rather 366 metropolitan economies – and the DC metro area is pretty healthy.   In fact hiring in the DC area remains stubbornly difficult for many firms,  particularly now,  when HR staff is spread thin and budgets for recruiting are so limited.

There are solutions to your hiring challenges, but it won’t be easy, and what you did to recruit people five years ago is less and less likely to work today.

Hiring in Washington DC

New clients often ask me why recruiting great people in Washington DC remains stubbornly difficult.   One of my favorite job aggregator sites – Indeed - explains why in a very simple graphic that compares unemployed people relative to job postings.   (9/15/09 Note:  Indeed updated this chart recently).

Washington and Baltimore have 1 job posting for every unemployed person.  This is the best performance of any major city listed.  Other cities,  like New York have a ratio of 2 unemployed people for every job posting.  But poor Detroit comes in last with eighteen unemployed people for every job posting.  

The graphic illustrates that recruiting is essentially a local business.  Hiring difficulty varies widely from city to city.

By the way, it’s also a good reminder, that if you want to hire better people (at least in Washington), you have to write a better job ad.  Something I have been ranting talking about for quite some time.

Stop Thinking About the National Economy

Thinking about the national economy is, by and large, a waste of time (unless you are Ben Bernanke, or Tim Geithner, in which case, please stop reading this blog and get back to work!)

The Brookings Institute suggests we do not have some monolithic national economy, but instead really have an interconnected group of 366 metropolitan economies.   It makes sense, as this is exactly how staffing actually works.  At it’s core, staffing is a local business.  The labor pool, the jobs, the pay, what’s considered a good job, what’s considered a good commute – all this varies widely by region.  Ignore it at your peril.  The national unemployment rate is irrelevant in hiring.  Nurses might be in oversupply in one region and there might be a nursing shortage elsewhere.  Whether you are hiring  20 construction workers in Miami or 2 Mechanical Engineers in DC,  the local  economic situation matters more than the national numbers.  This is why we are seeing a talent migration to Washington DC, which has one of the strongest regional economies in the country.

Every day this week I talked to a local employer who had run ads to find candidates, but still had not found the ideal candidate for an open position.   A strong local economy like DC, can be really irritating if you thought hiring was going to be easy.

A Golden Moment for HR

This is a golden moment for HR.  But I don’t see HR leaders taking an active role in it.  It’s like HR leaders don’t have a speaking part in the unfolding drama being played out on the national stage.

HR issues dominate the national news like never before.  But it’s not just national news –  in my conversations with small company CEOs, HR issues also dominate the minds of executives who are working on their own “economic recovery efforts.”

At a national level:

Treasury Secretary Timothy Geithner is woefully understaffed, with his top 17 deputies not even named, and over 30 Senate-confirmable positions unfilled.  Want to know who is working on the recovery effort?  Just take a glance at the list of Treasury Officials on the official website – it lists only Mr. Geithner.    Yikes!  Who is staffing this guy?

AIG sparked national outrage with their “retention bonus” debacle, particularly when it was found that many of those employees have already left the firm.  Where was HR in this?

The proposed Employee Free Choice Act (EFCA) or “Check Card” Legislation has serious implications for employers.  Where is the voice of The Society for Human Resource Management (SHRM) in the debate?  Many say it’s far too quiet.

Beyond the national headlines, small companies everywhere are innovating, trading in poor performers and managing productivity like never before.  And many are “winging it” without strategic HR support.

In this blog, I’ve posted articles on managing in a time of turbulence, the why old-school management fails in a recession, and why ideals are the new business models.  In a post on McKinsey’s website, Gary Hamel adds more fuel to the fire.  It seems that thought leaders everywhere are proposing radical new models of management and leadership.  But why don’t I see HR leading that conversation?   

Every CEO I talk with is trimming poor performers and “trading up” to better people who will drive results.  Yet a recent Accenture survey says that almost half of employees feel insufficiently challenged in their current jobs.  A disturbing Corporate Executive Board study showed that disengaged employees are 24% more likely to remain at their current employer due to the recession.  So why isn’t HR taking a bigger role in resolving these problems?

This is no time to be silent.  No time to play it safe.  This is the time for HR to move from tactical to strategic, or the latest round of HR bashing will continue.  I’ve spoken with several CEOs who empowered HR to take a more strategic role, and they are already reaping the rewards of that decision.

Small and Midsize Employers Lead Innovation, and the Recovery

The secret of great entrepreneurs is “Smarts Guts and Luck” according to a recent article by venture capitalist Tony Tjan.  As he puts it, his “central philosophy” is that “human capital trumps everything else . . .  it is all about the people, and we would take a B business plan with an A team over an A plan with a B team any day.”

In a recent survey by Intuit, 9 of 10 small business owners see opportunities for their business despite the recession.   In the “Future of Small Business Report” the authors note that “With no large corporate fortress separating them from the marketplace . . . small businesses rely on an almost instinctive muscle memory approach toward innovation to survive and thrive.”  As business guru Peter Drucker puts it:

“Innovation is the specific tool of entrepreneurs, the means by which they exploit change as an opportunity for a different business or a different service.” 

The Boston Globe ran an article entitled “Innovation may fuel economic recovery.”   They quoted George Colony, the CEO of Forrester Research as saying “It’s obvious that the new economy – whatever we’re going to emerge into – is going to be built by the innovation that will emerge during this recession.” 

In a recent survey, the Boston Consulting Group ranked the US second among large large countries for manufacturing innovation (and 8th overall). 

Unfortunately I find that most small businesses are chronically underserved when it comes to recruiting people who can drive innovation and results.   For this reason, I’ve written extensively on the need for search firms to innovate.   In a post on “The Outlook for Recruiting” on  ERE, Raghave Singh reached a similar conclusion.

 ”…much of the growth in jobs is expected to occur in small and medium-size businesses that have no need or cannot support full-time recruiters. An increase in needs for sourcing, as opposed to full-service recruiting, will occur as employers seek to minimize costs.”

While I agree with many of Mr. Singh’s points, I disagree that growing enterprises will have to settle for less than “full service” recruiting.  I’m convinced that search firms will either learn how to meet client needs at a price they can afford, or they will cease to exist.   

One thing is certain about innovation -  after the recovery, the world will look different.   So what are you doing right now to make it different?

100,000 New Federal Jobs

A recent Washington Post article suggests that between 100,000 and 250,000 people will need to be hired by the federal government to fulfill the demands of the President’s ambitious budget.  White House budget director Peter Orszag was quoted as saying:

“in several key areas — from properly auditing contracts to providing quality medical care to veterans and reducing errors in Medicare and other programs — investing in skilled professionals will not only pay off over time but also immediately deliver better service to taxpayers.”

The Department of Veterans Affairs expects to hire 17,000 people by year end.  And with a proposed budget increase of 10%,  the Social Security Administration expects to hire people in field offices, hearing offices and teleservice centers.

Bring on the federal hiring blitz!