So I regularly hear how executives talk about the intersection of strategy and people. And some executives describe their current staff like a tractor pull–a powerful engine (strategy) is dragging a heavy sled behind it (the current staff).

Organizations often say “people are our most important asset” but people are also the source of most of your problems.  People often disappoint you. Top performers quit. Average performers often fail to deliver. Bottom performers threaten to sue. Departments go to war with each other. You spend less time than you want leading new initiatives and more time than you want refereeing internal squabbles. And when I see that, I usually see an understaffed, underfunded, underwhelming HR department awaiting further instructions from the executive team.

It does not have to be that way. In great organizations the culture fuels the strategy. The HR strategy supports the business strategy. Your systems, processes, expectations and rituals give lift and propulsion to your strategy, like a sail pulling you forward.

People are not your most important asset. People come and go. How you harness human achievement is your most important asset, and your only enduring source of competitive advantage.

The systems and processes of dealing with people are where the magic happens.

• How you attract great people, and how you recognize and deploy the internal talent you already have
• How you align the people to the mission.
• How you consistently inspire top performance from your people.
• How you retain the most valuable and drive away the least valuable.
• How you gracefully exit the people who no longer drive results.
• And how you do all this at a price you can afford.

Competent HR keeps you in compliance with the law. Great HR practices transform people from a drag into propulsion.

Of course you felt disappointed, and perhaps even embarrassed. When it comes unexpectedly, the rejection stings even more. But why does disappointment feel so bad? Neuroscience can explain why … and neuroscience also yields a few clues why your job offer might have been rejected.

It’s all about expectations.

In a recent column in the New York Times, Alina Tugend interviews David Rock, author of “Your Brain at Work.” It’s a fascinating read, but this quote really stands out:

“When we don’t hit our expectations, our brain doesn’t just get slightly unhappy, it sends out a message of danger or threat.”

Woah. When your expectations are not met, you actually feel threatened.

OK, well enough about you, now let’s talk about why your ideal candidate might have rejected you. If you are like most employers, you did not do a very good job of managing their expectations during that lengthy interview process. You left them hanging several times by not clearly communicating what your interview sequence would be, or how long things would take, or how many times they would need to come back for additional interviews. In my experience with hundreds of small to mid-size organizations, the normal interview process almost always fails to meet candidate expectations.  So your normal hiring process constantly puts your ideal candidate’s brain into danger and threat mode. No wonder they rejected your job offer.

Three years ago, one of my first blog posts was about managing candidate expectations during the interview sequence. Candidates assume that how you manage the hiring process is how you manage the organization. If employing top performers is important to you, candidates assume you’ll demonstrate it during the interview process.

I detest that behavior.  Our candidates are people to be respected and served. Your candidates are potential employees, referral sources, customers, or donors.

The minute you allow petty story telling about the people you serve, you have stopped serving them and started down a slippery slope of condescension and arrogance.

I once worked in a staffing firm that had a policy of firing anyone who told a joke at the expense of a candidate. Zero tolerance. Fired on the first offense. If you want to improve your candidate experience and your hiring results, implement that policy first.

So over the past few months, I’ve “cleaned my room” to categorize the most useful and timeless articles I’ve read, where we can both read them any time. Here are links to the topics:

• Recruiting Advice for the Small to Mid-Size Organization
• Interviewing and Hiring Advice for Small to Mid-Size Organizations
• Leadership and Management Advice for Executives in Small to Mid-Size Organizations
• Maximizing your Productivity
• Perspective on the Washington Metropolitan Area Economy

My focus is on sharing what works, in this economy, for small to mid-size organizations.

I’m endlessly curious about how economic forces are reshaping our business environment. Fascinated by what makes change initiatives succeed or fail. Eager to learn what makes people engage and do good work. Over on The HR Examiner, I briefly summarized four books that have really changed my thinking about these topics. Although I’ve mentioned it before, no reading list is complete without including The Rare Find.

Happy reading!

Solution A) This solution has no upfront costs, but it diverts your internal resources away from their current work, takes 4 months to implement (costing $60,000 in revenue) and is projected to lose an additional $24,000 during year one, with the likelihood of continuing losses of $36,000 per year thereafter. This solution has a 50% chance of failing completely and if it does fail, it might trigger a cascade of similar problems.

Solution B) This solution has an upfront cost of $15,000 (which was not in your budget). It requires no diversion of internal resources, and takes 2 months to implement (2 months faster than Solution A). By the end of year one, Solution B will recoup the $30,000 revenue lost during its two month implementation, and is likely to generate an additional $36,000 in annual revenue thereafter. Solution B has a performance guarantee, and significantly reduces your risk of this problem cascading into other areas.

If Solution B seems like the obvious choice, let’s review what happened the last time a vital person with hard-to-find skills resigned from your firm.  Did you consider using a search firm to fill the job?  If so, did the conversation sound like this? “I hoped our HR department might be able to find someone to fill this job. We thought if we could handle the search internally, we might save money on search fees. And if HR failed, we could always hire a search firm later.” Or, perhaps your internal deliberations sounded like this? “We did not budget for any search fees, so we had to do it on our own.” Both conversations probably sound familiar, and on the surface they might even sound reasonable. But when you look carefully, you realize that that both conversations make the same four assumptions. They assume:

1. There is no cost to leaving a position vacant. There is zero cost to the lost productivity of both the employee and the team.
2. There is no risk to leaving a position vacant. Under-staffing and over-working the current team will not result in any turnover risk. Zero.
3. Any hiring process that results in a hire is just as good as any other. A hiring decision will be just as good whether you have only one candidate to consider, or a full slate of 6 qualified people.
4. Any person hired in this job will deliver equivalent results. There is no difference in productivity or performance between an “A player” and a “C player.” Zero difference.

So if all four assumptions are laughably wrong, how did you ignore them in your decision making? Research shows exactly why it happens. Recruiting costs are very easy to calculate, but it is far harder to calculate the cost of not hiring, and harder still to calculate the cost of hiring badly. When faced with that kind of complexity, busy executives look at what they do understand (recruiting costs), and ignore what they don’t understand (the cost of hiring slowly and badly). The snap decision becomes: “We can’t afford to pay a search fee.”

High performing organizations are different. Because they have specific performance targets to meet for every position, the cost of not hiring (or hiring badly) is far more obvious. So they have an easier time balancing their recruiting costs against the return on investment of making a good hire quickly.

This is exactly what our Solution A and Solution B example did for you above. With good information, the trade-offs were easy to make. It was the gathering of the information that was complex. (Which is precisely why so many people will skip the next section of this post and just read the conclusion).

A Better Framework to Evaluate Hiring Costs

The only reason for hiring is to achieve a business result. In business, that result is profit. In a nonprofit, that result is achieving your mission—the mission that satisfies stakeholders and leads to additional funding.  So to evaluate different recruiting options, you need to ask yourself a few questions:

1. Speed of hiring: What is the likelihood that we can be successful recruiting on our own? How long will our recruiting efforts take versus the speed of using a search firm? What is the expected cost of leaving the position vacant for that long?  (You want to consider lost productivity as well as the increased risk of turnover).
2. Quality of hiring: What search process is most likely to result in our hiring a top performer versus a less productive person? And what is the expected value of hiring a top performer versus an average candidate?

My example uses national averages to determine the “return on investment” from hiring.  In larger companies the average Revenue-Per-Employee is about $360,000. In smaller companies, it can be as low as $180,000 per employee per year. So assuming you run a small company, when someone significant quits, you’re losing at least $180,000 in revenue for every year the position is vacant—or $15,000 per month. If the position is vacant for 3 months, you’ve lost $45,000. Assuming that job performance matters for this role, a high performer in the job is at least 20% more productive than an average employee, and a low performer is probably at least 20% less productive. So a high performer creates $18,000 per month in revenue ($15,000 * 120%), and a low performer creates $12,000 per month in revenue ($15,000 * 80%).

Using those conservative averages to compare our two solutions:

Solution A (Hire on your own)

Typically, your overstretched HR department has no time to spare, and can only recruit by posting ads. Often, your understaffed hiring manager will fall behind in reviewing resumes, dragging out the hiring process a bit. So “trying it on your own” will probably take about 4 months to make a hire. Of course, by hiring in this way you increase your odds of hiring a low performer, because after 4 months most managers get pretty desperate to hire anyone at all. So if a low performer takes 4 months to hire, and then works the rest of the year (8 months), in the course of a year they only create $96,000 in revenue ($12,000/month * 8 months). Therefore, the expected cost of this approach is $84,000 in lost revenue ($180,000 average revenue per employee per year vs. the $96,000 actually generated). But of course that’s only if nobody else quits and you actually manage to make the hire on your own. You still have a 50/50 chance of needing to pay a search fee to fill the position.

Solution B  (Engage a Search Firm) If you outsource the hiring problem to a qualified search firm, you will pay a search fee up front (In this example, we’re assuming $15,000 for the fee). But in doing so, you’ve offloaded the work outside your firm, so the search should go faster. If the search firm helps you hire a high performer in 2 months, then the high performer will be able to work for 10 months this year and create $180,000 in revenue their first year ($18,000 * 10 months).  This is the same productivity an average performer would achieve in 12 months of work, so you can “break even” for the year by upgrading from an average to a top performer. In the first year alone, you get almost twice the revenue impact from engaging a search firm ($180,000 vs. $96,000), and you can hire twice as fast (2 months vs. 4) which reduces the risk of creating other turnover problems on your team. Unlike internal hiring, a reputable search firm usually has a lengthy performance guarantee in case the new hire does not work out.

Conclusion

High performing organizations have better performance data to evaluate the business impact of their decisions. In every decision, they ask “How will this action bring us closer to our goals, or take us further away?”  And when it comes to performance, there are few decisions more important than who you hire and how you hire.

So whether you use precise calculations specific to your environment or approximations like I did, you’ll always make better decisions when you trade off the cost of your recruiting methods against the estimated return on that investment.

Additional resources:

Revenue per Employee (Gazelles)

Profit per Employee (McKinsey)

Common cognitive biases – unconscious reasoning errors many of us make.

How to Prevent a Work Avalanche - avoiding the problems of under-staffing.

1) Self-serving studies where the study sponsored by pre-employment testing company X, shockingly, recommends you use pre-employment testing. Whatever… your eyes start to bleed in a few seconds and you can click away without much harm done.

2) An interview with a successful CEO where the journalist asks them their secret to hiring. As if you could take the hiring process used at a PR firm in New York and apply it to hiring forklift operators in Tulsa Oklahoma. While this sort of thing is amusing, it will not help make you a better interviewer. What works in one culture is irrelevant to another.

3) Thoroughly researched works that deal with the real-world complexity of hiring, and methodically track the results over time. A good example is  George Anders book, “The Rare Find.” Research this good is indeed a rare find. Read it, learn from it, wrestle with it–it’s worth it.

4) My real problem is category four. The stuff that sounds like science, and may even be decent science–but is not grounded in any kind of hiring process. People who have not rigorously worked on their hiring process gravitate to this stuff, like a “magic bean”–a panacea for all that ails their hiring process. But when you put it in practice, you find it’s just a parlor trick.  Here are a couple examples that people sent me this month:

One article says not to lean to the left when negotiating your salary. Pish posh. Interviewing is not a game of Twister. You’ll tie yourself in knots trying to pay attention to this stuff.

Watch the video below and you will think that giving someone a hot or cold beverage will influence your opinion of them (Hint: if you are interviewing, go for the hot beverage):

This stuff is ridiculous. If you want better hiring results, ignore the parlor tricks and focus your interview process on the factors that really do predict job performance.

Here is how work avalanches are created: When confidence is low, your organization responds to good news differently. You try to grow without corresponding staff growth. Headcount starts to trail revenue growth, and then falls further and further behind. Good news for the organization actually becomes bad news for the team. They were overworked before, and “good news” just makes it worse. Every new contract, new client, and new project just makes it harder to keep up.

How do you know you waited too long to add staff? Your best people are getting sick more often. You are seeing more preventable mistakes being made. Small issues cause tempers to flare, people are less tolerant of each other. They take things personally. Work just seems less fun. And eventually your best people burn out, give up, or quit–triggering an avalanche of work on the remaining team members.

Here’s the thing. Often, when you force your team to “do more with less” they are not doing more. They are making trades. They are trading long-term thinking for short term thinking. They trade planning time for reaction time. They stop making deposits into the relationship bank, and start making withdrawals–using up the goodwill they’ve built over many years. And the cost of that short term focus builds up… like snow building up on a mountain. Eventually the bill comes due in a work avalanche.

Here is what to do about it: When your hiring fails to keep pace with your growth, you can no longer afford to drag out the hiring process. But when confidence is low, that is exactly what happens. “Let’s try it first on our own, before we put it out to a search firm.”  Three months later the team is exhausted, frustrated, and at wit’s end. In your cautious desire to save money, you not only lost time and focus, you created even more risk–from people quitting.

Newsflash: When you are chronically understaffed, nobody on your team has the time or energy to do hiring on their own. When you are running from a work avalanche, you don’t want to make your backpack heavier.

If your business strategy requires you to keep staffing levels lean, you must be prepared to hire very quickly when you get good news. Either beef up your internal recruiting capabilities, have qualified contract workers on speed dial, or be ready to call in search firms the instant you know you need help.

Because standing still is not a good strategy when an avalanche  is bearing down on you.

It’s nothing personal, I’m confident that you are above average in every way. It’s just that most employers underestimate the importance of December planning and overestimate their ability to make things happen in early January. When they say  ”I plan to hire in January”  they really mean they will “finalize their plans for hiring” in January. Big difference. Finishing the planning in December means you can actually start recruiting on January second. ”Finalizing your plans for hiring in January” means that  you will post your ads (or start your recruiting) in late January. Then stack up some resumes and begin the interviews in late February, and then, by the time references are checked and notice is given, maybe your new hire will start work in April. And with a bit of luck, they should begin to be productive about the time your summer vacation rolls around.

I know. You are different. That kind of delay is not your intent. But I’ve seen it every year for the 25 years I’ve been in the search business, so yeah, I’m pretty confident that I’m right about this.

You see, December is a wonderful time of year…to put off work until January. You can hear the sweet, sweet lure of procrastination it in every work conversation. “We’ll get on that right after the holidays” and “Let’s set a meeting to tackle that in early January.”  Right now, it feels like you are just delaying by a week or two … it’s no big deal, right?

Except recruiting does not work that way. Not in January. January is different from every other month of the year in recruiting. It is the only month you can get a significant competitive advantage over everyone else. If you do your planning in December, and start recruiting aggressively on January 2nd, you can make your job offers before you have any serious competition from other firms. But when you miss that window, everything takes longer. And the only way to get the January advantage is by finalizing your recruiting plans in December.

Think about it: Your ideal future employees are just like your current employees. Busy, hardworking, stressed-out and looking for a break. And they will take break over the holidays. On a long drive they will reflect on what they want from their careers. Over eggnog they will make New Years Resolutions to go find it. And they will be primed, refreshed, and ready to be recruited in very early January.

But you won’t be recruiting in early January–you’ll be in meetings. Meetings to hammer out the dull job description with HR, waiting for your boss to sign off on the hiring requisition, checking in with some other department who wanted to “get with you” to review how their restructuring that might affect this position, and oh yeah, the CFO had a quick question about how this hire will fit in your budget.

So you’ll start recruiting in February, right when everyone else is recruiting. When recruiting takes longer because it is one of the most competitive recruiting months of the year. Hey good luck with that.

For want of a December meeting the job spec was not done.
For want of a job spec the recruiting was not done.
For want of recruiting the new hire was not found.
For want of a new hire your goals were not met.
For want of results your summer vacation was ruined.
And all for the want of a December meeting.

Full disclosure, I’m a Viking, and it’s been (fairly) observed that “we have stubbornness issues.” So quitting does not come naturally to me, but it can be useful.

This week we had a recruiting strategy that generated some truly terrific candidates in the first few days. The problem was that the first twelve people we spoke to were above the salary target our client wanted to pay. So we killed that outreach strategy, revamped the target candidate profile and outreach messaging, and now we are talking to some less experienced people who are happy to work for the target salary. The first batch of expensive candidates fit our mental picture of what the client wanted. But the second batch will actually have a shot at getting the job.

In another search we had a recruiting strategy we thought was perfect. Except in the first three days, none of our target candidates were interested.  None. So we quit. We revamped the message on day three, since clearly we missed the target. Initially we were concerned that our outreach strategy would generate too many candidates. Boy we were wrong–we got less than a tenth of the response we expected.

Most recruiting strategies require patience and perseverance. You find good people one at a time. Some of the best candidates need to be “courted” over a long period of time and don’t respond to your recruiting message at first. They might take several contacts to become interested. Slow and steady recruiting is fine, so if good people are gradually responding to your approach, stick with it.

But when nobody responds to your recruiting strategy, or when everyone who responds to your outreach is not the right profile…then you need to quit and try something else. When nobody appropriate is responding, then you are just being stubborn to continue on the same path. Quit. Admit your brilliant strategy had “some room for improvement” and pivot to a new one.

So here is the real question.  How quickly do you admit it’s time to try a different approach? I suggest you admit it in the very first week, sometimes you can tell in 3 days. For example, if you are running a job ad, look at your ad response in the first three days. If there are not good people to talk to in that pool, your ad did not work. Really.

Waiting and hoping it will get better is not a useful recruiting strategy.

When a hiring manager has really high standards there is often a business imperative for that need. Once we understand that need, their expectation suddenly seems reasonable. When a hiring manager insists on finding candidates with an uncommon set of attributes, their search will simply cost a bit more or take a bit longer. The manager’s request is not unreasonable–it is simply a trade-off. We tell the manager “This kind of skills can be found quickly and inexpensively, but that set of skills takes longer, costs more and is less predictable. Which approach would you prefer?”  The hiring manager simply has a choice. (Of course, it takes some market knowledge to be able to give this advice.)

Perhaps the most common recruiting trade-off is salary–the manager with “champagne tastes on a beer budget.” When they say “I need a superstar” but their salary budget is just average, or when they say “I want someone good” but their salary budget is below average … then what?

When it comes to salary trade-offs, I’ve learned that “showing” works far better than “telling.” When a manager’s expectations are not aligned with job market realities, I don’t spend much time telling them about salary surveys–it’s far more effective to show them candidates. They need to see what they get for their money. “Here is a superstar who is 20% above your target salary. And here is someone right within the target salary, but they lack this critical skill you wanted. And here is someone below the target salary, but you will need to invest a lot of your time to bring them up to speed.”  Even the most stubborn managers become reasonable when they can see candidates side-by-side. “Showing” gives them actionable information. Just talking about salary ranges never brings that level of clarity.

When a recruiter is complaining, it’s often because they allowed themselves to get boxed in to fighting against job market realities. Recruiters don’t define the job market–they navigate within it. If you consistently pay below the market rate, you’ll probably have high turnover. If you demand superstar performance levels, you’ll probably need to pay a premium rate. If you demand uncommon skills, your searches will require more time and effort. That’s just reality.

A recruiter’s job is to be the expert on job market realities. The hiring manager’s job is to drive business outcomes. When a recruiter defers to the hiring manager’s (often outdated) perception of the market, they cause the very problems that they later complain about.

For more on this topic, see:
Are you Hiring to Fit the Budget or Hiring to Fit the Job?

and

How Corporate Recruiting Budgets are Wasted