Rock Stars, Glory Seekers, and Unicorns

Are you frustrated in facing a really complex problem?  Have all your attempts to solve it failed?  That is precisely when you must resist the temptation to hire a “rock star” or savior – someone who can magically solve all your problems simultaneously.   I often see companies who want someone to come in, understand a complex situation, create a strategy to solve it, then execute the strategy singlehandedly, then when it succeeds, hire a team to build on that success.  One magical person who takes all the risk, possesses all the knowledge, has a wide range of incredibly diverse skills, and gets results without rocking the boat, causing trouble or needing much help from anyone else in the firm.  They want a unicorn - a mythical creature that lives only in their mind’s eye.

Brandon Watson wrote a wonderful post “Under No Circumstances Should You Believe That You Need to Hire “Rock Stars.”  His point?  “You don’t need to hire the best employees, just the right ones.”  Brandon puts it this way:

“Hiring rock stars …  is inviting trouble because they are likely to be glory seekers who are thinking about their own personal rewards, and less likely to be thinking about the team.” 

(By the way, for more perspective on the hidden downside of hiring “rock stars” read BusinessWeek’s “Why Jerks are Bad Decision Makers“ profiling ex-luminaries like Bernie Madoff, Lehman Brother’s Dick Fuld,  AIG’s Joe Cassano, and Bear Stearns’ Jimmy Cayne).

So, if you want to lower your risk and increase your ability to solve complex problems, instead of trying to hire a unicorn/rock star, instead build a team of top performers - make sure every single job in your company is filled with a top performer.   Do that, and no rock star (with their toadying entourage of mediocre performers) will ever be able to compete with you.  So this begs the question of what, exactly,  is a top performer?  

“A top performer is someone who is capable of, and interested in, driving the business results you need – someone who will take responsibility for getting results within the norms of your company culture.”

So, now let’s come back to how, instead of hiring a rock star, you might go about solving your frustratingly complex problem, using your team of top performers.  Working together, one person might provide the context and institutional knowledge of the problem, another might develop the strategy, another might play the skeptic – challenging assumptions and flawed reasoning, another might focus on execution, and another might work on hiring the team and providing the project management oversight needed.   In short it probably takes the talents of several people … and that is a good thing.  Because the future is only going to move faster and be more complex than anything we have seen so far – and whatever problems you are facing now will look easy compared to the problems that are yet to come.  So you’re going to need that team, trained,  primed, experienced,  and ready to tackle your next challenge, and the one after that.

The Leadership Acid Test

By now, every sentient CEO knows this is the time for bold action, for innovation, for challenging old assumptions and demonstrating leadership.  While many CEOs relish that challenge, few small businesses actually have the kind of management team that can really support innovation. 

Innovation simply demands a very different kind of leadership than the ”caretaker” leaders found in many smaller organizations. So how do you know if your team is up to the challenge?   Don’t listen to what they say – everybody is talking the innovation game now.   As my old boss, Steve Ettridge used to say… “turn off the sound and look at the picture.”

Here is my leadership acid test:  Is your management team taking bold, innovative action in the face of the economic downturn?  Are they measuring performance, holding each other accountable, and humbly adjusting course as they find (and tell you about) mistakes?

Or are they blaming circumstances, battling internally, and jockeying for position?  Look at your grapevine, are rumors increasing?   Are people knocking on your door to ask about their careers?  Do you feel like you are choking on increased gossip, fear, blame and paralysis?

Let’s be honest, nobody knows exactly what to do right now.  Nobody has perfect information.  But by now, most organizations are mobilized and taking action.   Some will succeed, many will fail.  

I see organizations sorting themselves into two tribes.  The first tribe is the cohesive, well managed innovators.  They are cutting fat carefully, and directing time and money into the future initiatives with the most promise.

The second tribe is the circular firing squad.  Slashing the good right along with the bad, at war internally, and they will probably not survive the downturn to emerge as a viable entity.

Here are the signs of a cohesive, innovative leadership team:

• Your team regularly challenges your thinking, makes you a bit uncomfortable, tests your assumptions and suggests new ways of looking at old problems. When you share a new idea, it is greeted with enthusiasm and “Hey, that could work if…”  instead of “That will never work, I don’t have time, or I don’t have a budget for that” or worse, people SAY they will take action, but do not.
• Your management team has specific, measurable, metrics to monitor their results and each individual on their team knows exactly what is expected of them.  People “own” their mistakes and failures and team help each other but also hold each other accountable for results.  Information is shared, everyone knows what is going on – even bad news is shared openly.
• You see an increased cohesion in the team – pulling together, and setting aside petty grievances, celebrating small victories.
• You are frequently surprised to hear of their decisions and results – they did not talk about doing it, they just quietly set about doing it.

And here are the symptoms of a circular-firing-squad leadership team:

• Your managers do not have firsthand knowledge of the issues your customers are experiencing. 
• Your managers come up with ”ideas” but rarely prioritize and take committed action on the few things that really matter.  Everyone is an expert in what won’t work, but nobody sticks their neck out for an idea that might work.  Meetings are unproductive talk-fests.
• Your managers are surprised by fairly predictable external events and worse, did not have a contingency plan for dealing with those surprises.  (Hope is not a strategy)   Communication is often poor and decisions made hastily.  Externally their actions look erratic, irrational and unfair. 
• Your managers do not have a firm grasp of the metrics that predict future performance.   They do not have “trigger points” identified to take action.  (“If sales fall below X we need to layoff 3 people”)
• Problems land on your desk without any hard analysis or suggested action plans.  People whine about problems without taking ownership for getting results despite the obstacles.  You feel like you need to make too many decisions “below your pay grade.”
• Most telling – you feel like you cannot trust their judgment.

If you have the circular-firing-sqaud team, you need to admit that you hired most of these people, and you let their performance deteriorate into what you have right now.  Now all you have is false promises, delay, failure, excuses, blame, and really poor information to make critical decisions. 

Instead of having a team who can innovate their way out of the downturn, all you can do is pray for the end - you cannnot outperform the market – in fact you will probably be viewed as a meal ticket by your better organized competitors.

Why Innovation Matters

Do more with less – recessionary words to live by.  Of course, that’s nothing new for small and midsize organizations.  When times are good, costs tend to creep up a bit, in lean times you cut back a bit.   So what is the smart money doing right now?  The really smart organizations are cutting costs through innovation, and not simply cutting costs.  And while those phrases may sound similar, they are the difference between lightning and lightning bug. 

I work with a lot of entrepreneurs, so you might notice that I reference innovation frequently in my posts.  So what are some innovative ways to cut costs?   For one, I’m seeing a renewed interest in outsourced services as companies work to turn fixed costs into variable costs.   Where it once made sense to hire an IT manager to support your growing staff, it might make more sense now to outsource IT support to an external vendor.  Where you once might hire an HR Manager, today you consider outsourcing HR instead.  Companies everywhere are reexamining old assumptions, revisiting old ways of doing things – open to new ideas.  They are innovating.

Business to Business (B2B) purchasers “want it fast, right, cheap and easy” (which is on the path toward the mantra of our age – “perfect, free and now”).  Innovation expert Stephen Shapiro calls this the Innovation Bell Curve.  Value Brands with good quality are displacing mid-market brands. 

In recessions, lower cost competitors often earn greater profits.  Wal-mart grows, but luxury brands are hurting – even discounter Target is taking a hit as consumers pull back on unnecessary spending.    McDonalds is doing just fine as people trade down from more expensive restaurants.  Wal-mart and McDonalds are not slashing costs and staff to survive, they are already designed to make a profit at a lower price point.

To speak from my own experience, Staffing Advisors is an innovative low cost alternative to traditional search firms – the Southwest Airlines of Staffing – we are built to make a profit at about a third the cost of a traditional search firm.  Consequently we are very busy right now, as busy as we were last year.   Similar to Southwest, our competitive advantage is “fast, right, cheap and easy.”   Even in a downturn there is still an enormous need for third party recruiters  – staffing is a multibillion dollar industry.

By innovating – literally inventing a new way to deliver search services – we have been able to keep costs low, serving clients who want an alternative to using a full-fee agency (and today that’s almost everyone) but more importantly, we are also able to serve companies who would never consider using a full-fee search firm – a massive and untapped market for search services.    In fact, more than half of our clients have never used a full-fee search firm, even in good times.

Our more expensive competitors  – because they did not innovate  - cannot compete in our markets and cannot cut their prices to our levels and still survive – their process is simply not designed to work that way.  

So yeah, innovation matters.  As Steve Shapiro says:  

“Exercise grows muscle while burning fat.  Innovation is exercise for business.  It helps grow the organization while also enabling cost efficiencies.”

So tell me, what are you doing in your job and in your organization to innovate your way out of this recession?

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?

Rethinking Capitalism – Why Ideals are the New Business Models

In previous posts (Why Won’t Your People Step Up?) we’ve looked back at the failure of old-school management strategies to keep pace with the nature of work today.   We’ve also looked at what Jim Collins has to say about managing in a time of turbulence.  Now it’s time to look far forward, and for that we turn to Umar Haque, who provocatively suggests that Ideals are the New Business Models.

So what will replace the current management philosophies that mostly evolved during the industrial revolution?  What will put us back on the path to prosperity?  What organizing principle will usher in the next era of global growth?  What business models will create real, sustainable value in our interactive era?  

What organizing principles are Google, Apple, Nintendo, Wikipedia, Threadless, Etsy, and Fair Trade using?  What are the new ways of organizing people and work?  

Mr. Haque suggests that today’s radical innovators are not competing by industrial era rules.  Instead they are driven by ideals, and these ideals disrupt and reshape industries.  If you want a glimpse of the future, set aside some time to watch his presentation.   Most presentations bore me, but this one is worth it.   And while not perfect, his model suggests some principles we can all use to challenge our thinking.   He certainly offers some fresh insight into how we organize our work.  I applaud the effort. Umair Haque @ Daytona Sessions vol. 2 – Constructive Capitalism from Daytona Sessions on Vimeo.

No time to watch the video?  Then you can click the link below for a quick read about Omar’s four pillars for smart growth. 

Moving HR From Tactical to Strategic

You can tell who is swimming naked when the tide goes out.   CEOs who have chosen to make their HR department purely tactical are swimming naked and getting crushed right now – they have only blunt instruments at their disposal – hiring freeze, pay freeze, layoff.  (Freezing is not a smart way to survive a threat).    A purely tactical HR department does a competent and efficient job with compliance and legal issues, they serve employees and companies with increasingly efficient HR services…and by and large, are uninvolved with major business decisions. 

 John Sullivan ranted that he “can’t think of another time where human resources as a profession appeared to be floundering to the point where it’s embarrassing itself.”  Where was the workforce plan?   He sagely makes the point that business is cyclical, why not plan for that?  But when I think of the small and midsize employer market, I have a hard time placing the blame squarely on HR.   There is also a lack of vision on the part of the CEO.

CEOs who have demanded (and invested in)  strategic HR support are getting far better results.  They get worthy advice on major decisions.  They can use a scalpel to cut low impact items and wisely reallocate scarce resources to the things that matter – the things that have leverage – gaining a multiplier effect.  They avoid the idiocy of across the board freezes and instead focus on smart ACTIONS that drive business results.  They are avoiding  the predictable problems that come from guiding people through change, so productivity soars, and results come faster. 

For a brilliant distinction between tactical vs strategic HR, read John Sumser’s post today “Five Things HR Can Do.”  It’s brief, practical, clear and concrete.   I won’t summarize or explain it, you deserve to read the original.  (If you are an HR pro, please follow his instructions, he’s exactly right).

There has been quite a dustup over the latest round of HR bashing  – “Why the CFO Can’t Trust HR“   - this is counterproductive.   It’s not about who is competent and who is not, or who should trust whom.  It’s this:   

If you run an organization, and you must make a hard decision that involves people, do you have a strategic advisor for that?  If you don’t, you are a fool.  Go get one.

In the small and midsize employer market, I think many CEOs simply don’t realize that a significant part of their problems are really HR problems and a competent HR strategist could help them every bit as much as a competent CFO can help.

How HR Can Build Trust with the CFO

Here it comes again.   Two years ago, Fast Company magazine rocked the HR world with it’s cover story on “Why We Hate HR.”  It became required reading for HR professionals.  Courses were developed to deal with it (but not very effectively).   Well, the new game is “Why the CFO Does Not Trust HR.”    It won’t be hard to learn the rules this time, the argument is not much different than the one Fast Company made.

The instigator this time is Rutgers University professor Richard Beatty, author of the new book ”The Differentiated Workforce.”   In a recent presentation to a CFO group, he stated that “typical human resources activities have no relevance to an organization’s success.”    You can read more about the presentation here, but some of his arguments included:

1. Job satisfaction is irrelevant to financial returns
2. Time, money and training is wasted on poor performers
3. Being an employer of choice is “silly”
4. And finally, “the language of organizations is numbers and HR isn’t very good at data analytics.”   Beatty went on to say that most HR pros “don’t think like business people.” 

Frankly I found the arguments provocative, but most were relatively weak.  He picked on employee satisfaction rather than employee engagement for example.  (Indeed, reported job satisfaction is not correlated to performance, but employee engagement has proven value).   Naturally, the blogosphere lit up with commentary.  Trusty, reliable ERE posted something quickly, that community does not sit idly by when provoked.  The guy who peers into our future, John Sumser,  stepped back and put it all in perspective with a posting called ”Here Comes the Train” – suggesting that this argument will hit HR with all the force of the Fast Company article two years ago.    Admittedly while most of the conversation is about large companies, the very same issues apply to small and midsize firms.

So after reviewing the back and forth, I recommend you read the post from Jim Holincheck at Gartner.  His post, called “CFO’s Should Trust HR, but Do Have Reasons to Be Wary“  dissects the less compelling arguments Professor Beatty made, but notably, he left standing the most damning argument.   Holincheck notes that HR pros are generally not strong at business acumen and speaking the language of numbers.  He concludes his analysis with this:

The CEO and CFO  “. . . should partner with the HR leadership to make sure that it is making intelligent decisions about workforce composition and investments.  However, too few HR leaders are stepping up to the plate to build the necessary competence in the HR organization.  This has to change.  Investments in talent management applications and social software alone will not get us there (not even close).  Workforce planning and analytics are the “secret sauce” to get the value from these investments.”

So just as a refresher, in the Fast Company article 2 years ago, the complaint was that HR pros:

1. Lack business acumen
2. Pursue efficiency instead of value
3. Pursue standardization and uniformity to reduce exposure to lawsuits, while employee needs are more varied
4. Do not understand the CEO perspective (see #1) 

So, if you work in HR, and you ever want to be trusted (or even to be listened to) it’s time for an intense focus on developing your business acumen.   It’s time to understand and speak the language of the CEO and CFO and make hard business decisions based on “the language of numbers.”  

Here is how you will know you’ve succeeded.    Don’t ever mention HR programs without first linking them to a strategically desirable business result – then be willing to be held accountable to the business result you promised – just like sales, just like accounting, just like every other department.  Except your job is harder, because your success involves the people in all those departments . . .because  HR underpins every single part of the organization.  

Daunting?  Yes.  Achievable?  Definitely.  Rewarding?  Absolutely.

How to Hire People Who Thrive in Downturns

Have you noticed that some of your employees are less productive, just when you need them most?  Some people are frozen in place from fear, while others are innovating, trying new things and challenging the status quo.  Harvard Business Review posted an article on the need for flexible, positive leadership, quoting futurist Alvin Toffler.   

 ”The illiterate of the twenty-first century will not be those who cannot read and write, but those who cannot learn, unlearn and relearn.” 

The path forward is not clear.  We need innovation to survive and thrive.  And innovation demands that we all develop our patience and persistence, while our leaders must demonstrate optimism and enthusiasm. This is the time to step up and take risks, making plenty of mistakes along the way. 

If your key people do not have the skills to thrive in this market, it might be trade-in time. In an earlier post, I mentioned how to hire for resilience - and patience, persistence, optimism and enthusiasm are essential to resilience.   I’ve heard it said that you can’t trust someone who has not failed at something, learned and bounced back.

Look around you, do you see resilience and indomitable spirit or just people trying to look good by avoiding mistakes and placing blame on external factors?

Where the Jobs Are . . .and Other Fallacies

I’m looking forward to an onslaught of news articles about how the stimulus package will create jobs in different industries.  And I will dutifully devour that material and breathlessly report back to you on how it will affect the DC region.  And I will be wrong in ways I cannot even imagine.  As Yogi Berra once said, “It’s tough to make predictions, especially about the future.”   (He’s a national treasure, that guy).

So Yogi’s comment is my first disclaimer as I share with you a snazzy state by state interactive map of economic forecasts, but before you have fun with the interactive forecasts, let’s first review the forecasts made LAST year by BusinessWeek’s impressive panel of notable economists.  In December of 2007:

“The economy won’t sink into a recession next year. That’s the overwhelming view among the 54 economists in BusinessWeek’s annual economic outlook survey.”

OK, so 14 months ago, literally 2 of 54 economists actually predicted this recession we are in.   And these are the guys who are telling us how long it will last?

If you still believe in economic forecasts, just slog through Black Swan, and your misplaced trust in economic forecasts will be forever put to rest.  

This is not to say I am pessimistic, far from it.  I just have no confidence that anyone can accurately forecast the future. So we all need to be ready for an unpredictable future, which very few firms are doing.  Being ready does not just mean cutting costs, it means challenging old ways of thinking and reallocating resources to support your future growth.  It means asking new questions about the business.  “Where are our strongest growth prospects?  Do we have the right team in place to capitalize on those opportunities?  What costs can we eliminate if we try a different approach?  Who is effectively driving results for me right now, and who is just lost in the turbulence?”  (Are you a CEO?  Click here.  Are you a recruiter? Click here) 

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?

What Exactly is a Top Performer?

I cringe every time a hiring executive tells me they use Topgrading.  My reaction is visceral when people mention “Hiring A Players.”  (So naturally I cheered when Harvard Business Review published the far more sensible “Let’s Hear it for B Players.”)

I acknowledge that Brad Smart is a very credentialed guy and he has built quite a dynasty on the Topgrading concept -  I just never see it applied intelligently in small and midsize enterprises.   Never.  (Remember,  I work hard to avoid using absolutes in sentences, so I must be adamant about this).   

OK, so I also freely admit that I gave up and only made it halfway through the book (worst beach read ever).  I just find Topgrading too rigid and impractical.  And no way will most managers first learn the interview techniques and then spend 3 hours in a CIDS interrogation, I mean interview. . . no, I mean interrogation.

What I object to most about Top Grading is the vague definition of an “A Player” -  “the top 10% of available talent for the compensation level” -  like anyone could possibly determine who exactly qualifies.  But this is what really irks me; even if you did figure it out, it would NOT help you hire correctly.

One thing I know for certain:  top performance in one environment does not necessarily predict top performance in another.  Simply hiring Olympic athletes or poaching your competitor’s top person guarantees you nothing.  Nothing.

So rather than filling your company with mythical “A Players”  here is strategy that will dramatically improve both your results and the quality of your life: 

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:

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.