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.

Is November a Good Time to be Recruiting?

We’re getting a lot of calls right now from potential new clients who have been recruiting on their own since the summertime. In past years, we got those calls in mid-September, then as the economy worsened, we got the calls in October. But this year, we’re getting them in November. It’s an economic barometer–I call it the “How long can you suffer until you ask for help?” indicator.

But in November, when people call, they often ask me a question. ”Is this a good time to be recruiting?” People are worried that they frittered away the great recruiting months of September and October.

Our ability to get the attention of great candidates varies depending on the time of year. (We can always find someone who is willing to talk with us.) So the real question is “How long will it take to put together a robust slate of highly qualified candidates?” And the holiday season adds some delays and complexities to that. It brings to mind a quote attributed to General Omar Bradley:

“Amateurs talk about strategy, dilettantes talk about tactics, and professionals talk about logistics”

So on to the logistics. On the 2011 calendar, there are 4 beautiful weeks of recruiting left–from November 14th to the 18th, and from November 28th through December 16th.  Outside of that, you will have a very difficult time attracting the attention of currently employed people.

So if you really want to get someone on board in early January, don’t dabble with just running ads and hoping for luck. This is the time to aggressively reach out, and to move quickly to interview anyone with potential. The recruiting window is closing fast.

But if something happens, and you end up frittering away the next few weeks, promise yourself that you will stop suffering this year. Make your plans in mid-December to be recruiting heavily in early January–which is the best time to recruit all year. At least then you can get someone started in mid-February.

With Unemployment so High, Why Pay a Search Fee?

Bread Line Sculpture at the FDR Memorial

People who are unfamilar with the DC job market often ask why anyone would pay a search fee to find someone when unemployment is so high.

It’s a reasonable question, and saying “Good people are still hard to find” seems somehow incomplete as an answer.  So if you need to answer the question more authoritatively, here are the facts. 

While the national unemployment rate remains stubbornly high, the effect of the economic downturn is being felt very unevenly.  Some cities have much lower unemployment than others, some industry sectors are faring better than others, and unemployment rates vary dramatically depending on your level of education. 

So, in our typical searches we are looking for a candidate who lives in the Washington area, currently works in professional services (associations, nonprofit leadership, government contractors, or similar kinds of work), and most of our searches require someone who has a college degree.

Looking first at cities –local unemployment rates vary from 4% to 28%.  The Baltimore/Washington area has remained one of the strongest big city job markets in the country throughout the recession.   Our regional unemployment rates are currently around 6% and northern Virginia is even lower, hovering around 4.5%.  (If you recall, 5% used to be considered by economists to be “full employment” – where everyone who wanted a job had one).  (Sources:  http://bls.gov/web/metro/laummtrk.htm  and  http://policy-cra.gmu.edu/data/UnemploymentRate.pdf

But when you are recruiting, the real question is who you are competing with for the same candidate – are you the only employer in town with a good job to offer, are does everyone else in town want to hire the same candidate? So a useful way to visualize the difference between cities is this “Job Market Competition” chart from Indeed – a job board aggregator.  They list the number of unemployed people in a city relative to the number of job postings, and again, you see Washington/Baltimore among the most competitive job markets in the country.  Where a city like Miami may have 5 unemployed people for every 1 job posting, Washington has never varied from a 1 to 1 ratio throughout the entire downturn.

Next, looking at industry sectors  – The Washington area Professional and Business Services sector is our fastest growing market, adding more jobs during the past year than any other segment of our local economy.  (Source:  http://policy-cra.gmu.edu/data/JobChangebySector_Metro.pdf).  People who work in the professional services sector are among the most employed people in the region, and their job opportunities are expanding. 

Finally, looking next at the candidate population – the national unemployment rate varies from 4.4% for people with a college degree to 14% for people who have not completed high school.  So again, our ideal candidate is statistically, least likely to be unemployed. (Source:  http://www.bls.gov/news.release/empsit.t04.htm. For an even more graphic illustration of the disparity between education levels see this New York Times interactive model: http://www.nytimes.com/interactive/2009/11/06/business/economy/unemployment-lines.html)

In summary, we are competing for candidates in the hottest major job market in the country, in the fastest growing sector of the local economy, for people who statistically have the lowest level of unemployment.

If you do not engage a search firm, and do not have a skilled recruiter on staff, your primary way to reach candidates is to run ads on job boards - competing with other organizations for the very few qualified local people who are actually checking the job boards.  This approach often drags on for months, with no certainty of reaching a successful conclusion.  

Instead, when you engage a search firm, hundreds of qualified, local candidates are contacted immediately.  Many of the people contacted would never have heard about the opportunity otherwise.  With a robust outreach strategy, you can usually have someone hired within one or two months, and the entire cost of the search can be paid for with the salary you saved by having the position vacant for a couple months.

That’s why we’ve never been busier, even though the national unemployment rate is still so high.

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.

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.

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!

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?

More Jobs in Washington DC

When most media outlets converge on a single story line – like layoffs -  it’s easy to overlook the other stories.  So, to give some balance to the pack journalism angle about the terrible economy, here are a few recent news stories and how they might positively affect job creation in Washington DC.

From the Washington Post:  If Spending is Swift, Oversight May Suffer.   How will the economic stimulus plan affect hiring in our area?  Well, for one thing, it takes ALOT of people to oversee billions of dollars in spending.  Excerpts from the article:

“Since 2000, procurement spending has soared about 155 percent to almost $532 billion while the growth in the acquisition workforce has fallen far short, rising about 10 percent. . . The government’s watchdog infrastructure, including inspectors general, also will face new challenges. The House and Senate bills each include about $200 million in additional funding for inspectors general. But some observers say that may be insufficient given the demands.”

From CNBC:  FDIC to run “Bad Bank” – FDIC Chairwoman Sheila Bair has strong support for a “bad bank” which will buy up the so-called “toxic assets” which are clogging the banking system.    The way I see it, a bad bank = good jobs, right here in Washington for all the people will be needed to run it.  Again, it takes lots of smart people to spend that kind of money wisely.

From Reuters:  Mortgage Rescue Plan  – The Obama administration is designing a mortgage rescue program that would ask Fannie Mae and Freddie Mac to ease payments to thousands of borrowers.  And hey, aren’t they both headquartered right here in our region?

From The Washington Business Journal: Stimulus Offers $6B Green Boost to Federal Buildings - the wounded construction market could certainly use a federal bailout, and they’ll get it in the proposed stimulus plan.  But there will also be jobs created for oversight of the program.  Excerpt from the article:

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:

Center of Gravity Tips Toward DC

Washington’s power and influence is growing as a direct result of the economic crisis.  And talented people and high paying jobs will surely follow. (See my previous posts about The Great Talent Migration).  

The Washington Post ran an editorial this weekend - ”The Height of Power” – outlining how Washington is emerging as “the undisputed center of national power and influence.”    This is not so much due to our inherent greatness (as much as I love this area)  but rather it is due to the collapse of other centers of power such as New York.  The author points to our region’s well educated workforce, relatively low unemployment, and relatively high household income.  But the real power in Washington right now is the federal government’s power to print money and distribute it.  As the editorial puts it:

“All this is bad news for much of America, but it should mean great business for many residents of greater Washington. . . Office buildings in the District and surrounding environs can now expect a new rush of tenants, both from the private sector and the soon-to-be-expanding federal bureaucracies.”

All month I’ve been talking about the “hiring blitz” at the FDIC, at Treasury, at the State Department, and at the FBI.  And more will surely follow.   Just follow the money.

Where the Jobs Are…NOT

“Green collar” jobs, infrastructure investments, financial bailouts…just exactly where will the new jobs come from?  In the Washington region – where the federal government accounts for almost a third of our total economy - we benefit when when Treasury struggles to fill jobs to support the $700B rescue package,  we benefit when the  FDIC hires 1400 new bank examiners,  and when the State Department adds 1,500 positions, and when the FBI starts its Hiring Blitz.  This is why Dr. Fuller reported at the GMU Economic Conference that our local economy still has a “worker shortage” and is still ”importing” people from other areas to fill our jobs.  I’ve been calling it The Great Talent Migration, and it appears it will only increase in 2009 as massive government spending offsets job declines in other areas like construction.  in 2009, DC is projected to gain high paying jobs, not lose them.

Our search practice is thriving.  Maybe it’s because we get better results for far less money than traditional firms, but mostly it’s because hiring is still a challenge for most organizations.  Across the region we have small firms who are expanding, association clients filling key roles in education, certification, and member services.   We’re filling jobs in marketing, nonprofit development, finance and accounting, IT, and HR.   And more and more of our best candidates are coming from outside the region.

So is the “green revolution” overblown?  Well, it depends what you call a green job.   According to a recent analysis done for the DC Office of Planning, the so called “green collar” jobs are often just the same construction workers who were being laid off  in the downturn.  But I think their survey placed too much emphasis on just the green building movement, and not other green jobs. Commenting on the study findings, GMU economist Stephen Fuller observed that the green jobs thing is “substantially oversold.”