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.

How to Hire Within Your Salary Budget

As a manager, you have the financial responsibility to hire the very best person you can, given the salary budget you have.   But sometimes you can’t find the person you want to hire within your salary budget.   What do you do then?  (First, be sure to read my previous post about hiring to fit the budget instead of hiring to fit the job).   

Before you overpay for your next hire, or underpay and waste salary dollars on someone unqualified, you need to first understand whether you have a recruiting problem (you have not yet seen the right candidates) or a salary budget problem (you have seen plenty of candidates, but simply cannot afford to hire the right ones).  

If you think you have a salary budget problem, when you really have a recruiting problem, you will overpay for skills, probably hire someone too senior for your job and throw your salary budget out of whack.  In casual conversation this recruiting problem is often presented as a salary problem (as in “we had to stretch our budget, because Frank was the only qualified person we interviewed.”)

If you think you have a recruiting problem, but really have a salary problem, you will interview endlessly and never end up hiring someone qualified.  In casual conversation this salary problem is presented as a recruiting problem (as in “we just need to see a few more people”).   A salary budget problem left uncorrected forces you to underpay relative to the market – which first leads to hiring low performers and then leads to turnover problems as your people leave you to make more money elsewhere.  

So how do you know whether your salary budget is unrealistic or whether you just have a recruiting problem? 

In my experience, conducting hundreds of executive searches across all functional areas, here are a few “rules of thumb” that will serve you well:

• Have you spoken with, and learned the salary of, at least 6 qualified people who have experience similar to what you need?  If not, you definitely have a recruiting problem – you simply don’t have enough information to know if your salary is unrealistic yet.  (In counting your six people, do not count people who have progressed beyond your position but are “willing to step back.”   And don’t count people who aspire to your position, but have not yet “stepped up” to prove their ability in a similar organization). 
• OK, if you have spoken to at least 6 people who are well qualified to do your job, were at least 5 of them interested in the position?  If most of your candidate pool was not interested in your position, you still have a recruiting problem – you simply don’t have the right candidate pool.
• OK, if you have at least 5 people who are qualified to handle your job, and interested in taking your job, you will probably find that at least 3 of them are earning roughly the same salary (give or take 5%).   Typically in your group of qualified candidates, you can ignore the lowest salary, ignore the highest salary, and find your “sweet spot” right in the middle.  That sweet spot is the “market rate” – ignore it at your peril.    You are welcome to look at several salary surveys, but they give you nothing but job title to help you make a comparison to your job opening … which is hardly scientific.   Hey, you can talk to anyone you want, or read anything you want - the hard cold reality is that when you find at least 3 living, breathing, qualified people with similar skills and abilities who are all earning roughly similar salaries … THAT is what you need to pay your new hires.   End of story.

 So when you know you have a salary problem, stop interviewing, gather up that salary information from all those qualified people you interviewed, muster up some courage, and go make a compelling case to your leadership team to raise the salary for the position.  Be absolutely sure you have the salary budget you need, or else ask your managers to let you off the hook for all those goals you are accountable for.   Not asking for what you need is not doing your job.

I’ll tell you what some people do when they have a salary problem. They keep looking.  And looking.  And looking.  Hoping to get lucky.  Hoping to find someone willing to accept less than fair market rate for their skills.   That is what I call the “ignoring reality” approach.   And here is how it plays out: first your job is vacant a long time, followed by a brief period of mediocre performance by someone underpaid, soon followed a vacancy when the person discovers they can make more money elsewhere and quits.   Because nothing is more expensive than hiring cheap employees.

Are You Hiring to Fit the Budget or Hiring to Fit the Job?

If you work in a small firm, many of your new hires are one-of-a-kind.  They are your only HR person, or your only IT manager, or your only Development Officer.  So when it’s time to hire someone new, you are often unfamiliar with what to pay, or what the “going rate” is for those skills.  And there is nothing wrong with not knowing.  Not knowing is actually a good thing – you can be more open minded.

But sadly, many people are really uncomfortable with that uncertainty.   Perhaps they need to budget for a position, or justify it to their boss.  Perhaps they are the boss and they feel like they must dictate salary to control costs.  So in order to feel more certain, hiring managers turn to salary surveys, or worse, they ask a few other small firms what they are paying, or even worse they assume they can pay what their last employee earned in that position (like the one who failed, or the one who quit).  But worst of all are the people who ignore the reality of the job market entirely and say “I budgeted $60,000, so let’s get the best possible person we can for that amount.”

All of these are bad ideas.  OK, some of these are really bad ideas.  They all force you into hiring to fit the (arbitrarily determined) budget, instead of hiring the right people to fit the job, and then figuring out how to make the budget work.  Like the aspiring young snorkeler in the picture, hiring to fit the budget is a bass ackwards hiring practice.  Here’s why:

The purpose of a budget is to control costs.  High performing people are a great bargain, it’s the underperformers who are expensive.  When you limit your interviewing to consider only those people who fit your budget, who do you think you are most likely to exclude?  The high performers.  And who are you most likely to include?  The underperformers. Funny how that whole cost control thing can backfire on you.

Salary surveys tell you what some small sample size of average people in that job title get paid – as if everyone with the same title has precisely the skills you need…absurd.  The same problems occur when you ask around.  If all you ask is “What do you pay your IT Manager?”  the answer is always meaningless.  But it’s worse than meaningless, because you probably felt like you just learned something when in reality, you really did not.  

Admittedly, it’s no easy task to keep salaries equitable for your employees.  And overpaying new hires can be demoralizing to loyal current employees.  And yet, and yet, and yet…when you are hiring for a critical position and are not sure what to pay, you owe it to yourself go about it in this order:

• First, decide what skills and abilities you need to achieve the results you want to achieve.
• Second, go recruit people who have all those skills and abilities, who actually want to work at your firm.  
• Third, interview people across the spectrum of skills, experience and salary levels.  If you recruit a robust candidate pool, you will almost always find a “sweet spot” – a salary level where most of the good people tend to cluster.  If the best qualified people are clustered around $120 – 130k, but your salary budget is $115, you really owe it to yourself to understand this before proceeding.  When you ignore this market reality and hire the people who fit the budget instead of hiring people who fit the job you will end up spending far more on turnover than you save on budget.  Lower performers also consume more training and management time, and are less productive, hardly a bargain for your budget.  
• Fourth, having looked at people with a wide range of skills, decide what level of skill is worth paying for to achieve the business results you require.  
• Fifth, find the money to make them a job offer at a fair market rate.  Don’t lowball your job offers to fit budget – if you want to keep great people, pay fairly.
• Sixth, if in the search process you learned that the current market rate is higher than what you pay your other people, either bring their salaries up to market, or plan for more turnover.

Great people who drive business results are always worth what you pay them.

When Good People Behave Badly

Today’s guest post is by Pat Nichols,  who does business as Transition Leadership International, LLC. He serves civic sector organizations facing major strategic transitions–start-ups, turnarounds, mergers etc., as interim CEO or as a consultant.

These are tumultuous time and good people often behave badly in times of turmoil.  Some engage in back stabbing, rationalizing that someone else is about to stab them.  Some exclude key people on important issues because those others “would only obstruct progress.”  Some conduct whispering campaigns.  Some use anger as a weapon.  Almost universally, they impute the worst possible motives to one another with the claim that only a villain would behave in the way those others do.

The brief reflections here are based upon 14 years of leading nonprofit/NGO turnarounds, primarily as interim CEO. 

When a leader takes responsibility for calming the roiled seas and charting a new course, it seems to me s/he will derive great advantage from several key attributes and behaviors:

Listening:  People have to tell their tales, in part to justify behavior that they know is less than exemplary.  They need to vent and, then, to create new, better stories.

Calm:  People will try to draw the leader’s anxiety to the level of their own, as a sort of emotional vindication.  By exuding calm the leader can do much to reduce the turmoil. 

Rule setting:  I find it useful to ask people to tell their stories in ways that don’t point fingers at others.  Most won’t be able to do it, but the request sets a tone and gives the leader a way of tamping things down when the rhetoric becomes too intense.

Selective affirmation:  This is right out of Psychology 101.  It seems to me the leader needs to affirm the emotions without affirming the conclusions [e.g., “That must have been very hurtful to you. I wonder how the other person perceived it.”] 

 Discouraging attribution of motives:  People often want to reinforce their positions by ascribing evil intent to their adversaries (e.g. “the only reason she would have done that was that she is after me.”  Once those motives take on an aura of truth any bad behavior on the speaker’s part becomes an act of virtue—because fighting evil is inherently virtuous.  So, I think it is important to directly, if gently, confront this.  (I try to use phrases like, “I understand why, seeing the facts as you do, you would come to that conclusion.  But, isn’t it possible that his motive was…). 

Trust:  It is important that the leader not jump to conclusions, that s/he assume that each person involved is both well meaning and reasonable. 

Mitigate risks:  That said, some people will prove that they don’t deserve the trust.  If most people think that Blackbeard is a cut throat there’s a pretty good chance he is.  So, though, both Blackbeard and the organization may benefit from trust, nonetheless, it would be wise to think about how cut throat behavior might damage the organization.  The leader can, then, be prepared in advance to deal with it.

Tie everything to mission and values:  Finally, and perhaps most importantly, people, in working, want to identify with a mission and a set of values.  In turmoil, lots of other values and emotions get in the way.  It seems to me the leader should be constantly puling conversations back to the mission and the core (or aspirational) values of the organization.  (e.g “I understand why you did that, but if we’re committed to a transparent and supportive workplace aren’t there other approaches available?”).

Almost everyone actually wants to behave honorably, in my experience.  However, in situations of turmoil the models and expectations often get distorted and doing the right thing actually comes to seem inconsistent with the organizational norms.  Thus, treating others well can seem too risky. Approaches like the ones above have been useful for me in trying to build a healthy organizational culture.

R U Digital or Do you Live in the “Real World?”

I’ve heard that it only takes about 40% of your productive capacity to keep the boss off your back.  So, if you are an employer and you want the REST of your employees’  productivity, you have to be more inspiring…like a Yahoo Community. 

A couple days ago, I mentioned an HBR article that discussed the need for management theory to evolve.   HBR threw down the gauntlet and made a good argument for why our concept of management needs to change, but they stopped short of suggesting exactly what to do.

Yesterday, Kris Dunn moved the ball forward a bit with a great post about “Why Your Company Needs to Think Like a Yahoo Community.”   Kris suggests that we employers use less command and control management and instead think more like an online community.  (Those communities get really smart people to engage and work for FREE after all).  Kris advocates a more modern approach to management, a “secret sauce” of “part praise, part visible scorecard, and part future career promise” for people who make a difference.  It’s a good start, a place to look for inspiration…and sadly, wholly divorced from the reality of many HR professionals and executives.  A recent study by the Human Capital Institute found that “hardly any” HR professionals (2%) have a deep understanding of how social networks, you know, actually work.

What fascinates me is the wide gulf between the social media adopters and the people who are still living in “the real world.”  Many “real world” people think Twitter is a waste of time, and perhaps it is.  But like it or not, social media will have an increasingly powerful impact on how work gets done.  Although some managers believe social interaction at work is a time waster, some studies show that social people are actually MORE productive.  In fairness, the study looked at people with both digital networks and face-to-face networks (and face-to-face networkers were more productive than digital, but BOTH outperformed the anti-social hermits).

As someone who built a pretty decent network of old-school, face-to-face connections (formerly called a rolodex) I really marvel at how many digerati are not well regarded in the “real world” and how many dinosaur “real world” people are (virtually) ignored by the digital folk.   Hmmm, it sounds like that (r)evolution in management theory might take a while.

How Important is Effective Recruiting, Really?

We’re working with a client to solve a problem with their talent pipeline.  They have a steady (if slightly unpredictable) need to find one or two very expensive, very “hard to find” people every month. 

I live to solve problems like this.   Ask me about FMLA or the tax implications of a Flexible Benefit plan and I’m utterly adrift.   But talk to me about a systemic recruiting problem and I’m all over it.   (If you are like me, your mind is already working on the problem and you are thinking of where to find pockets of candidates, thinking of what outreach strategies to use and figuring out how you might use various social media strategies to engage them in a conversation?  Ok, well, maybe that’s not you and just the voices in my head talking…)

Anyway, it’s a great gig.   The CEO totally “gets it.”   He knows that the candidate experience needs to be consistent from awareness building, through initial contact, through cultivation, through the entire recruiting process, through the offer/acceptance/onboarding process, through the performance management /compensation process, through the employee referral process.  One cohesive, authentic experience that conveys “You are important to us a person, you are important to our success, and your personal success is important to us.” 

When we get the recruiting strategy right, he wins.  Get it wrong he loses.  Because the right people are at the very center of his growth plans. 

The CEO knows his current uncertain, unpredictable talent pipeline means several (very bad) things to this firm long term:

• His first line managers are tempted to settle for mediocre people because the flow of good ones is so uncertain.  So senior managers have to watch hiring much more closely to avoid the mistakes that come from settling for Mr. Right Now, instead of Mr. Right.
• More time is wasted in the interview sequence because managers are currently choosing from the “best of the worst” instead of the best of the best.  
• Work piles up, deadlines get missed, teams get stressed and customer service suffers as positions go unfilled longer.
• Managers are very reluctant to manage performance tightly because everyone is so hard to replace.
• The sales team is not emboldened because “yes but how will we staff it?” lurks in the back of everyone’s mind.
• Teams are burdened with low performers, because, well, someone is better than no one right?  And loyal top performers pick up the slack without complaining…up to a point, and then they start to look around…and the death spiral of lowered expectations starts in earnest.
• Employee referrals are a tiny fraction of what they could be, because, nobody asked, and well, you don’t want your friends to be put off by a lousy, uncertain hiring process, and burdened with slacker teams now do you?
• Oh, and millions of dollars ride on the outcome. 

So yeah, my client and I both think effective recruiting is really important, and its’ importance is not diminished one iota during a recession.  Because great people never line up around the block to work for anyone.  Someone needs to know exactly who they are looking for and draw them into a conversation first.

An excellent framework for thinking about the recruiting pipeline  is Doug Davidoff’s recent post about The New Marketing Funnel.  While not written with recruiting in mind, I think it’s a great contribution to the ROI of Social Media debate. 

We HR blogniscenti love to debate active vs. passive job seekers, social media vs job boards, xraying Linkedin  using boolean searches, cold calling techniques, etc..  It’s a great education and a spirited debate, but for me, it’s only entertainment until I can apply that knowledge to solve a real world problem for a CEO who “gets it”  and have a transformational impact on the success of his firm.

Why Won’t Your People Step Up?

With increasing regularity, CEOs ask me the question “Why won’t my people step up to the plate?”  In troubled times, many executives feel suddenly alone and disappointed by the lackluster response of their key subordinates.  

So why is it that so many companies are filled with anxious people who are hesitant to take initiative or trust their own judgment? 

A provocative article in the February 2009 Harvard Business Review argues that the problem might not just be about your people.  Maybe your management strategies have not evolved to keep pace with the rapid pace of change and the increasing volatility in the world around us.  Frankly, I think HBR got it exactly right in this article.

Why do so many work environments stifle creativity, emphasizing continuity and past experience over change and new ways of thinking?  Why do many work environments lead to group-think and so few work environments encourage information sharing, risk taking and challenging of the status quo?   

Every day I see the powerful impact of culture and work environment on your ability to attract, retain and inspire your most talented employees.  As W. Edwards Deming observed “A bad system will beat a good person every time.”

 ”Modern” management theory was primarily developed by people born about the time of the Civil War ( Frederick Taylor and Henry Ford come to mind)  These management strategies were designed to get maximum productivity from semiskilled labor.   The focus was on control, efficiency and scale, and they worked well for an industrial economy.  But these command and control systems are wholly unsuited for the kind of work that is probably occurring in your office today. 

Your management structure, how you organize people and work, how you allocate resources, how you share information, how you give power to a limited group of people on the org chart - all those things you “grew up with” and learned from your previous managers –  may be precisely what is making your employees give up, shut down and wait for direction from above.  As enlightened as you think you are, your current management practices (and the people it attracted) may be threatening your ability to adapt to the turbulence in the market today. 

Today’s challenges are how to build a resilient organization that can adapt to dramatic changes, and how to inspire initiative, imagination and passion in workers.  The newer models of management will be unfamiliar, uncomfortable and might make you feel “out of control” so YOU must evolve in order to thrive.

So what are you doing to give power to your natural leaders – the people who mobilize others without formal authority?  How do you reduce fear and de-emphasize compliance -  encouraging people to voice their dissenting opinions?  How do you ensure that power and resources flow to the most competent people and don’t just become the domain of a box on the org chart?  How can you rely less on top-down supervision and give front line employees more ability to serve customers? 

Obviously there are no easy answers, but HBR argues it’s time to move past Management 1.0 into the next era of management.  I wholeheartedly agree.  

See these related posts for additional perspective:

 How to Hire People who Thrive in Turbulence

How to “Trade-in” Poor Performers for Top Performers

How Companies Turn Crisis into Opportunity

Topgrading for Small Companies? Still No

 Brad Smart, the author of Topgrading, wrote a very thoughtful reply to my recent post called “What Exactly is a Top Performer?”   I was pretty hard on Topgrading in my post and Brad intelligently rebutted my arguments in several areas, suggesting I read his free 50 page e-book “Avoiding Costly Mis-Hires.”  

I did read the e-book, and I will get to that, but first I have to say… this is great!  We’re having a conversation about my favorite topic, in a public forum, with a renowned expert on hiring.   And when I say “we” – that includes you – so post a comment, send me an email if you are shy, share your experiences!  

• First a bit of context.  I consult with, and write this blog for, small to midsize employers. 
• Brad Smart consults with employers of all sizes.  He is best known for his work with GE and the global 100, but he has plenty of raving fans among smaller employers.  One big fan is the very well-respected Verne Harnish -  founder of Entrepreneurs’ Organization (EO) – who calls Topgrading the “Best Approach to Interviewing.”   Verne also says Topgrading is “not for amateurs” and warns that it takes time and focus to make sure you are getting it right.

And there is the rub.

I read Brad’s free 50 page e-book (pdf).  It does indeed make a strong case for Topgrading, with lots of links to other resources.  (One link that grabbed my attention was ”Most Personality Tests are Shams“).  Naturally you cannot learn Topgrading in 50 pages, because, as Verne notes, it’s not easy to learn.  

The e-book’s primary objective is apparently to rebut the (common?) argument that Topgrading is hard to learn, by proving that it’s worth it.   He makes the case well, and I really enjoyed reading it, and loved seeing my favorite quotes from Jim Collins and Peter Drucker about the competitive advantage of hiring great people – Brad and I definitely agree that hiring high performers makes a huge impact on your ability to get results.   

But in reading it, I found nothing that would help my clients make better hires, short of implementing a massive, formal, top heavy initiative to learn how to conduct a Topgrading interview.  And that is simply not practical when you are hiring only one or two of each kind of person, and not 50 or 100 like they do at GE.  Smaller organizations need to think hard, move fast, and make the best decisions possible with imperfect information – jobs are not static, they change rapidly.  You can’t look back at the last 50 people hired in a job or look forward to tracking their results a year from now, because you hired ONE.  As someone who runs a search firm, I am also cognizant of the candidate perspective, which is generally not favorable toward Topgrading.  

So I’m sorry Brad, I sincerely appreciate your comments, but I still think Topgrading is too top heavy for 99% of small and midsize companies – and I just don’t think it’s necessary – there are better ways to achieve the same results.  Maybe Verne will prove me wrong, but I just can’t recommend it.  We’ll continue putting all our energy into developing faster, less expensive, less cumbersome ways to help our clients consistently hire people who will drive business results.

Now, that said, here is where I absolutely, positively agree with Mr. Smart:

Bad Job Ads Attract Only Desperate Candidates

All online advertising attracts some bad candidates, but poorly written job ads seem to attract only desperate candidates.   Bad ads look like all the other ads:

 ”XYZ company, located in Washington DC, is the foremost widget maker in the region.  We are seeking a Controller.  Responsibilities include… blah blah blah”

Research shows that job seekers look for jobs using the title they have, or the title they want.  So for fun, I took a common job – controller – and I went to Indeed (where all the candidates are going these days) and looked at the first 10 non-agency ads for a controller in my zipcode.  I cut and pasted all the job descriptions into a fun site called wordle that gives you a visual representation of the words you are using - you can see the word cloud here  – it’s a very cool representation of some really dull ad copy.  (For a bit of contrast, this is the word cloud for what this blog is about).

Time will not permit me to cover all the things wrong with the ads, so I’ll just give you the highlights (lowlights?). 

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: 

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: