What High Performing Organizations Do Differently

Imagine a problem has just occurred that will cause your company to lose $15,000 per month in revenue, and might soon cause a string of similar problems. Which solution to the problem would you choose?

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

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

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

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

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

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

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

Why is Executive Search so Expensive?

Once upon a time, twenty years ago, in a backwards country called telephone-land, all your news came from a thing called a newspaper.  And all your mail was delivered by the postal service.  And the telephone (land line of course) was the fastest way to reach someone.   Yes, twenty years ago, finding candidates and presenting job opportunities over the phone was a pretty expensive thing to do - so executive search services had to be expensive.  

But now, if you live in a place I call “the world,” your news comes to you on your computer, most of your mail comes to you on … your computer (or your phone), and, if you still have a land line, your telephone calls disappear into a place called voicemail.

So if all the technology to find and reach candidates has changed, why is executive search still so expensive?

There are two big myths that have prevented executive search firms from using technology to lower the price of executive search.   But you’ll have to read my guest post on Fistful of Talent to find out what they are.

Who’s That Driving Around in Your Employment Brand?

Hiring managers, who is that behind the wheel of your employment brand?  You’ve had 5 internal meetings to discuss the language on your new website, but then you hired a contingent recruiter to work on your job opening after talking to them on the phone for what, half an hour?  

What exactly are they telling people about you, your company, and your open job?

When you engage a search firm, you hand over your reputation as an employer.  They are authorized to represent you (for the duration of their engagement).  It’s like handing over the keys to your car … with your company name emblazoned on the side of it.  They ARE your employment brand while they are behind the wheel.   And remember, they are talking to a lot of people about your company.

So how much control do you have over what they say?  In most cases, none at all.  So yeah, you probably want to know who you are dealing with, what their reputation is, and precisely what they will say about your job opportunity.

At Staffing Advisors, we craft a written marketing message for you, and give you a chance to look it over before we use it.  (You told us that you offer great work/life balance, but really don’t want to want to over-promise that?  Ok, no problem, we’ll delete that sentence…).  We want to be sure the message sets the right tone for skills, performance expectations, cultural fit … everything.  

Then, when we deliver the message, someone with real credibility reaches out.  Kelly Dingee, our Strategic Recruiting Manager has real digital credibility.  She writes well enough to meet Jessica Lee’s demanding standards at Fistful of Talent (no easy feat), she was named one of the Top HR Digital Influencers by John Sumser over at The HR Examiner, and then publicly praised this week by both Kris Dunn and Glenn Cathey - that’s doing pretty well with HR’s digital royalty I’d say. 

So yeah, Kelly looks legit when she reaches out to someone.  And that is reflected in how people respond to her.  (Test this for yourself.  Google the name of whoever you are trusting with your brand.  That’s what smart candidates do before they respond.  So how does it look?) 

We’ve connected with over 25,000 candidates this year (people who were referred to us, or people we reached out to).   I hear about every single person who has had a complaint with the service.  This year, I talked to less than a dozen disappointed people – that’s less than one in two thousand who had a complaint - and remember, 24,900 of those people ended their experience with us by getting a rejection letter.   

I’m not saying you need to hire us to protect preserve and defend your employment brand (although that is an excellent idea), and I’m not bashing how other search firms do business (Relax third-party recruiters, I’ve said for years that the contingency search model is perfectly valid).

 I’m just saying you need to think harder about who you let drive your reputation around.  Because it matters more than you may realize.

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.

Whose Problem is That?

It is said that “success has many fathers, but failure is an orphan.”  When you make a great hire, everyone takes some credit.  But when you fail, well, there is always plenty of blame to go around -  nobody ever takes full responsibility for the bad hire. 

Because hiring involves so many people, no one person ever seems to “own” it in a small firm.  The rogue hiring manager gets away with bad behavior, the HR department can often avoid responsibility for lackluster recruiting, and nobody corrects the CEO when they are out of touch with job market realities.

If you want to end the blame game and instead bring real predictability to your hiring, you need to decide who is responsible for solving the thorny problems that usually lead to hiring failure.  Problems like these:

• When a hiring manager has not thought very deeply about the position they want to fill, whose problem is that to solve?
• When your job description does not square with market realities (10 years executive experience and willing to do entry-level work for low pay) – whose problem is that to solve?
• When your recruiting and outreach efforts fail to find at least 6 qualified and interested people in your price range - whose problem is that to solve?
• When your hiring process drags on for months - whose problem is that to solve?
• When a hiring manager repeatedly selects the wrong kind of  candidates – whose problem is that to solve?

You get the idea.  Someone has to “own” these kinds of problems, or they will persist for years, sapping the strength from all your recruiting efforts.     

Oh, and one more thing?  Before you engage a search firm, ask them who they think is responsible for solving these kinds of problems.   

While many search firms (like ours) actually enjoy resolving these complex issues, many others limit their role to candidate recruiting and would not dream of ”intervening” in your hiring process.   While there are valid arguments to be made on both sides of that debate,  you – the buyer – need to understand what to expect in exchange for your search fee.  Confusion often leads to disappointment, and a continuation of the blame cycle.   (You might also want to read our previous post on the differences between contingency vs. retained search)

The Danger of Playing it Safe When Hiring

Hiring can be made more predictable, but it cannot be made safe.  Sooner or later you will make a hiring mistake.  You will.  You simply cannot avoid it, mistakes happen.   But here is the problem: most managers work far harder to avoid making a hiring mistake than they work to ensure they hire top performers.

A phrase in US News & World Report struck me:  ”Einstein, Churchill, and Edison would not make it past Personnel.”   They are not bashing HR here, they are simply pointing out that managers are far more likely to make a safe hire than an inspired one. 

In a turbulent economy like this one, when every new hire counts, when there are no salary dollars to spare, why are so many managers still playing it safe?    The evidence has been clear for many years, top performers are a much better value than average employees - even when you pay them more.   Yet most managers still play to avoid losing rather than playing to win.   Why?  

As Peter Drucker observed: ”Culture eats strategy for lunch.”

Here is how your organizational culture undermines your efforts to hire top performers: 

1. Managers know it’s really embarrassing to take a risk and hire someone who publicly fails.  It might damage their own career, so they soon learn that safe, mediocre hires will not usually make them look bad (unless they build a whole team of them … but even then, they could perversely appear to be MORE valuable because “nobody here can replace them.”)  
2. Smart mangers often spread around risk:   When you play it safe and only consider nice, “normal” resumes, your boss will usually go along with your nice safe hiring decision, so you feel like you have “political cover” if things don’t work out later (“Hey, we both agreed we should hire him.”)   But to hire an “out of the box” high-potential employee, managers have to go out on a limb and justify it to their boss.  Few people want to stick their neck out like that - they would rather leave a job vacant, and spend another month or so to see “who else is out there.”   Managers know that if they make a risky hiring decision, the risk of failing is definitely all theirs (see #1), but it’s much less clear who gets the credit for the new hire’s success.  Taking a risk is simply not an attractive bet. 
3. Nobody wants to rock the (salary) boat:  When you have to stretch your salary budget to afford a top performer, you take another kind of risk. (“Ughh, we have to look at the budget again?  Really?” )  Besides, what will other people say?  Doesn’t “fairness” dictate that everyone be paid about the same? (Actually no, but that’s another matter entirely).   The pressure to hire to fit the budget is so overwhelming that few people have the energy to fight it.  
4. The risk of success:  The “problem” with top performers is that they quickly deliver a lot of results.  The savvy manager quickly realizes that  they might have just hired their replacement … before they wanted to be replaced.  Nice, safe, non-threatening hires help managers avoid this ”danger.”  I know from experience that the phrase “That candidate could do my job” is not what managers say when they are about to hire, it’s what they say just before they reject someone.

I could go on, but it’s depressing.  And besides, there is really only one way to keep these internal cultural pressures from driving you to make mediocre hires.  

Put. Results. First.

You have to hire people based upon the outcome you want to achieve. 

No, I’m not saying you should hire the (somewhat random) list of skills specified in the job description … far from it.   I call that “copy and paste” hiring - and it’s always a bad idea.

No, if you want to hire top performers, you must first understand the specific results you need your new hire to achieve during their first year on the job - you need a Results Description, not a Job Description.  Your internal pressures and politics will take a backseat when you hire people based upon their ability to achieve tangible, concrete results within a specific timeframe.  

If achieving your goal will require a few more budget dollars, or if achieving your  goal will requires that you hire an out-of-the-box candidate, or if some other consideration stands in the way of achieving your goal, well now you can start to negotiate from strength.  The manager is no longer a “troublemaker” they are simply surfacing the issues which must be resolved on the path to achieving the goal.   And the manager can claim credit for the success of the initiative.  And that results-based approach to hiring drives fear and mediocrity right out of your hiring process.

Why You Need to Keep Score

As human beings, we don’t like looking at our failures.  So we tend not to keep score, or create hard metrics for our own performance.  We’d rather not think about our mistakes and prefer to focus our attention on more pleasant things.  

And while not keeping score may be pleasant, it’s also very expensive.  Because hidden in your failures are some positively huge expenses, and some really valuable lessons about how to prevent similar mistakes in the future.

I recently helped a client analyze the cost of their hiring mistakes, and also the cost of their hiring delays.  It took a few weeks to go back and gather some data about hires, terminations, and lag times between various stages of the hiring process.  And it took a day or so to pull it all together and get it into a spreadsheet.  

We found hundreds of thousands of dollars in (preventable) lost profit.   We found more money than the entire annual budget for the HR department.   Much of the lost profit was in places that were not even considered a “problem area” before we rigorously looked at the numbers.   This is in no way unusual, in fact, I have yet to do one of these projects for a professional services organization where we did not find hundreds of thousands of dollars of lost profit.    Now my client knows exactly where to focus their attention to recover all that lost profit – and that’s great news.

Numbers matter.  So as a big fan of rigorous metrics, you’d think I’d be happy to look at my own data.    I’m not,  I prefer to avoid it.  So knowing that, I set up a process where I have to look at it.   Ellen, our Operations Manager, gathers and publishes our statistics regularly.  Everyone in the company can see the data, and when I look at it  I always find a surprise, some area where I can do better.   I always learn something that I would never have learned otherwise.  For me, failure is a great teacher.

So today, Ellen and I reviewed the retention statistics on our placements.  I must tell you, this is much less fun for me than it was before the recession because we count layoffs against our statistics.  (I think performance problems are often buried inside of layoffs, so we count them ‘against’ our numbers).

And although the search industry prefers to look at retention rates for 18 months, we look at them for 3 years - anything less just lets us off the hook too easily.   Our promise is to help our clients hire people who get results, and it’s devilishly hard to measure real results and long term contribution during an executive’s first eighteen months on the job.   So if we only counted retention rates at 6 months or a year, we would not learn much about how our placements actually contributed to our clients getting results.  

So here are the retention stats on our placements:

• 91% are still on the job at 12 months.
• 90% are still on the job at 18 months.
• 85% are still on the job at 3 years.

I must tell you, these numbers were much better last year, so this was painful to look at, but you know what?  I learned something by forcing myself to look at them.   By sharing them with you, I am challenging myself to further improve next year …. and that’s the real reason you can’t afford not to keep score – it’s fuel for improvement.

Great Recruiting is Useless …

Many people think the reason to engage a search firm is to get help with recruiting.  Well, maybe that approach works in big companies, but in small firms great recruiting is nearly useless by itself. 

Hiring smart internal recruiters, engaging search firms, and even turning the recruiting process over to a Recruitment Process Outsourcing firm is usually a really bad idea for small organizations.  Recruiting support is absolutely useless to you …  if it is not integrated within a cohesive hiring and performance management process.  (NOTE: By cohesive, I do not mean expensive).

Do you ever wonder why so many companies are frustrated and disappointed by contingency search firms?  It’s because most contingency search firms do not see it as their “place” to suggest how organizations should run their internal hiring process.  So contingent search firms focus their efforts on recruiting.  But great hiring involves a lot more than recruiting.  And you can’t improve the whole until all the parts work together:

• Simply writing up a typical job description is useless … unless you first understand what performance is expected from the new hire and what competencies are necessary to drive that performance.
• Developing an interesting and complete job description and ideal candidate profile is useless … unless you reconcile your target hiring profile with market realities.  (You might find you have champagne tastes on a beer budget and may need to revise your performance expectations to fit the budget).
• Simply posting a job description on job boards is useless … unless you employ additional strategies to recruit less active job seekers.  You can’t make an intelligent hiring decision selecting from only those people who happened to see your ad.  Conversely, you should not avoid ads, they can be a good way to diversify and expand your candidate pool.  If you want great hires, it’s important not to limit your candidate pool to people found using any single recruiting method (including employee referrals).
• Simply recruiting more candidates (or paying an agency to recruit) is useless  … unless your hiring managers know how to interview and how to distinguish top performers from other candidates.  Research shows that most hiring managers do not use the best strategies to select top candidates.
• Simply doing a better job of selecting resumes and interviewing candidates is useless … unless you structure your interview sequence to provide a great experience for the candidates.   You can do more harm than good when your disorganized interview sequence reveals internal organizational conflict and indecision.
• Simply making the occasional good hire is nearly useless  … unless your managers have confidence that your hiring process can reliably produce great people “on demand.”   Until the hiring process is considered reliable, managers will always be reluctant to manage poor performers.  (When managers are confident they can “trade up” then performance management becomes much more effective.)
• Improving your hiring process is a fine start, but you will not be able to keep improving your process … until you follow-up on every hire to ensure that they achieved the business results you expected.   After all, getting business results is the whole point of hiring isn’t it? 

A great hiring process is a “force multiplier” for a great performance management process, and vice versa – both processes support and multiply the effectiveness of the other.  

But recruiting?  Don’t even think about spending money on recruiting until the rest of your hiring process warrants the investment – you will just be pouring fine champagne in a dirty, leaky, plastic cup.

Here’s Why I Don’t Call You …

If you are not yet a client of Staffing Advisors, do you ever wonder why I don’t call you?  You obviously read this blog, maybe you read our newsletters, maybe you heard me speak somewhere or we met at a networking event, or maybe you just know someone who knows me. 

I could find your contact information (DUH, I’m a headhunter) and it’s likely that you would take my call if I called you, and yet I don’t.  It’s not that I don’t want to talk to you …  far from it.  

So why don’t I call you when it appears that everyone else in the search business calls you regularly?  And further, how exactly do we remain busy, without cold calling, while so many other staffing firms are struggling?  

Because the world changed.  People want communication, conversation and engagement on their terms, not cold calls.   So we’re here on your terms, and as you can see, we put all our energy into researching and sharing how to solve your staffing problems … not pestering you for work.

What’s probably not obvious is just how many people call us.  Friends, casual acquaintances, people who have never spoken to us, people who have no budget to engage our services this year, people who might never be in a position to engage us for a search … all kinds of people call.  All the time.

This blog has been a great way for me to start a conversation with you, without interrupting your day.  You can continue that conversation by posting a comment on this blog, connecting with me on Twitter, sending me an email, but really, most people just call me.  So what do people call me about?  Well last week it looked like this: 

• “We have someone retiring and need some help to rethink the position.” 
• “I need to prove a point to my executive team, can you send me some articles or research on … ?”
• “We’re too busy to even come up with a job description, but need help in our … department, can you help?” 
• “I’m trying to find good candidates for an open position and have no idea where to find them, any suggestions?” 
• “Can you look at this job ad and suggest where to post it?”
• “We have someone who is just not working out and we need to replace them, what should we do?”
• “We simply must develop a pipeline of candidates for this role, these hiring delays are costing us a fortune, and our managers are afraid to fire anyone because they are so hard to replace.”

Sometimes people engage us to solve the problem, sometimes we just have a nice conversation and share a few ideas.  No matter.  

People feel comfortable calling me because the cash register does not have to ring every time someone calls. The financial stuff always works out in the long run.  I’m an inquisitive guy and love hearing what’s going on in your world.   It’s all a fine education for me, so you are never wasting my time by calling, and I never expect anything in return.  (That’s how things work in social media, it’s a “pay it forward” mentality, full of small acts of kindness).

But just don’t expect me to call you.  I already know you are overworked, understaffed, doing more with less … you’re swamped.  I have no intention of being that rude guy who interrupts you.  So call me when you have a question, okay?  

Oh, and every time some other search firm cold calls you?  Please just consider that a gentle reminder to call me with your question, because I’m right here, researching your answer, not on the phone - interrupting other people.

What Good References Tell You

Reference checks.  Do you swear by them, think they are a joke, or just get them over with quickly as an administrative formality?   

Clients often ask us what we learn from checking references.  Common refrains are:  ”Isn’t it a waste of time?  Don’t references just all say nice things?”  or “Don’t most companies have a neutral reference policy just so they won’t get sued?”

I swear by them.  I love checking references.   My very clever employment attorney, Rick Vernon even crafted a wonderful reference release document (and five years ago he graciously agreed to allow me to share it with you).  Yeah, when someone raves about their reference release form, you know they are a fan of checking references.

So what do we learn from checking references?  Well, for starters we learn:

1. How willing the candidate is to complete and return the release form.
2. What kind of people are willing to be listed as references.
3. How willing the references are to get back with us quickly.
4. Whether the references were contacted in advance to expect our call.
5. How willing the references were to share their time. 

So simply asking for references tells you quite a bit.  But going further, what do good references actually say when you talk to them?  We advocate asking the references about job competencies, just like you did when you interviewed the candidate (“Tell me about a time when …”).    But beyond their answers to your questions, what else should you be listening for?

Often references go beyond a candidate’s job competencies and tell us the candidate is:

• Personally engaged in their work, invested in getting results, but “does not take thing personally” when setbacks occur
• Curious to learn more about their work
• Willing to share information
• Happy to go above and beyond what is expected, perhaps working too hard.  Sometimes not knowing when to stop improving something
• Easy to work with, accommodating, upbeat
• Professional in demeanor
• Likes to be challenged
• Willing to take the ball and run with it
• Good at asking the right questions, tracking down resources, and solving problems
• Great at communicating, easy to manage

By and large, great people have great references.  At the end of a good reference call, you should feel more energized and excited about hiring the candidate.  If you don’t, it should be a red flag for you. 

So, if you are not getting a signed reference release, or if you are getting a release and not calling the references personally, or if you are calling the references personally but not hearing glowing feedback like this … well, then you might want to adjust your hiring process.

The Staggering Cost of an Executive Mis-Hire

You see it all the time.  A new executive joins an organization, and within a few months there is an exodus of people beneath them.  “They are just bringing in their own team” we all say.  “They have their own style and are just holding people accountable” we all say. 

The people who quit (instead of working for the new manager) say “I just did not like the new direction of things” or “We did not work well together.”   Add it all up and the cost of a hiring a new executive can go far beyond their salary – even when they are successful.  

Of course, when a new executive fails, it can be catastrophically expensive (some estimates are in the millions) , customers can be lost, and whole business units must sometimes be rebuilt after a toxic manager finally leaves.  Some suggest that the psychological costs of a bad hire far outweigh the measurable financial costs.  One study showed that almost all leaders have “dark-side characteristics” that place their organizations at risk.

With so much at stake, why is executive hiring often left to “gut instinct” and why does so little attention get paid to making a cultural fit?   In my twenty years of work in executive search, I think the problem results mostly from jump starting the search before taking the time to really think about the position and write down what you are looking for.  Most executive searches are doomed from the start because the executive team did not take the time to reconcile their differences, define their expectations, and write down what attributes they really wanted in a new hire. 

If betting hundreds of thousands of dollars on a hiring project without a solid plan sounds reckless to you, I would have to agree.  So, to reduce your chances of making an executive mis-hire, you might want to read:

• If hiring looks so easy, why is it so difficult?
• How Resume Bias Causes Staffing Problems
• How Panel Interviews Can Improve Your Hiring
• So You Think You Can Interview?

The Invisible $200,000 Problem in Your Recruiting Efforts

Jim leads the recruiting effort for Habenae Muneris (HM) - a professional services firm with about 50 employees.  For the most part, things are working pretty well for him, meaning that business is good, the company is profitable and nobody really complains about recruiting.  Hiring delays are fairly common at HM, but there’s usually a good reason for it, and the delays aren’t any worse than at any other firm he’s worked for.  The most common hiring delays are caused by the hiring managers, not Jim:

• Some managers are too rigid in how they look at resumes, overlooking potentially good people and adding weeks of delay to the hiring process. 
• Some managers are unclear about their hiring specifications until they start interviewing – when they suddenly become incredibly picky about what they are looking for in an “ideal” candidate.  This recalibration essentially starts the recruiting cycle all over again.
• Some managers are hard to schedule (adding weeks of delay) and then, when pressed for time, they make rash decisions out of desperation to speed things up.  This results in hiring candidates who are not a good cultural fit, or sometimes paying too much for someone.

You know, the usual stuff that happens at every firm.

Like most firms their size, HM does not track turnover specifically, nor are there any metrics in place to measure the speed and accuracy of the hiring effort (time-to-fill or quality-of-hire for example).   Turnover is not broken out by department, so managers with a bad track record are not identified or held accountable for their mistakes. Some managers have quite a bit of turnover, and some have very little, but in reality, the managers pay far more attention to their customer deliverables and billable hours than the cost of their turnover.   In fact, some of the managers with the worst turnover are the people most beloved by their customers.  The managers at HM are not trained in interviewing and are not accountable for hiring speed, so they do the best they can to squeeze in time for interviews around their billable work and client commitments.  Like I said, typical stuff you find everywhere.

From time to time, the senior leadership team at HM says they would like to be “more agile in meeting customer needs” but really, there is no compelling reason to change anything – after all, customers are not complaining, business is still coming in the door and Jim has been a careful steward of the resources he has been given – he stays within his budget.   Jim stays current with his profession, reading all the articles on ERE, but the cost and complexity of building a recruiting pipeline  for a company the size of HM just seems prohibitive, and besides, the managers cause most of the hiring delays anyway.

Except here’s the problem.  In my research, most firms about the size of HM lose over a million dollars in revenue and lose between $100,000 and $200,000 dollars in profit because of common, preventable inefficiencies and delays in their hiring process.  Yup, the  owners of these professional services firms unknowingly cut their own paycheck by $100,000 – $200,000 every year.  

How can this be happening?  It happens because an inefficient recruiting process loses money in ways that are often not counted, so the losses are literally invisible.  This lost profit can’t be found by accountants because it does not show up on the financial statements. 

But you can make invisible losses quite visible with a few simple metrics – literally a one page Excel spreadsheet.  (And yes, I can send it to you if you ask me nicely).

So here’s where the money disappears:  In a professional services firm, when a position is vacant for a month, that’s a month of billable time that did not get billed.  For most DC government contractors, working at normal 10-15% profit margins, that’s a couple of thousand dollars worth of profit that did not get booked every single month a position is vacant.  So, when you leave a senior level position vacant for 4 – 6 months - POOF!  – you’ve disappeared ten or twenty thousand dollars of pure profit on just that one position … and your accountant will never find it.

At HM, people will tell you that most open positions get filled in 45 – 60 days.  Except there is a lag from when it is filled until the new hire actually starts work and becomes billable – so the unbillable window is really more like 60 to 75 days.   And, well, OK, when you really look at the data closely, it’s not all that uncommon to leave a job vacant for 90 days.  So when you take a staff of 50, with a 20% annual turnover, you need to fill 10 positions every year just to maintain your current staff levels.  (Rest assured, if you don’t specifically track it, your turnover is higher than you think).  If normal vacancies are open an average of 60-75 days until someone becomes billable, you gave up $40,000 in profit every year just backfilling current positions.   But most firms are also trying to grow by 30% – which means hiring an additional 15 people.  If that goes as slowly as the replacement hiring, then it will potentially cost you another $75,000 in lost profit.  

And these losses don’t include your recruiting, advertising, training or onboarding costs, we’re just talking about unbilled hours right now.

So, if we take 3 or 4 hard-to-fill positions that go unbillable for 4-6 months, that adds up to $60,000 lost.  Add another $40,000 for all the billable time lost due to normal employee turnover.  Next add $75,000 for revenue you could not bill on new positions because of staffing delays.  Finally, add in $25,000 in unbillable time for the 3 hours a week that each of your ten managers must spend with new employees on interviewing, training, orientation and performance management.   And, for HM,  it all adds up to $200,000 in preventable costs – all hidden in plain sight within a stable, profitable professional services firm of just 50 people.   Just imagine how much more profit HM will lose when they have 100 employees.

The key to reclaiming this lost profit is in making these invisible costs visible, simply by tracking and reporting on them.  The management team can then direct attention and resources to the most costly inefficiencies and delays in the recruiting process.  

Once you have the data, solutions are not expensive and can take many forms: it might be management training to help reduce turnover for one manager, tighter interview scheduling for another, helping develop better job definitions for a third, interview training to make better hiring decisions for a fourth, or perhaps in making a strategic investment in building a recruiting pipeline for a certain hard-to-find type of candidate.  The good news is that all of the above can be accomplished for a tiny fraction of what was being lost.

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.

Copy and Paste Hiring

Career consultant Laurent Brouat wrote that recruiters mostly copy and paste.  They recruit (copy) a candidate from one company and place (paste) them into another company in the same industry.  ”Yup, got one – same title, same industry, we have a match.”    He argues that recruiters often don’t think broadly about what “out of the box” candidates might be interesting for the job; they just find the right buzzwords and make the switch.  While the best search professionals do not do this, I know many recruiters who do exactly this, and have no problem with it.  Hey, since hiring managers are likely reject any resume that does not “fit the profile” why bother doing anything else?  

“Oh, you need a CFO for your trade association?  Sure I’ll find you a CFO from another trade association.  They’ll know the ropes, they’ll be easy to train, they should hit the ground running.”

Cut and paste is idiotic.  When a recruiter lets a manager get away with that, it’s just wrong.  Recruiters should know better.  Managers should expect more.   What people really want from their hiring is results – business results. 

So if you are a hiring manager and you find that your external or internal recruiters can’t have a conversation with you about business results - it’s time to seriously rethink how you do your hiring.  An effective search process is much more than cut and paste.

Finding the right person for a job is a management consulting function.  Whoever is helping you recruit needs to delve into ALL of the following:

• What business results are you trying to achieve?
• What is standing in your way? What obstacles must the new hire overcome along the way to getting those results you outlined?  How should we share the bad news about the position?
• What skills does someone need to have to drive results?  Do we have the budget to afford this person?  If we can afford someone with all those capabilities, why would they want to come work for you? 
• Who is a cultural fit?  Conversely, who might have the qualifications, but would not be a good cultural fit?

A recruiting consultant should ask probing questions and challenge the hiring manager to see beyond the resumes and into how someone would really fit in the job.  A great recruiting consultant judges their own performance on the business results their new hires achieved a year later.

Why Do Change Agents Often Fail?

As the recovery begins to take shape, CEOs are increasingly optimistic and forward thinking.  As new initiatives are unleashed, it’s very tempting to want to bring in someone who will “shake things up” or be a catalyst for change.  It’s also very risky.  Studies show that up to 70% of change initiatives fail. 

So why does change take so long to unfold and why do so many change agents fail?  Because as researcher Jeremy Dean writes in Psyblog,  it’s hard to influence a group as a new person.   In fact, a recent research study showed that change agents “commonly face increased negativity and outright rejection” from groups they are attempting to change, no matter how diplomatically they introduce their ideas.   The research shows that jumping in and trying to make a splash with new ideas is a very poor strategy.

“Groups are hostile to criticism from newcomers and are likely to resist, dismiss or ignore it”  … until the newcomer first proves their loyalty to the group.

 Jeremy outlines the 10 Rules That Govern Groups.  Among the rules are these:

•  Group norms are very powerful, changing behavior in unexpected ways, and breeding conformity.
• People who do not “learn the ropes” are ostracized.
• Leaders gain trust by first conforming to group norms, and then introducing change that others would willingly follow.

That sounds pretty slow to me.  But if that approach is too slow, and jumping in with new ideas is even less effective, then what is a clever change agent to do?

If you are trying to change group behavior, research on the Neuroscience of Leadership suggests than instead of simply transmitting your own ideas to your employees, a far more effective approach is to focus team members on the desired results and then getting the team to focus on their own insights how to achieve the goals.  As author David Rock and Research Psychiatrist Jeffrey Schwartz recently wrote:

“Attention continually reshapes the patterns of the brain … People who practice a specialty every day literally think differently, through different sets of connections, than do people who don’t practice the specialty. In business, professionals in different functions — finance, operations, legal, research and development, marketing, design, and human resources — have physiological differences that prevent them from seeing the world the same way.”

That’s right.  Research shows that concentrating attention on a mental experience, over time, literally creates physical changes in brain structure. 

Therefore, an effective leader will concentrate attention using a solution-focused approach, introducing questions to help teams focus on identifying and creating new behaviors.  Over time, the continual focus on new ways of thinking will create an environment where people have their own insights, and with a bit of positive reinforcement, these insights will change not only how people think short term, but will also create lasting changes in their perceptions. 

Literally rewiring the brains of your team.  Powerful stuff – that’s clearly a power to be used for good or for evil.