Be an Investor When Recruiting and Hiring
Who you hire is one of the most important decisions and investments you can make in your business. However, recruiting and hiring today is more important than finding a person with the right skills and qualifications. Do the candidates fit our culture and strategic vision? Do they share our values and have the right behaviors to make them successful and provide your company a long-term return? Will they still be around in 5 years?
Warren Buffett is considered to be one of the most successful investors of all time and is currently the third wealthiest person in the world. Regardless of one’s opinion of the “Oracle of Omaha,” it is hard to argue with his amazing track record of success. As the Chairman and CEO of Berkshire Hathaway, Buffett has inspired millions, while making billions through a philosophy of investing that can also be applied to successful hiring practices in your business.
Aside from utilizing financial ratios and other analytical tools to find undervalued companies he can invest in, there are other key considerations that Buffett and many other successful investors look for before making a decision. Never compromising on business quality, taking the long view, and listening to those you know and trust, to name a few hallmarks of Buffett’s investment strategy.
Could thinking as an investor also be applied to hiring? After all, when recruiting and hiring a person to join your company, you are making a major investment. That same hire can often be critical for the future success of the company. Time, training, compensation, benefits and other “rewards” for the people you employ are your investments in growing your business and making a return. In today’s low unemployment, low retention “candidate’s market,” approaching recruiting and hiring as an investor may make the difference and lead to better decision making in this critical area.
Never Compromise on Quality
“It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”
– Warren Buffett
Berkshire Hathaway was originally a textile manufacturer when Buffett first took control in 1962. He later stated that entering the textile business was one of his worst trades ever but kept the name. That experience taught Buffett that “you get what you pay for.” He was no longer interested in buying something at a bargain in the hope of getting a nice short-term return, especially when the long-term prospects for the business look terrible. He chose a path of “value investing,” in which he looks for prices that are low compared to their actual or future worth and often overlooked by other investors.
Never compromising on quality can also be applied to hiring. For example, Candidate A is a high-quality candidate that matches all of the skills, qualifications, experience, behaviors and cultural alignment needed for great success in the position. “A” checks off all of the boxes, has been thoroughly screened and you can see a bright long-term future. Candidate B also has many of the same skills and qualifications. “B’s” behaviors and culture fit were not as strong and the references not as glowing, nor was there a projected long-term future with the company. Here’s the kicker— “B” wants 20% less in salary than “A.”
How many would automatically gravitate to Candidate B because they felt they were saving the company money or had to stick to a budget? Quality investments yield high returns and increase in value over time, similar to Candidate A in our example. How does this apply to value investing? Candidate B will inevitably cost the company more over time and return less due to low engagement, poor cultural fit and eventual turnover – in other words a lot more than the 20% saved in Candidate A’s compensation. As Buffett has stated, “Price is what you pay. Value is what you get.”
Taking the Long View
Once asked how long he would hold a high-quality investment he made at what was considered a reasonable price, Buffett answered, “Our favorite holding period is forever.” Embracing a “buy and hold” investment philosophy, many of his investments have been held for decades.
Buffett and investors care more about the future price than the value it was on the day it was purchased. As a business leader, you should care more about what a new hire can bring you a few years into the future instead of having them be able to “hit the ground running” and automatically start making returns on day one. Look for those candidates who are quick learners and can innovatively solve problems. They are the ones that have the experience and behaviors that will help them integrate quickly into your company and excel in the future.
Smart investors also continue to invest – just as companies need to keep investing in their people. While you may not have the budget to increase their compensation, look for other ways to invest in your new hires and current top talent and leadership. In a recent Udemy “Workplace Boredom Report,” 46% of employees are looking to leave their companies because of a lack of opportunity to learn new skills, and 80% agree that being given more opportunities to learn new skills would make them more interested and engaged in their work. Do you offer continuing education, seminars, training programs and other developmental programs that will keep your employees learning new skills? There is a measurable ROI to upskilling your employees, and often it is in the form of productivity gains, increased engagement, more profitability and reduced turnover.
Listen to Those You Know and Trust
“Management changes, like marital changes, are painful, time-consuming, and chancy.”
– Warren Buffett
Warren Buffett has always noted the importance of only investing in competent and trustworthy management teams. He knows that when he selects partners or managers, their actions and decisions will be felt for many years. As a business leader, you too must be cognizant of selecting competent and trustworthy people to join your organization. They could have a major impact on future performance and growth.
This is easier said than done. Buffett has a huge network of resources and advisors he can utilize to find the best and most trustworthy managers and leaders just by word-of-mouth. What about you in your industry at this time? Ask people you know and trust, especially in related industries. There is also a lot of value in aligning yourself with a well-trained executive search or consultant that can help you find your next leaders and management team, as well as help you build your organizational and human resource strategy. These experts will take the time to learn your culture, successful employee behaviors, and can best find you candidates when you don’t have the scale of Mr. Buffett’s connections.
New Hires are an Investment
“Another misconception is that VCs [venture capitalists/investors] like to take risks. That really isn’t true. VCs like to not take risks and bet on sure things.”
– Dave McClure, Founder, 500 Startups
The financial world is filled with many characters – both good and bad. By not compromising on quality, taking the long view and listening to those you trust to find and hire the best talent will lead to less risk and a better fit for the position and within your company. When hiring, think and act as an investor – Mr. Buffett has several “billion” reasons why it works.
Simply Safe Dividends “Top 10 Pieces of Investment Advice from Warren Buffett”;
Udemy Workplace Boredom Report;
If your company is ready to strategically address, improve and invest in the hiring of the most important part of any company – it’s people – contact us today!