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
All’s Fair in Love and Retention
Employee retention can seem like war in the current candidate market, but it doesn’t have to be. Often, when top-grade managers leave their organization, it is because of reasons that could be addressed by company leadership and have little to do with salary. In our own internal surveys that we use with candidates, “Company Culture” is the number one motivation for making a career move. As recruiters, we often see candidates willing to take up to a 20-25% cut in base pay for an opportunity that provides more of a challenge, a better company culture, more work/life balance, and a “runway” to their future goals. To get your people to stay, you may be thinking, “Well, I’ll just increase their compensation and that should do it.” Or – when presented with an employee that is leaving, “I will make him a counteroffer he can’t refuse.” Worst case, your budget may not allow for it. Best case, you may get another year or two out of the employee, but the underlying issues for them wanting to leave still remain. The good news is that it is not just about compensation. The bad news is that if you’re not taking steps to address employee retention and understand why your talent is leaving, it is open season on your people. We have identified many clients and companies we work with that have excellent employee retention, and they all share the same four components that we call L-O-V-E (L for Learning and Development programs, O for a great Onboarding experience, V for Values and Culture, and E for Engagement). Thus, when it comes to retention, think about making LOVE, not War. Learning and Development How many of us have said to ourselves at points in our career, ”Did I learn anything new today or was it just another day at the mill?” Learning and development programs are proven ways to boost engagement and loyalty. According to Ellie Bertani, Director of HR Strategy and Innovation at Walmart, “I believe business needs to stop looking at employees as a cost center and realize they are an investment. Training them is an investment that will pay dividends in the future.” There are external factors at work as well. According to Niall McKinney, president of AVADO, “As more jobs become automated, employers need to help employees re-deploy in new or more advanced areas. Around 32% of current workers ages 16-54, regardless of their position, may need to retrain within the next 12 years. Research also shows that workers are leaving your company because they don’t see the career path and opportunity they’re looking for. They may have higher expectations, or they simply need guidance. They also may have been thrown into a position without proper onboarding or training and are learning simply by making mistakes, which can be soul-crushing. 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. This is where a more experienced counterpart or mentor can provide the training, skills, career/life guidance, coaching, and patience that can help them learn the position, see their fit within the company and culture, and see a future. Do you offer continuing education, seminars, training program,s and other developmental programs that will keep your employees learning new skills? Do you have a portion of your meetings dedicated to best practices or learning something new, or even a simple sharing of information? There is a measurable ROI to upskilling your employees, often in the form of productivity gains and reduced turnover. Onboarding Onboarding is a great tool for welcoming a new team member and first impressions here are lasting. Think about your own career. How many of us on our first day in a new job had to find a temporary workspace since our workstation wasn’t ready? They may not have had our email setup yet and didn’t even have new business cards printed. “I’m sorry, I didn’t get the email that you were starting today,” was often a common refrain. You can feel the love and sense of belonging in your new company, right? According to ServiceNow, 80% of workers experienced some issues when starting a new job. One-third stated they received no training at all, while 28% were unsure of their responsibilities and goals. 20% felt they were not fully onboarded after three months on the job! In fact, that same 80% would rather go on an awkward first date than attend a new job onboarding session or orientation. What do new hires want out of onboarding? In the ServiceNow survey, 58% want a walk-through of key processes or want a “buddy” or mentor they can turn to for questions. According to a recent Harris Poll, 93% of employers agree that a good onboarding experience is critical to influence the new hire’s decision to stay with the company. In fact, nearly 1 in 10 new hires leave a company due to a poor onboarding experience and the attrition rate can be up to 22% in the first 45 days of a new hire. The solution? Have a comprehensive plan for onboarding new hires. Your onboarding may include: a pre-boarding with your new hire (welcome packet and schedule, including a welcome letter from the CEO, sent prior to their first day); scheduled walk-throughs with key department heads; a longer duration for getting acclimated (most successful onboarding plans take weeks or even months); and the assignment of a coach/mentor to help them learn the new job quickly and immerse them into your company culture. Values & Company Culture Company values and culture are more important than ever when it comes to retention. Are you giving people insight into the company’s mission, values, vision and purpose? A good thing to do is write it down, not just have it on your web site, but have it visible throughout your entire operation. According to Bretton Putter, Founder and CEO of CultureGene, “The success or failure of a
Focusing on Youth in Hiring is Hurting Your Organizational Health
In the Fall of 1984, Ronald Reagan, at the time the oldest U.S. President in history, was in a fight for re-election. In his first debate with youthful challenger Walter Mondale, he appeared tired and lacking energy. Many began to question his stamina for the job. In the second debate, he was asked a question about his age and being able to function in tough circumstances and in a crisis. Without hesitation, Reagan said the lines that we wish would be used more by older candidates seeking a job today: “Not at all… and I want you to know that also I will not make age an issue of this campaign. I am not going to exploit, for political purposes, my opponent’s youth and inexperience.” He never looked back and won re-election in a landslide. Underlying the humor of Reagan’s response (even Mondale laughed at the time) is the truth in his words. Do we, and organizations in general, consciously and/or subconsciously choose “youth and inexperience” over “experience and wisdom” to our detriment and even to the detriment of the younger employees we onboard? Are we missing training, coaching, mentoring, and even reverse mentoring opportunities that would ultimately lower turnover and benefit the entire organization? Is it time to rethink age in hiring, especially in the current “candidate’s market,” and get away from the misconceptions and perceived costs of hiring older workers and focus on the benefits? In Search of Experience and Wisdom “Age is an issue of mind over matter. If you don’t mind, it doesn’t matter.” – Mark Twain Most can agree that experience and wisdom are good things, but there are clearly also times when age and health can lead to poor performance. On the flip side, performance in younger employees could be just as impacted by a lack of training (investment in your personnel), mentoring, and coaching, which could lead to increased turnover and impact the future of your entire organization. We recently placed a 61-year-old candidate into a client who simply couldn’t ignore the fact that she would make the entire department better. Instead of age being a negative, this particular person’s depth of work and life experience, high energy, and continual learning mindset, as well as the fact that she had been a coach and mentor to several in the same field for decades, became a major positive. She didn’t need training— she was going to become the trainer. The client saw that this was a resource that many of his Millennials could tap into, and concerns over age and longevity in the position were overcome. Too often as business leaders, we look for “shiny and new” over “tried and true.” On the flip side, the disdain that many in the Baby Boomers and Gen Xers have for Millennials (and vice versa) is not a new phenomenon. Saying that Millennials are more prone to leaving jobs and switching companies than previous generations is misleading. They leave jobs because they are young and new to the workforce, and there was probably little in the way of training investment, coaching, and mentoring to keep them there and get them through the rough patches. According to Pew Research and a study they did comparing Millennials to Gen Xers, the percentage of 18-to-35-year-old employees who stayed with their employers for 13 months or more was 63.4% for Millennials in 2016 and 59.9% for Gen Xers in 2000. In addition, the percentage of these same groups who had been with their employers for 5 years or more was 22% for Millennials in 2016 and 21.8% for Gen Xers in 2000. It is easy to form generalizations about generations and blame the Millennials for leaving because they do not “have a strong work ethic.” It is also envy, and we have all been there. Ask an all-star major league baseball player from the 70s or 80s if he wouldn’t want the salary of even the most mediocre ballplayer today? What about Millennials just entering the workforce out of college? According to Mike Brown and the “The Class of 2018 Career Report” conducted by LendEDU, 41.3% had already found a job, and of those, only 37% envision staying at that same job for over 3 years. 28% of those who had found a job envisioned staying at their job for up to 3 years, while 25% thought they would last 6 months to a year, and 10% said they would leave as soon as something better came along (click here for the full study at LendEDU). The research indicates that younger workers are leaving your company, not because they are “Millennials.” They are leaving because they don’t see the career path and opportunity they’re looking for, and they may indeed have higher expectations, or they simply need guidance. They may have been thrown into a position without proper onboarding or training and are learning simply by making mistakes, which can be soul-crushing. 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. This is when a more experienced and wise counterpart can provide the training, skills, career/life guidance, coaching, and patience that can help them learn the position, see their fit within the company, adapt to the culture, and see a future. Do you have a mentoring program? There is a wealth of company, industry, and subject knowledge in older workers that Millennials can tap into and that employers should value. Programs that enable knowledge transfer and connect younger and older workers have been found to have a high return on investment because of the impact they have on increasing retention rates, promotions, and overall employee satisfaction. There is also a benefit in reverse mentoring in which older executives are paired and mentored in turn by younger employees on technology, social media, and trends. After all, what organization couldn’t benefit from a free exchange of ideas, wisdom, and engagement between employees in different generations?
Confessions of a Recovering Executive Recruiter
It never felt right. After a rewarding career that allowed me to see inside a wide variety of companies and experience a range of strategic directions, and the people who were charged to deliver them, I learned like so many of us that the common denominator to success is people. I wanted to apply all I had learned in my prior career to help companies succeed by improving on their critical people equation, so I transitioned to a contingency recruiting firm, which appeared to express a similar desire. However, from day one there was an abnormal emphasis on “transactional sales,” and not truly mastering the craft of human resource strategies and management. Internally, we hired for sales behaviors, and not for any particular expertise in human resource advisory or even an understanding of people. All of the supposed expert recruiting trainers and training materials all focused heavily on “sales.” Go ahead and look up executive recruiting training manuals or videos. Look at how much time is devoted to volume-based sales training. Do you find any training on retention planning? Or how to identify the specific behaviors that lead to success? Or how to help a client company identify a build out of a succession plan as part of the hiring initiative? They are all about the techniques involved in driving high volume transactional sales phone calls. So, I dug in and gave the “accepted” approach the benefit of a doubt knowing that I would never waver from a commitment to properly collaborate with a client in their best interest. Long story short, for many years I continued to enjoy my clients and candidates. I found myself more and more learning the recruiting side of human resources by doing the opposite of what had been preached for way too long in the recruiting world. My professional growth focused on independently learning more and more about the details of human resource initiatives and strategies. How to conduct an accurate behavioral assessment, how to build productive teams that match a company’s vision for growth, how to develop onboarding strategies that are critical to increasing retention, and as the Baby Boomer generation continues to grow older— the nuances of successful succession planning. Every industry must evolve, and today it is happening at an increasing rate due to technology and the changing values of generations. We need to ask ourselves in every business and industry: “What should we be doing differently to be more effective?” This may mean that we break away from doing what we have always done. Tough to do in a niche, such as Executive Recruiting, which still relies on training and sales methods developed over 30 years ago. As I recover from my contingency recruiting experience, there have been many takeaways, but there is one absolute flaw that must change, and it can be summed up in one word: transactional. Contingency-based recruiting is mired in a transactional method of doing business. A “throw as much against the wall and see what sticks” strategy. Make hundreds of calls a day, get as many job orders (positions companies agree to let you recruit for) as you can, and once you have all those job orders— get as many candidates as possible to get “send outs” (candidates your client has agreed to interview). Recruiting industry metrics continue to focus on this volume approach. However, the paradigm needs to shift to a focus on quality conversations leading to long term relationships with clients and candidates, and not on how many calls you made. In the Contingency Recruiting world all your time is spent working for free unless one of the many resumes you threw against that job wall sticks. Then, and only then, will the client pay you even though they are likely pushing their internal team to find a candidate to hire, so they don’t have the recruiting expense, and have also engaged several other competing recruiting firms (for free once again) on the exact same position they engaged you on. Thus, creating a horse race that emphasizes speed and quantity over quality. Does this sound like a recipe for success? Do you think this process places the executive recruiter as a trusted advisor to either client companies and candidates? Do you think recruiters are thoroughly learning what they really need to know about your company to best represent your brand and find the right cultural fit? Does the recruiter know anything about how human resource strategies are changing? Do you think a recruiter is identifying what really motivates a candidate and what is best for their career development? Most importantly: Do you think this methodology leads to quality results? “Get as many job orders from as many clients possible!” We heard it over and over. Internal contests are developed in Contingency Recruiting firms to focus on getting as many job orders as possible. I watched many recruiters take on jobs from clients they would never have done otherwise and were never going to put effort into hiring. Let’s guess how well an executive recruiter understands your company culture, strategies, strengths, weaknesses much less the role itself when they are making hundreds of calls a day? A competent contingency recruiter will focus on the process your company has in place for hiring during this conversation but misses what is even more important— a pure understanding of the position and how that position positively affects where your company is going. “Get as many send outs as possible!” These contingency firms also have internal contests that focus on the most “send outs” during a period. Makes sense statistically in that the more candidates you get your client to interview, the more you increase your chances of getting that person hired. But who benefits other than the recruiter? Let’s say I was able to get a client to interview (7) candidates. How much time has the transactional recruiter even spent with these candidates? 60-minutes max, and many are submitted after a 30-minute conversation. Or worse –
Retained Executive Search in a Contingency World
Sandy has a problem. As head of a mid-sized consumer products manufacturer, her National Sales Manager just gave her two weeks’ notice. Her current plan to fill the position is to do what she has always done before – hire a couple of “contingency” recruiters, who will compete against each other, to quickly find her a replacement because there are major retailer line reviews coming up. This situation is not new to Sandy or hundreds of other companies. However, upon further review, Sandy has had 5 people in that same position in the last 8 years. Furthermore, the constant turnover in this position has had a major impact on sales and expenses. “Breakeven” was actually celebrated two years ago, and her sales are down 8% this year-to-date in what should be a robust sales environment for her product line. In addition, Sandy wants to go younger, thinking she can mold a “millennial” or college graduate into the type of National Sales Manager she believes will stay and grow into the position, as well as save salary expense in the process. When we initially talked to Sandy, she elected to go the contingency route once again because it has always worked for her in the past. Really? Instant gratification, the “quick fix,” or “putting a warm body into the seat,” is a strategy that rarely works, but is at the heart of the contingency executive search model. The speed and cost are often attractive to the client and the recruiter! The search firm finds someone they think will work, arranges interviews, and when that person is hired, they achieve a nice pay day and then move on. In talking with Sandy, it became clear that there were several underlying issues where just plugging a body in would not work and lead to even more turnover in an important position that demanded stability… The staggering turnover in this position over the last 8 years points to the fact that little thought has gone into developing retention strategies and effective onboarding. In talking with some of her former managers, when they joined the organization, they immediately sought ways to leave it. There is a lot more at work here. A traditional interview process (lack of behavioral interviewing) that actually directed a well-rehearsed candidate to say what Sandy and her human resources team wanted to hear, rather than identifying the best candidate. A confusing compensation plan. Sandy has been focusing her energies on saving time and money rather than putting the right person in the position, which has saved her neither time nor money. She has “accepted the fact” that there have been major costs and missed opportunities due to turnover, but she chooses to continue the same strategy. We live in a world where instant gratification and the need for speed often overwhelm the need for quality and taking the time to get it right. This is much like the difference between contingency executive search and retained executive search. A retained executive search firm is engaged in all aspects of the search process, starting with defining a customized search strategy, all the way through to candidate onboarding. Retained executive search firms often continue consultation and follow-up months after the hire, since their success is based on the impact and long-term commitment of the executive hired. These firms conduct the search exclusively—no other recruitment agencies will take part—so that it will be very client-focused with intense investment of resources to find the right candidate. Retained search firms work very closely with each client, and will take their time and use an agreed-upon methodology to find the best person for the job. The process is rigorous, with a shortlist of 4 to 6 quality prospects developed after an exhaustive sourcing process, beginning with upwards of 300 initial targets. While retained search may be perceived as expensive, it provides a better ROI, and over time, it is no more expensive than contingency, and especially the opportunity costs involved in having a bad hire. The key is that retained search firms are looking for the most qualified candidate. On average, a retained placement ends up being a better fit in their position and ultimately stays in the role longer than with any other type of recruiting scenario. Companies will most often request a retained search when they are looking to fill an executive level position, and sometimes when all other less expensive—and ineffective—contingency search options have been exhausted. The moral of the story and the happy ending… Anything worthwhile usually takes time and effort, and this is especially the case when finding the right hire. Think of the wasted time, expense, and opportunities that Sandy has had over the last 8 years. After a lot of analysis and discussion, Sandy agreed that it may be time for her to “retain” a different hiring strategy. We agree!