Hiring: Can You Do Better Than Flipping a Coin?

Most top executives admit that they have repeatedly hired people who are “B” or “C” players, who have had an adverse impact on the company, who needed to be replaced. Most will admit they have someone on their staff right now that fits this description. Many studies have shown that without a formalized, professional approach to evaluating candidates, employers can expect 50-60% hiring accuracy, no better than flipping a coin.

I would define hiring accuracy as bringing a person on board who performs well, has a positive impact on the organization, fits with the team, and stays with the company a reasonable period of time. Based on what I hear from clients, hiring accuracy has not improved in the last 25 years. Almost every other aspect of corporate management has improved. Why not hiring? CEOs are smart people. They know how to use business case analysis, and seek expertise when they implement a new IT system. They will invest millions in top grade automated machinery, and establish finely-honed metrics for key performance indicators. BUT, they won’t invest in acquiring precision hiring methodology, choosing instead to judge job candidates by first impression and personality, and using an intuitive “gut feeling” process to make hiring decisions. This practice arguably suspends logic and sound business processes!

When an employer utilizes a performance-based approach, which defines specific, measurable objectives, and combines that with looking at tangible evidence of accomplishment and initiative, suspending intuitive judgment in favor of objective analysis, accuracy can improve to 80-90%. What CEO would not change a process immediately in order to get that kind of improvement? As our economy recovers and the labor supply shrinks, which will be steadily happening over the next 20 years as boomers retire, hiring is one process that needs to be better than a coin flip.

Pain Killer Vs. Vitamin

I learned the expression “Is it a pain killer or a vitamin?” in the angel / VC investment world. This question is asked of start-ups by investors, to determine if the product being developed and funded is essential for the intended purpose (a pain killer; a must-have), or just nice to have (a vitamin). When a CEO applies this to his/her current products or services, the answer is very revealing. In an economic downturn, very few customers buy vitamins! But, they still need pain relievers. In the aerospace sector, pain can often be size and weight – the need to fit critical technology in a smaller, lighter box. Companies will pay millions for such pain relievers. In the communications world, pain can be the need to transmit more with less – less power, using less bandwidth, over fewer, smaller lines.

In my world, HR and executive search, a person can be a pain. I don’t mean an annoyance, like a “pain in the ----“, I mean a real pain – an obstacle to progress, unable to generate needed results, an impediment to team functioning. A new, more effective person who gets past these obstacles is the "pain reliever." I tell my clients they should only hire me if I can relieve pain, and have a critical, measurable impact on their bottom line. For 2009, we all need to think this way!

This Just In... Small Business is Optimistic

Microsoft and Elance have just released a survey of 600 small business owners, conducted in December, that reveals that 60% are optimistic about 2009. They believe that 2009 will be as good or better than 2008. 37% are worried about 2009, but believe they'll weather the storm.

I've said in previous blog entries that attitude is a huge factor in success, so I was really pleased to see the positive approach. I too feel the economy will bounce back decisively this year, and we are preparing for that.

True or False: Available Job Candidates Are Better Than Ever?

Many of my business friends and clients have remarked to me that the recession must mean that there are great people available for jobs. That is a tricky issue.

If someone is currently unemployed and actively looking, the question is why? Did the prior employer shut down a facility? Sometimes; and in that case, there could be very good quality people impacted. However, the more usual reason that people are available and looking during a recession is that they are the “B” and “C” players that companies realized they needed to let go first. Who lets their BEST people go when times are tough? Smart companies keep their best people, and make them work even harder, which means they don’t have the time or inclination to look at job ads.

In boom times, you might get 40-50 responses to an employment ad, and perhaps 5-10% (2-5 people) would be worth considering. In a recession, you might get 400-500 responses, and maybe there are 10-20 worth considering (drops to 5% with so many people applying). Will you be able to weed through 450 so-so people to find the good ones? Most “B” and “C” players still manage to put together a decent resume. So, I contend it is actually harder to find good people in this kind of a job market, and the best ones are even less accessible, because they are working harder, and wouldn’t dare be looking, for fear of risking what they already have.

My answer is False – not better – you need to get the “A” player to get you through the tough year ahead.

Top Ten Business Survival Strategies for 2009

Guerilla Marketing: A 25 year old concept, especially valid today. Use aggressive, unconventional, creative, and low-budget tactics to acquire new customers.

Customer Satisfaction: It is so much easier to retain a current customer and expand business with them than to acquire a new customer. Make sure you are better than any competitor.

Value Selling: How are you better than competitors, and why are you worth more? Answering these questions will maintain your margin.

“AS IF”: A big part of beating the competition is believing that you can, and acting “as if” you will. People believe you, when you act with unquestionable credibility.

Partnering: Who else can bring you customers and/or promote your product or service? Develop strategic alliances to boost possibilities.

Prepare for the Unexpected: Could a major client pull its business? Conversely, what if the recovery happens quickly? Prepare plan “A”, plan “B”, and plan “C”.

Cash Management: Hold on to cash. Prioritize payments based on who can “kill” you – IRS, EDD, landlord, mortgage holder, raw materials suppliers (that you need for your product) etc. Other vendors have to learn to wait.

Solidify your Banking Relationship: Too many companies are being surprised by their banks pulling lines of credit, refusing to renew, etc. Make sure you know where you stand with your bank. Shop for a new one before you need to.

Controls: Cut waste and inefficiency. Apply lean techniques to every aspect of your business, with the possible exception of marketing and advertising.

Work Harder and Smarter: Your time and value as a leader are critical. Make every minute count!