Posts

Using a process to guide your hiring decisions has two advantages. A hiring process can significantly decrease the chance of a mis-hire. Mis-hires are people that you end up firing or re-assigning because of poor performance. Some estimate the cost of a single mis-hire is between six and 27 times the position’s annual salary, depending on the level of responsibility [Brad Smart, Paper 360°, January 2008].

The second advantage is that using a process can significantly improve the chance of hiring a top performer. Hiring a top performer can make a huge difference, especially in a small or medium sized company.

According to one study of management and professional workers, “Top” producers generate 48% more than “Average” producers and 96% more than “Non-producers” [The validity and utility of selection methods in personnel psychology: Practical and theoretical implications of 85 years of research findings. Psychological Bulletin, September 1998, Vol. 124, No. 2, pp 262-274.].
One well known organization, The Container Store (one of the Fortune “100 Best Places to Work” for eleven years straight and twice as number one), has taken this finding to heart and has a simple 1=3 rule: One great employee can replace three good employees [Verne Harnish communication September 2, 2010].

If you still doubt the advantages of  using a process to guide your hiring decision, consider the wisdom of The Checklist Manifesto by Atul Gawande. The author’s message is relatively simple: Using a checklist (a simple process), no matter how much of an expert you are, improves outcomes. This is true whether you’re a pilot of a commercial plane or a surgeon at the local hospital. In his study, using a checklist for 4,000 surgical procedures spared 150 people from harm and 27 of those from death.

An effective hiring process includes some expected and some unexpected components. The expected components are a clear definition of the expectations of the positions, how performance on these expectations will be measured and the specific experiences and training necessary to qualify for consideration.

The (sometimes) unexpected components are a clear definition of the company’s values and a list of competencies required to be a top performer in the position.

Imagine for a minute that you are looking to hire the players that will take the field for your favorite baseball team. You are likely to have expectations for each position, a measure of how you will judge performance and an idea of what kind of track record you are looking for.

So, for a catcher you would expect a person to be able to manage the pitchers, throw out base runners, hit for power, etc. You are likely to more highly value a prospect who is hitting over .300, has a strong track record for managing pitchers and throws out five of ten base runners who attempt to steal.

You probably would also want to know whether or not the player shared your team’s values of hard work and keeping a low profile off the field. You might also want to know whether or not the player had natural talent (particular competencies) to develop into a superstar.

Once you have a clear definition of how you expect a top performer in a given position to perform and how you are going to measure his/her performance, you need strategies for finding and selecting the right person.

To implement a hiring process, you’ll need a strategy for advertising the position, a strategy for screening out the bottom 80% of candidates, a strategy for assessing candidates to determine potential fit and potential for growth, a strategy for interviewing candidates, a strategy for checking candidate references, a strategy for deciding among finalists, a strategy for making the finalist an offer and the strategy for on-boarding the finalist should the offer be accepted.

There are many different ways to execute each of these strategies. For example, you might advertise on craigslist or through your LinkedIn connections. You might also decide that you’ll screen out candidates with less than five years experience and that you will use group interviews for all candidates that make it past the initial screening.

However you decide to execute the strategies, you should adhere to three simple rules. Number one, do not “fall in-love” with the candidate to the point where you overlook his or her track record for meeting the critical expectations of the position. The “blindness” of love will wear off and you very well could be left with an average or worse performer. Number two, use reference checks to probe for excellence in the candidate’s ability to meet expectations of the position. True top performers leave a trail of good will and people willing to offer praise. And, number three, as frequently as possible have multiple interviewers actually interview the candidate and then compare notes. Two minds are much better than one even if you are personally able to listen to an answer and formulate a question at the same time.

Hiring in medium and small companies is a critical decision to get right. Often the last person hired dramatically influences the direction of the company, for better or worse. Using a hiring process helps improve your chance of getting your next hire right.

Hiring top performers is important because a top performer at any given position is significantly more productive than an average performer. According to one study of management and professional workers, the “Superior” or “Top” producers generate 48% more than “Average” producers and 96% more than “Non-producers”. [ref]The validity and utility of selection methods in personnel psychology: Practical and theoretical implications of 85 years of research findings. Psychological Bulletin, September 1998, Vol. 124, No. 2, pp 262-274. [/ref] One well known organization, The Container Store (one of the Fortune “100 Best Places to Work” for 11 years straight and twice as number one), has taken this kind of finding to heart and has a simple 1=3 rule: One great employee can replace three good employees. [ref]Verne Harnish communication September 2, 2010. [/ref]

If we take The Container Store’s ratio as an example, it means that if you can hire a top performer for a given position at the rate of $50,000/year, anything you pay over $16,667/year for average performers is a financial burden on your organization. Even if you cut the ratio down to 1.5=1, anything you pay over $33,333/year is a burden. This is the financial reason for making hiring top performers a priority. There are also non-financial reasons to hire top performers: Improved culture and morale, decreased turnover, top performers (like top athletes) make everyone around them better, and the fact that top performers tend to hire other top performers meaning that over time, you’ll have top performers at all levels of your organization.

Despite the financial and non-financial incentives to hire only top performers, we hear three objections:

1. Top performers are hard to identify,
2. The people who are not top performers have been with the company since the early days and I don’t know what to do with them, and
3. I’m not sure who is a top performer and who is not.

Our response to these objections is:

1. Top performers are readily identifiable if you hire using a process designed to select for specific backgrounds, competencies and organizational “fit”.
2. By determining position accountabilities and the metrics to assess performance, it’s possible to sort between top performers and average performers. This opens the door to developing those employees who have the potential to be top performers and to re-assigning or letting-go those who do not have the potential–often by mutual agreement.
3. See 2 above.

Small and medium sized businesses cannot afford the financial burden of having less than top performers at all levels of the business. Investing in hiring top performers can pay handsome returns. It starts with knowing what top performance is and moves to only hiring those who can perform up to that level.

Please contact us if you have questions or would like to discuss this post further.

1. Meet with them and really listen–simple but powerful.
2. Discuss their performance. Ideally this is done with the aid of some sort of “position scorecard” that lists the things they have been accountable for doing and a rating or measure of how they’ve done. For example, if a person is responsible for customer satisfaction, satisfaction might be measured by a survey of customers.
3. Assuming your top performers are true top performers, the scorecards will be positive and give you an opportunity to express appreciation for their efforts and success.The conversation can naturally flow into “where would you like to be in 3-5 years” and “what can I do to help you get there and keep you working at a high level for us”.
4. Probe for motivation. The art of appreciation is taking into account what motivates a person. Telling someone who does a task well, that you appreciate their ability to get things done, means a lot more to them than saying the same thing to someone who is motivated to be part of a team and get along with others. In the latter case you want to convey that you appreciate their contribution to the team and their loyalty, for example.
5. Probing for motivation can be tricky. Money, work/life balance, prestige, managing others, accomplishing tasks, being part of an effective team are all important motivators. Sometimes people are not clear about what motivates them and cannot accurately answer questions about what is motivating. The art of this is noticing the person’s behavior over time and divining their motivation. Giving them more of what motivates them makes them want to stay. Do not make the common mistake of assuming that someone else is motivated by what motivates you.
6. Ultimately, if you have trouble divining another’s motivation, generic appreciation is better than none at all. While I won’t go as far as saying, “appreciation is the #1 important thing for employees”, it is true for the majority of employees, especially the ones you want to keep around. The exception is the entrepreneur or CEO (or wannabe). Appreciation is not as important to this type of person. This sometimes makes it hard for the top person to express appreciation to others–if I don’t need it, why should they.
7. One more note to complicate matters further. Perhaps you’ve heard of the phrase, “hierarchy of needs”. A person’s need for money follows this theory which is basically, once you’ve taken care of surviving and then being comfortable, money stops being as powerful a motivator. It’s like food or shelter. If you don’t have them, that’s all you think about getting. Once you have them and don’t have to worry about them being present, their importance diminishes until they are dwindling again….