We recently conducted a survey to discover our readers’ most pressing workforce management challenge. They answered loud and clear: More than half of those surveyed stated that finding skilled employees was their greatest hurdle. Another 20 percent of readers stated that effective hiring was their top challenge.
This issue takes on even more importance considering that the need to hire employees is on the rise for most companies. According to the “SMB Hiring Outlook Survey 2013” by Sage North America, a third of small- to mid-sized construction companies reported an increase or plan to increase the size of their workforce in 2013. With such growth comes immense pressure on business owners to make smart hires. CBO interviewed three business management experts to glean insight into how to create an effective hiring process.
Recruiting is the First Step
The consensus among the experts is that if you wait until you have a position to fill to begin hiring, you have already failed. Jack Daly, a widely recognized sales management consultant and the author of “Real World Management Strategies that Work,” drives this point home: “Sports teams are quite frankly run better than businesses.”
Would Nick Saban or Rick Pitino ever entertain the thought of filling their roster without active recruiting years in advance? Surely no coach, even a less successful one, would consider selecting replacements only as their senior players are preparing to graduate. Yet, business owners often do just this. “There are businesses that aren’t spending any time recruiting good people to come into their company, and then they wonder why their performance is suffering or lacking,” Daly says.
He encourages business owners to act as if their companies are never fully staffed, principally because waiting until you have to find someone often puts you at the mercy of the pool of active job seekers. Stan Davis, founder of Standish Executive Search, concurs: “Active job seekers are maybe 20 to 25 percent of the people you want to attract.” Since no smart business owner would reasonably choose to ignore 75 percent of the talent pool, the need to prioritize recruiting is undeniable. “You’ve got to go where these people are, and you’ve got to dig them out. That’s what good search firms do—they build a network,” Davis says.
What Recruiting Looks Like
If you don’t employ a search firm, you should develop a strategy for in-house recruiting. So, what does active recruiting look like? Jack Daly says, “I can’t imagine a builder not having a list in writing of people who they are actively recruiting right now.” He suggests “courting” top talent. This involves more than calling and emailing. “I’m talking about breakfasts, lunches, dinners, personal visits and building a relationship on an ongoing basis.” These persistent efforts often cause people to move in your direction.
There is another compelling recruiting tactic: Take a page from Google or Apple, and create a company culture that attracts the best and brightest. Even if you don’t have a Silicon Valley budget, there are steps you can take. Daly suggests these four key ingredients to build an attractive sustainable employee culture:
- Build recognition systems – Having systems and processes for ongoing recognition of good performance is integral to attracting and retaining people.
- Create communication systems – Ensure you are regularly communicating to employees about where the company is going and how they’re performing.
- Institute personal and professional development processes – Answer these questions for employees: “What’s in it for me?” and “Why should I come to work in your company?” Also address how you will help employees grow personally and professionally once they get there.
- Develop empowerment processes – Create an environment where people are comfortable making decisions as if they were the owner of the business, as opposed to having to get approval for everything they do.
In this day and age, most savvy owners are aware of the importance of creating a strong company culture, but it often does not happen because of the time commitment involved and the daily issues that need to be addressed. “They (business owners) rush to the urgent at the expense of the important,” Daly says.
Creating a winning culture has another benefit: retention. “While you are out looking for other talent, make sure you keep the talent that you’ve got. If you’ve got good people, your competitors are going to find them,” Davis says. Among the ways to keep your high performers, you may think that competitive pay is the most important path to retention, but that is incorrect. Davis, who has studied this subject, explains: “Over and over again, the single largest reason why people leave jobs is disaffection for their supervisors.”
Define Who You Are Looking For
In order to begin a search, you must understand who you are looking for. To accomplish this, Daly suggests identifying a star performer in the organization who already holds the position you would like to fill and identifying the personal characteristics and attributes that make this person so successful. He shares a question posed in his workshops:
Imagine two candidates are in front of you. Both have 10 years of experience and have worked in two companies prior. The first person ranks in the third quartile based on performance but has 10 years in the construction industry. Meanwhile, the second person has 10 years of experience and ranks in first quartile of performance but his experience is not in the construction industry. Which one would you be prone to hire?
If you chose the candidate who is the top performer with no construction experience, then you are in good company. “When I’m in front of an audience, business leaders all say the one with the top performance with no industry experience,” Daly says, adding, “Then why are you only recruiting in your industry?” The smartest contractors are looking outside the industry to sectors such as manufacturing to acquire A players.
Who Are These A Players?
Recognizing an A player comes somewhat naturally, but experts say there are certain characteristics that most clearly define them. “Resourcefulness, more than anything, is what you want in all candidates,” Brad Smart says.
Smart pioneered the method of “Topgrading” for hiring and evaluating employees in the 1970s and has since authored several books, including the most recent “Topgrading – 3rd Edition,” which is a New York Times best seller. The 40 case studies in the book demonstrate how hiring success was improved more than 300 percent. Smart has conducted hundreds of workshops on the subject. Unfortunately, Topgrading developed an image of being for large companies like GE, Barclays, Honeywell, etc. “It is, but the biggest value is to small companies, lean companies. … In reality, smaller companies can afford mis-hires a lot less than the biggest companies. The 40 case studies in ‘Topgrading – 3rd Edition’ include a few large companies, but the vast majority are small and mid-sized,” Smart says.
Essentially, Topgrading can be defined as a method for interviewing and hiring that fills every position in the organization with an A player. An A player is defined as one who qualifies among the top 10 percent of those available at a given salary.
Davis also weighs in on the subject of finding A players, advising business owners to look for people who are not risk averse, who are keenly aware of developments in the industry and who work well with others. “If they have a mindset that everyone who works with them or for them is at least as smart as they are, that tends to help with collaboration,” he says. Smart adds that you want “people who want it done right the first time and are compulsive about achieving excellence.”
Some owners worry that they cannot afford to pay enough to attract top talent. Smart suggests that you examine salary surveys and be realistic about compensation. However, he believes there are alternatives to paying top dollar. “Tap your network. The best way to recruit is to ask everyone you know whose judgment you trust and get all the A players in your organization to do the same thing,” Smart says. For example, instead of paying $150 thousand for a B player VP of sales with 15 years of experience, perhaps someone in your company knows a terrific director of sales with eight years of experience but A player potential. “My clients have been much happier throughout the years going with the less experienced person with high potential rather than lowering the bar to hire a B player rather than an A player,” Smart says.
The Topgrading Interview Process
Once you have a thorough picture of who you are looking for, recruit them, screen them over the phone and bring them in for the interview. Smart’s research shows that only 25 percent of people hired turn out to be high performers for three reasons: low performers lie on their résumés, typical interviews are shallow and easy to fake and reference calls are usually worthless. Topgrading offers solutions: “truth serum” (defined below) and extremely thorough interview guides.
One Topgrading method that all business owners can employ right away to improve hiring success is using the truth serum. This is defined as the TORC technique, or threat of reference check. Candidates are told at every step in the hiring process that the final step will be for them to arrange reference calls with their former managers and others that you want to talk with. “That is incredibly powerful because the C players can’t get former bosses to talk about them, so they drop out. Good, you didn’t want to interview C players anyway,” Smart says. “But A players, sharp people with accurate résumés, will be happy to arrange those calls.”
Smart has created an online interview guide in order to show business owners how to conduct a long chronological interview dubbed the Topgrading Interview. “In order to have close-to-perfect hiring, you need to accurately judge people not on two, three or four competencies, but on 40 or 50 competencies,” Smart says. It is also suggested that the interview be conducted with two interviewers because it almost doubles the success rate of the hire. Such an in-depth interview process used in conjunction with the “truth serum” was designed to overcome the biggest interview obstacles.
In the Topgrading Interview, there are 16 basic questions to ask about every job the candidate has held. We asked Smart to isolate three of the most important questions: (1) What were your successes and accomplishments in that job? (2) What were your failures, mistakes or things you just wish you’d done differently? (3) What’s your best guess about what your previous employers will say were your strengths, weaknesses and overall performance when you arrange a reference call?
Using Hiring Knowledge
If so much knowledge exists that can lead to better hiring, why do businesses continue to struggle in this area? The answer lies within the mindset of the owner. “The problem with recruiting is that it takes a lot of time, and, as a result, there’s not an immediate return on investment, so the business leaders tend to avoid doing that because they are looking for immediate gratification,” Daly says. Without a focus on long-term strategy, many owners end up rushing out to hire in a pinch and then keeping their fingers crossed.
Owners tend to have the perception that they don’t have the time to spend on hiring. When Brad Smart encounters this objection in his workshops, he advises business owners to measure the cost in man hours to conduct his 12 hiring steps versus the cost of a mis-hire. In “Topgrading – 3rd Edition,” Smart cites multiple studies in which it is calculated that the average total costs associated with mis-hiring a mid-manager is eight times his or her salary. Also, the average amount of time wasted dealing with the mis-hire is 278 hours. “Managers sometimes say that they don’t have four hours to interview and hire an A player, but do they have 278 hours to waste on a costly mis-hire?” asks Smart. That’s an attention getter.
Owners and managers who don’t dedicate time to recruiting and interviewing can also get stuck in a rut. According to research by Smart and his team, traditional shallow hiring approaches typically yield these results: “About 25 percent of people hired turn out to be really, really bad hires; 50 percent turn out to be okay but disappointing; and only 25 percent turn out to be those high performers we expected.” This begs the question: Do owners simply resign themselves to live with those disappointing B players because ineffective hiring methods mean that only one in four replacements will turn out to be better, two will be the same and one will be even worse? “Topgraders don’t have to live with B players because with a hiring success rate of more than 80 percent, they know they can replace Bs with As,” Smart says.
Today presents an opportunity to get out of your hiring rut and staff your company with A players. With the construction industry on the rebound, Smart observes that “where you are as construction company owners five years from now really is highly dependent on how well you hire this year and the year after.”
