The Return on Right Hiring (ROR)

The old adage “People are your most important asset” is wrong.

People are not your most important asset.

The right people are.

– Jim Collins (Good to Great)

The story is simple and I remember it now for it bears a semblance to the issue of right hiring at hand. The Emperor’s New clothes. Depending on when you grew up or the school you attended (no pun intended), then you would be familiar with the story. “The Emperor’s New Clothes” is a short tale about two swindlers posing as cloth weavers who promised an Emperor a new suit of clothes that are invisible to the eyes of anyone who is unfit for their positions, or one who is incompetent, or stupid.”

I’d like to know how those weavers are getting on with the cloth,” the Emperor thought, but he felt slightly uncomfortable when he remembered that those who were unfit for their position would not be able to see the fabric. It couldn’t have been that he doubted himself, yet he thought he’d rather send someone else to see how things were going. The whole town knew about the cloth’s peculiar power, and all were impatient to find out how stupid their neighbors were.

“I’ll send my honest old minister to the weavers,” the Emperor decided. “He’ll be the best one to tell me how the material looks; for he’s a sensible man and no one does his duty better.”So the honest old minister went to the room where the two swindlers sat working away at their empty looms.”Heaven help me,” he thought as his eyes flew wide open, “I can’t see anything at all”. But he did not say so.”Heaven have mercy,” he thought. “Can it be that I’m a fool? I’d have never guessed it, and not a soul must know. Am I unfit to be the minister? It would never do to let on that I can’t see the cloth.”

“Don’t hesitate to tell us what you think of it,” said one of the weavers.”Oh, it’s beautiful – it’s enchanting”, said the minister, peering through his spectacles. “Such a pattern, what colors!” I’ll be sure to tell the Emperor how delighted I am with it.””We’re pleased to hear that,” the swindlers said.

So one after the other came one minister after another to check the progress of the ‘weaving’ of this expensive cloth…each came back with a good report of how beautiful and exquisite the clothes were. And why wouldn’t they so, as it would mean that they were unfit to be ministers or incompetent or just plain stupid. How many of you can count the number of times you wished you had had the guts to tell a CEO or a leader that they had just hired the wrong person? Do you recall those times you had to play along with everyone regarding the recruitment of someone that you felt uncomfortable hiring – but you would have been a lone voice in the wilderness so you chose to say that ‘the clothes were beautiful and exquisite’. I know that some business leaders have had instances where they hired someone for purely business-building purposes but can they be candid enough to admit it instead of selling us akara and telling us it is cheese.

As I think about hiring or recruitment of people again I remember another story. Nope this isn’t a fairy tale like the former. It is the story about all of us. The story just ended around 2009. For want of a name…let’s call it the Nigerian Stock Market crash. Before the crash, everyone ‘knew’ how the market worked. Literally everyone! Most felt the market was easy to understand and ‘manipulate’. I was even told that a CEO of one of the stockbroking firms said, “We don’t need research in this market.” This was a statement alluding that the market did not require any unbiased in-depth analysis. It seemed, then, that all you needed to do was to read the papers to see who was selling shares at a discount (discount my foot), buy some then wait for a few weeks and your shares had appreciated. Voila! In short at that time everyone ‘knew’ what to do and so no one needed an in-depth analysis. And what happened after all – ‘knowledgeable’ investors had entire or close-to-entire portfolios wiped out.

Hiring right is like the Nigerian Stock market before the crash – everyone ‘knows’ what it takes to recruit properly so no one needs to take any lectures from another. No CEO or leader would admit that what he/she knows about hiring was from many years of trial and error. Most would readily concur that staffing a vacancy doesn’t require any in-depth analysis as such. And what has been the result– costly,avoidable,poor recruitments, redeployments and promotions. And I don’t mean costly in naira or dollar terms only. In this trial-error-learn cycle, many mistakes have been made even by some of the well-meaning amongst us. Some have hired emotionally and gotten their fingers burnt. Or like I said in my article, Hiring Great Talent takes Guts, maybe they just lacked the guts required to make an unbiased professional assessment of the better candidate for the job. You must understand that people aren’t inherently bad in themselves (in usual circumstances), so a bad hire is actually the result of good people doing bad hiring. So what exactly makes for bad (or poor) hiring and what do we stand to lose (the associated costs)?

A person without the right competencies (knowledge, skills, abilities, attitude, and motivation) for the job is an obvious mis-hire – that is Poor Hiring 101.

Don’t let any candidate bamboozle you with, “but I can do the job.” Secondly, a qualified person placed in the wrong role is also poor hiring. Our offices are replete with people who have been cast into roles that given an option they wouldn’t even touch with a 20m pole. Thirdly, a wrong process also has a high tendency of producing poor hires. I always make the point that: the process assures the product. In simple English this means that a product is only as good as the process that was used to arrive at it. So a potentially good hire can even be tainted by a poor and unprofessional process. Permit me to digress/buttress and send a note of caution to growing companies (otherwise known as SMEs). The challenge SMEs face in the recruitment market is that they have to contend with more established, reputable firms who also happen to have deep pockets (talk about unfair advantage!). So the question SMEs must answer is:“why should anyone come to work with us?” One unmistakable way of attracting premium talent as a growing firm is through an engaging, creative and professional process.

Bad hiring is expensive.

Plain and simple . . . no need sugar-coating the situation. There are direct and indirect costs associated with poor hiring. Certainly the productivity of such a hire would be low – maybe even dismal. The productivity of the team would also be low (in instances where the person heads the team). Team morale could dip and thus stifle performance and creativity. From my dashboard as an organisational effectiveness strategist, I can tell you this for free: one of the differentiating skills for leaders in the 21^st century is the ability to manage people who are smarter, more skilled and with more self-motivation than you. A team or group is only as good as the leader’s ability to generate discretionary effort from direct reports. Implication? A lot of teams/groups/divisions in our organizations have their potential stellar efforts repressed by their leaders.

This begins to give you a fair idea of the ripple effects of the poor hiring of a leader. Quality of work output would reduce for sure. Poor quality hires may result in poor customer service, which leads to revenue loss and even loss of market share (Taleo research). In customer relationship management it is easier to maintain the customer than to regain a lost customer – the cost is just too high and it could have been avoided. An additional damage from bad hiring is erosion of brand equity.

You don’t even want to add costs for separation of the poorly hired person and eventual replacement costs. Don’t forget that when we talk about staffing or hiring, we speak of hiring junior-senior staff; administrators; managing directors; committee members or chairmen; governmental parastatal heads; project managers; pastors; vice-chancellors; ministers or commissioners; and the list goes on and on. The more complex the role, the more control it has over people and resources, the more the damage bad hiring can cause. Caveat emptor! Hiring right then isn’t a nice-to-have but a need-to-have . . . a clear imperative.

Hiring right means having the right kind of people, in the right numbers, at the right time, through a right process in right placements.

You wouldn’t come to terms with the impact of a great hire until you merge your personal experience with the findings made by Jim Collins and his research team in the best-selling book, Good to Great. Let me situate you right in the centre of their quest. In the study leading to the book, they sought to answer one single question, “Can a good company become a great company and, if so, how? Or is the disease of “just being good” incurable?They found out that for a good company to become great it needed to apply six different concepts all together. No.2 on the list is what they call, “First Who . . . then What?” First get the right people on board, get the wrong people off and then figure out where to take the organization i.e. right people then right vision or strategy.

Here is an excerpt: “the good-to-great leaders understood three simple truths. First, if you begin with “who”, rather than “what,” you can more easily adapt to a changing world. If people join the bus primarily because of where it is going, what happens if you get ten miles down the road and you need to change direction? You’ve got a problem. But if people are on the bus because of who else is on the bus, then it’s much easier to change direction: “Hey, I got on this bus because of who else is on it; if we need to change direction to be more successful, fine by me.” Second, if you have the right people on the bus, the problem of how to motivate and manage people largely goes away. The right people don’t need to be tightly managed or fired up; they will be self-motivated by the inner drive to produce the best results and to be part of something great. Third, if you have the wrong people [please listen carefully], it doesn’t matter whether you discover the right direction; you will still won’t have a great company. Great vision without great people is irrelevant.

Consider the case of Wells Fargo.

Wells Fargo began its fifteen-year stint of spectacular performance in 1983, but the foundation for the shift dates back to the early 1970s, when then-CEO dick Cooley began building one of the most talented management teams in the industry (the best team, according to investor Warren Buffett). Cooley foresaw that the banking industry would eventually undergo wrenching change, but he did not pretend to know what form that change would take.

So instead of mapping out a strategy for change, he and chairman Ernie Arbuckle focused on “injecting an endless stream of talent” directly into the veins of the company. They hired outstanding people whenever and wherever they found them, often without any specific job in mind. “That’s how you build the future,” he said. “If I’m not smart enough to see the changes that are coming, they will. And they’ll be flexible enough to deal with them.”

Cooley’s approach proved prescient. No one could predict all the changes that would be wrought by banking deregulation. Yet when these changes came, no bank handled those challenges better than Wells Fargo. At a time when its sector of the banking industry fell 59 percent behind the general stock market, Wells Fargo outperformed the market by over three times”.

Then again maybe you should speak with seasoned financial analysts and portfolio managers (not jobbers) and they would tell you that people selection is one of the non-financial variables that is used in their valuation models. The name they have for it is management credibility or/and management expertise. It simply means, ‘hire the wrong people’ and drain your commercial value. Analysts typically perform a Fundamental and a Technical Analysis (and sometimes a Sentiment analysis) to extrapolate the value of a company and its potential movements. Also if you are familiar with the 5Cs in Credit Analysis, you would know that many requests for credit lines have been turned down because one of the cardinal Cs – Character. And the explanation is very simple. Why should I avail a loan to someone or an organization if I suspect their willingness to repay?

I think the point has been successfully made – hiring right is a source of competitive positioning.

Hiring the wrong or the right talent impacts the bottom line . . . soon or later. To get your hiring right and to build a sustainable framework for consistently hiring the right talent would require a system that has some specific elements built into it – I would highlight as many. You could call it “Hiring Right by Design”. Let me make this statement, hurriedly: having a bad hiring process is worse than having a bad hire. Or put it this way: having a hiring process that wasn’t consciously designed to be great is worse than a bad hire because such a process would almost always throw up poor hires.

Hiring philosophy and culture.

The starting point for a great hiring system, is a hiring philosophy that believes that there is something as great talent. It believes that there are great performers and there are less-than-great performers. It must believe that people are a clear source of competitive differentiation. They must have faith in an objective process where hiring managers and interviewers can hold and uphold independent views about candidates.

Pre-existing vacancy.

As obvious as this seems, there must be an agreement that a vacancy already exists. Please run away from the pressure to hire if there wasn’t an initially identified vacancy. There is one exception – and I say this with a lot of care. Some organizations do have well developed talent management programs in which they hire great people when they see them even if there isn’t a vacancy yet. Nonetheless, the rule of thumb is to have a vacancy existing before hiring starts.

Pre-existing Organogram.

Have a developed organogram showing work relationships before hiring commences. An organogram is one of the most effective (yet simple) tools used for organizational and people planning. Amongst other reasons, it presents the organization in a glance. It shows reporting lines and accountabilities. So for hiring to be effective, it is imperative that a document showing the planned staffing direction exist before hiring commences. It is like having a plan before building a house. Ok, so imagine the ‘brilliance’ of a builder who decides to begin building without such a plan!

Talent pre-definition.

If there is one thing you do, just one thing, it is this particular one. Beforeyou kick-start the hiring process, you must decide on what you are looking for ahead. I dislike the thought that this would come as an obvious advice, when that is exactly what a number of people do. Or the more sincere ones amongst usjust doa weak job of the pre-hiring assessment. To avoid biases that could show up along the process, this pre-definition is a non-negotiable. It’s at this point that you determine the Key Competencies Required (knowledge, skills, abilities, motivation, and interests).

You would need tofurther sub-divide these competencies into Essential and Desirable. Tradeoffs may have to be made, so what would these be? What experience level would the job require? What are the success factors necessary for one to be effective in the role? The hiring manager’s expectation of the role must be mined extensively. What would be the working conditions? All these would lead to us developing a document that distils and summarisesall these – popularly called a job and person description.

Have a rich pool.

From today, become weary of just getting one resume when you have a vacancy. Your hiring cannot be better than the pool of talents you can access. This isn’t to make the case for a volume of resumes. Not at all! This is one of those instances were quantity doesn’t equal quality. It actually means that we should consciously seek a rich pool of candidates – to the best of our abilities. We shouldn’t get carried away by that one resume that arrives on our desk.

Validated Assessment methods.

To the best of your abilities and to the extent your budget allows, employ validated candidate assessment methods. I appreciate that some of us have a “sixth sense” developed over many many years of work experience but may I admonish that we cannot design that into the process. We can’t reproduce it consistently. Or better still it isn’t a reliable and validated assessment tool. If we are to build our staffing system into a source of competitive advantage then it is vital that the processes and tools that we choose be validas a predictor of performance on the job and possess consistency in application.

Assessment methods include the use of selection tests and structured interviews. Selection tests include ability tests, personality tests, intelligence tests, assessment centreetc. A lot of exemplary practices combine more than two of these tests, eg an ability tests, an assessment centre and a structured interview. The most common of all is the interview. The following factors increase the ability of interviews to be valid and reliable: structured vs unstructured; interviewer trained or untrained; interviewing experience; number of stages or levels; competency based vs resume based; adherence to pre-defined qualities, etc.

Candidate Management.

Yes I know that there are fewer jobs out there than applicants, but candidates need to be treated with respect, dignity and a slice of thoughtfulness. Listen, organisational greatness doesn’t happen by accident. If we don’t design in a service-oriented candidate management system, we would most likely lose good candidates all through the process. If they do join our team, it would only be a matter of time before they seek comfort somewhere else. Candidates should actually be treated as customers.

Speed.

It is important that we don’t allow the recruitment process to linger as we run the risk of losing good candidates that way. But too many managers are ‘busy’ doing ‘more important’ things than to give hiring the quality time that it deserves. “Hiring the right people is one of the most important things a manager does, and yet it is also the one that managers are the most likely to neglect. It seems that just when it is most important to spend the time it will take to find the right person, too many managers, swamped with the extra work vacancy has created; just grab the first person who looks acceptable.This is called SATISFICING: doing the minimum necessary to get through a task, rather than MAXIMIZING: seeking the best performance possible” (Jone L. Pearce, Organisational Behaviour).

On-boarding process.

Organisations need to make the success of their new hires their responsibility. And why is that? There are studies that indicate that people choose to stay or leave a firm within their first few days. Apart from that, the time-to-contribution or time-to-performance of the new hire would take too long. New hires need to be hand-held as they are confronted by the culture of the new organization. Given the cost and amount of time associated with hiring, it therefore makes even economic sense for new hires to remain in the firm as against leaving prematurely. Therefore, they need to be systematically integrated into the firm in such a way that mitigates the possible ‘shock’.A properly designed onboarding process goes beyond just orientation.

A lot of times what a lot of people do is just to introduce the person around to a few people, hand over company documents, probably some videos, of course a lot of forms to fill, etc. But what a new hire needs actually goes farther and runs deeper than that. A better process is focused on integration – or immersion. This is the immersion of the person into the firm and an emotional engagement of the person with the firm. Obviously this process would run for months and needs to be managed delicately. Remember that this cannot be ad-hoc, it has to be built in – it is still “Hiring Right by Design”.

Jack Welch, in his book Winning, had this to say about hiring:

“Hiring good people is hard. Hiring great people is brutally hard. And yet nothing matters more in winning than getting the right people on the field. All the clever strategies and advanced technologies in the world are nowhere near as effective without great people to put them to work”.

QED