I got to spend a couple hours talking about hiring last week with Miche Rayment, who runs The Hire Effect and wrote a book by the same name. Since we’ve both worked with growing companies to define hiring processes and hire key positions, we shared some stories and developed some tools to help people decide how they should approach hiring.
I had the most fun when we were brainstorming what to call the “hiring strategy” of the many companies that, well, don’t have a hiring strategy. It went something like this…
“They just decide they’re going to hire someone, and start looking, and then find somebody and hire them.”
“It’s like they just go pull someone in.”
“It’s like a vacuum. They flip a switch, and then wave around a tube that’s sucking in whatever gets near it.”
“That’s it – it’s the Suck Strategy of hiring!”
“How do you hire? We suck! Hahahaha.”
That was the most fun part of the conversation. The most interesting to me was when we talked about how much time a company should spend on a hire.
Let’s be honest – most companies don’t have the flexibility or discipline to go through a highly rigorous process with every hire. (Some hiring guides espouse taking months with each candidate! That is just unrealistic for most companies.) On the other hand, some roles and situations demand a lot of structure and steps in the hiring process.
So, what are the factors that a small company leader should look at to decide how much time to spend on a hire? There are just a few I look at:
- Importance of the role: bigger impact of the role = more time hiring
- Newness of the role: uncertainty of what the role is and what kind of person to hire for it = more time hiring
- Availability of talent: hard to replace a bad hire = more time hiring
- Pace of growth: faster growth = more growth issues coming up faster = more need to hire the right person = more time hiring
- Degree of competition: more competition = higher need to perform = more need to hire a strong performer = more time hiring
There are many situations when a company can just Suck to find an acceptable employee. But if any of the factors I list above apply to you or a position you have available, you should spend the “extra” time in your hiring process to find the right/best person. In those situations, the consequences of hiring are significant.
I recently gave a webinar for the SPARK.grow program on high-potential employees – how companies can identify, foster, and be attractive to high-potential employees, and how high-potentials can identify, develop, and be attractive to high-potential roles. (The recording of the webinar is here.)
I described a “High-Potential Talent Stack.” That stack has 6 levels – the bottom 3 are the factors that enable someone to perform at any job, and the top 3 levels are the factors that enable someone to perform as a leader. I want to describe each level…
Performance – this is how well the person gets work done
Results Focus – this is the ability to not just put in the effort, but to figure out a way to go around roadblocks and keep at a task until you get the result that is needed
Learning – high-potentials are always expanding their toolkit of skills, and learning about the work they do
Investment Thinking – this is the ability to think in terms of Return on Investment
Maturity – high-potentials handle themselves well, in different situations and with different people
Leadership – this is the combination of skills that are needed to get a team to perform at a level and in a direction that they wouldn’t get to on their own
This stack is a powerful tool. It shows what a company can look for when hiring new staff, and what they can train and develop to improve their high-potentials – and shows high-potentials what skills to develop for further growth.
Each level of the stack has 3 more specific components. The target is to score a total of 12 or higher when each of those components is rated on a 1-5 scale. Scores of 4-4-4, 5-4-3, or 5-5-2 would all qualify; scores of 5-3-3, 4-4-3, 5-5-1 would not qualify. It’s a high hurdle – but the people that meet that standard are often the “10x-ers” – the ones who have 10x the impact on your business than your typical employee.
Almost universally, small businesses underinvest in their high potentials. There’s too much potential ROI for you to do that.
You don’t need to hire every position with the same approach. Sure, some companies have the same hiring process for everyone, and it often involves spending 6 months on each hire and only hiring A+ people. In theory, that’s what you should do, but in practice, there are some hires that deserve more effort and some that deserve less.
How do you tell when to invest more or less? I’ll be talking about that on my webinar this month – the 3 different approaches to hiring, and when each one is appropriate.
For this column, I want to focus in on the highest-investment approach.
When does a hire deserve a heavy investment? The primary drivers are (a) the impact the position can have on the organization, and (b) the experience your company has with hiring that specific type of position. In other words, you should invest more heavily in your recruiting process when you’re hiring:
- Executive or key manager positions – because the impact of that position will be a multiple of the costs of even an elaborate hiring process
- New positions – because you don’t know what you’re looking for, and because you need to train your organization on what the new position will do
What does it mean to invest heavily in a hiring process? You should spend more time…
- Planning the position before even starting the recruiting process
- Choreographing the hiring process – who to include when
- Building a bigger candidate pool
- Interviewing candidates
- Confirming your final choice
It’s OK not to go all-out on every hire. What’s important for growing companies is having the wisdom to know when a more extensive recruiting process is needed, and having the discipline to invest the time needed when it is required.
If you do that, you’ll avoid the costs of a bad hire, which can be dramatic – around 2-3x the person’s compensation for a manager, and 5-10x the person’s compensation for an executive.
I have 2 clients who are focused on “accountability” this year, and it’s proving a hard row to hoe for both of them. Why?
Well, first of all, accountability is a somewhat scary term. If someone is saying we need it, then that must mean that we are not being accountable, and that sounds like someone’s not happy with people’s performance.
Worse, if there’s not a way to gauge performance, the people are likely to take a need for accountability as a judgment on their dedication. They’ll confuse accountability with work ethic.
It’s unfortunate that accountability gets this reaction. In Stage 2 companies, accountability is more about making things that used to be managed intuitively into things that are managed objectively. It does make a judgment about how people are working, but not in the way they think – accountability focuses on working on the right things, not the level of effort.
In fact, most of the time I work on accountability, people have a clearer sense of direction and less stress in their jobs.
I can spend lots of time talking about how to make your organization more accountable, but for now, let me finish by answering the question, “How do you overcome the initial resistance to accountability?”
I recommend 3 steps. First, before you bring up accountability, praise the team’s work ethic (assuming it deserves praise…if it doesn’t, that’s a deeper problem…), so that they know that you know they are dedicated. Second, give them an example of people spending more time in an area than they should. (Serving the bottom 20% of your customer base is a fairly typical area.) Finally, ask the team, “Do you have a way of quickly seeing whether the other people on the Leadership Team are succeeding?” If you don’t, then you’re probably spending more time than you should simply understanding how you’re doing, instead of diving into the issues that will make your business better.
Congratulations, Second Stage CEO. You’ve gotten customers, survived cash flow crises, created a vibrant team. And, now, at last, created job descriptions! You put it off as long as you could, because job descriptions are so un-startup. But you’ve realized that it’s time to get clear on what people are responsible for, so that there’s more accountability, and so that it’s clear whether that new hire is getting the job done (or not).
If you’re a young Stage 2 company – say, 10-30 people – your job descriptions can focus on people’s responsibilities – what they do…their functional tasks.
But if you’ve passed 30 people, you’re going to need more from your job descriptions – rather than responsibilities, you’re going to need to focus on competencies.
What are competencies? They are the things that people are able to do – which could mean making copies or putting a design into AutoCAD, or could also mean handling angry customers or juggling multiple priorities. Sometimes competencies are the functional tasks, but frequently competencies are behaviors that go beyond the task. Competencies give a much deeper view into what a person, position, or team is capable of.
Responsibility: process assessments
Competency: recognize errors and problem-solve when one is found
Responsibility: respond to customer inquiries
Competency: empathize with customers in pressure-filled situations
You need to know the functional responsibilities of your people. And if you look at the competencies you need in a position, you’ll paint a much richer picture of who can be successful, and what training your people might need.
As usual, the TV show Mad Men is a hot-bed of intrigue again this season – and it’s especially fun to watch the workplace as a management consultant. There are a few lessons that Mad Men can teach Second Stage leaders about Talent Management.
The focus needs to be on people, not work. As Second Stage companies grow, they need to spend less time focusing on how the work gets done, and more time focusing on who is on the team and how they work together. The firm’s partners are still focused on their work, not on managing their team, and I expect that we’ll start to see the team dysfunction increase as the season goes on. (If it does, it would be natural for the firm to break apart at some point – team dynamics usually overtake good work.)
Culture needs to be managed. Sterling Cooper Draper Pryce, like every company, has a culture – the question is whether it’s consciously acknowledged and managed. And the key to culture is defining just a few principles that drive the culture. In this year’s premier, Megan calls out one of SCDP’s principles: cynicism. There’s no inherently good or bad principles – they just have to work for the company. My guess is that the other principles for SDCP would be creativity, individualism, and fun. It’s hard to have principles that don’t fit the executive team.
Manage your high potentials. Pete Campbell is a huge asset to the firm, but because there’s no one helping him manage his development and career path, he’s a problem. High potentials are great – in many ways the heart of Stage 2 companies. But they come with a cost – you need to make explicit, valuable investments in them.
I suspect SDCP could use a better strategic planning process, too, but that’s a topic for another post…
Like many other areas of the business, sales change significantly in Second Stage companies. Because there are so many customers that you’re dealing with, you can’t manage them the way you did when you were a start-up – responding to whoever had the hot need at the moment, or treating everyone the same.
No, in Stage 2, you have to start to differentiate your customers. To start to do that, ask these questions:
Who are your best 5 customers?
What are the characteristics of the Top 20% of your customers?
What are the characteristics of the Bottom 20% of your customers?
When I asked these questions at a recent seminar, one executive said that she realized that they were spending most of their effort on their worst customers, instead of on their best. That’s the kind of thing that happens if you manage your sales with a start-up mindset when you’re a Second Stage company.
But once she realized her mistake, she was able to refocus her team and her energy to her best customers – something that her best customers, and her own team, appreciated.
If you’ve launched a small business that’s ready to take that next step, there are three things that are very likely.
- First, you’re working hard. Probably harder than you’ve ever worked in your life.
- Second, you’re loving it. While the work is hard, you love it so much that your business is stuck at a certain point of growth
- Third, you’re trying to grow, and you want to grow in a smart way, but you’re not sure how to do it.
For instance, as your sales have increased, you’ve probably significantly increased the workload of your bookkeeper. But as you continue to grow, will your bookkeeper provide the kind of financial oversight and business acumen your business needs?
And as the size of your team in all of its functions grows, do you have the right Human Resources structures in place to get the most from your talent?
Are putting the right people into the right roles to effectively manage your company’s growth? Do you know who your superstars are … and how you define a superstar?
It’s time you got some expert advice. Someone who can lead you down the path from entrepreneur to enterprise. This is where training can help.
It gives you another perspective. In the same way that a tennis player will look to her coach to understand how she can tweak what she’s doing to hit the ball harder, you’re going to get the benefit of someone’s expert opinion.
Our team offers exactly that kind of mentoring. We’ve seen all sorts of small businesses take that next step. We know what it takes for them to increase their sales, staff their teams, and effectively manage their costs along the way.
You wouldn’t buy a new car without knowing that an owner’s manual, or someone, could show you how it works, would you? Then why would you run your small business without help?
One example of a business that’s been helped by training is LLamasoft, an ambitious software company who needed some guidance on how to take that next step. Here’s what LLamasoft CEO Don Hicks has to say about training:
“When your company moves from startup to second stage growth, you don’t have the luxury of being an amateur manager. You’re a professional CEO and you need to learn from the best.”
At Phimation, we offer the kind of training that can help your business make that leap to the next level. Our Stage 2 Insight program is designed for small businesses with revenue from $1 to $50 million. It combines a self-guided workshop, webinars and a focused resource guide to help you focus on creating winning strategies, then developing them into effective frameworks and tools that grow your business.
Go back to that list of three likely things from the beginning of this post. If you could find a way to love what you’re doing even more, why wouldn’t you do it? If someone offered to show you how to hit the ball harder, wouldn’t you appreciate their advice?
Find out more about Stage 2 Insight now.