The New Art of Hiring Smart

People are our number one resource! The war for talent is heating up!

Trite expressions, no matter how true, aren’t much help to a growing company. Pioneer Entrepreneurs Patrick Pitman and Barry Brown [1] each lead young companies that are starting to ramp up, and they need to hire more people – the right people. Consequently, speaking with Steve Wilson about hiring smart seemed like a good idea.

Workshop Commentary by W. David Bayless Pioneer Entrepreneurs
http://www.pioneerentrepreneurs.com/index.php

(Thanks to Dave and Julie Foster of Montana-Jobs.net for passing this along- Russ)

Hire well

Systematically reduce the cost of turnover

Hire local first

Hiring smart remains a complicated process

Related Resources

In 1996, Steve founded Willow Creek Consultants to show companies how to recruit, train, and motivate top-performing people. Sounds good. Even better when you consider that in 1986, Steve started Mid-States Technical Staffing Services, which grew from its home in Bettendorf, Iowa into an Inc. 500 company over a five-year period. In a consulting field replete with platitudes, Steve has walked the talk.

If you must hire, hire well.

Steve’s 7-step process for hiring smart is preceded by a simple rule: don’t hire anybody unless you must. I must confess, at times Steve sounds bipolar. On the one hand, he’s fond of optimistic quips such as, “There are not that many bad people in the world, but there are a lot of good people in the wrong jobs.” On the other hand, his presentation features a pessimistic statistic that claims 56% of employees lie to their supervisors. The way I choose to interpret Steve’s schism is that great employees are scarce – by definition. And, increasingly, the success of our businesses is determined by the quality of our people. Given a critical, scarce asset that is difficult to identify, recruit, and develop, it only makes sense to use as little of that resource as possible. If you can outsource or automate the mundane, non-critical aspects of your business, you should. At the same time, get really good at hiring great people who focus on the execution of the essence of your business.

Systematically reduce the cost of turnover.

Steve’s approach to hiring is based on the following assertions. First of all, hiring mistakes are manifested in unnaturally high employee turnover. Second, the cost of turnover – search costs, lost customers, poor morale, lost productivity, unemployment claims, liability – is high, particularly for a small, growing company. Third, companies mistakenly overemphasize hiring “a skilled person with experience.” Fourth, turnover can be reduced substantially through the implementation of a systematic, tiered hiring process. I’ll try to sum up Steve’s prescribed process. If you want to dig into the details, you can download his presentation slides and listen to the audio archive of Steve’s teleconference with Barry and Patrick.

As Steve puts it, entrepreneurs “hire for skill and fire for [lack of] fit.” That described the early days of Mid-States Technical Services, and the result was debilitating turnover. As a result of his personal experience as well as his research, Steve strongly recommends hiring primarily for attitude and cultural fit. While a minimum level of technical skills is required for any job, Steve says that the tendency to “hire a skilled person with experience in your environment” is a barrier to dramatically enlarging your pool of qualified applicants.

It would seem, though, that creating an expanded pool of applicants composed of people without direct job experience imposes two costs upon the employer. First, there is the cost in effort of winnowing down a large pool to a single employee. Second, there is the prospect of higher training and development costs.

Steve acknowledges that a company has a limited amount of time to devote to the hiring process. In economic terms, hiring costs are constrained by the incremental value of decreased turnover – about $5,500 a year for an $8 per hour employee according to one study cited by Steve. That strongly suggests that management should only spend time with the best candidates.

To make the job easier, Steve reasonably suggests that a company start by being clear about the kind of characteristics for which it is recruiting. In other words, every position in the company should have a description. But, he doesn’t advocate the traditional, overblown, static job descriptions of a big company HR bureaucracy. Alternatively, a small company should consider a simple grid divided among, for example, administration, sales and marketing, and production classifications and, for instance, entry and advanced job levels. These six job descriptions would be fleshed out with the minimum unique skills necessary to fulfill these roles. Steve says that he used a 3 by 6 grid to describe all the jobs within his 100+ person company.

Job descriptions in hand, Steve recommends using an array of inexpensive software and Web-based tools including reference checks; personality, abilities, and interests testing; and “job matching” profiles to augment the standard application and interview in order to narrow a broad pool to a small set of qualified applicants having the best cultural fit.

Regarding potential training costs, Steve argues that training happy, self-motivated people is not much of a burden. Provide them with self-training opportunities, encouragement, and frequent, small rewards during their first six months on the job, and these people will, in essence, train themselves. His logic? Those who want to learn will learn. Those who don’t won’t – no matter how much time and effort you spend on formal training. I’ve found this to be true. The major banks I worked for once upon a time spent a lot of money on training. However, training was perceived to be a reward for top performers, not rehabilitation for laggards.

Hire local first.

Steve built his company on the economic frontier. After all, Bettendorf isn’t exactly the acknowledged epicenter of engineering talent. He shared a secret: “The last resort is to relocate a person.” That’s because a relocated person has to acclimate to two new cultures: the culture of place and the company culture. A less experienced, local person with great attitude and a capacity to grow can often be a better fit, in Steve’s experience.

Andrew Field, a member who runs his own Inc. 500 company – PrintingForLess.com in Livingston, Montana, has followed a similar path. As his company grew, Andrew hired people from around the country who had experience in the printing industry. Unfortunately, most couldn’t make the transition. Andrew has found that “commitment to place” is a leading indicator of a good prospective hire. (Incidentally, Andrew is a big believer in the utility of personality profiling as a component of the hiring process.)

Hiring smart remains a complicated process.

Personally, I’m a little suspicious of online tests that purport to measure a person’s propensity to be unethical, lazy, or a substance abuser. Intrusive background checks run against the grain of my libertarian-flavored Democratic politics. Ultimately, however, the approach Steve advocates is entirely consistent with my understanding of how adaptive systems really work. It pays to open your mind to a broad array of possibilities and then vigorously cull options down to those that demonstrably work the best. That’s how nature works. That’s how the venture capital industry works. I imagine that it works in the hiring process, too.

On the other hand, real life is never as simple as a 7-step process might suggest. While advocating hiring for fit over experience, Steve seems to contradict himself when he proposes a “targeted selection” interview process that claims, “Past performance is the best predictor of future performance.” Nevertheless, contradictions abound in business. That’s why management is hard.

In the end, I believe that Steve’s recommendations have a lot of merit. (More importantly, so do Patrick and Barry.) In sum, understand what you really need in a new hire; be open to the possibilities of a broader applicant pool; focus on fit and attitude; and use a variety of tools and methods to rapidly and systematically cull your applicant list so you can invest your scarce time with the best applicants. And, while you are busy managing your process in order to reduce your turnover costs, don’t neglect to trust your own instincts and sense of judgment.

http://www.montana-jobs.net/