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Why Hiring is Paradoxically Harder in a Downturn


by Auren Hoffman
Read bio here

Sponsored by Compendium 2009

Why hiring is paradoxically harder in a downturn
Noise goes up but the quality stays the same
Hiring is always hard. The hardest thing to do at a company is the recruiting and hiring. It was really hard when the economy was doing well. Paradoxically, for certain industries (especially those reliant on innovation such as those in the tech space), it’s even harder when times are tough.

That’s right … hiring in tough economic times can actually be much harder than when times are good. In a downturn, the amount of resumes from C-Players massively increases while the amount of resumes from A-Players probably remains the same.

Never settle

First, let’s assume you’ve already bought into the “When Good Isn’t Good Enough” philosophy of always trying to hire A-players because they are just so much more productive than B-players (an ‘A-Player’ by definition is incredibly productive and smart and has that ‘it’, that rockstar-esque factor that makes everyone want to work with her). That means you won’t settle for people who are good but instead hold out for people that are great.

Great people – the A-Players – are a very different breed from the good (B-Players) and mediocre (C-Players). Great people are more likely to be employed with a company since a great person is often over 3 times as productive as a good person. Joel Spolsky argues in Smart & Gets Things Done that an A-player is anywhere from 5-10 times as productive. Joel looked at coursework data from a Yale computer science class and found that the fastest students finished their workload as much as ten times faster than the slowest students (average was 3-4 times faster).

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Spolsky, Joel. Smart & Get Things Done. Berkeley, CA: Apress, 2007. p 6.

The (Un)Employed A-Player

In troubled economic times, anyone can get laid off, but a disproportionate number of layoffs tend to fall on C-players. This is because they are the lowest performing people in a company and there generally are more C-players at a company than any other caliber. Note that this isn’t always true, as evidenced with Yahoo!, a company that has recently experienced many layoffs but doesn’t have many C-players. In Yahoo!’s case, majority of the lay-offs fell on B-players and even some A-players. Yahoo! is an exception and is an exceptional company — most large companies, however, are chock-full of C-players.

A smart company would (or should) never lay off a great person unless her/his job function is eliminated. For instance, if a smart company had to lay off one of two software engineers with one being great and other being good, it will very likely lay off the good engineer and retain the great one (and might even give the great person a raise). Again, this is the logic that smart companies should follow. Then again, there are many dim-witted companies that lay off their great people for odd reasons and so you’ll find some great people out of those laid off.

Where to find that A-player

Some A-players are less likely to be looking to jump ship during tough times due to a risk adverse profile, security, financial reasons, or other reasons. They are happy where they are and more likely to hunker-down in tough times. On the flipside there are A-players that are MORE likely to leave. Tough times often paint companies into a corner and force them into maintenance mode rather than continuing to innovate. Great players love to innovate and usually NEED to innovate. It’s usually very hard to keep these type of A-players caged-up and thus this presents a big opportunity for recruiting.

For instance, in the past it was really hard to hire great software engineers out of financial behemoths like Goldman Sachs, Morgan Stanley, and JP Morgan Chase. These companies have outstanding people and pay these people really well (often 50% above the salary at a tech company). Nowadays, even if these people have not been laid off, the great people are going to be leaving in droves. Why? Because in the next two years, it is really doubtful they will be doing anything remotely innovative. Instead they will be maintaining current systems due to the understaffed and underfunded technology departments. No fun there so expect a big exodus out of these companies.

It’s also worth noting that great people are often first to leave sinking ships. They don’t feel they need to stick around for a severance because they are confident they can always get another job.

How to deal with the paradox

Let’s face it, these great, A-Player type people are just really hard to find. Let’s say for sake of argument that A-players make up 1% of the population that could do the job, B-players are 19%, and C-players comprise the other 80%. It’s uncertain if these percentages are accurate, but there definitely are more C-Players than B-players and more B-players than A-players. Now if people find out you are hiring (through a Craigslist ad, posted on careers page, etc.), it probably means you are going to get a massive influx of resumes from C-players. Many of these resumes will be indistinguishable from those of A-players (it’s always hard to distinguish on paper). Which means the amount of noise (aka undesirable hires) will likely increase. Which means more work sifting through these resumes and talking to many more people.

It’s important to screen for great people in order to turn the volume down on all the noise.

Unfortunately, it is really hard to tell the difference between an A-player, B-player, or C-player just from a resume. Which means you need to engage with candidates and therefore you’ll have far more candidates to deal with given this economic climate. My guess – for a standard job announcement, you’ll have three times the number of C-players applying, twice the number of B-players, and the same number of A-players. Wow…your noise level has just massively increased!

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At Rapleaf for instance, we have a written one-hour technical interview as the first screen for resumes we like. Last year, our pass-rate for the test was 17% … meaning 17% of the candidates passed the written interview and moved on to a second round (a live chat with a Rapleaf engineer). Today our pass rate is about 6-8%. Our noise level has really increased.

One way to decrease the noise level (and thereby increase the amount of quality) is to specifically target candidates rather than to post a job ad. I would suggest targeting a company you think has great people, call into that company, and try convincing the talent to meet with you. I know if I was based in Manhattan and was recruiting software engineers, I’d be calling on the people in the top banks. While not everyone at a top bank is a great player, your ratio of great-to-good is going to go up substantially (assuming they haven’t already left).

Of course, not every position is harder to hire in this downtown. It is easier to find great people whose industries have been totally decimated by this recession. You’re in luck if you are looking to hire investment bankers, corporate lawyers, construction workers, or people in manufacturing.

This downturn looks to affect us all for the next couple years, so be sure to fill your company with only A-players and thereby creating your own A-Team.

mr. t image

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  1. July 16, 2009 at 5:57 pm

    All I can say is I wish I had written this article.

  2. Char
    July 21, 2009 at 1:36 am

    Here we go again. This is just another way of packaging the same old excuses about hiring. Hiring people, people in any discipline, technical or not is not like choosing and buying the latest shiny tech gizmo, looking for the most bells, whistles and gadgets. We are dealing with people, flesh and blood with lives and families. The selection process can not be reduced to a primitive diad binary of this person got more answers correct than the next person- so hire that person. The same holds true for selecting the fastest. What about the other than “A” person that does not do well on tests but can figure nasty technical problems that no one else could. What about the person slower than some of their peers but spends time with end users to understand where they are coming from, solve their problem and show them how not do it again, all the while not making the user feel like an idiot. While the tech whiz can fly through multiple problems on any given day but leaves users in a daze trying to figure out what they do and how not do it again. All the while the user feels stupid and intimidated for causing the problem in the first place. What about the Non “A” person that has an un-bridled passion to do the job well and will put whatever energy into the job at hand to get it done well verses the acknowledged “A” person who looks down their nose because those kinds of attitudes are just so “quaint.”

    A good manager- someone who actually knows what they are doing and by definition a good manager is someone who makes more good decisions than bad ones, rely not on test scores, psychological tests, behavioral interviewing, How to move Mt Fuji, etc. but on their experience, skill and even gut. The rest is indeed just noise, an excuse to fall back on when the new hire fails- “Well he passed all the tests.” And sometimes even the best of use screw up. It is called a “mistake.” That is why we have erasers and the undo button

    Am I speaking from a point of theory? Hardly. Frankly I have an “A” person’s attitude and mind but sometimes present a B or even a “C” person’s demeanor. Some time ago a job I applied for, and was turned down because I was not an “A” person- someone with a degree just like everyone else in the department but I solved a problem the “A” people with their degrees could not. A couple of years ago, a position I interviewed for where they gave me a 3 part technical exam, which I know I passed but was told I was not technically competent. Yet, I consistently advise subject experts on how to fix problems they could not figure out but where I have no prior working experience with because something that does not neccessarily show up on a test is I know how to think and reason out problems to a solution. Another position I applied for (This is my personal favorite) I was not an “A” person because as the manager put it “I must be a lot older than I purport to be. I have way to much common sense and wisdom.” My last position, they thought I was overqualified, but hired me anyway “because I could help keep my manager organized.” In addition to keeping my manager organized, the first two weeks I was there, my manager was out on paternity leave. I had the place to myself but kept thing running smoothly and end users happy and productive. Then, well Char is smart- give her that to do. Char is smart- that will take this load off her manager so he can concentrate on more important things.

    If you want a away to cut through the noise- first off do not follow the rest of the herd- do not bother with the job search engines. Their acknowledged ROI (asktheheadhubter.net) is around 4%. And the failure rate for new hires in the first year, mostly in the first 6 months, especially those in technical profession is 50%

    Rather, hit the trade/user groups and the job search centers and the job search support groups. In person, why- there you will find technically competent people keeping their skills up, interacting and helping others, confident in themselves not to keep their experience and skill to themselves, while continuing to learn and grow. Sit back and quietly observe who is engaged, active and participates, then make an announcement about available opportunities. Compare the people who respond to your announcement with those observed who were engaged, involved and participating- Those are your “A” list candidates. Sure, the response will be smaller but far more qualified. Like the man who lost his keys in the street but looked for them in the next street over because the light was better.

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