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Facts? I Don’t Need No Stinkin’ Facts!

August 18, 2009 Leave a comment

by John Wentworth
View bio here

mentalking“Data are bunk when it comes to picking employees.  I know!  I can tell who to hire in five seconds by just listening to them.” 

Jim, the recruiting director of Acceleration Service, sat at lunch with Fredrico, one of Acceleration Service’s divisional general managers.  Jim really liked him.  Fred was frighteningly bright, equally perceptive, but haunted by high achiever demons.

The demons included hubris.  Fred was sure that he was right.  About everything.  The problem was that he usually was, even when everyone around him disagreed with him.  His pattern recognition skills were superb, able to understand the essence of a situation from just shreds of facts.

But he overestimated his ability to pick new employees.  He ran a sales call center and kept one out of every ten employees hired.  As he and Jim sat there at lunch, Fred refused to use any data-driven selection tools.

Jim sighed.  “You are flaunting the entire discipline of psychology, you know,” he said to Fred.

Fred just smiled.  “I know what I know.”

Jim sighed again.

Jim was particularly frustrated because of some data-driven revelations that he had engineered and that Fred had acted on and which had turned out to be pivotal to Fred’s success, and which Fred had seemingly forgotten.

Fred at one point could not get anyone hired.  He was using a test and his recruiter had not been able to find anyone who could pass the test.  He reached out to Jim who assigned one of his corporate recruiters to the task.  Soon, they had candidates who passed the test and who got hired.  Everyone rejoiced.

But the rejoicing was premature.  Virtually everyone who was hired either left or was fired.

Jim sat down with Fred.  “What’s going on?”

“I don’t know Dude,” Fred said.  “It’s always been this way.  I have been able to create a cadre of loyal producers who are making a lot of money, but we can’t find any more of them.  I thought the test would help.  It’s normed to my top people, but it’s letting too many of the wrong people through.  I’m worrying about whether we have the right test.”

Jim growled under his breath.  He knew the test and he knew it was respectable.  And he knew that any respectable test, if it was normed to the right people, would create a filter that let people who were like the normed group through.  He recognized the limits to tests, too.  If you did not measure anything that actually correlated to on the job success, testing was useless.

And it was here that Jim had some sympathy for Fred’s point of view.  His environment was not like other call centers.  His management was not like other call center management.  Many of his successful employees had not been salespeople before.  They had been karate instructors, beach bums, nurses…there were a few that had sold, too, but they had not been particularly successful until they came to Fred’s shop.  So possibly, he thought to himself, Fred’s shop is so weird that the test is just not measuring what drives success here.

Jim called up the psychologist who had developed the test. 

“Ya know,” the Southern, folksy psychologist said, “we did gather some data when we normed the test that we are not currently gathering.”

“Why not?”

“No particular reason other than we had such a clear profile of success from the other data that we thought we probably didn’t need it.”

Jim just looked out the window, wishing he was doing anything other than having this phone call.

“Well, there is another reason, too.”

“What’s that?”

“The data have to do with dark side tendencies.”

“Which are?”

“Things like being suspicious, shy, sad, pessimistic, a sufferer, eccentric, loving risks too much and that sort of thing.  Not many managers want to hear that their top performers are high on these measures since, in extremis, they get you pretty close to mental illness.”

“So Fred’s top performers are nuts?”

“ ‘Nuts’ is not a word found in most psychology texts, but, yes.”

“So let’s measure the dark sides of the candidates.”

“And so we shall.”

And so they did.  Because they did not really know what they were looking for, they did more.  They quantified candidate profiles against the job requirements, which mostly had to do with their skills and prior successes, against the light side test scores and against the dark side scores.

Jim and Fred were having lunch.  They really did enjoy each other’s company, so they did not get to work topics until coffee.

“The first piece of stunning news I have to report is that we have an inverse correlation between candidates you have hired and their having done well in their past sales jobs.  If they were successful salespeople before they came here, they have left or been fired from your shop.”

“I told you that the karate instructor was the model we should be emulating,” Fred said, more serious than not.

“Then we found that there was no correlation one way or the other with light side scores on the test.”

“I told you that the test was no good!” roared Fred.

“And there is a very tight correlation between high dark side scores and strong performance.  Your top people are all nuts.”

Fred knew what dark side tendencies were.  And he knew he had them.  He just looked at Jim, for once in his life without words.

“Plus this: my recruiter has been living in your facility as you know.  He’s been taking his coffee breaks in your bullpen.  He has heard your Inside Sales Manager just beating up the new hires.  This might explain that several of the high dark side hires, whom you guys rated as stars, up and left suddenly.”

“So you are telling me that my environment and culture don’t match the people I’m hiring?”

“I am.  You are hiring eccentric and driven people who are pretty thin skinned and then your manager is beating them up.  It does not work.”

“OK, I get that he should not beat them up, but what kind of culture should I have?”

“You are a high dark side score person.  What culture do you want?”

“I make my own culture wherever I go!”

“Yeah, yeah.  And you fly, too.  Be serious.  Think back to when you were a kid.  What did you want your world to be?”

“I was surrounded by criticism.  I wanted unconditional love.  I felt different from other kids.  I wanted to be reassured that I was OK.”

Suddenly Fred’s face lit up.  “I got it! So I should provide that to my employees.  Unconditional love and belonging.”

“Yup,” Jim said.

Fred had gone back and made the conversion in his mind and actions.  Given that he was a man of extremes, it was not a surprise when the next day he started hugging all the new employees and telling them he loved them.  They were surprised and a few were a little put off, but on balance they liked it.  And they still quit.

“Why?” Jim asked Fred.

“I don’t know,” Fred answered.  Your theory must be wrong.”

“And your sales manager is abusive.”

“There is that!”

Fred went back again and started listening to the sales manager as he “trained” his new hires.  It turned out that “trained” meant berated, humiliated and scorned.

Fred fired him.  Jim helped him hire a new one.  The new one had the opposite problem.  Everyone stayed.  They just did not produce.

And the new sales manager, who was actually brought in as a VP, talked Fred into getting rid of the test and Jim’s recruiter.  He generated his own flow from his prior acquaintances and then hired the ones he liked…but they did not produce.  Fred go so enraged that he took over the inside sales himself, moved the new guy to outside sales and reengaged Jim.

Jim sat with him.  “You do know, I trust, that the research on good salespeople is that they start slow and take about six months to hit stride.”

“Not mine.  They do it faster.”

“But, considering for just a second that you might be wrong, I wonder if you gave them more of a conventional environment including a less enthusiastic training and a longer fuse, if they would not perform after a while…just like the majority of sales people.”

“I’m not abusive!”

“You are not as abusive as the guy you fired, but you do everything you can to make them go away.  Their training is like one big long stress interview.  Only the super-strong survive.”

“And those are successful.”

“There might be a better way.”

“Not for my shop!”

“Keeripes, you are stubborn.”

“And…I am right!”

So they kept hiring, not using a test or really anything else except Fred raging and swearing and threatening in the mass interviews.  Fred’s theory was that what he asked them to do, learning to sell his way, was difficult but could be mastered by those with extraordinary strong constitutions, those who were desperate to make a lot of money.  So he brought people in almost indiscriminately and then abused them in the interview process.  He hired those who responded right and were sufficiently drawn to the stress environment that they accepted his offers.

But they did not perform, either.  Jim suspected that they took the job to get the salary and then bolted as soon as they could find a less stressful job.

Fred hired a new inside sales manager.  Jim had personally watched over this search, including using a test.  The test showed that he was a mini-Fred.

“This guy is just like you,” Jim told Fred.  “Are you sure you want to hire a mini-you?”

“I’m not sure, but I’m going to try it.”

The guy reported for work with a load of inside salespeople who had told him they wanted to follow him.  Jim got fired again.  This time he was amused, not irritated. 

The new guy figured out in about a month that it was no fun working for an older clone of himself and took off.  The sales reps that he tried to hire him came in, sat through the stress interview and then left, never to be heard from again.

This left Fred as the acting inside sales manager with his payroll burdened with the VP who had been marginalized into an outside sales manager role and whose morale, and productivity, stank.

There is no happy ending to this story.  It is closely based on a real life experience of our company with a client whom I consider to be a close friend.  But his flaws prevent him from creating a stable, smoothly functioning organization that can grow.

He is not the only one.  Many entrepreneurs, me included, own businesses because we were lousy employees.  We are infantile and narcissistic, wanting to create an organization in our image, wanting to see ourselves reflected in our corporate mirror.

The only solution is to build a barrier of individuals who can both lead and follow between the entrepreneur and the rest of the organization.  This, however, requires trust, something the infantile and narcissistic have a hard time embracing.

The other issue this story drives home to me is that recruiting is very heavily influenced by the organizational context in which it is done.  Many recruiters try to do recruiting the same way every time, for every company.  They frequently fail.  The wiser recruiter looks at the organization, identifies the obstacles and resolves them.

If the organization wants to hire candidates who just don’t exist, or are not available for the money the company wants to pay, that issue needs to be resolved or recruiting will fail.  If a hiring manager does not want to hire because s/he is not sure of his/her boss and is afraid of being criticized for his/her hiring decision, that issue needs to be resolved or no hires will be made and recruiting will fail.  If the hiring manager makes erroneous hiring decisions, s/he must only be shown candidates who will succeed in the job, or turnover and low productivity will overwhelm what benefit the organization gets from filling jobs.

Recruiting, if fully done, is as complex as any other organizational matter.  Recruiting does not have a history of stepping up to that complexity, but, if it does not, recruiting will fail.

Recruiting Costs Too Much!

June 15, 2009 1 comment

by John Wentworth
Wentworth Recruiting

Read John’s bio on the HR Performance website

upsidedownworker

“Costs too much!” the CFO growled.

“I agree,” the VP of Logistics chimed in.

“How much should recruiting cost?” Jim asked.

“Less,” both of the others said.

“Oh, you are a bunch of help,” Jim said cheerfully.

“You need to take this seriously,” the CFO threatened.

Jim pulled out a piece of paper, a report by Staffing.org, and read:

The overall Recruiting Cost Ratio for employers has fallen to 9.5%, with a range of 7.8% to 11.2% and relatively little variation. The average for suppliers remains at 14.2%, close to last year’s overall measurement.

“We average under 10%,” Jim said.

“That’s above average,” the CFO barked, as only CFOs can bark when complaining about cost.

“And we have the highest productivity we’ve ever had and no turnover. Not a little. Not less than average. NO turnover.”

“No turnover. So what?”

“The Department of Labor says 2008 separations were 48.7% of total employment! One out of two employees leaves! We have zero turnover. Some people say an employee turning over costs 30% of that person’s pay, some say a lot more. Let’s take the low number. Logistics hired 50 people last year. The average salary was $70,000, so if one of our people left, it would cost $21,000 to replace them, pay for lost productivity, training, cost of recruiting, etc. And let’s say half your people turned over. 25 times $21,000 is what?”

The CFO scribbled. “Just over a half a million dollars.”

“What was our cost per hire?”

“You said it was around 10%.”

“Yes. 10% of salary and zero turnover. How much is 10% of salary?

The CFO got busy again. “Fifty hires at an average of $70,000 is $3,500,000 in salary. Ten percent is $350,000.”

“And zero turnover saved us how much?”

“$500,000.”

“So I can’t promise you that we would have had that much turnover, but if you accept both averages, it looks like our recruiting made you $150,000 this year in avoided expense.”

The CFO and VP of Logistics weren’t happy, but they were stumped. So Jim left.

“It’s never that easy,” Jim told his wife that night. They were sitting on their deck, enjoying the last light of the day. Their kids were playing in the yard.

“What do you mean?” his wife asked.

“Around four, the staff analyst for Logistics strolls in my office and drops the news on me that the cost of talent acquisition isn’t the issue at all. They were just whupping on me because they could not whup on each other.”

“Hunh?”

“Logistics is over budget. The villain is that they hired too many people.”

“So why are they beating up on you?”

“Because the CEO has made them promise to be nice to each other. So the real issues are not surfacing because they can’t figure out how to deal with them without getting grumpy at each other and getting the CEO mad at them.”

“You work with a bunch of children.”

“And those very same children sign the paycheck that pays for this palace, your jewels and the fabulous round-the-world trips we take all the time.”

“Ho. Ho. So can you do anything?”

“Maybe yes, maybe no.”

When Jim went to work the next day, he started his sleuthing.

The CFO told him, “I have a directive from the CEO to make sure that we do not spend more than we can afford. The staffing levels are too high, too expensive. So you and yours are the choke point. I’m going to cut your budget.”

“What will that do?”

“It will save the company money! And keep you from hiring more people.”

That didn’t make any sense to Jim, so he left and went to the SVP of Operations.

“We need the people. We are getting new business and we have to staff it. You need to keep filling our jobs. My people are dropping like flies we are working them so hard.”

“Do you ever talk to the CFO?” Jim asked her.

“All the time. Why?”

Not being sure of his ground quite yet, Jim slipped the question. “Just asking.” Then he left.

Sitting on the deck again that evening, Jim said to his wife, “This is too absurd to be true. The CFO really wants fewer hires. He tells me but does not tell the line people. And he wants to cut my budget so I don’t have enough money to fill the jobs.”

“Why doesn’t he just talk to the line people?”

“Dunno, but there must be a reason. Gotta find out. This is a lot harder than it needs to be.”

“Dinner is ready,” Jim’s daughter, who had volunteered to cook that night, yelled from the kitchen. Jim and his wife gathered up their things, looking forward to a fine meal.

“You daughter cooks?” Sarah Hockney, the CEO, asked Jim. They had worked together off and on throughout the years and liked and respected each other.

“She’s been taking classes and thinks she might go to the Culinary Institute.”

“Wish my kids cooked. I think their MacDonald’s addiction blinds them to that ambition.”

“Yeah, but maybe they’ll go to a state school, so you’ll trade fine food for low tuition.”

“Never thought of it that way. So why are you here in my office? What are you going to try to torture me with?”

“We have a problem and I need your help.”

“I don’t remember your ever coming into my office when that was not so. What is it this time?”

“Your operations people are getting more business and feel strongly that they need to staff up. The CFO feels that staffing levels are already too high and, following a directive he ascribes to you, is getting ready to cut my budget so I cannot provide the recruiting service your operations people need. He also says I cost too much.”

“How much do you cost?”

“Ten percent of salary.”

“That’s pretty good. I seem to remember that the national cost per hire average was higher.”

“It’s about the same, but it’s a squishy number. There is no standard for what data go into it. Everybody does it a little differently, depending on whether including data or excluding data gores their ox.”

“Funny how that works.”

“It’s also squishy because different jobs are variously difficult to recruit. So comparing the cost per hire of hiring teenagers to work at a movie theatre – big supply, low requirements – to hiring programmers in some esoteric and rare software like Ruby on Rails, is apples to oranges.

“So I don’t mean to hold out the numbers as gospel, but we are about two tenths of a percent over a reasonably reliable national average. And, we have no, count them, zero, turnover of the people we hired last year.”

“So your costs are OK.”

“I think so.”

“And no turnover should be saving us a ton of money in replacement, training, lost productivity, supervisor’s time, etc.”

“I think so.”

“And you have talked to all the parties concerned?”

“I have, but they do not seem to be talking to each other about this. I think this is an unintended consequence of your ‘play nice’ directive.”

“I am consistently astonished at how people can find ways to screw up even the most simple and direct instruction.”

“What should I do?”

“Analyze the problem for me,” Sarah told Jim.

“There are two problems: number of hires and the resulting salary cost and the cost of acquisition. The second is about 10% the size of the first. Both problems have two parts: total cost and run rate. I’m sure you have a formula that tells you how many people you need for how much business you sell. So that gets us to total cost. I have not traditionally been involved in that, but I can be if you want.”

“Keep going. You are now going to talk about run rate.”

“Yup. I’m sure we can plan out when new hires should be on the job. Once we do, we can lay out a schedule of salary and acquisition costs. The CFO will want to stretch the hires out to reduce the cost this year. Your ops people will probably want it sooner, but maybe they will be sensible.”

“Can you make that schedule?”

“Consider it done.”

“Thank you for your visit.”

“Thank you for your help.”

Sara went to work with her people, constructing the issue for them. The CFO was, in fact, being very protective of cash, but was not focusing on his putting the new revenue at risk having too few people to do the work. The CFO was also conveniently ignoring the fact the requisitions for the jobs had been approved by all the needed individuals, including him.

The operations people were being reasonable, having already built a schedule of when they wanted their people to be in their seats.

The sales people, on the other hand, were chuckling and feeling mischievous about all the trouble they had created by selling so much business. And, being commissioned, they were chuckling all the way to the bank.

Jim got his hands on the schedule and priced it, cost of acquisition and salaries, all based on fill dates.

He took it first to the head of HR who nodded. He understood the problems and was very glad that Jim was the front person on this. Jim then took the spreadsheet to the CFO.

“This is the schedule they want. Every requisition has been approved. The analysis shows when each person will start. If you look at the weekly cost graph you will see a huge bump in the middle of the year, but then you will see that once the jobs are filled, the cost of recruiting goes to nearly zero.”

“That’s too much money,” she CFO growled.

“It’s the same amount of money if we do it on their schedule as it would be if we did it more slowly. We just spend it faster. But it’s the same amount.”

“That’s not true for the salaries, though. The sooner the jobs start, the more it costs us.”

“True,” said Jim, “but these staffing levels are consistent with the business we’ve booked. We can’t do the work without the people and the deadlines came from the client. Our ops people didn’t just dream them up out of thin air.”

Some months later, the CFO growled, “Costs too much!”

“I agree,” the VP of Logistics chimed in…again.

This time they were not talking about the cost of staffing. They were talking about the cost of dinner which they had agreed to split to celebrate a banner year. Sales had booked all the troublesome business. Jim’s analysis had created the platform for a rational dialog between the CFO and the operations people, so recruiting had been allowed to get their job done.

The cost per hire had dropped, in fact, to 9% of salary and they still had no turnover.

Their profit for the year was great. They had beaten all their client deadlines, in great part because they had talented people on board when they needed them and they stayed, so time, money and energy did not need to be diverted to replacement and retraining.

“Easy children,” the CEO said. “I’ll pay.”

She smiled at Jim.

“But before we end, I want to single out Jim for helping to break up the log jam that was threatening to keep us from getting people on board. Jim, thank you.”

“You are welcome,” replied Jim. “Does this mean you are going to recommend to my boss that I get a raise?”

“You cost too much!” the CFO growled, grinning from ear to ear.

“I agree,” the VP of Logistics chimed in also grinning.

The entire group raised their glasses in a salute.