The 16% Solution: Selecting and Hiring Better Employees

Lately, I have been alternating columns between internal and external recruiting issues. I’m sure I frustrate many recruiters because I don’t offer the 10 greatest questions, 5 craziest ideas, or 20 recruiting secrets of the ancient Natufians. While it’s true that these suggestions have value, line managers ó the folks who “live with” the employees we recruit every day ó really do not care about the problems recruiters have. They don’t want to be “sold” and they don’t want anyone to send them “problem children.” There is nothing more frustrating for a line manager than having an open seat, slowly drifting behind in goals, screening dozens of applicants, hiring a promising candidate, and eventually discovering the shiny new employee has the initiative of a Brussels sprout and the productivity of cauliflower. Sure, managers will often try to work with produce to improve performance, but that is mainly because they don’t want to publicly announce $10,000 hiring mistakes. Learn From the Pros Imagine what it would be like if pro sports teams hired players without tryouts. Players might have a lot of fun, but consistent wins would be out of the question. Now, imagine what would happen if some bright recruiter watched each rookie compete and only recommended athletes with talent. Guess which team would start winning all the time? Everyone recognizes that athletic ability is important for professional sports. But for some reason, this kind of reasoning does not transfer to employment. We see it all the time: people cannot learn, they make poor decisions, they cannot get along, they cannot sell, they are dishonest, they are unmotivated, and so forth. Estimates of poor hiring costs range from 20% to 50% of annual base salary. That is, $1,000,000 in salary translates into $200,000 to $500,000 lost every year! The dollars are significant. Here’s the issue: There is big money at stake, immediate bottom-line savings potential, and a department (or service) perfectly positioned to offer a solution. Talk about opportunity! Nevertheless, the majority of folks in this field argue with science, defend their subjective opinions, seek after one-question interviews, and search for sales, management, or training tests that have nothing to do with performance. As the old saying goes, if you are not the lead dog, the view never changes. The Bad and the Ugly It’s easy to count financial losses in jobs where performance can be easily measured (e.g., sales, processing, and so forth), but sometimes these numbers are hard to quantify, especially in salaried jobs (e.g., secretaries, managers, professionals, and so forth). So, here are some examples of hiring mistakes from my own experience:

Hundreds of pounds of raw materials wasted by operators’ mistakes

Thousands of dollars embezzled by unscrupulous bookkeepers
Sales managers attempting to sell accounts to competitors
Regional office managers withholding paychecks in exchange for kickbacks
Senior management frequently changing market strategy without realizing the lag effect of sales cycles, only to be “amazed” by falling sales
Administrative assistants refusing to address simple customer questions
Managers refusing to confront problem employee performance
Senior managers refusing to embrace new vision and directives
Salespeople refusing to learn details about product
Scientists turning a six-week new-product project into six months
High turnover among people who did not know what the job would be like

There are many, many more examples, but walking down memory lane gets me depressed. On-the-job performance is all about job-qualified employees and job-qualified managers. No training program will fix a hiring mistake. No incentive program will motivate incompetence. Just like a professional sports team, the best place to ward off incompetence (management or otherwise) is in pre-hire. Period. End of sentence. That’s it. Any organization or individual missing that point is determined to pour money down the sewer. Low Performance Does Not Have to Be a Fact Of Life Organizations tend to take low employee performance for granted. Line managers bitch and moan about excessive coaching time, trainers train, and senior managers serve ice cream on Fridays to raise productivity. Imagine that kind of behavior among a sports team. It would be laughingstock! Broken-down players coached by incompetent managers, drilled on skills that do nothing to change behavior, and senior managers serving ice-cream cones. Woo! Is someone asleep at the switch or what? It just may be me, but when something is broken, find the root cause and fix it. Sometimes I get “nastygrams” pointing out the influence managers have on performance. They argue low performance is not entirely the employee’s fault. I agree wholeheartedly. Bad management, at any level, is just another example of unqualified people hired to perform a job ó only this time, it’s an internal hiring problem. Unskilled or unqualified people at every organizational level drag-down productivity; whether they be a temporary hourly employee or a senior executive, the only difference is the amount and scope of drag. Nothing is perfect, but it seems a whole lot cheaper to identify salespeople who cannot sell, service representatives who quit, people who steal, and managers who squelch performance before they are hired. Radical idea, huh? Imagine that: a department that actually screens out applicants who cannot perform job basics (e.g., problem solving, learning, planning, interpersonal, AIMS, or whatever else interferes with productivity) before sending candidates to the hiring manager! Feedback, Anyone? How can a recruiter or HR staffer tell if he or she is doing a great job screening for the right skills?

By systematically following up with each new employee, comparing job requirements with pre-screen evaluation with job performance. No smile-sheets. Real surveys. Real data. Real responses.
By observing whether a normal line manager (i.e., not a charter member of one of the five basic food groups) rejects less than 15% of submitted candidates. Contingency recruiters often get “hosed” by this because hiring organizations seldom give them enough information to go on. However, there is still no excuse for internal departments or recruiters not to do better. (And, if interested, there are solutions for external recruiters, also).
By observing if a change in the business plan can be immediately translated into corresponding changes in performance appraisals, hiring criteria, promotions, training, and incentive programs. It just makes sense to hire, manage, train, and appraise based on achieving the business plan, doncha’ think?
By observing whether 90% of the employees hired are highly productive, have low turnover, and have high training pass rates.

Where to Start? First, realize that an HR or recruiting job is not about filling seats, but about maximizing productivity by finding highly skilled employees who produce more, turnover less, and train faster. Think of it as a quality initiative. Second, every “normal” organization (i.e., one that is not overly dysfunctional) will have departments with double-strength headaches they want to eliminate. All you have to do is find them. Here are some examples:

Turnover too high (retail, sales, call center, warehouse)
Productivity too low (sales, telemarketing, manufacturing, processing)
Management wants to reorganize (flat structure, teamwork, decision making)
Training issues (people cannot pass training tests, learning problems)
Downsizing or reorganization (more work from fewer people)
Mistakes or weak bench strength (potential mergers, re-engineering)

In Part 2, we’ll discuss ways to resolve the 16% solution. They won’t make you an expert, but they will help show the way.