The Grass is Usually Not Greener

Aug 15, 2006

Hiring people into your organization from the outside is always a crapshoot. You can never be sure if the person is going to really have the skills you think she has, nor can you be certain if she’ll fit the culture of the organization. Yet, for most recruiters it is assumed that somewhere around 90% of all our requisitions will be filled by an external candidate.

This hasn’t changed much, as far as I can tell, over the years. We still operate on the belief that while talented employees have always been hard to find, a well-defined job description, combined with good recruiting, will usually produce an adequate new external hire at a reasonable cost.

Today’s evidence suggests that no matter how well-defined the job is or how competent the recruiters, a significant number of jobs will not be adequately filled. Some recruiters report that they have to go back to the hiring manager and encourage her to redefine the job to meet the skills of candidates they do have. Others encourage the hiring manager to settle for less competence to keep time and costs reasonable. And sometimes the position is just not filled at all. The work is either redistributed to incumbent employees or the project is dropped.

There are several reasons why it is more and more difficult to find skilled staff, but the driving cause is that organizations themselves have changed. They’ve evolved from basic production and manufacturing operations to operations that require large quantities of often tacit integrated knowledge to be successful. The factory of 1950 or 1960 hired a high school graduate or less, trained them in one or more repetitive skills and assumed that family, geography, and social forces would keep them loyal. And for almost 100 years that model worked quite well. But today’s organization has need for employees with more complex and constantly evolving skills.

For example, an effective salesperson in a biotech firm may have to know a great deal about the technical side of the product, but also possess knowledge of how it was tested, who was involved in that process, what the competition has to offer, what pricing may be appropriate based on knowledge of the competition’s probable pricing models, and so on.

Or a project manager for a chemical company might need deep technical knowledge, but also knowledge about previous projects, how the people on the project team have worked together in the past, what internal politics will affect the team, and what new R&D innovations might be useful to the project.

Even a mid-level employee needs to juggle very rapidly changing technical information, absorb and integrate knowledge about the external environment and changing market conditions, and stay involved with a variety of internal departments and functions.

The amount and depth of knowledge today’s worker needs is very hard to find in candidates moving into organizations from elsewhere.

Of course, being able to integrate knowledge from a variety of sources has always been necessary. What is different is the amount of knowledge, where the knowledge originated, its complexity, and how fast it changes. At the same time, traditional training models and methods have been hard-pressed to keep up with this, and will not be able to for some time. Other causes include the changing social contract within organizations that promised employees, although informally, some permanence and security. With the waves of layoffs that have regularly occurred over the past decade, little loyalty is left. Millions of people shun working for corporations and have chosen to work as free agents ? either as contractors, consultants, or independent part-time employees.

At the same time, the dot-com boom gave rise to a new interest in entrepreneurism. Younger people are more willing to start their own businesses or work in small organizations with minimal structures and bureaucracies, so they can have the freedom to pursue their own ideas. This has removed thousands of talented and highly educated people from the active job market.

The least expensive and more potentially productive way an organization can cope with this talent shortage is to learn how to nurture and evolve its own incumbent employee population. Diverting some of the resources spent on recruiting external talent, often with limited success, to focus on improving the efficiency and skill of the current employee population, can pay high dividends.

The time is takes for a new employee to become productive can range from a few weeks to several months or more, depending in the level of the position and the experience of the employee. No matter how long that takes, it costs the organization salary and training dollars, for no immediate gain.

IBM, General Electric, and hundreds of other organizations learned this long ago. They hired primarily at the entry level and then invited employees to take advantage of wide ranging and very effective development and training opportunities. This helped them keep recruiting costs low and built an immense pool of internal knowledge and ability.

Here are some ways to improve your retention and create the talent you need:

It starts with two philosophies: (1) that employees are investors in the organization, not assets or units of production; and (2) that by having a development philosophy there will always an employee who can do whatever job you need done.

An investor is someone who contributes to the success of organizations and is looked after and afforded respect. Organizations that act this way take the time to recognize the important of the implied contract that exists between them and employees. By understanding what employees really believe about your attitudes toward them and their development, you can start a process to renegotiate the contract.

Spend Time on Development

Put in place a process for employees to gain the skills and experience they need to do a variety of jobs. Strong organizations have people who can do many different things, not just vertical pipes of specialists. Continental Airlines has the same employee act as ticket agent, gate agent, and baggage handler. This gives employees the chance to learn many different things and avoid boredom, and it gives the organization flexibility when it needs it. Provide access to informal and formal knowledge-gathering and tools such as databases, corporate documents, analyst’s reports and so forth. Create forums for collaboration and discussion that any employee can be part of. A key ingredient is to lessen hierarchy and bureaucracy and open up communication and sharing.

Make Movement Easy and Profitable

So many organizations invest lots of time and money in development and then restrict when, where, and how an employee can apply for or move to a new position. HR policy has to be aligned with a development approach to recruiting, and internal movement has to be easy, common, and without political consequences.

By encouraging movement, an organization also fosters the exchange of information, breaks down silos, and spreads knowledge, and builds a community of people who know one another.

Reward Managers Who Develop People

As part of this change in philosophy, managers who hire internal candidates and who allow their own people to move easily should be rewarded. The active development and movement of people it what makes this process successful. Any constraint on creating an internal free talent market will make it less successful. Some organizations require that that managers move a certain percentage of employees to other departments or positions and that they get rid of a certain percentage of underperformers. These two actions reinforce the organization’s commitment to development as a recruiting strategy and to performance as the criteria for success.

Don’t Go Outside Very Often

Make it hard for hiring managers to look outside for people. Put in place a process that focuses eyes internally first and only allows an external hire in certain circumstances. Over the past several months, many organizations have adopted this position in order to avoid more layoffs, but it should be the way we always do our search for talent.

Most organizations have people who are capable of more and who want to do new things or learn new skills. But these organizations feel that development will take too long and cost too much. So they more quickly look outside for talent and spend as much or more money finding unknown talent. And, with the talent scarcity that we see today and the rapid, complex organizational knowledge that employees need to be most productive, outside people are hard to find and do not have the knowledge we need. Nurturing your own internal talent aggressively may be the best strategy and will create a workforce that is more loyal, committed, and capable.