The Top 1% Recruiting Gap — Why Most Firms Have Surrendered to Google

Mar 17, 2014

A think piece designed to stimulate your thinking on competing against the top 1 percent firms for top talent

If you’re an executive interested in recruiting, here is a scary thought to consider. For the first time in your lifetime: As a result of their compelling approach to managing talent, the elite 1 percent of firms now have a powerful recruiting brand advantage. The resulting “recruiting brand gap” between the top 1 percent and the remaining 99 percent of firms is now so wide … that most firms have given up trying to match the talent approach of the 1 percent.

The Top 1 Percent of Firms Have Unique Talent Differentiators

You might not be aware that there is a “recruiting brand gap,” and you will probably be further surprised to learn that most firms have given up trying to eliminate it. Let me begin the discussion by defining who the elite top 1 percent of firms are and what separates them from the remaining 99 percent.

Envision a dozen corporations, represented by firms like Google, Facebook, and Apple, who manage talent in a radically different way than the average Fortune 500 firm. You probably already know about the highly publicized talent features of this 1 percent of firms, like 20 percent time, free food, pick your next job, free bus and ferry rides to work, a free barbecue joint, and not even tracking sick leave or vacation time. However, you may not be aware of the three foundation “talent differentiator factors” that dramatically separate this elite group of firms. The three differentiators are:

  • Differentiator #1 — They manage their talent completely differently — firms like Google manage talent in a unique way. While most firms are focused on providing a good job, reasonable pay, and security, elite firms stand out first and foremost because they manage with the goal of providing employees with the opportunity “to do the best work of their lives.” This focus is important because “doing the best work of their lives” and having a major impact are the top two attractors of top performers and innovators. Part of doing your best work is a management approach that offers extraordinary opportunities for employees to innovate, and a degree of freedom, extreme risk-taking, autonomy, and radically delayered organizational structures that the remaining 99 percent have been unwilling or unable to duplicate. Because they focus on these two primary attraction factors, these 1 percent firms have produced extraordinary results. For example, Google and Facebook each produce more than a breathtaking $1 million of revenue per employee every year, and Apple employees produce over $2.1 million. Their unique talent management approach also leads to extraordinary market value. For example, Apple is No. 1, and Google is No. 3 on the list of the world’s most valuable firms in market capitalization. Facebook is already at No. 17 and it is continually moving up despite it only been in existence 10 years.
  • Differentiator #2 — They have powerhouse employer brands — because of both the way they manage and their extraordinary business results, the employer brands of these firms are dominant in the talent marketplace. As a result they can continually grow and dominate their industry segment because they can successfully attract and hire an endless number of truly exceptional performers, innovators, and pioneers from around the world. Google for example has the world’s No. 1 employer brand. It has been listed in first place by Fortune magazine as the “Best Place To Work” for four of the last five years and that it has topped the Universum list for the best employer for college students for the last five years. Apple and Facebook are also regularly recognized as top employer brands on various social media websites. Because of their company image, each of these elite firms is able to attract an extraordinary number of applicants each year. If you are competing against them for the same candidate, the chances of your firm winning are minimal.
  • Differentiator #3 — They make extraordinarily powerful business cases — elite firms offer amazing talent management features, stunning work sites, and employee benefits (like free transportation and free food) that executives at other firms would consider to be frivolous. However because they are all public corporations, executives at any of these firms simply wouldn’t be allowed to offer these extraordinary benefits without excelling at metrics and making a business case to demonstrate the high impact and the ROI of each talent feature. Can you imagine asking executives at your firm to approve a free ice cream store (like they have at Facebook) without a powerful business case? Of the three foundation differentiators, the easiest one for 99 percent firms to match is the capability of making a powerful business case for funding the talent features that make the 1 percent so productive and innovative. However, even though it is easy to copy, I have found, to my surprise, that this business case for talent capability is almost nonexistent among HR executives in the remaining 99 percent of the firms.

Most Talent Managers Acknowledge the Extraordinary “Recruiting Brand Gap”

I am fortunate to have the opportunity to interact with hundreds of talent management leaders each year. And during his interactions talent leaders, almost without argument, readily acknowledge the “recruiting brand gap” between their firm and elite firms. Without exception, they are sometimes painfully aware of the extraordinary strength of the employer brand image of elite tech firms like Google, Facebook, Apple, and SAS and non-tech elite firms like Zappos, Costco, and Amazon. They are also well aware of the metric-driven talent approach at Google, the extraordinary serial innovation emanating from Apple, and even the extraordinary customer service provided by elite firms like Zappos or Rackspace.

But the surprise comes when I (or any outsider) suggest to leaders in the 99 percent group that they should try to emulate even a few of the WOW talent features at the elite firms. Surprisingly, the answer to that “why-not-try-it? suggestion” is almost always some variation of the excuse “no, our executives would never even consider that.” In fact, I frequently receive the following criticism from among talent leaders at the 99 percent:

“Why do you always use Google (or Facebook and Apple) as examples … when our firm can never be like Google?”

Why the Remaining 99 Percent Have Given Up Trying to Match the Talent Features at Google

“Our firm can never be like Google” is to me a statement indicating surrender, submission, and capitulation. After completing talent case studies of Google, Facebook ,and Apple (all can be found in the archives), I became intimately aware that their talent management and recruiting approaches were far different and superior to any of the 200+ corporations that I have worked with. However, most of their talent management practices were easily discoverable, and every talent feature that I identified was certainly copyable at other firms. As a result, an unwillingness to even try to catch up and to emulate the talent management practices at these 1 percent firms was stunning to me. So I decided to do some analysis and investigation on the resistance reasons that caused so few firms to be willing to even try to copy the practices that worked so well at the 1 percent.

  • It is primarily a power issue that creates the resistance — it took me a while to identify that the root cause behind the resistance of talent leaders to copying emanated from outside of the talent function. Historically most executives have been more than willing to fight to close any talent gap between them and top firms. This was because the differences between firms occurred primarily in the easy-to-change “paycheck areas.” That means that if you wanted to improve your employer brand or competitiveness in the talent marketplace, you simply put more money into these paycheck-related areas like increased pay, bonuses, and employee benefits or enhanced retirement. Making changes in paycheck areas are expensive but they are easy to do. However, competing with the top 1 percent is far from easy because it involves changing how you manage employees by providing them with significantly more freedom, power, and control. And that is problematic because executives at the 99 perecent firms, despite all their talk, still relish the control and the power that they hold over those beneath them. And as a result, what I call the “Google model” (which represents the approach used by most of the elite firms) is completely rejected before it is even seriously considered by most 99 percent firms because it requires executives and managers to shift to an “influence model.” Under that model, executives and managers must influence, convince, and sell employees rather than order them around. Some even fear the approach because it requires a completely new executive skill set and a great deal of patience.
  • There is also an issue of executives resisting a shift of the focus toward employees — for decades executives and managers were seen as the primary source of direction, strategic product planning, corporate decision-making, new ideas, and even innovation. However the “Google model” approach used by the top 1 percent makes a radical change by shifting the focus toward the employees. Rather than expecting ideas to come from executives, everyone in this environment expects them to come from lower-level teams and employees. At the 1 percent firms, executives have voluntarily and openly relinquished their all-encompassing role because they realized that the real value created by the firm now comes from innovative and collaborative employees.  While the executives at the remaining 99 percent of firms still hold onto the assumption that the real value is added by managers and executives. An additional problem arises because you can’t expect employees to make great decisions and come up with new ideas without all of the relevant information. So the elite firm approach also requires that you provide almost every low-level employee with free access to information that used to be restricted to executives. So after the refusal for executives to give up power, the second strongest factor causing the capitulation to the elite firms is this apprehension around shifting the focus, the expectations, and the information access that used to be a source of pride among executives to the average employee.
  • It wasn’t an absence of a business case that caused the resistance — because any firm can easily provide some variation of a benefit like “free food,” I explored why talent executives were unwilling to try offering these easy to do type of employee features. My first thought was that their surrender to the “g=Foogles of the world” was primarily caused by their previously mentioned inability to make a strong business case. So to my surprise, when I offered to show talent leaders how to make a “Google-like” powerful business case, I consistently found that they not only didn’t want to learn how to make a compelling business case but they weren’t even interested in having a discussion on the topic. To me it became clear that even with a compelling business case to support them, most firms still wouldn’t be willing to try to match the top 1 percent.
  • Not being a tech firm doesn’t mean you don’t have to compete for talent with the elite 1 percent — another argument against competing with the 1 percent was the frequently heard “but-we’re-not-a-tech-firm” argument. Many of the top 1 percent are tech firms, but others with powerful “recruiting brands” and talent management approaches including Zappos, Costco, Amazon, and Goldman Sachs are clearly not tech firms. And in any case, all talent leaders should acknowledge that you still must compete with elite tech firms when it comes to recruiting candidates who work in technology, on the web, and in social media. Recruiting these areas has become critical, no matter what industry your firm is in, because the operations functions of almost every large firm is now dominated by the use of technology and social media. And even if your firm’s jobs are primarily in marketing, design, advertising, finance, and even HR, your “talent competitors” for those non-tech jobs include firms like Google (where barely half of the hires are software engineers). Your executives need to learn that they simply can’t ignore the fact that if you give up and allow the best technologists and other key professionals to migrate to the top 1 percent of firms, you are permanently damaging the revenue and innovation results of your firm.

Final Thoughts

Based on my almost five years of analysis, my overall conclusion is that there is clearly a wide and easy-to-measure “talent management gap” between the top 1 percent and every other corporation on the planet. This gap will be permanent for at least the next decade. This permanent gap simply can’t be dissolved when so many talent leaders from both large corporations and small businesses immediately reject as unfair or irrelevant any direct talent management comparison between their firm and Google, Apple, or Facebook (see the comments section following this article if you want to see examples of immediate rejection).

Unfortunately the reality is that most talent leaders have deemed closing the gap at their firm as a mission impossible. I find that accepting the “we-can’t-compete role” on the talent side is especially sad, because no one on the product side of the business ever readily cedes a product space to competitor without a fierce battle. In talent management, surrender and submission should not be an option.

The gap may even widen as the use of social media increases around the world because it will become even easier for potential candidates to clearly see the stark differences between the top 1 percent and the remaining 99 percent. And what this means is that there will be a continuation of the current brain drain away from the 99 percent and toward the elite 1 percent.

I also discovered that there is similar and widening gap between recruiting at the 1 percent of large corporations and the even more flexible, open, and exciting opportunities and talent management approaches offered by startup firms. But that’s a topic that I will reserve for a future article.

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