Want to add $10 million to the bottom line? How about $25 million? Experts say this is a rough estimate of how much a 1,000-person company loses annually from poor employee performance. The losses come from mistakes, rework, excessive head count, turnover, low motivation, poor coaching, low sales, poor quality, absenteeism, and so forth?most of which can be tracked to poor hiring practices. Executives often say that their organization “only hires the best.” After all, posters on the wall say so; but, facts show otherwise. For example, any honest hiring manager will admit that hiring decisions based on interviews are “iffy.” Why? Personal impressions gathered from interviews and applied job skills are often two different things.
Let’s look at this from another perspective. Supposed executives managed a sports franchise instead of a company. Now imagine them sitting in the owner’s box high above the field watching the team play. The players are so far away and the visibility so low that players look alike. Owners can clearly see the scoreboard after each play, but, other than that, individual player skills are obscured. At least that was what it’s like in some organizations. Subordinates “filter” critical information needed to make decisions, individual performance is often unclear, and feedback is often limited to examining reports at the end of each period. They know the results, but never really knew who or how they got there. They control money and resources, but individual employee performance is a shadow on the wall. Shadow management has some consequences: Whenever these companies institute a change in direction, employees and managers either resist or push-back; when they promote people to management, half of them fail within a year; when they reorganize employees into teams, the teams either stumbled or made bad decisions; and, the list goes on. Many years later they discover why they have so much trouble:
- Assumption: Employees can adapt to any job role we needed. Fact: employees are “pre-wired” with certain job skills; changing these skills is like changing the weather.
- Assumption: Every performance problem is because of low motivation or a lack of training. Fact: motivation is only part of the problem and training cannot fix hiring mistakes.
- Assumption: The HR department is skilled at qualifying employees. Fact: HR does not know how to identify job requirements or measure job skills. The only tools they know sometimes are interviews and workshops.
- Assumption: Managers are skilled coaches. Fact: 80 percent of managers have no ability or desire to manage.
- Assumption: Every hiring manager is a great judge of people. Fact: 50 percent of employees in some cases are “dead wood.”
The American Myth
The “American Myth” is that anyone in this country can become anything they want to become. This sounds good on the surface, but it creates unrealistic expectations. The statement actually means: America is a land of opportunity, not a land of equal job skills. Although we would all like to believe the “man in the street” could become an astronaut, President, or professional knowledge worker, facts show otherwise. Success only comes when personal skill-sets match job requirements. If the job requires interpersonal skills, offensive employees will tend to fail. If the job requires good planning, disorganized employees will tend to fail. If the job requires a high level of abstract intelligence, dull people will tend to fail. If the job requires a high level of perfectionism, sloppy people will tend to fail. Can job skills be trained? Maybe. Look at it this way. Employees fall into three groups:
- “Naturals” with a full set of job skills
- People with basic skills that can be developed
- People without skills
The good can get better but the clueless remain that way. Consider this: You cannot teach a pig to sing. For one thing, it irritates the pig. For another, pigs cannot sing. Why? Both science and practical experience tell us that human behavior and abilities are firmly established by genetics and environment. That is, genetics establishes our basic abilities and tendencies, while environment shapes and tempers them. In other words, what you see is what you get. The forces of nature actively resist change. So, regardless of the amount of training or incentives implemented, poor communicators tend to communicate poorly and good producers tend to produce.
Shadow Management Can Lead to Bad Decisions
Shadows “represent” objects. They are not reality. Because executives wield considerable power over employee economic well-being and professional status, subordinates learn to cast “shadows” that hide weaknesses and over-estimate strengths. This leads many executives to make decisions based on shadow assumptions. For example, we assume from examining the shadow of a highly successful individual contributor that he or she will make a good manager. Practical experience shows, however, that such promotions usually trade one good contributor for one bad manager. (One might suspect this is one reason why university research shows about 80 percent of people holding management positions have limited ability to manage.) When organizations attempt to reengineer work or reorganize into self-directed work teams, the result is usually disappointing. After dozens of meetings and workshops, executives often find that people are not motivated to do the new job, they cannot make effective decisions, or they do not want to assume added responsibility. These problems can often be traced to trying to fit square pegs into round holes — requiring employees to perform tasks for which they are not qualified.
Human Resources/Recruiting Failure
HR/recruiting activities are the “gateway to the organization.” Virtually every new employee must pass through HR screens. HR is the “talent scout” of the organization. Unlike professional talent scouts, though, HR seldom has a clear idea of detailed job requirements and seldom uses trustworthy and reliable evaluation tools. In other words, while pro talent scouts insist on watching applicants play the game before they join the team, HR just asks them questions. The name human resources implies a larger role in the organization. It means being “people experts.” For example, the production department works closely with procurement to make sure materials meet specifications. The accounting department works closely with auditing to ensure reports are accurate. But, the HR department has few professional recruiting and hiring standards short of interviews and reference checking. The result is poor recruiting and selection practices that regularly fill the payroll with variable quality people. This wastes line managers’ time and organizational resources.
Three Questions Testing the “Depth” of HR/Recruiting Skills
Senior managers can quick learn whether HR knows how to staff, hire and manage by asking the following three questions:
Q: What do you know about the 1978 Uniform Guidelines on Employee Selection Procedures?
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A: This document was published in 1978 by the Department of Labor. It defines best hiring practices, legal protocol, how to assure that hiring and placement tests are both fair and objective, sets standards for evaluating adverse impact, and defines necessary documentation. If the HR representative waffles or hesitates, consider the response as severe as an accounting manager who is unable to define tax-withholding requirements (see www.scientificselection.com/readings.htm).
Q: Can I see documentation showing the validity data for each one of our hiring or placement tests?
A: Application forms, interviews, resumes, and pencil and paper are all considered “tests” because they separate one candidate from another. If the HR representative says they don’t test applicants, then ask, “Do we hire everyone who applies? How do we know who is qualified or not?” A: Basic interviews have a long history of inaccuracy. Otherwise, everyone in the company would be a star performer. A: No documentation means the company has limited evidence to defend itself against an unfair employment challenge
Q: Can I see the documentation showing job analysis data for each job family on the company?
A: Being shown a job description or pay-band chart is the wrong answer. A job analysis is a specific list of measurable competencies associated with different jobs. If HR shows you a single list appropriate for the entire company, they misunderstand the meaning of the word “competency.”
Living in the Shadows
Executives are relegated to living in a “shadow world”. It comes with the position. So, the easiest way for them to ensure good decisions is to ignore the shadows and control the source: Recruiting, hiring, and promoting only people qualified for the job. Employee quality needs to be treated just like every other organizational resource: Initial quality control and ongoing maintenance of something that could cost an average of $50,000 each year. Put another way, experts estimate unnecessary expenses of poor managers and professionals at 50 percent of base salary, 30 percent for skilled and semi-skilled, and 10 percent for unskilled. Another way to look at it is to first imagine the productivity of the top 25 percent of your current employees; then imagine what the company would be like if these were the norm, not the exception. Otherwise, poor recruiting and staffing practices cost companies a fortune through:
- Hiring weak employees
- Squandering training dollars
- Inviting expensive litigation
- Encouraging turnover
- Low productivity
- Ineffective coaching
- Inhibiting company profitability
- Interfering with management reorganization efforts
- Poor employee and managerial decisions
Short of firing and rehiring the few HR managers who understand staffing, begin regaining control by:
- Finding someone with experience using the 1978 guidelines to analyze jobs, validate tests, and implement an effective hiring and screening process.
- Developing a performance management system tailored to each job. If a one size fits all approach worked, employees would always be clear about what to do and when to do it.
- Using your newly-built selection system to evaluate current employees and managers. Provide development opportunities if employees and mangers need it, but insist everyone meets requirements of their job within a fixed period of time.
- Progressively implementing an aggressive hiring process to staff your organization with consistent performers.