Not With My Budget, You Don’t! Part 1

We like to think of organizations as being “organized,” with individual pieces working together like a fine machine. But all too often, close investigation shows our fine machine is more like one of those “designer watches” you buy from street vendors?? all show and no go. Like it or not, such is the case with recruiting and hiring practices at many organizations. Read the dailies in any newsletter or the advice from any guru and you will learn how to find applicants, how to retain employees, and how to select the best people. All very shiny and bright, yes? Well, at least on the surface. But look closer at organizations and you will find managers who should have never been promoted and jobholders who should have never been hired. Why didn’t recruiters see these deficiencies when these people were hired? I think one of the reasons is that recruiters are surrounded with mediocrity. High Performance Is Not the Norm Astronauts are only sent into space when they pass training. Pro athletes only play when they pass tryouts. Commercial pilots only fly when they pass simulator exercises. Musicians only play when they pass auditions. Can you imagine what orchestras would sound like, how many games a team would win, or what would happen to air safety if rigid entry requirements were not the norm for these occupations? Now contrast this with how most employees are usually hired. A few interview questions and, maybe, an unproven test borrowed from the training department? Is it any surprise, that only 20% of the typical workforce is high producing, 40% hang somewhere around the middle, and the rest just take up space? Consistently hiring high-performing employees eludes the majority of organizations. Why? One reason is that people don’t really understand critical job skills. Job Skills Are Not Clear There are bazillions of small details associated with every job, but they all tend to fall into four broad areas. They are:

  1. Being smart enough to solve problems, knowing job technology, and learning new information
  2. Article Continues Below
  3. Being able to plan and implement work
  4. Having sufficient interpersonal skills to get things done through people
  5. Having the right attitudes, interests and motivations for the job

It all sounds so simple. Be smart enough, plan well, get things done through others, and care about work. Too bad organizations never take the time to figure out how much of each is needed for each job… they just default to doing what they know best. Technical managers, for example, tend to concentrate on technical knowledge when hiring. They live and work in a technical field, so it is comfortable for them to focus on what they know best. If you ask them about reasons for low performance, though, they tend to cite poor interpersonal skills, bad planning, or poor work standards?? the very things they ignored during the hiring process. Sales managers, on the other hand, tend to focus on interpersonal skills. They live and work in a social environment, so they focus on persuasive skills and personal appearance. But when asked about low performance they often cite lack of technical skills, no follow through, and integrity issues?? again, the very things they tend to ignore. Recruiters and other hiring professionals who might not have the background in any specific field, tend to focus on “getting to know” the applicant. What seems critically important to the interviewer is usually only a small part of the job. Low performance and turnover, though, can usually be traced to things that were either overlooked or poorly measured. And these little mistakes add up to big costs. Productivity Differences Are Expensive The cost of bad hires and poor promotions varies with the position and the organization. Most experts estimate average productivity differences to be worth a minimum of 40% of salary (higher impact jobs like management, sales, and professional are as high as 70%). Converting words to dollars, this means that superior performers will out-produce their less skilled team members by about 40% of base salary. Take, for example, a department of 100 people paid $50,000 per year. The top-half employees will produce about $1 million more (!) than the bottom half (100 x 50% x $50,000 x 40%). This economic difference comes from things like lost sales, mistakes in judgment, poor budgeting, bad decisions, or quality errors. You don’t need an outside expert to do the math in your organization. You only need to figure out turnover costs, employment fees, lost opportunities, sales differences, project mistakes, delayed schedules, coaching time, etc. to see how much low producers waste each year. If you don’t know your costs, you can use the expert’s model above, or you can just pretend there is no difference (“that’s not my problem” is a widespread epidemic in business). Diffusion of Responsibility When organizations separate hiring functions from line functions it is easy to lose sight of who is responsible for what. For example, if a poor employee is hired, is it the responsibility of the person who wrote the job requirements, the recruiter who found the applicant, or the line manger who made the hiring decision? There is no question about whether or not a bogus employee is expensive?? the only unanswered questions are: 1) just how expensive, and 2) who is willing to step up to the plate and take responsibility for them. And, willingness to “step up to the plate” often depends on “who experiences the pain.” In Part 2 we’ll discuss why it is human nature for people to diffuse hiring responsibility, how much it costs the organization, and why only a few people will choose to do something about it.


2 Comments on “Not With My Budget, You Don’t! Part 1

  1. You are correct. There are many ways that people calculate productivity differences. When I was writing this article, I was debating which method to use and obviously mixed two of them. This example should have read 50% (top half) x 50K (salary) x 100 (people) x 40% difference = $1mm. Regardless what method is used, the financial cost of unequal performance is still staggering.

    You can read the original article at:

    Post your own Article Review

Leave a Comment

Your email address will not be published. Required fields are marked *