Opportunity Hidden in Plain Sight

In this article, I am going to address only folks who want to know more about the benefits of hiring the right employees but are uncertain how to explain the need to management. I strongly believe the future belongs to HR people who:

  • Value verifiable facts more than unsupported opinions.
  • Realize human decision making is seriously flawed and want to improve it.
  • Are anxious to gather hard facts showing that their placements turnover less and produce more than the competition’s.
  • Realize interviews are seriously flawed for anything other than the most rudimentary pre-screening.
  • Fully accept responsibility for the quality of people in their organization.
  • Know there is no easy way to determine whether applicants have job skills.
  • Want to present a compelling financial argument for their job.
  • Want to ensure their organization maximizes its legal hiring credibility.
  • Know human resources has the biggest ROI potential of any organizational activity.
  • Have finally realized the vast majority of books on hiring contain nonsense.
  • Believe people are fully responsible for their own job success or failure.
  • Realize the consequences to both the organization and the individual of not ensuring people have the right skills before being assigned to a job.

Choosing among applicants to find the right person is not easy. In every case, it becomes a confused combination of facts, subjective opinions, and probabilities, where “facts” refers to hard-to-fake job skills data gathered during the pre-screen phase, “opinions” refers to final decisions based on available facts, and “probabilities” refers to the percent of correct decisions made. The ONLY organizational choice an employer has is how much to reduce the amount of subjective opinions and increase available facts. Where do we start? Let’s look at some everyday probability “scores” for most organizations:

  • 20% of salespeople produce 80% of the sales. (These are the salespeople who are willing to cold call, build relationships, discover needs, make persuasive recommendations, schedule and follow up on activities, and deliver quality customer service.)
  • 20% of managers have good management skills. (These managers coach good performance, counsel bad performance, develop employee relationships, demonstrate personal integrity, plan and organize effectively, develop subordinate skills, acquire resources for subordinates, eliminate obstacles, and help subordinates learn to solve their own problems.)
  • 50% of all hires fail to meet job performance expectations. (They are hired based on poorly-matched cognitive skills, organizing skills, interpersonal requirements, and attitudes, interests, and motivations).

Aside from the inherent lack of management respect that results from slip-shod recruiting and uncoordinated HR activities, the organization takes serious financial and operational hits due to the above three issues. “Hits” the organization takes from poor sales selection:

  • Greater cost of sales for each “80 percenter” who only contributes to 20% of the revenue
  • Additional training expense, coaching expense, and turnover expense
  • Lost sales and prospecting opportunities
  • Lost respect from customers and prospects
  • Insufficient sales revenue
  • Greater customer turnover
  • Greater competitive vulnerability

“Hits” the organization takes from poor manager selection:

  • Shallow succession-planning pools
  • Expensive mistakes arising from bad management decisions
  • Increased employee turnover due to bad management activities
  • Lower employee productivity and morale

“Hits” the organization takes from poor employee selection:

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  • Training dollars wasted trying to fix broken job skills
  • Employee inertia that passively resists senior management direction
  • Failed management initiatives
  • About twice the normal turnover ratio
  • About half the average employee productivity ratio
  • Increased risk of financial failure (more expense than necessary for the revenue gained)

Occupational Myopia There is good news and bad news in every event. The bad news for hiring incompetence is that people take it for granted. For some reason, managers and HR people alike wear blinders that encourage them to argue for nonsense hiring practices, such as:

  • Never doing studies to prove their hiring tests actually predict job performance.
  • Arguing that interviews are “not really” tests, even though they are used to pass/fail job applicants.
  • Failure to seek and act on specific performance feedback to ensure continuous improvement.
  • Long-term managers (with limited experience outside their own organization or industry) illogically insisting their employees are the finest in the world.
  • Not coordinating hiring, management, and development.

So what’s the good news? The good news is that opportunities abound for people who want to make a difference! If you’re one of these people, you can start by finding a like-minded manager in the organization. Get together and calculate the cost of high and low performance. Consider turnover expense, wasted training dollars, increased manager coaching time, absentee expense, individual productivity, and so forth. It won’t be easy, but here are some tips to get you started:

  1. Decide what to measure (units per hour, sales dollars, customer service ratings, turnover, absenteeism, mistakes, and so forth), but just be sure the numbers are accurate and trustworthy.
  2. Roughly divide groups into high and low performers based on your criteria.
  3. Carefully document the costs and productivity of the high group and the low group. The goal is to look at each employee as a “miniature business unit.” That is, the organization is in a sense “renting” each employee’s time and talent in exchange for a product or service that either makes or saves the organization money.
  4. If you cannot come up with quantifiable productivity numbers, then consider the cost of full-time employees versus the cost of outsourcing the activity.
  5. The goal is to quantify employee dollars spent in exchange for employee contribution. If no one can put together numbers on productivity, then, in quality terms, your HR system is totally out of control. Bad mojo.

Every journey starts with the first step. The first step is quantifying the internal numbers as I’ve described above. That’s your job. Now (unless you have another 10 to 15 years to invest in personal development and formal education) find someone outside your organization who is expert in identifying and measuring job competencies.

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