PERFORMERS: The Winning Workforce. A Thought Leader Article By Dr. John Sullivan. Performers: The Winning Workforce

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1 PERFORMERS: The Winning Workforce A Thought Leader Article By Dr. John Sullivan 1

2 As more and more firms struggle to recruit talent, hiring managers seem more and more willing to settle for average hires just as long as jobs are filled, and despite the fact that settling hurts their teams performance and limits the firm s capability for many years. Recruiting Performers Versus Paycheck Employees If you want your managers to aim higher, you must do two things: Make them aware of the benefits and value of hiring top performers, people capable of moving fast, adapting, and innovating Critically assess and dramatically upgrade your current recruiting process so that it attracts those valuable top performers I ll address both issues in this article, beginning with the value of recruiting, and following with the differences between top performers and the average hires managers may be settling for now. 2

3 Although the hiring managers at your firm may intuitively know the value of recruiting, they may not realize that recruiting is the most impactful of the people-management functions. How impactful is recruiting? The Boston Consulting Group demonstrated that firms that excel at recruiting could achieve three-and-a-half times more revenue than, and double the profit margins of, firms with average recruiting. Recruiting: The most impactful of all peoplemanagement functions. Superior recruiting attracts high-impact performers They attribute this difference to the recruiting process: Superior recruiting processes give hiring managers the ability to identify and hire top performers. Large firms, like Apple and Google, and smaller firms, such as Facebook and Netflix, have dominated their markets because of their ability to attract these high-impact performers and innovators, people who provide extremely high economic value. 3

4 Average recruiting attracts paycheck employees In contrast, firms that use average recruiting processes, such as INBOX Recruiting, in which applicants submit resumes to a generic inbox, tend to attract paycheck employees, people who do not focus on career development and the success of the company; they simply want to cash their weekly checks. We ll talk more about INBOX recruiting and how you can transition from it to a superior recruiting process later in this article. For now, let s look more closely at the differences between paycheck employees and performers, and the benefit of the latter. The Boston Consulting Group demonstrated that firms that excel at recruiting could achieve 3.5 times more revenue than, and 2.0 times the profit margins of, firms with average recruiting. 4

5 Paycheck employees hurt the bottom line Why avoid paycheck employees? First, paycheck employees are high maintenance. Case in point, a 2012 study by Robert Half International showed that weak employees could take up almost one day a week of a manager s time. Second, to compound the damage, paycheck employees may stay with your firm for decades, multiplying time spent on performance issues, and holding managers back from focusing on core duties that contribute to the bottom line. The paycheck employee in action There is no better example of the damage a single weak hire can cause than what recently happened at Comcast: a single paycheck employee at their call center shredded the firm s reputation by badgering a customer who simply wanted to drop his service. Because the customer recorded the damaging call and posted it on the Internet, that single employee likely cost Comcast millions of dollars. 5

6 Paycheck employees comprise 80% of the workforce Third, paycheck candidates are easy to find and sell on a job. They tend to approach you rather than being hand selected for a role. Many hiring managers, in the rush to fill open positions, make the mistake of hiring large numbers of paycheck employees, forgetting how they eat away at time and hinder the firm s growth. Don t get me wrong. Paycheck employees are not bad people. But they do make more errors, slow innovation, and disappoint more customers than do the more desirable and impactful performers. The trouble is that paycheck employees, along with below average, problem employees, comprise 80 percent of the working population and contribute little to your firm s output. 6

7 The slow and difficult way to hire. Side note: What is INBOX Recruiting? A few pages ago, we introduced the term INBOX Recruiting, briefly defining it as using a generic inbox to receive resumes. But INBOX Recruiting usually goes further. If you re using a generic inbox to accept applications, then you re also likely to be using spreadsheets, Post-it notes, and independent calendars to track and set up interviews with potential candidates. Because such tools do not readily integrate, you may find that coordination and collaboration is difficult, and that the hiring process is slow. Even a narrowly focused Applicant Tracking System might not be able to increase your speed and hiring results because it, too, lacks complete integration. Such a system may also lack Candidate Relationship Management capabilities, which help you build relationships with prospects and candidates. Bottom line? For stellar recruiting results, avoid INBOX Recruiting. 7

8 Performers produce more, faster. We considered why paycheck employees are bad for your business. Now, let s see why performers are so good. Consider the 80/20 rule. In your business, 80 percent of the profit likely comes from 20 percent of your products. This rule applies to employee productivity as well: 80 percent of your output often comes from 20 percent of your employees the performers. Why pursue top performers? Performers in tech roles produce 25x more than average employees. One 2012 University of Indiana study by O Boyle and Aguinis proved this concept, showing that the top 5 percent of a firm s workforce produces 26 percent of the output (five times more than you would expect). And Steve Jobs himself found that these top performers in technical jobs produce a whopping 25 times more than do average employees in the same time. 8

9 Performers need less, and give more. It makes sense that performers would produce more, faster, than would other employees, because performers need less initial onboarding. They are already well trained and highly skilled, and as a result reach their expected level of productivity (also known as time-to-performance) in as little as half the time that it takes other employees. Top performers also add value because they bring leadership skills to your firm. They re collaborative and capable of operating in complex, continually changing and ambiguous business environments. Performers even help during the new-hire onboarding process by acting as members of the welcoming committee, willing to mentor and help. Tony Fadell: A performer in action Perhaps the best-known example of the added value of hiring performers is Tony Fadell. As a mid-level new hire, he contributed to pulling Apple out of the doldrums by helping them design the ipod MP3 player. His presence also inspired others to innovate, helping to turn around the company to the point where other employees and new hires also followed his lead and became serial innovators. 9

10 In Summary: Which employee would you rather hire? PAYCHECK EMPLOYEE TOP PERFORMER Think Homer Simpson Think Tony Fadell, LeBron James Average to below-average performance Superior performance Comprises more than 80 percent of the workplace Not likely to be looking for a new job Not interested in career development or the success of the company Easy to find with average recruiting processes Approaches you looking for work Takes a long time to become productive Eats away at management time up to two months worth each year Makes more errors Slows innovation Likely to disappoint customers Cares about personal success and the success of the company Unlikely to respond to common job postings; Attracted only by superior recruiting processes Hand selected for open positions Reaches expected level of productivity in half the expected time Generates 80 percent of a company s output Produces in multiples of their salary Innovative; strong leadership skills Can mentor and inspire new hires

11 Fact: Performers are a bargain. Your hiring managers need to understand that performers are a bargain--especially if you re at a small or medium-sized firm. While performers generally earn up to 25 percent more than average workers, many firms, including Apple, Google, Yahoo, and GE, have found that performers produce in multiples of their salaries. This outstanding pay-to-output ratio gives performers one of the highest return-on-investment values of HR. Managers also need to understand that performers comprise only 5 to 10 percent of the workforce; the rest are paycheck employees. And because there are fewer performers on the market, they re more difficult to recruit. But it can be done with the right recruiting processes. 11

12 Performers: Just the Facts. Side note: Why pursue top performers? The top 5 percent of a firm s workforce produces 26 percent of the output. Top performers in technical jobs produce a whopping 25 times more than the average employee does. Performers reach their expected productivity level (also known as time-to-performance) in as little as half the time that it takes other employees. Performers produce in multiples of their salaries for an outstanding pay-to-output ratio and one of the highest ROIs within all of HR. The top 10 percent of applicants for highly competitive jobs are no longer available after a mere 10 days. 12

13 Four elements of the recruiting process that dramatically improve hiring results. Over many years of research and advising firms, I discovered four essential components of a modern recruiting process. Attend to these matters to better find, attract, and hire top performers for your company. 13

14 1 The ability to recruit passive prospects Because most firms treat their performers well, performers seldom look for new jobs. Although you might be tempted to refer to these fully employed performers as passive prospects, a more accurate name for them is not looking for a job performers. They re not passive; they are, in fact, just the opposite bold and aggressive. Because they re not actively looking for jobs, they won t respond to most traditional job postings, nor will they have posted a current resume online. Paycheck prospects, on the other hand, are continually looking; they re the ones who post their resumes and respond to yourjob postings. Perhaps the most famous illustrative example of not looking for a job talent is LeBron James. In 2009, LeBron could have stayed with his team, where he was well treated and well paid. But he decided to go to Miami, not for paycheck reasons, but for the increased chance to win a championship. LeBron repeated that move when he returned to Cleveland in 2014 once again, for nonpaycheck reasons. 14

15 Consider also that, because performers are not-looking, you need different recruiting and employer-branding strategies to attract them. The best recruiting processes for attracting performers tap passive sources like LinkedIn, where performers can apply for jobs using their profiles alone; most performers won t take the time to update their resumes. You can also find these not-looking individuals on interactive social forums like Facebook, Twitter, Pinterest, and functional online discussion forums. Bottom line? If you expect to find and attract the very best, your recruiting process needs to be capable of identifying and convincing notlooking performers to apply. For instance, consider integrating with LinkedIn, or tapping Facebook, Twitter, and other online social venues. 15

16 2 A strong employee referral capability Another effective approach for attracting not-looking prospects is an employee referral program. Research by CareerXroads revealed that referrals produce the highest volume of any source of hire. More importantly, research by Staffing.org revealed that referrals also produce the highest quality of hires, i.e., the best performing hires with the longest retention. If you update your recruiting process so that it contains an effective referral program, you should be able to get more than 50 percent of your hires from employee referrals. One of the more important features of an employee referral program that actually engages employees is speed and efficiency the program must enable you to be responsive, and to handle referrals quickly. My own research has shown that the #1 factor limiting a continual flow of employee referrals is not being responsive to past referrals. This is because employees, after spending hours of their own time finding and selling a top referral candidate, quickly become frustrated when HR never explains to them why their referral didn t get interviewed or, even worse, when HR doesn t respond at all to the referral. 16

17 My research has also indicated that the most effective way to get top-quality referrals is to ask your top-performing employees to become talent scouts. You must motivate your employees to continually seek out individuals with superior skills and knowledge during their daily interactions and on social media. Smaller firms might find that allowing former employees, vendors, and even customers to make referrals also can lead to improved recruiting results. Bottom line? Add a referral program to your recruiting arsenal. Promote the program within your company. And move quickly on all referrals. 17

18 3 A process that lets you hire fast In today s highly competitive talent marketplace, the most desirable candidates are in such demand that they may only be in the job market for a matter of days. For your small or medium-sized firm, fast hiring can be a competitive advantage because few large corporations have the ability of speed in this process. To hire fast, you need efficient administrative and interview scheduling processes, as well as hiring managers who can make quick, educated decisions. One medium-size tech firm tracked applicant abandonment days and found that the top 10 percent of applicants for highly competitive jobs were no longer available after a mere 10 days. 18

19 To achieve a rapid hiring capacity, pre-identify and pre-assess qualified, interested individuals and place them into your pipeline. Maintaining that pipeline, or talent pool, allows you to immediately notify pre-selected individuals when a job opening arises. And because you ve pre-assessed them, you can make rapid hiring decisions. Bottom line? Build a fast hiring process. The best people are on the market for just a few days and most large companies can t move that fast. 19

20 Because the job market is continually changing and new recruiting tools appear frequently, your recruiting process must also be data or metric driven. 4 Metrics so you can continually improve recruiting With data in hand, you can use analytics to identify which of the recruiting tools and process elements are working and which ones need to be refined. Recruiting metrics can tell you which hiring sources such as referrals, niche job boards, or LinkedIn are the most effective at identifying top performer prospects. The data can also help you reduce hiring costs and delays, and to determine which recruiters and hiring managers are producing the highest percentage of top performers. 20

21 The best firms also use surveys to assess hiring manager satisfaction and to ask new hires and applicants what attracted them, what worked, and what in the recruiting process needs improvement. For example, just last week I met with a major satellite entertainment provider s leaders who are adapting for their recruiting process the same market research approach they use to determine what attracts new customers. Metrics can also help you understand which steps or elements of the recruiting process have the highest negative impact on overall recruiting effectiveness and speed. Bottom line? Use metrics and surveys to learn where your recruiting process is strong and where it needs improvement. 21

22 Recruiting has fundamentally changed over the last few years. Relying on old-school approaches will doom your success and prevent you from finding and hiring performers. Concluding advice: You can t afford not to invest in recruiting. To capture top talent, lean on the latest and most effective recruiting tools, which are likely going to be a prospect s first, and potentially only, point of contact with your company. With such a limited window, performers will, like it or not, judge your entire company based on the innovation, speed, and technology they see in your recruiting process. If your recruiting process lacks integration, if it fails to use the latest technologies think mobile capabilities, recruiting videos, talent communities, and live video interviews you may unintentionally be sending a message that your firm is behind the times. 22

23 You might counter that you simply don t have the time and resources to reengineer your recruiting process. But the truth is that you simply can t afford not to invest in it. And you shouldn t postpone these changes, either, because, as the job market becomes tighter around the globe, it becomes more difficult every day to recruit and land highly desirable, innovative performers. If you don t act quickly, the workforce at your firm will fill with paycheck-driven Homer Simpson types. And once paycheck employees comprise the bulk of your employee population, performers will see it during their interviews and Internet searches, and likely overlook your company. Keep in mind that the benefit is not purely economic. When an effective recruiting process is delivering speed and positive results, you ll improve the status, credibility, and executive confidence in the recruiting and HR staff as well. I know of one company whose leadership was so impressed with their recruiting department that they invited recruiting to present at a stockholders meeting the ultimate status and credibility! 23

24 About the Author Dr. John Sullivan Hailed by Fast Company as the Michael Jordan of hiring, Dr. John Sullivan is an internationally known HR thought-leader from the Silicon Valley specializing in bold and high-business-impact strategic solutions. He s a prolific author with over 900 articles and 10 books covering all of Talent Management. He s also an engaging corporate speaker who has excited audiences at more than 250 corporations and organizations in 30 countries on six continents. His ideas have appeared in every major business source including the Wall Street Journal, Fortune, BusinessWeek, Fast Company, CFO, Inc., NY Times, SmartMoney, USA Today, HBR, and the Financial Times. He has been interviewed on NPR, CNN, and on the CBS and ABC nightly news. Dr. Sullivan served as Chief Talent Officer for Agilent Technologies (the HP spin-off), and is currently a Professor of Management at San Francisco State. His articles appear on his popular website and at 24