“People”: The Secret Ingredient to Success

In simple terms, you can measure your business success by how well you get customers, keep customers, and the efficiency of your operations. Many companies measure their success by revenues, income and other traditional accounting yardsticks. The problem is that the accounting approach measures how you did but not how you should have done. For example, take a company that grew 20% last year, and had $10 million in revenue. Its management team was weak, so it lost an additional 20% growth, missed out on another 5% in net margin, and had unnecessary turnover of 10% in client base. So this same company (assuming a 10% net margin) could have seen another $800K added to their bottom line. The one secret ingredient was “people.”

While I like the idea of coaching, training, and other means to develop people, these tools will never replace the sheer power of hiring the right people in the first place. You can not turn a chicken into a duck or a pig into a cat, which is what many owners try to accomplish. Much more effort needs to be put into hiring top performers in every seat and promoting the right people. The cost of not doing so is huge. There are all kinds of forms to calculate the cost of mistakes out there. In Brad Smart’s book “Top Grading” the cost of a mis-hire was calculated to be 14.6 times base salary. So to put that in to real terms, someone making $100,000 is going to cost your firm $1.5M over the lifetime of their employment in lost opportunities and mistakes that happen.

In tangible terms we can always see the difference between “A” players and the rest. The “A” players’ productivity is 3 times the productivity of the others. The higher the “A” players are in the firm, the better the consequences.  The easiest place to look is in your sales department. The top sales people do far in excess of your average and bottom producers. Go into programming departments. The top producer outputs far more than anyone else. You can go in to any department and position and measure the same difference; the top producers will give you 3 times the output.

Before I move further, let’s clarify the definition of “A” player because many owners say they cannot afford them. “A” players are those people in the top 10 percent of talent available at the pay grade you have defined, for the tasks you want them to do, and willing to do it in your market. In many cases organizations are already paying for “A” players, but the lack of discipline in their people processes allowed them to hire “B”s and “C”s.

Here are some signs their might be a problem with discipline around people:

  • There are no measurable key performance indicators in place to know whether each person is achieving “A” performance.
  • 90% of employees are not considered “A” performers.
  • “B” and “C” players are not fired or redeployed when they cannot become “A” players.
  • There are no talent reviews of people to see who are “A,” “B,” and “C” people.
  • People are almost never fired, and loyalty is the most important value of the company.
  • When there is an open position, the candidate pool has no “A” players.

There are a lot of justifications offered regarding the lack of performance. The reality is companies are making big mistakes in their hiring practices. They say things like “I have gotten my money back on this salesperson because we got enough deals to cover his/her salary.” This ignores the fact that the person did not reach quota, sucked up a lot of management time and energy, hurt company reputation, and created a hole in the organization when they suddenly left. Had the company hired correctly, the ”A” player would have met quota, still be there, and have a lot of momentum right now. Here are some good ideas to follow to dramatically improve your people processes:

  • Move away from behavioral interviewing and use the “Top Grading” process for interviewing.
  • Use assessment tools in your hiring process.
  • When promoting employees use the “Top Grading” process.
  • Have at least 2 KPI standards for every position, and if people are not able to meet them, redeploy or replace those people. For help on KPI there is a website www.kpilibrary.com.
  • Do performance reviews annually and define whether someone is an “A,” “B” or “C” player. If they are a “B” or “C” decide how they can become an “A.” If they can’t, it is time to let them go.

Review our website to understand how an executive coach or business coach can help you increase the success of your career and business, or contact Howard Shore at [phone link=”true”] or shoreh@activategroupinc.com.

Take Control and Increase Growth: Article 2 of 4

The purpose of this article is to help business owners understand the key daily decisions that influence dependence on external funding and either limit or expand the growth potential of a business. There are essentially 4 decisions: 1) cash; 2) people; 3) strategy; and 4) execution. This article (#2) addresses how your decisions about people affect growth and identifies 6 ideas for growing your business.

Some of the most difficult and important decisions a leader makes concern people. Decisions about people have a dramatic impact on growth. Great people develop strategies. These are the people who think about how to beat your competition. Great people execute strategy better than average people.

It is critical that a company try to hire the very best person for each and every position. The smaller your company, the easier it is to see your mis-hires. For example, if I have 5 employees and 1 is a mis-hire, that means 20% of my workforce is ineffective and is dragging down the other 80%. The larger you get, the less obvious your mistakes may become.

In the Harvard Business Review article “How Fast Can Your Company Afford to Grow” by Neil C. Churchill and John W. Mullins, the authors explore the precise calculation of how fast you can grow a business without running out of cash, discussing how using cash to hire the right people can play a major factor in your growth.

What is the Impact?

Too often there is a disconnect between the importance leaders attribute to hiring and the discipline they put into their hiring process.

Responsibility for hiring is treated too lightly.

Not enough time is invested in selecting each person.

The right assessment tools are not used.

Adequate direction to make the right decision is not given.

People ignore facts that are right in front of them when making hiring decisions.

Consequently, companies typically hire less-than-ideal candidates, using “gut” and intuition instead of solid information. It is estimated that companies are lucky to hire a good person at least 50 percent of the time, and only get great people 10 to 20% of the time. It is no surprise that executives find themselves working more hours, having more stress, and feeling that they have to do everything themselves.

Based on extensive research published by Bradford Smart, PhD, in “Topgrading,” the average cost of mis-hiring someone whose base salary is under $100,000 is $840,000 (approximately 8 times salary), and the average cost of mis-hiring someone in the $100,000-$250,000 base-salary range is $4.7 million. Even if you believe your number is only one-half or one-third of Dr. Smart’s estimates, it is important to realize that getting and retaining top performers for every position from the receptionist to the CEO impacts your cash and growth in a significant way.

6 Ways to Improve Growth by Hiring the Right People

There are 6 ways proven to maximize a company’s growth potential through its people:

  1. Improve Your Interviewing Skills – Dr. Bradford Smart is a guru in hiring the right people. His program was used by Jack Welch and, to my knowledge, is the most used in Fortune 500 companies. Dr. Smart’s Top Grading process teaches unique interviewing and hiring principles, practices, and processes. You can access their information on DVD at Top Grading Tools so that your company can use these same strategies.
  2. Assessment Tools – Using assessment tools in the hiring process can increase your hiring success fivefold. The best tools allow you to create customized benchmarks for both your organization and the position you are hiring for. As you screen candidates, they take the assessments online and are compared against the benchmarks. We help our clients use Objective Management Group’s (https://www.objectivemanagement.com/) assessment tools for salespeople because these tools are 95% predictive and are the only tools we have found to be focused on salespeople.  For all other positions, we also recommend TriMetrix© (http://www.ttiltd.com/results.php) as they focus on the behaviors, values, and skills of the ideal hire. There are a lot of good tools out there – some a little better than others – but the most important recommendation is to use something.
  3. No Compromising – It is very common, particularly in smaller organizations, for leaders to justify promotional and hiring decisions based on time constraints, market limitations, or some other self-limiting issue.  In other words, the decision-maker will hire or promote a less-than-ideal candidate based on a short-term constraint that may or may not truly exist. However, even when a real constraint exists, the long-term benefit to the company is most times best served if diligence and patience prevail.
  4. Pay Above Average Wages – When considering trends (e.g. aging, education, competition, inflation, globalization, etc.) you compromise your ability to compete in the future unless you are willing to pay better-than-average wages. There is little doubt that we will face an employee shortage in the future, creating wage pressure. It would be better to be ahead of the curve on this front. Your goals over the next five years should be as follows: 1. double revenue per employee, and 2. increase wages by 50%.  My prediction is that companies that have strategies to keep wages low at the front lines and in their factories are going to have a really hard time in the future.
  5. Provide More Training – The first thing that companies do in a downturn is cut training. There should be no surprise that employee and customer dissatisfaction soon follow. Top-performing companies do not slow down training; they increase it. Every company should require a minimum number of hours of training per year for each worker. Achievement of training quotas should be reflected in performance evaluations and affect whether or not someone can be promoted. The results of training are measureable in terms of employee retention, employee productivity, employee satisfaction, and customer loyalty.
  6. Provide Coaching to Executives – Right Management Consultants recently revisited a detailed study on the benefits of business/leadership coaching. The study examined results realized by 100 executives/managers, mostly from Fortune 1000 companies, who participated in coaching programs that typically lasted from six months to one year. They reported that the employers received 6 times the value to their bottom line of the cost of these programs. In addition, the companies that provided coaching programs to their management and leadership teams realized improvements in productivity, quality, organizational strength, customer service, and shareholder value. They also received fewer customer complaints, and were more likely to retain individuals who received coaching. Individuals who received coaching reported experiencing better relationships with their direct reports, immediate supervisors, peers, and clients. They also reported better teamwork and job satisfaction, reduced conflict, and renewed organizational commitment.

In Summary

Hiring decisions have a dramatic impact on how fast your company can grow. Hiring and retaining the wrong people uses cash, while hiring and retaining the right people creates cash. Therefore, hiring and retaining people should be given at least as much thought, time and energy as serving external customers and developing products and services. By utilizing the suggestions in this article, you will dramatically increase your hiring success, increase employee productivity, improve employee retention, increase customer loyalty, and drive more growth.

Contact me today to learn how Activate Group helps individuals to increase their success and works with organizations to attain consistent revenue and profit growth rates of at least 20% annually. Call [phone link=”true”] or e-mail me at shoreh@activategroupinc.com.

Reference taken with permission from Gazelles, Inc. Growth Tools, Mastering the Rockefeller Habits by Verne Harnish, and Gazelles Systems Intellectual Property release 4.0. Howard Shore is a Gazelles Coaching Associate.

11 Keys to Acquiring Top Talent

The perennial challenges for would-be employers are how to maximize the talent caliber of the people they hire for positions in their company, how to accelerate acquiring top candidates, and the cost of acquisition. The reason most companies fail to get what they say they are looking for is a combination of attitude and discipline.

The first key, and the most important, is a firm’s attitude toward acquiring top talent. When I refer to attitude, I mean “habits of thought”. Most senior executives and managers do not love recruiting people. If you compare recruitment to their primary business function or role, they find it quite uninteresting and even a distraction from what they feel they should be doing. It is something they have to do so they can get back to their real job.

Some other common (and equally undesirable) habits of thought include:

  • We cannot afford the best talent so we have to settle for whatever comes through the door.
  • We are not a big company so we cannot attract the same quality of people as a big company.
  • I do not have time to interview people.
  • Even though my existing person is not doing a good job, I am better off keeping him/her because it will save me the time of recruiting and training the new person.
  • There is no talent in this town.

These attitudes are going through people’s minds prior to even starting the process. If not dealt with, these negative habits of thought definitely impact the ability to maximize one’s effectiveness as a recruiter and help the company select the best people.

Acquiring talent is a process just like any other in your company. In order to improve one’s skill at something, one must first have a passion for mastering the process. A company must evaluate its talent acquisition processes to make sure that they include all of the following steps. When any of these steps are not followed well, you have a weakness in your process that increases the likelihood that you will not hire the right person.

1. Job Profile – Do not start recruiting until you have completely defined the position profile. The profile must identify: position description, key performance indicators of a job well done, accountabilities, who this person will report to, who will report to this person, who their internal and external customers will be, competencies required, critical success factors, and key process ownership.

2. Advertisement – It is important to know where the most success is happening for the type of position and level of person you want to recruit. Posting a position is supposed to attract the candidate’s attention over all the others, qualify appropriate candidates, and screen out bad ones.

3. Assessments – Many companies are misusing assessments. By law, if you are using assessments in your process you need to screen all candidates. A person becomes a candidate as soon as you receive the resume. Negotiate a per-hire pricing with your assessment company. In addition, one assessment does not fit all. For example, I find that Objective Management Group’s assessments are the best for sales, while behavioral-based assessment is good for other positions.

4. Phone Screening – This is not supposed to be an interview. The purpose of phone screening is to determine which are the best candidates. If these screenings are taking more than 10 minutes, they are being done improperly.

5. 1st Interview – Key stakeholders are involved in the first interview process. The key is to do the job right the first time to avoid bringing back someone too many times and slowing down the process. Top people do not stay in the market long and get discouraged easily. Tandem interviews are highly recommended, and structured in-depth interviews such as the one presented in the book “Topgrading” by Bradford Smart should be used. A common mistake by an interviewer is to not allow the candidate to do most of the talking, and there should be little to no “selling of the position” during the interview.

6. 2nd Interview – This interview should be scheduled soon after the first. Be ready to sell the position, answer their questions, and have a few follow-up questions after the first interview. This is the time to close the candidate.

7. Compensation – Be strategic with compensation. Too many people get into the comparison trap, which causes myopia. Think about how each employee can create value and compensate them relative to their contributions. If step one is done well, it becomes easier to be creative in this step.

8. Reference Checking – Validate the critical information collected during the interview that caused the desire to hire the applicant. The candidate should help in setting these up. “A” players will always do this.

9. Background Checks – Do them.

10. 90-Day On-Board Routine – If you bring your employee on board in the wrong fashion you may permanently destroy your relationship with that employee. Many employees leave within the first 6 months, and the root cause is a failure to bring them on properly. Many were the right people for the jobs.

We have found that when organizations follow the steps well, they save themselves a lot of time and money. In addition, they usually need fewer employees because the people they have are top performers. Take the time to today to shift in mindset and decide to become the best acquiring talent in every seat in your organization. It is well worth the effort.

Howard Shore is a business growth expert that works with companies that want to maximize their growth potential by improving strategy, enhancing their knowledge, and improving motivation. Contact Howard Shore at [phone link=”true”] or shoreh@activategroupinc.com.

Experience vs. Results When Hiring and Promoting?

Many of the companies we work with and come across define their recruiting criteria incorrectly, and some do not even realize they have a problem.

The typical initial problem statement is, “We need to fill a position with a qualified candidate.” Defining “qualified” is where they tend to go wrong. Some go on to say, “We will have better results when we hire from the inside than from the outside.” Others insist, “We should only look at people that previously have worked in this particular function for a certain number of years.” Or, “We want someone that has been in our industry before so we won’t have to teach them our business.”

What these criteria and the initial problem statement often overlook is the real problem in the company. There is not an “A Player” in every position, and the company does not make defining, finding, keeping, and growing “A Players” a necessity

When filling positions in a company, there is one common denominator that gets overlooked consistently in almost every company I come across. If you want to solve a problem, it is important to first define it correctly. Once you have defined it correctly, you can then come up with the questions you need to answer in order to solve your problem. Redefining “We need to fill a position with a qualified candidate” as “We need an “A Player” in every seat” forces you to redefine your expectations for the position and the criteria for the candidates. Many people you might have hired using the old definition should now not get past your screening process. Here’s a case in point.

There is a Fortune 500 Company that I deal with that recently made some big moves in its management team. This company has had a track record of having good people. At a social gathering, some of their employees were telling me about the person supposedly being groomed to become CEO and about the one just promoted to CFO. I know both these people. They have been with the company for a long time, and are people I like, trust, and respect. Both are well credentialed and very smart. However, neither one is qualified to fill their new position, and their track records inside that company prove it.

The new CFO is technically sharp and was great in his previous position, and management should have stopped there. The CFO of a public company that wants to grow must have vision. This is the new CFO’s biggest weakness. He is not a strategist, and you cannot teach someone to be strategic. It is a capacity a person is born with or not.

The other vital talent is leadership ability. As one of the top 3 people in the company, the CFO must be someone that can inspire everyone in the company to achieve greater levels of performance. They must be able to find, grow and produce top talent. This person has never done either. He tends to focus on the negative rather than the positive, is really hard on other people, and places too much emphasis on the technical aspects of accounting (his comfort zone) rather than the financial aspects of business to help grow the company. He was an “A Player” in his former position, but will wind up a “B or C Player” in his new role.

The CEO-apparent is a different story. Everybody loves him for his engaging personality, his Ivy League background, his quick wits, and positive outlook. He has worked in every function in the company, which is what makes him so appealing. He got promoted fast, furious and young. So why do I think there’s a problem? Results! His first claim to fame was a really large project that he was in charge of in his early days. The project was projected to cost $50M. It came in at over $200M, and never did what it was supposed to do.

His proponents will say that the cost overruns were approved by others; he did not make those decisions, and that he made sure stuff got done as decided. I say that he should have had the insight and courage to stop this monster from the start and help senior management save hundreds of millions of dollars. All the next stops showed no remarkable results for the company, just promotions for him. So, what the company now has is a very smart politician taking its reins. Perhaps he should run for governor in our next election.

This is significant because an “A Player” will produce 3 times the value to your company as a “B or C Player” yet they all cost the company the same amount of money in terms of compensation. Ironically, many times the “A Player” is misperceived as “B or C” player because they are pushing back instead of “going with the flow.” They are saying, “Do not go through with this massive project because it is a train wreck,” or they are asking to try to do things a different way. If you micromanage them, they cannot innovate and give you the results you need.

The next time you fill a position in your company, ask the right questions:

  • What are the key performance indicators of “A” performance for this position?
  • What are the key success factors for producing this performance?
  • What qualities does the person need to have to produce this performance?
  • What track record do you want to see for you to trust that they can do this job?
  • What are the cultural aspects of your company that are important to consider when choosing a candidate fit?
  • What values must a candidate have in order to be hired, and what questions will you ask to test whether they’ve demonstrated those values in the past?
  • What early warning indicators will you put in place so that you can tell whether things are working?

Howard Shore is a business growth expert that works with companies and people that want to maximize their growth potential by improving strategy, enhancing their knowledge, and improving motivation. To learn more about him or his firm please contact Howard Shore at [phone link=”true”] or shoreh@activategroupinc.com.

Four Key Training Factors

What are the factors that cause the difference between successful and unsuccessful training initiatives? While every project is different, we have identified four key factors:

  1. systems, processes and culture
  2. results mindset
  3. trainability
  4. commitment

Activate Group chooses from processes and principles that have proven to yield consistent success for many years. The results have occurred across different countries and continents and have been used in almost every industry. We find that it is best to not reinvent what works. Instead we work hard to focus on proven practices.  The challenge lies in the four key factors discussed above.

Systems, Processes and Culture

CEOs and the rest of the leadership team come in all different sizes, shapes, styles, and backgrounds. Those variations influence how people behave, hiring practices, motivation schemes, degrees of accountability, amount of focus there is, strength of culture, and so on. This will have a direct influence on the success or failure on training initiatives.

As a result, we do our best to learn as much as we can about your systems, processes, leadership styles, and culture before designing a program. By learning about the organization and its people we can understand how your organization and its leadership may inadvertently compromise the success of the initiative. These obstacles need to be addressed to help maximize success and return on investment and energy.

The key here is to understand that training is change, and change begins in the company, not with the consultant or trainer. The job of the consultant or trainer is to provide processes, systems, knowledge and/or tools that can help you change your culture and how your people operate in that culture. The consultant or trainer can help the leader identify thought processes that are getting in the way of progress. It is the senior leadership’s responsibility to show their organization that they are committed to making these changes to their own thought processes to drive results – even if that change is not comfortable! If you have an open mind and are committed to change, then your people will step up.

Results Mindset

There must be a results mindset to training. While this seems obvious, it is common to find training programs that are done for the sake of training.  Many organizations have not thought through the “why” of training and, the outcomes they are trying to achieve, and how in the short- or long-term they intend to affect the top and bottom line. All training should have a positive impact on your bottom line. In addition, companies should determine the proper allocation of their cost structure to training. Management must carefully prioritize training to target those initiatives that will have the biggest impact on bottom line. Properly planned training reduces turnover, improves productivity, increases quality, reduces the number of people needed in the organization, increases customer retention, and/or leads to more sales. Benchmarks to measure progress should be predetermined and tracked.

Trainability

This is the most important issue of all. When an organization does not like employee performance the first response is to throw them into training. However, would you send an accountant to medical school? Typically the best accountants would not make great doctors as they possess and were born with different talents. Talents cannot be taught in a training class. We can teach people skills and knowledge, but if they lack the core talents for a role, they will still underperform in that role. Very often companies have not done the proper job in the hiring process, and rather than taking the proper steps to acquire appropriate personnel, they are hoping that training will make their problems go away.

Using assessments we try to help our clients determine whether they have properly hired people into the right roles to begin with. Or if they are promoting someone, whether that will be the right move. Otherwise, they will be providing training to the wrong people. You want to provide training to people that can and will perform well in their position. Many companies have a policy of “a hope and a prayer” that their poor performers will turn around after attending training. This has never worked well and will continue to be a bad practice for companies.

Commitment

Just because an organization made a decision to do training does not mean there is a commitment to that decision. Typically for an organization, training equals change. Companies use outside trainers to gain access to methods that are typically better than what currently exists inside the company. There is a belief that the current internal system is inadequate. However, the new ideas conflict with the traditional belief systems of many of the employees and even the executive team.

While this is known, management underestimates the challenges that will be faced when people push back and do not want to change. They are unrealistic on how long it will take for people to permanently and consistently change their old belief systems to the new ones that are required to implement the new processes. Most initiatives should take a minimum of 9 to 12 months, and most leadership teams are not patient enough to wait. While they begin to see results, these are leading indicators and sometimes not as large as management had envisioned, or the measurements are in the wrong areas. They fail to recognize the value of the programs and stop too early because of their lack of full commitment to see things through.

Great leaders look for a training organization that will help them properly evaluate and understand the impact of their systems, processes and culture on the results they want. Such an organization helps clients structure a program with measurable results and just don’t design training for its own sake. They focus on training the right people and look to work with clients that are committed to seeing their programs through to the end.

Howard Shore is a business growth expert who works with companies that want to maximize their growth potential by improving strategy, enhancing their knowledge, and improving motivation. To learn more about him or his firm, please contact Howard Shore at [phone link=”true”] or shoreh@activategroupinc.com.

3 Tools for Effective Employee Recruitment

Acquiring talent is a process just like any other in your company. The entire recruitment process is a sometimes long and arduous one, and therefore it is a magnet for shortcuts and rushing. Don’t give into the temptation to save a few hours of time and end up with bad candidates that cost your company thousands in the long run.

Tools You Must Utilize When Recruiting

Every recruitment effort should utilize the following three tools as the first three steps in the process:

1. Job Profile: Completely define the position as the very first step in the recruitment process. Use the job profile to identify and communicate the job description, key performance indicators, accountabilities, detailed reporting structure, internal and external customers, required competencies, critical success factors, and key process ownership.

2. Advertisement: Posting a position is supposed to attract the candidate’s attention over all the others, qualify appropriate candidates, and screen out bad ones. It is important to know where the most success is happening for the type of position and level of person you want to recruit.

3. Assessments: Employee assessment tools are an important component in your overall hiring process because it is an objective rather than subjective measurement tool. While they do not provide you will all the information you need, they do provide you with critical information you cannot get from an interview and can increase your likelihood of making a better decision. By using an objective tool, you can compensate for subjective techniques such as interviewing questions where question and answering can vary greatly and leave a lot of room for variation in opinions, different interpretation, inconsistency in application, and more chances for you to make mistakes in the process.  We have found that proper application of assessment tools can help you:

  • Save a huge amount of time.
  • Level the playing field on resumes.
  • Reduce some human errors.
  • Improve the number of qualified candidates.
  • Increase the quality of candidates that make it to interviewing stage.

Have you tried recruiting without using these three tools? What was the outcome?

Call Howard Shore for a FREE consultation at (877) 692-6211 to see how an executive business coach can help you run a more effective business or become a more effective leader.