The biggest problem in organizations today isn’t “what” they need to do, it’s “who” do I hire to do it, which makes hiring one of the most important business functions of your business. According to studies made by ghSMART, the average hiring mistake will cost you about 15x the base salary of the employee, yet the average success rate of hiring a new manager is only 50%!
Every business owner today is painstakingly all too aware of this issue. The Economist published in Oct 2006 that “the search for talent is the single biggest problem in business today”, and it’s not getting any easier with our ever-dropping unemployment rate. In Oct 2017, the Bureau of Labor Statistics measured the unemployment rate rate at 4.1% down from 10% in 2010! That means that every talented worker who wants a job can find a job pretty easily.
So if great labor is hard to come by how do we fix this massive issue in business? Steve Kerr, the legendary management expert says, “people unfamiliar with the great hiring process methods consider it a black art”. It probably makes a lot more sense to you why there’s only a 50% success rate in hiring—the people running the show are leaving it up to their best guess to make the final decision.
Luckily there have been a few savvy businessmen that have figured this out for you. Randy Street and Geoff Smart in their book “Who” outline the 4-Step process that they derived from over 1300 hours of interviews with hundreds of top CEOs including 80 celebrity business leaders and 20 billionaires. This process has been tried and tested and the result isn’t a 50% success rate, but rather an astounding 90% success rate!
They developed this 4-Step Process by first starting to identify the real issues in the hiring process. It turns out that the top mistakes that managers are making today are:
They aren’t clear about what is needed in a job.
They have weak flow of good candidates.
They do not trust their ability to pick out the right candidate from a group of similar looking candidates, and
They lose candidates that they really want to join their team.
The four step process that they later developed is centered around avoiding these mistakes. Follow them exactly as instructed and you will drop your failure rate by 5x from 50% to a mere 10%. This diligent process may seem time consuming but it will save you much more valuable time and money down the road.
Step 1: Make a Scorecard
In order to first clarify what is needed in a job, you should take the time to create a "Hiring Scorecard”. This scorecard should include three things:
Mission Statement - Write two to three sentences describing the core purpose of the hire. Be specific and concise. Don’t use a bunch of jargon that sounds great but means nothing, and use metrics whenever possible. Be as crystal clear as possible about what the role of this person is, it will help you avoid the trap of hiring the “all around athlete” that has a super impressive resume, but is only mediocre at the task at hand.
Target Outcomes - Outline three to four primary objectives you want this new hire to achieve. Present these goals as outcomes rather than activities so that you scare off any candidates that aren’t actually capable of doing the job. Everyone thinks they can manage a social media page because they know how to post to Facebook, but do they know what it takes to steadily grow a Facebook Page from 0 to 20,000 likes in six months?
List of Competencies - Create a list of the skills, characteristics, and values that you want your A-Player to have. You should include competencies that are common among all A-Players, values for cultural fit, and specific skills for the job at hand. Create this list with checkboxes next to each competency so that you can check them off as they prove that they meet each requirement. See our scorecard template for an exhaustive list of all the competencies you may need to include on your scorecard.
Step 2: Source Great Candidates
The second big hiring mistake is not having a large enough pool of qualified candidates to pick from. Most hiring managers start recruiting once a job opens up, but the better way to go about this is to create a consistent stream of applicants ahead of time.
The best CEOs are making 10 calls a week on possible candidates to start building relationships with them ahead of time. By constantly building your network, you will already have a large pool of candidates to pick from when the time comes to hire somebody.
Likewise, when you make a job posting, create the post in advance and keep it up there perpetually. By leaving a job posting up, you will have a large pool of candidates to pick from when it’s time to hire.
Step 3: Interview & Select
Your interview process should be streamlined into four steps so that you can quickly breeze through all the candidates and then have deeper conversations with those who make it through the screening process.
Screening Interview - Eliminate all B and C players as fast as you can. Spend no more than 20 minutes per phone call. Ask questions about their career goals, strengths, and weaknesses. You should be weeding out 80-90% of candidates in this step.
The Who Interview - Allot 90 minutes to three hours with each candidate and ask them to walk you through their professional history in chronological order. Have them start with a brief background of their education, but make sure to allow plenty of time at the end for them to talk about their most recent and relevant jobs. Ask them to tell you about their top accomplishments and low points at each job and why they left. Eliminate all candidates with major red flags.
The Focus Interview - Spend another 90 minutes to three hours ensuring the candidate has the competencies and skills required to achieve the outcomes listed on the scorecard. Make this a tandem interview with another colleague that is well qualified to ask questions related to the skills being analyzed.
The Reference Check - Finally, ask the candidate for names and phone numbers of their three most recent bosses, two peers, and two subordinates. Confirm with the references that everything the candidate has told you is true and listen for genuine excitement about their relationship with the candidate. Dull, unexcited responses are red flags because it could mean the reference is holding back harmful information to avoid a lawsuit.
Step 4: Sell, sell, sell
One of the hardest parts about getting A-Players to join your team is that everybody wants them. As an entrepreneur it’s even harder because you won’t be able to offer the same level of compensation as your competitors, but there are a lot of attractive qualities to joining a start up—leverage these pros as much as possible.
Remember, all A-Players who want a job already have a job, which means that you’re going to have to steal A-Players from other companies, or rather sell them on joining your company instead of staying in their current role. One of the most attractive offers that you can leverage as an entrepreneur is that they will have a blank canvas to paint on. They will get to build processes and make decisions that will launch to company forward. It's very attractive for an A-Player to be able to take the skills that they’ve learned in a corporate environment and roll those out as a top leader of a new company.
Additionally, equity or profit sharing in a company could be a very attractive bonus to their baseline compensation. Autonomy and a seat on the board may also make them feel like their work is more meaningful than working in a large corporation. Sell them hard or else they will slip through your fingers at the last step of the process.
If you’re still having trouble with your hiring process, download our toolkit on Hiring A-Players.