For the last several years, it has been very tough for Scaling Up businesses to fill critical open positions. It’s a complaint I hear often from CEOs. Like the tight residential real estate market, this tight labor landscape is a “seller’s market,” creating opportunities for B Players to overprice their services.
However, just as if you were building your own home to get exactly the space you need, investing some time up front architecting your search can help you recruit just the right addition for your team. If you are willing to invest time strategizing, working smarter, and performing some employee onboarding and development actions, you can still find stellar A Player and A Potential talent who will give you excellent value for your money. In order to guarantee your success, here are 5 critical steps I have garnered from over 14 years as an executive coach and recruiter.
1. Do your homework: Know who you are looking for.
The classic adage “measure twice and cut once” rings true here. Too often, hiring managers have not invested the requisite time to understand and craft a job specification. I encourage my clients to move far beyond the usual mundane (and frankly low value) job description and instead craft a robust A Player Agreement™ that delineates the specific skills, activity levels, and results candidates would need to perform in the role. I also advise them to go one step further and create a search intake form hiring managers must think through and complete that specifies the attributes desired in ideal candidates for the position, and where they can be sourced from.
As it is often said, the person who aims at nothing hits it with amazing accuracy. If your team is not filling critical open posts in a reasonable time, odds are they have not done the critical prep work needed to find great people.
2. Actively hunt for passive candidates: Rely on recruiters and talent acquisition managers rather than HR.
Your run-of-the-mill HR manager is usually not truly passionate about recruiting the best team money can buy. They may talk a good game about talent, but the truth is most are passionate about compliance work rather than the accountability and heavy lifting of actively hunting for passive candidates using big data tools. Their focus on keeping you compliant with the “minimally acceptable standard” candidates yields just that. Does the phrase “good enough for government work” sound familiar?
Most HR managers are lazy and inept at identifying true talent. Hence, they use passive tools like Indeed to find candidates. Indeed sucks! If you want to find average to below-average B and C Player candidates and sift through hundreds of unqualified resumes, use Indeed. Besides being a colossal waste of money, Indeed attracts B and C players who are malcontents at their current jobs. Guess what you will get when they join you?
If you want to improve both your talent acquisition and retention, then pivot from HR to HCM (human capital management). HCM professionals adopt more of an outside-in approach and function more like a general manager of a pro sports team, actively recruiting outside talent as well as focusing on coaching up the existing talent to build the best team money can buy. They use active big-data recruiting tools to find and reach out to well-adjusted A Players who are happy in their current roles. A great HCM manager can spot this talent. Present candidates with a better position, culture, and compensation and these A Players will want to join your team.
3. Hire A Potential, not B Players.
One common mistake companies make is to hire B Players instead of A Players or A Potentials. A core reason for this mistake is you get enamored by candidates from prestigious, larger companies in your industry. You assume just because these industry-leading companies hired someone, they are good. However, this assumption is flawed for at least three reasons:
- Bigger companies offer plenty of room for B and C Players to hide. Oftentimes, these candidates are happy to claim the results of their colleagues or of a larger team as their own when their individual contributions are actually minuscule.
- Candidates at larger companies also typically have much bigger support systems around them. As such, these candidates tend to be needy and not self-sufficient. When they onboard at a smaller, self-reliant firm, they typically expect a lot of additional headcount or third-party agency support around them to produce results. We recommend hiring candidates from smaller, mid-market Scale Ups who can generate results on their own.
- Similar to the point above, candidates from bigger firms usually have outsized salaries and titles while the scope of their jobs and results are often paradoxically smaller. Oftentimes these candidates are more removed from the market. As I write this, we are looking for a director of sales for a Scaling Up client. I just wrapped up a call with a selling manager at a smaller firm who is much more affordable yet more effective than candidates from larger firms with almost twice the base compensation. Go find these diamonds in the rough!
Instead of being enamored with candidates from the brand name companies in your industry, look for adjacent industries that can provide A Potential candidates. A Potential candidates are defined as candidates who are either the next level down in title or from an industry that you view as perhaps having less sophistication or prestige than your own. These rising stars have excellent results at their pay grades, and with a little bit of development from a formalized onboarding plan, they can provide you exceptional value. My clients routinely get a value dividend from candidates that they hire at say $80,000 and subsequently train and promote to a $100,000 position when the market value of outside candidates (who aren’t even qualified for the position due to lack of skills and results) is $120,000. Obviously, this situation is a win for both the A Potential candidate and the company. It’s the arbitrage a company with a successful human capital management strategy can muster.
To execute this strategy, oftentimes we create new-to-the-world roles and titles to differentiate our offering and train for what we need (as in the HCM vs HR manager example). Perfect candidates for the role usually say something like, “I never knew this position existed,” because it didn’t! These unique roles and titles also serve to protect your A Players that you developed from other recruiters’ searches.
4. Move quickly and deliberately.
This point is so basic you may be tempted to think it does not apply to you and blow over it. However, in my experience, most companies I start working with (and fortunately their competition) do not move quickly enough or follow a sufficiently well-defined interview process to secure quality A Player candidates. In fact, this go-fast-to-go-slow ethos is so prevalent in business that it reminds me of the classic saying, “You don’t need to be faster than the bear, just faster than your buddy.”
Too often, a company’s hiring process is filled with interviews and bottlenecks that don’t involve the decision-maker. Cut all of those out and put fewer, better candidates directly in front of hiring managers, not flunkies. We ask all of our clients to commit to an eight-working-hour response time on candidates. When you get back to candidates this quickly, you blow them away. You immediately differentiate your company as one that cares about talent. In fact, one COO at a client’s company recently remarked, “It’s that easy!” A manager who is screaming at you for talent because they are understaffed can’t be too busy to conduct a quick 20–30 minute resume screening call with a candidate. If they don’t care enough about talent to talk to qualified candidates, you have the wrong manager.
In this respect, successful recruiting today is much more like dating than resume screening. Do you want two great dates from trusted sources or 20 medicare ones from a creepy dating site? Using big data, look for qualified prospects in target-rich environments or referrals from employees or friends, and go on a couple of quick dates with defined follow-up and next steps. Then use a robust interview system like Topgrading and reference checks to get it right when things get serious!
CEOs and executives bristle and make every excuse in the book not to follow a defined system like I just outlined above, but then will inevitably burn more time revising the job specifications and getting back to candidates than if they had invested the time later in the process when it really mattered—like a deep-dive, Topgrading behavior-based interview and critical reference checks.
5. Make a winning offer candidates don’t have to think too long and hard about.
Companies can go through a lot of effort to find and vet candidates only to end up losing them to weak or poorly researched competitor offers. Often this is a result of not doing your homework, as was highlighted in the first point. You have to know what skill sets you are truly looking for and the relative market value of those skills.
For example, we recently hired a human capital manager (HCM) for a client. We knew that the candidate’s knowledge of outside recruiting was essential for them to deeply understand both external acquisition and the internal development of people. Most companies would have recruited for a garden-variety HR manager here and would have massively overpaid for lackluster results. This is because, as I mentioned, most HR managers are passionate about compliance, not the nitty-gritty work of developing and coaching people. So our winning strategy was to find a talent acquisition specialist for the HCM role (think A Potential) where we found more performance at a fraction of the cost of an HR manager.
To ensure we landed the candidate our client was thrilled about, we made an attractive offer that was over 10% higher than their current salary with a lucrative signing bonus. This offer was also accompanied by a robust A Player Agreement, which outlined the challenging growth aspects of this role. The candidate accepted the offer immediately upon receipt, saying the decision was a “no-brainer.”
Our rule of thumb for clients is to make a compelling offer of at least 10% higher than the candidate is currently making. I’ve run across companies who think they are special enough that people will want to work for them for less than they are making now. Quite candidly, they are delusional and we refuse to coach them or recruit for them. If you recruit correctly, you will never look back negatively on a classy, sporty offer to an A Player or A Potential. Also, get creative with your offers. Things like signing bonuses, unlimited vacation, quarterly bonuses, and learning stipends go a long way when attracting these super candidates who take a longer-term view of their careers. In fact, Verne Harnish’s incredibly useful book Scaling Up Compensation has a wealth of ideas to help you look at the compensation you offer creatively and strategically.
Many companies miss on making a compelling offer because they don’t have all of the facts. They might be scared by some of the new salary history ban legislation in states like Massachusetts, New York, and California, and in some cities like Cincinnati. This legislation is well-intentioned to address potential gender and racial pay gaps, but because it was created by bureaucrats who never hired anyone in their life, it does not work for several practical reasons.
Firstly, companies are not going to knowingly overpay for talent. Overpaying for talent is a bad business practice; for example, there is no need to pay $110,000 to a candidate currently making $80,000. There are most likely plenty of candidates at a more reasonable step-up salary from $80,000. Also, it is far worse for the candidate who negotiates too high of a salary to lose their job in three months for not meeting the expectations of the higher-salaried position than to start more reasonably and get promoted as they perform. Pay chases performance; performance does not chase pay.
Secondly, no two candidates are the same. They each have unique skills, results, and compensation. Pay is a relative function—you should expect higher results and skills from a more expensive candidate than a more affordable one.
Thirdly, salary is relative to the individual. Each candidate is going to accept a better offer relative to their current pay. For example, most candidates making $80,000 will jump at $88,000 as an excellent deal to propel their careers forward. And if they are truly an A Player, we’ll promote them as soon as they max out their A Player Agreement.
That said, in markets where you can ask for a candidate’s salary history, you should definitely do so as well as ask for their salary expectations for the new role. Despite what the governments in those locales with salary history bans say, salary is an excellent indicator of an employee’s value and therefore is a critical variable in making an offer that is a win-win for both the employer and the candidate. Understanding the gap between a candidate’s current salary and their expectations is also an excellent data point to understand. Asking about the gap between where they are currently and where they hope to be will expose their beliefs about money, expectations, and potential entitlements.
Our clients intentionally create very broad pay scales. In some cases, the top of the range is twice the value of the bottom of the range—say $75,000–150,000 for a marketing manager. This is a best practice espoused in Scaling Up Compensation. With remote work bringing the world closer than ever before, you will see a wide range of salaries between markets. A broad pay scale gives you the flexibility to compete while also growing the candidate once they are employed. Also, with wide bans, you may see some more junior people at the lower end of the band with a much higher results to pay ratio which equates to much better value for you. Aligned with this, often these junior candidates are more hands on, which suits the lean staffing model of Scale Ups better as they bring capabilities in house.
Also, as a side benefit of broad pay scales, in markets where you cannot legally ask for a candidate’s salary history; the candidate will typically ask you for the salary range and then immediately volunteer where they will need to be within that range. When a candidate volunteers their salary expectations, you remain compliant with the new laws.
You can still secure great talent (if you’re committed to it).
Following these straightforward steps will ensure you are finding, recruiting, and onboarding both A Players and A Potentials in even the tightest of labor markets. As the CEO, align on these principles with your talent and operating managers and hold them accountable for following the process and achieving results.
If you and your team are not getting the talent you deserve, schedule a coaching session with me and we can build a plan to get you better people!