Hopefully, Your Firm Doesn’t Claim a Family Culture

Hopefully, Your Firm Doesn’t Claim a Family Culture

I am a strong believer that company culture is critical in its success. It defines who you are, who you attract, and how you behave. As Jim Collins says, the most important thing is “Who is on the Bus.” However, when talking to many clients and business owners, I often hear that they have a “Family” culture within their organization. I am always perplexed by this answer, but it has become a red flag in my book about the possibility of the organization’s performance.

What Does Family Culture Mean?

Drilling down, it would appear that it means that the organization is nurturing like a family. Mentally they envision a Norman Rockwell painting of everyone happy and getting along. However, most family gatherings are not like that. Rather it starts that way and then someone says something that leads to the usual conflicts arising. I know families where they always invite guests to ensure everyone remains on good behavior.

When I hear family, the first thing I think of is “dysfunctional.” Now everyone is pointing out that only my family is dysfunctional; however, we all have thought our spouses/partners’ families were dysfunctional when we met them because they didn’t behave like ours. But it is not just behavior; there is true dysfunction. As a friend reminded me of at my wedding, at every wedding, there is the equivalent of the “Drunk Uncle.” Let’s consider some of the cast of characters that can appear.

  • The matriach/patriach. They rule. All allegiance is to them. They were paramount in the family’s success, so their “rules” are lived to even when no one can remember how or why the rule came into being. I have seen families lose fortunes following such directives because the world had changed, but all that remained was the rule and not the intent.
  • Favored child. There is always one. They often perform way below par and everyone else, but the parents continue to make excuses for them and support them. They are the ones who believe they are owed everything under their “favored” child status.
  • Second Class Child. The one that was ignored as all the attention got lavished on the favored child. They often work harder, produce more, and die for the family’s success; only they are never taken seriously. Often they become bitter and seek the destruction of all.
  • Drunk Uncle. We all know him/her. Embarrasses everyone, totally inappropriate, starts fights, resented by all, yet tolerated because they are family. However, everyone hopes they will not make the next event.
  • Bitter Sibling. Was overlooked in the succession plan, so bitter forever. Points out how the others received everything on a plate, but they received nothing. They ignore the fact that they have lived off the families’ wealth for the entire lives.
  • The Outcast. Unable to fit in went on their own. Has done well, but resented because they had the strength to walk away and is enjoying life.

If we have a “Family” Culture, then we probably have some of these in the organization.

What is the Problem?

Employees leave organizations because they lose respect for their supervisors.  Why? Their supervisor tolerates “B and C” performers. “A” players want to be surrounded by other “A” players. In a high-performing company, if you don’t meet expectations, you are fired. There is no job security other than through performance.

However, we never fire relatives; we can’t. You are always my father, mother, son, daughter, etc. Thus, claiming a family culture, by definition, requires that you will tolerate poor performance. Knowing that there are “B” players on the team who are never going to leave because of the “family” culture will just driveway more “A” players. This is a negative reinforcement cycle that leads you into a future of mediocre performance as an organization.

My father gave shares in his company to his parents and siblings. When my aunt married someone who didn’t reflect my father’s values, she demanded that my father give him a job in the company as she was a shareholder and it was a “family” business. My father fired all his family members and reminded them that he had them sign undated sale agreements back to him when he gave them their shares. He dated them all and became the sole owner. From then on, he would only hire those that could perform.

So What to Do?

If one looks at successful family businesses, I see that they don’t claim a family culture. They emphasize those family values that they care about. They can say that their values are “nurturing and developing” e.g. they are a “pool” company. Or they can say that they train and develop their people to go on to better things, e.g. a “stream” company. In my father’s case, one of his values was caring. When one of his accounting staff’s husband was diagnosed with terminal cancer he sent her home on full pay until the husband had died. He made sure that the bonuses and gifts he gave made it to the employees’ families. When my father died, over three hundred Africans came from the townships in South Africa to pay their respects at his funeral.

Further, I have noticed that high performing family businesses often have rules, like those below, when a family member wants to join the family business they must:

  • Have worked elsewhere before joining.
  • Apply for an open position
  • Have the requisite experience and qualifications,
  • Be interviewed and selected by non-family members.
  • Report to non-family members and stepping over the chain of command to family members higher up can be a termination event.
  • Realize they will be fired for nonperformance. If they are, they are still in the “family,” just not in the company.

So if you want a culture of performance, don’t say you have a family culture. Focus on what part of the “family” culture you want to emphasize and say that.

Copyright (c) 2021, Marc A Borrelli

 

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Reflecting on the current employment environment as we emerge from COVID makes me think of “Being Caught Inside When a Big Set Comes Through.” Why?

For those who don’t understand the analogy, it is something that surfers experience when paddling out when a large set of waves appears. The first wave appears in front of you, and it is a monster. So you put your head down and paddle like crazy to get over it before it crashes on you. You paddle up the face of the beast, hoping to get over the top before it breaks and drags back down “over the falls.” You make it, and you look up to see the next monster, larger than the last, bearing down on you. Tired, you have to paddle harder to make it over that one before you end up in the “impact zone.”

2020 was the first wave that appeared. We all put our collective heads down and paddled hard. We made it over. However, talking to many in early 2021, I don’t think we realized how much effort that had taken. Everyone was tired, many a little depressed. But as we looked up, the next wave was there blocking the entire horizon. That wave is the increase in business activity.

Some of my clients are experiencing more business in Q1 than they did in H1 last year. So we need to paddle hard to make it over this one. However, with everyone tired and depressed from the last one, it is getting harder. Everyone is looking for employees right now, but you are asking more of your employees when they are already working flat out and dealing with the stress until you hire.

The Current Situation

As a result, many are thinking about moving. A new survey reported by Fast Company found that 52% of U.S. workers are considering a job change this year, and 44% have plans in place to move. What is interesting when breaking down the data is that:

  • 59% of those whose annual household income is between $50,000 and $75,000 (the middle-income bracket) were thinking about moving.
  • 76% of those under 30 either looking or open to new opportunities.
  • 48% of six-figure salaried workers were planning their change, and 66% of them are feeling more confident about their decision to change jobs than they did six months ago. 
  • 21% of those surveyed felt there were “better opportunities available to [them] at other companies.”

What I have also seen recently is not only that people are considering leaving, but who. The “Who” here are those centers of influence within the organization. To understand that, look at your “shadow org chart,” which shows employees who have disproportionate levels of impact relative to their hierarchical position. To develop one, ask your employees these three questions:

  1. Who energizes you at work? (list four or more people)
  2. Who do you go to for help and advice? (list four or more people)
  3. Who do you go to when a decision needs to be made? (list four or more people)

If key influencer leaves, then many others may decide that the time to move on has come. One executive told me this week that his concern was that if two of their top influencers left, that would be the beginning of the end.

A recent HBR article suggested asking both the departing employee and the rest of your team questions, listening attentively, and acknowledging their concerns. Focus on goals and reassure your team that they’re still important and achievable, and provide them with educational opportunities to show that you care about their long-term effectiveness.

Regardless, those looking or considering a change are looking for:

  • A stable organization and where they are sure they’re growing and changing within that organization. 
  • More pay. Pay is the main factor that entices employees to look for a new role.
  • Work-life balance is also an essential requirement. 68% of employed workers and 43% of women said that remote work and work-from-home options are “very important,” versus 33% of men. 18% want to have more flexible hours in a new job.
  • Finally, the overall work environment is an essential factor.

However, employees say that the most critical factor that keeps them with their employer is engaging work.

Furthermore, a recent study from Ceridian reports that the cost of onboarding a new employee can range from $2,000 to $4,000, and talent expects a rise of 29% to change roles. I have mentioned before that everyone I know is looking for people. So if a 30% increase is required to change, and 50%+ are looking to move, expect salary and wage costs to increase.

The Challenges

So given the above, the critical challenges for organizations today that want to get over that second wave are:

  • Recruiting.
  • Onboarding.
  • Engagement.
  • Growth path.

Recruiting

I have written before about recruiting and ways to make it better and more of a system. However, I think some of the critical factors to consider right now are:

  • Stand out above the crowd. How do you attract the best talent and not just one of the many looking for a new opportunity? To achieve this, you need to produce job ads that create interest in your organization and the opportunity to attract everyone, not only those considering moving. 
  • Using your employees, customers, and suppliers to help find new talent. These people all know you. They know your culture and values. So they are the best people to refer people to you if you are looking. However, first, you have to tell them what you need. If you have a great job ad, share it with them. Encourage your employees to refer people.
  • Employee testimonials on your website. Again I have mentioned this before, but it still amazes me how few companies have employee testimonials on their website. The first thing a prospect will do is go to your website to find out about your organization. Having no employee testimonials is not a good way to entice them. Worse is only having stock photos of employees other than the leadership team.
  • Ensure your reputation is good. Check Glassdoor and other sites to see what has been said about you. While you cannot always change the negative posts, understand them and be willing to address them in an interview.
  • Interviewing. With many people looking to move and the cost of replacing large, make sure that you are getting the right person. A term I prefer is “auditioning.” As many have said, the key is culture and values. Concerning ability, ensure they can do the job. Given how busy everyone is, it might be harder to defend hiring someone capable but requires training. However, getting the wrong person just because they have the skills is a more expensive proposition in the long run.

Onboarding

Onboarding is more critical than ever, and it is more challenging than ever with COVID. However, now you have to ensure that your new members can absorb your culture and values and know your strategy and expectations.

I have discussed onboarding with many CEOs and find that all are struggling to do it effectively. A few thoughts are:

  • Ensure they know your culture and values, and strategy first. With this knowledge, they can make better decisions that benefit the organization.
  • Ensure they understand what is expected of them and have regular check-ins for the first year to ensure that both of you are on the same track.
  • Understand their objectives and needs. These are both professional and personal, but you can build a plan together to help realize them if you know them. That is not to say the company has to give them more but enabling them to see that they have a path to what they seek will show interest on the organization’s part. Right now, several companies are offering an extra day off a month or large bonuses. Figure out what you can offer to make your employees feel appreciated and not cause trouble in your organization.
  • Make sure they feel welcome. Remember, a majority of people regret the move after the first day! Make sure your new employees don’t. 

Engagement

Keeping all employees engaged is key to keeping them, those that you have and those that you are hiring. That means they need to know:

  • The current situation. Your employees need to know where you are today. Now is time for the truth because they do know, just not necessarily from the leadership team. Telling them everything is okay when they see chaos around them means that the leadership team is out of touch with reality, and now is the time to move on.  
  • Where is the company going? Make sure they know the company’s BHAG and 3HAG. Knowing where you are going provides more energy for the task, and right now, we need everyone to paddle.
  • What is their role? Make sure they know their role in the organization. First, make sure they can answer the following:
  1. What do we do, and where am I in the process? 
  2. How do we make money, and what do I do that helps that? 
  3. How will we succeed?
  4. What is most important right now that my team has to do? 
  5. Who must do what? Accountability and reporting roles and 
  6. How can they help? Seek input from them regularly on how to improve processes and actions to perform better. It is incredible how often employees know a better way, but no one ever asks. However, please don’t ignore their feedback because they will never give it again. If you don’t want to use it, explain why.

Growth Plan

As part of the onboarding, understand what they want in their life. If they wish to grow to a new role in the next X years, help them develop a plan. If they are contented at their current position but want to move flexibility, work on that. Understanding their wants and needs shows interest by the company, and that builds attraction. If they feel you care about them, they will care about you. 

Given all that is happening, this is not the time for the Mushroom Theory of Management!

Finally, given that many people are thinking of leaving, if you can afford it, maybe this is the time to prune some of that deadwood.

Good luck paddling out, and I hope you make it through the set.

 

Copyright (c) 2021 Marc A. Borrelli

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Sunk Costs Are Just That, Sunk!

Working with my Vistage group this week, we had an exciting discussion about “If you were starting your business today, what would you do differently?” This discussion made me think of sunk costs and how they limit us. I have discussed how to make better decisions before, but sunk costs deal with our assumptions.

What are sunk costs? A sunk cost is a payment or investment that has already been made, and it is sunk because it is unrecoverable no matter what. So, it should not be a factor in any decisions from now on.

The Sunk Cost Fallacy

The sunk cost fallacy is when an action is continued because of past decisions (time, money, resources) rather than a rational choice of what will maximize the returns at this present time. The fallacy is that behavior is driven by an expenditure that is not recoupable regardless of future actions.

For example, a company that decides to build a new software platform. They have done their analyses and determined that the future benefit they will receive from the software will outweigh its development cost. They pay for the software and expect to save a specific cash flow level from the software’s production each year. But after a few years, the platform is underperforming, and cash flows are less than expected.

A decision has to be made: should the platform be abandoned or not? At this point, the software’s initial cost is a sunk cost and cannot be recovered. The decision should only be based on the future cash flows—or the future expected benefit—of the platform compared to the value of replacing it today, not the original cost of the software.

However, businesses, organizations, and people often have difficulty abandoning strategies because of the time spent developing them, even if they aren’t the right choice for the company or individual. Therefore, recognizing what a sunk cost is will result in better decisions. 

How sunk costs sabotage us

Here are a few ways, but this list is not exhaustive.

At Work

Bad Pricing

Companies often justify pricing based on their costs. Most commonly, the R&D expenditure to develop the product. Whatever the R&D costs were, they are irrelevant to the pricing. The market will only pay what the product is worth, not what was invested in it. A pharmaceutical company’s attempt to justify high prices because of the need to recoup R&D expenses is fallacious. The company will charge market prices whether R&D had cost one dollar or one million dollars.

Similarly, many businesses price their services on the hours it took to deliver a service. However, the costs of providing the service are sunk, and you cannot recoup them. The market will only pay you what they deem the value of the product or service to be, so using pricing to recoup costs is “backward.” Instead, one should determine the price and then figure out how to deliver the product or service at the profit margin desired.

Consider if a company invested $100,000 to produce a product and planned to sell them at $100 each. However, the day after the product launch, a competitor announces a better competing product at $50. Will anyone pay $100 for an inferior product when the best one is available for $50?

Bad Investments

Sunk costs are why so many investors tend to remain committed or even invest additional capital into a bad investment to make their initial decision seem worthwhile. How many times has an investor tell you, “As soon as X gets back to what I paid, I am selling.” Why?

What they paid is paid. The investor cannot change that; it is a sunk cost. The real question is, “Does X offer higher returns in the future than Y, some other asset I am considering, after transaction costs?” If yes, then stick with it. If no, switch out X for Y. 

Assume you spend $4,000 on a wine tour of Napa. Later on, you find a better wine tour to Bordeau that costs $2,500, and you purchase that trip as well. Later, you realize that the two dates clash and the tickets are non-refundable. Would you attend the $4,000 good wine trip or the $2,500 great wine trip? The $2,500 trip. The $4,000 trip is irrelevant in consideration because it is inferior, and the money is gone.

Bad processes

Returning to my initial question, “If you were starting your business again today, what would you do differently?” Many people will give outstanding examples of what they would do differently but never consider making the change because of the investment they have in their current process. As with assets, if your current process generates a cash flow of $X per year, and switching would generate some cash flow greater than $X after the costs of switching, you should switch.

Misaligned employees

Many companies have employees whom they know are subpar. However, they cannot fire them because they have been employed for a long time or the company has invested some amount in them. This situation is most often seen with those employees who have been with the organization since the beginning. However, the organization has outgrown them. 

Again, the time invested by the company and the employee are sunk costs. The decision is what is the best investment going forward. If a more significant return is achievable with a new employee, then the change is required.

Sunk Costs Exist in Our Personal Lives Too

Feel free not to ski in bad weather.

You may be considered a fair-weather skier, but the cost became sunk when you purchased your ticket. You might feel obligated to stay and stick it out if the ticket was expensive or you have a limited holiday window, but if not skiing in a freezing whiteout makes you happier, do it! Either way, you aren’t getting your money back.

Don’t go to the gym just because you have an annual membership.

While working out may be advantageous to your health, your annual membership shouldn’t dictate whether you go to the gym on any given day. If you have paid up front, then the money is gone. So if you would prefer to take a hike, ride a bike, relax and meditate, you should. However, I am not saying there may be more benefits to working out.

Don’t grow up to be a lawyer.

I chose lawyers because I was this example; however, I decided before I graduated law school that I didn’t want to be a lawyer. Assume you went to law school, passed the bar, started working, and then realized you hate being a lawyer. What should you do? You invested so much time, energy, and money in that degree, so it can’t be worth starting over again with a new career? Unfortunately, time, energy, and money are all sunk costs, so if your end goal is your happiness, you might need to cut your losses and refocus your energies elsewhere. 

With the above examples, next time you face a decision, ignore all the sunk costs; you will make better decisions for your organization and yourself.

Copyright (c) 2021, Marc A. Borrelli

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Clarity is a repeated theme of mine and The Disruption!, whether in regards strategy or how you make money. Listening to Josh Kaufman discuss his “Five Parts of Every Business” and the need to define your business model while presenting this information clearly magnified the point.

 

What Are The “5 Parts of Every Business”?

Kaufman says in every business model there are “5 Parts of Every Business,” each of which flows into the next:

  1. Value Creation: A venture that doesn’t create value for others is a hobby.
  2. Marketing: A venture that doesn’t attract attention is a flop.
  3. Sales: A venture that doesn’t sell the value it creates is a non-profit.
  4. Value Delivery: A venture that doesn’t deliver what it promises is a scam.
  5. Finance: A venture that doesn’t bring in enough money to keep operating will inevitably close.

 

Value Creation

Kaufman defines Value Creation as “Discovering what people need or want, then creating it.”

Most customers don’t know what they need or want. As has been pointed out many times, people wanted a faster horse, not an automobile. However, whatever they want, in reality, they are just seeking a solution to a problem. Therefore, the critical issue is determining “What problem you are trying to solve?” Or, as Clayton Christensen said, “What is the job the customer is hiring you or your product to do?”

Defining this is often hard, as many companies don’t know what job their clients are seeking them or their products to provide. I have discussed this before. However, as the adage says, “people aren’t buying drills, they are buying holes.” This is a vital part of your business model.

So, working with your team to determine “the job to be done” and your “Core Customer” is well worth the effort because you can better describe what you do, and all your employees will better know what you do and how what they do impacts it.

 

Marketing

Kaufman’s definition is “Marketing is defined as attracting attention and building demand for what you have created.”

In today’s digital world, with Google, Facebook, Linked In, and Instagram, marketing separating yourself from the masses is hard, especially if people don’t understand the product and service. Therefore, by focusing on the job to be done or the problem you are solving, it easier to stand out among the crowd.

Also, as you identify what the “job to be done” is, you can better identify your Core Customer. Remember a Core Customer is:

  • An actual person with needs and wants. If you sell B2B your core customer is still a person because you have to convince a person to buy.
  • Who buys for the optimal profit.
  • Who pays on time, is loyal, and refers others.
  • Has a unique online identity and behavior; and
  • A customer who exists amongst your clients today.

Build Direct started as a company supplying contractors. However, it soon realized that while contractors were a key customer component, they were not the company’s Core Customer; instead, Build Direct’s core customers were young female DIYers interested in the products and education. Build Direct focused its marketing according to that recognition and started providing much educational content for young female DIYers. This specific marketing drove much better brand recognition and engagement.

Also, South Shore Furniture in Canada identified their core customer as “Sarah.” Sarah is so vital that there is a mannequin of Sarah in all meeting rooms, so no one forgets whom they are seeking to serve.

Besides, marketing to the correct demographic is easier and more fruitful if you know your Core Customer. Without this information, the marketing section of your business model is just hope, not a strategy!

 

Sales

Kaufman defines sales as “Turning prospective customers into paying customers.”

However, as Jeffrey Gitomer, put it “People don’t like to be sold, but they love to buy.” So the key is how do you move prospects into customers? Businesses have to earn their prospects’ trust and help them understand why it is worth paying for the offer. Another way of looking at this is, “What is your brand promise?”

Companies need to know what their brand promise is. For example, Starbucks is “Love your beverage or let us know and we will always make it right.” Some organizations may have supporting brand promises to prove more definition of the brand promise. Your brand promise must be measurable, because as Peter Drucker said, “What gets measured gets managed.” So if it is measurable and measured, the organization can ensure that it meets its brand promise, which provides more assurance to the prospect. Finally, with a clearly defined brand promise that is measurable, the organization ends up saying “No” more than “Yes” to opportunities and ideas since they will damage the brand promise.

Since no one wants to be taken advantage of, Sales is about educating the prospect to identify what is essential to convince them you can deliver on your promise. A clearly stated brand promise that is measured and quantified increases the ability to persuade the prospect to purchase from you. It amazes me how many business models don’t have a brand promise.

 

Value Delivery

Here Kaufman defines Value Delivery as “Giving your customers what you’ve promised and ensured that they’re satisfied.” With this, I have no issues. Anyone who doesn’t deliver what they promised is effectively a “scam artist.”

To ensure you that make the customer satisfied, you have to exceed the customers’ expectations. A popular way to determine customer satisfaction is through Net Promoter Score scores which we see more and more (if you are looking for help with NPS surveys of your customers, contact me). You want more promoters and detractors. However, the NPS score tells you what the customer thinks after experiencing the service or product. Companies need to develop systems that ensure the service or product is exceeding expectations.

A great example is the Ritz Carlton’s policy whereby any Ritz-Carlton employees can spend up to $2,000 per incident, not per year, to rescue a guest experience. This policy ensures that the customer is getting a great experience because it empowers employees to fix problems and provides the customers’ concerns are solved quickly. As David Marquet says, “Move the decision making to where the information is.” That is what Ritz is doing, and it is empowering employees and making customers happy.

Companies that have outsourced many functions to cut costs, so any customer has difficulty reaching the people they need or have to spend five minutes going through a phone tree to contact some is already failing at this.

Ensure your business model tracks customer satisfaction and you have ways to ensure that customers are happy.

 

Finance

Kaufman defines finance as “Bringing in enough money to keep going and make your effort worthwhile.”

As I have pointed out, this is key, and many people don’t realize the situation because of flawed analysis and lousy modeling. However, the key for any organization must be a well-defined “Profit/X.”

Many organizations don’t have a well-defined Profit/X, but there is a lack of discipline that ensures good financial performance without it. Profit/X is some unit of scale, and profit can be gross profit, net profit, EBTIDA, or EBIT. Examples that I have seen are:

  • profit per airplane
  • profit per job
  • profit per customer
  • gross margin per delivery
  • profit per employee

There is no correct Profit/X, just the one that works with your business. One organization that did deliveries chose Gross Margin/Delivery, which focused on reducing the cost of delivery to maximize profit. Once Profit/X is selected, the entire organization must seek to meet or exceed it; thus, everyone needs to understand it and how they drive it. With that focus and discipline, the organization is more likely to meet its financial goals and objectives.

 

Summary

In summary, the organization needs to be able to define its business model by the following:

  • Define the problem its products or services solve or, more precisely, what job they do.
  • Who their Core Customer is so they can market to them effectively?
  • What is their brand promise, and how is it measured?
  • That their customers are satisfied, returning and recommending.
  • That they have identified their Profit/X so that they are profitable.

Doing this work is an excellent exercise for any leadership team to help bring clarity to your organization. If you need assistance doing it, contact me. Good luck, and may your business grow.

 

 

Copyright (c) 2021, Marc A. Borrelli

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I have mentioned the coming talent crisis and how to hire. However, talking to clients and others, many are seeing a huge uptick in business during the first quarter of Q1, not only compared to Q4 2020 but compared to Q1 2020. As a result, these companies are in a rush to hire to meet this surge in demand. What amazes me is how many are so unprepared.

All business owners know that they and their team need to be selling continuously. As Estée Lauder put it, “I have never worked a day in my life without selling. If I believe in something, I sell it, and I sell it hard.” While many small and midsized companies seek to live up to this statement, they fail to see recruiting through the same lens.

Continual recruiting is key to the survival of a company, and it is not something that is left to chance and a time when you have a position to fill. Doing so often results, to paraphrase Barry Deutsch, “When looking for basketball talent, you get to pick the tallest pigmy.”

All companies need to be continuously recruiting. By that, I don’t mean hiring, but recruiting. It’s building a pipeline of people that you would hire if you needed someone to fill a position, or someone you would hire regardless of the position if they were available.

Recruiting doesn’t just fall on HR and the CEO, but the entire organization. To succeed, as Jim Collins says, you need “The right people in the right seats doing the right things.” Well, where do you get the right people? Here are some suggestions.

Develop your recruiting flywheel

In Good to Great, Jim Collins refers to the Flywheel Effect concept as:

“No matter how dramatic the end result, good-to-great transformations never happen in one fell swoop. In building a great company or social sector enterprise, there is no single defining action, no grand program, no one killer innovation, no solitary lucky break, no miracle moment. Rather, the process resembles relentlessly pushing a giant, heavy flywheel, turn upon turn, building momentum until a point of breakthrough, and beyond.”

I think organizations with great hiring abilities have developed a hiring flywheel where they have a process and pursue the process relentlessly until it operates with its own momentum. At that point, all others look at the organization and wonder how it does it and what is the magical change. There isn’t any, just a continual pushing for the flywheel process.

A Strategic HR person

Many organizations have a Human Resources manager. However, that role is typically a person how manages payroll, benefits, and compliance. They sit “under” Finance and ensure that employees get paid, get their benefits, and are in compliance with a myriad of rules. This role is crucial whether you have internally or outsource it.

However, few companies have a “Strategic” Human Resources person who sits in the “C” Suite. This person needs to ensure that the organization’s resources are aligned with its strategy. As the organization moves through its 13-Week plans and 3HAG, they know when additional talent is going to be needed. Hence, they are ahead of the curve, ensure that the requisite talent is hired, assimilated into the culture, and onboarded in time for their needs.

Backfilling as fast as you can when in growth mode is difficult, as everyone in the company is too stretched thin. New employee hiring decisions are often made with the thought process, “Let’s just hire someone to fill this need; if it doesn’t work out, we can get someone else.” Such a process is time-wasting and very expensive. Also, new employees are thrown into the tumult without proper onboarding, an understanding of what is expected, and an understanding of the culture. They’re thrown in because the organization needs bodies, and this can all be done later. Still, it never is, and the good employees leave.

Talent folder

Everyone on the Leadership Team must have a Talent folder. It should contain the names of anyone they have met that they believe would be a great addition to the team. They need to follow these people on LinkedIn and make sure they know where they are, what they are doing, and most importantly, keep in touch. When a position in the organization opens up, that member of the leadership team can reach out to them to see if they would be interested in joining the company. The leadership team should review their collective talent folders in each quarterly meeting. They look at the next 13-Week Sprint and the resource limitations they face, either through insufficient resources or talent.

Ask Employees for Referrals

All industries are incestuous; everyone knows people in the industry in similar roles because they all attend the same conferences, often previously worked for the same companies, or did some training together. It must be part of your culture to get your employees to nominate great people they meet as potential hires. By emphasizing behaviors and culture, your employees will know what types of people would fit. There is no better recruiting tool than a very happy and excited employee working to attract you to their firm. These people should be vetted and added to someone’s Talent Folder. If an employee nomination is hired, reward your employee. However, it is best if they are not involved in the hiring process beyond the nomination, and the nominees have to remain for a period of time.

Ask Customers and Suppliers for Talent

Your customers and suppliers know you, your company, your vision, and your culture. Ask them for people that they think would be a good fit. Especially if there is a position that you want to fill, and they know more specifically what you are looking for. If they like working with you and believe in what you stand for, they are far more likely to refer someone to you than if the opposite is true. However, this requires a great relationship with your customers and supplies. You don’t just want to ask when you need someone, but you need to make it reciprocal as well.

Check your reputation on GlassDoor

It might be easy to dismiss negative statements from unhappy employees; however, like client reviews, statements on GlassDoor matter. All prospective employees now look at GlassDoor to see how you rank and what people say about you. If there are negative statements that make the organization look bad, you can expect many “A” players to wonder if it is worth applying for your position or moving on to an organization with a better reputation. You can expect questions from GlassDoor statements to be raised in interviews, at least from “A” players. Thus, it is in your interest to ensure that you work to maintain a good profile like you would from your clients.

Have Employee Testimonials on Your Website

Most organizations have a link on their website about job openings or career inquiries. However, few have employee testimonials that reinforce the company’s culture, commitment to its employees, and great stories of how it has helped its employees achieve their goals. These testimonials can do more to recruit people who are aligned with the organization than some CEO/owner statement as it shows how the organization is “Walking the Talk.”

Good luck developing your flywheel and attracting the talent you need. If you need help, reach out, we are here to help our clients succeed.

 

Copyright © 2021, Marc A. Borrelli

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Regardless, the stress is coming at us from all sides. I recommended that my clients spend time talking to their direct reports, employees, clients, and suppliers and asking how they are doing. Not just asking, but actively listening to hear what is going on in their lives. Things like this make a difference.

Besides, a repetitive theme is “Clarity,” e.g., what is your strategy in a single sentence. However, regardless of our intentions, the corporate playbooks come out periodically, messing everything up. I have recently heard companies ignoring such advice and reverting to keeping all information secret and locked up.

Now I am not talking about profits or trade secrets, but rather things like strategy, brand promise, employee development, and bonus calculations. This lack of clarity causes confusion and more stress. However, it is also giving rise to another issue, the loss of “A” employees.

My recent blog on the coming talent crunch pointed out a shortage of “A” players. As see from my clients and others, as we are starting to emerge from COVID, demand is increasing. Many are scrambling to fill positions to meet that demand. As a result, for “A” players, the call is out that you are needed, and the market will reward you!

If your organization is focused on obscurity over clarity, whether intentionally or not, your “A” players are vulnerable. It reminds me of my many years in M&A when a selling owner or CEO would concoct stories to cover the buyers’ due diligence. In every case, the “A” players would realize what was going on. In the best cases, they would be in the CEO’s office that same day asking, “Are we being sold?” However, in the worst cases, they would start the discussions around the proverbial water cooler. Nature abhors a vacuum, and it never ceases to amaze me the stories that people can come up with when they don’t know what is happening. Regardless, the net effect of uncertainty with the future leads all your “A” players to get their resumes out and start looking. Only the “C” players stay because they have no options.

Regardless of how your business is doing right now, you need your “A” players to survive and thrive. If you are left with your “C” players, you might as well start looking for a buyer or considering some other form of exit.

So, consider your “A” players. They need to know the strategy, brand promise, and core purpose of the organization, their career development and options, and their expected compensation and how it is calculated. Why?

Strategy

If they don’t know the strategy, they cannot execute it. As David Marquet put it in, Turn the Ship Around, “Push the decision making to where the information is.” The information is at the front lines, not in the board room. The more your employees know about the strategy and the clearer it is, they can make the correct decisions as market conditions change. And market conditions are changing rapidly at the moment.

Core Values and Brand Promise

COVID has brought home how precarious life is. So, people during this time of lockdowns and death are questioning the meaning in their lives. They are now looking at the organizations that employ them and asking if their values align. A recent Harvard Business Review article put it that Core Values are no longer a nice thing to have but a core part of the strategy. So, if you cannot articulate your core values and brand promise clearly to your employees, they will determine it on their own, and it may be very different from what you proclaim. Self-determined values are based on the behaviors they see rather than what is claimed. In that case, you may lose those employees who would support the values and brand promise you aspire to rather than what you live.

Career Development

As mentioned above, COVID has brought home fragility. Many are questioning if they want to do “X” for the rest of the career. Thus, a vital part of any employee review at this time is understanding what they seek for their future. It may no longer be promotion and leadership, but more time with family or new experiences in other divisions or markets. Understanding your employees’ desires and working with them to realize their desires while meeting the organization’s needs is more likely to retain them than ignoring them.

Their compensation and its calculation

Your “A” employees are getting calls from headhunters and recruiters because there is a talent crunch. If not, they soon will be. While the vast majority of employees don’t leave because of compensation, as a result of COVID, many bonuses or pay raises were deferred, changed, or ignored. Many organizations face cash flow issues and are in no position to provide employee bonuses or raises but explaining that is key. Others thrived during COVID, and many of their employees have stepped up well above expectations.

In some cases, those employees don’t understand how their financial rewards correlate to their efforts and believe they were short-changed. Those employees are more likely to take a headhunters’ call. Therefore, explaining the situation, explaining the policies, pay, and bonuses are calculations will help dramatically.

With greater clarity, you will more likely realize your strategy and keep your “A” players, enabling you to thrive. Obfuscation will only lead to tears.

 

Copyright (c) 2021, Marc A. Borrelli

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