April 15, 2021
TPL Insights: Building Peak-Performance Cultures #63 – How Disciplined Hiring Promotes Cultures of Peak Performance
With paraphrased content from Peter Cappelli
While at lunch with a commercial contractor with 1,200 employees, he asked: How am I going to hire for the growth projected in my market when I can’t keep my mid-level workers? While my good friend is in the construction space, he is hardly unique. We hear the same thing from CEOs and CHROs in healthcare, logistics, financial services, technology, retail, manufacturing, private equity and nonprofit. Peter Cappelli, Professor of Management at the Wharton School and Director of its Center for Human Resources wrote an article published in a recent Harvard Business Review entitled Your Approach is All Wrong. Peter says the business-as-usual approach won’t work anymore. My contention is that it really never has.
Peter says: Businesses have never done as much hiring as they do today. They’ve never spent as much money doing it. And they’ve never done a worse job of it. He goes on to say that since World War II, human resources professionals have analyzed jobs and written position descriptions describing what a particular person should have, after which openings are posted, and people apply. The screening process often includes skills tests, reference checks, personality and IQ tests and interviews. Companies are spending record dollars on new technology, much of which is throwing good money after bad.
Many U.S. companies—about 40%, have outsourced much if not all of the hiring process to “recruitment process outsourcers,” which in turn often use subcontractors, typically in India and the Philippines. At companies that still do their own recruitment and hiring, managers trying to fill open positions are largely left to figure out what the jobs require and what the ads should say. When applications come—always electronically—applicant-tracking software sifts through them for key words that the hiring managers want to see. Then the process moves into the Wild West, where a new industry of vendors offer an astonishing array of smart-sounding tools that claim to predict who will be a good hire.
The big problem with all these new practices is that we don’t know whether they actually produce satisfactory hires. Only about a third of U.S. companies report that they monitor whether their hiring practices lead to good employees; few of them do so carefully, and only a minority even track cost per hire and time to hire. A different approach for dealing with retention (which seems creepy to some) is to try to determine who is interested in leaving and then intervene. Vendors like Jobvite comb social media and public sites for clues, such as LinkedIn profile updates. Measuring “flight risk” is one of the most common goals of companies that do their own sophisticated HR analytics.
Hiring and retaining talent remains the number one concern of CEOs in the most recent Conference Board Annual Survey: it’s also the top concern of the entire executive suite. PwC’s 2019 CEO survey reports that chief executives view the unavailability of talent and skills as the biggest threat to their businesses. While hiring for growth is important, the root cause of most hiring is drastically poor retention. The root causes of poor retention and excessive turnover are poor hiring practices and ineffective cultures. Today’s approach must be radically different. Census data shows, for example, that the majority of people who took a new job last year weren’t searching for one: Somebody came and got them.
As much as I search for validated research and real-world data around great hiring practices, I struggle to find it in one place, succinctly packaged in a manner that can be readily applied. Great hiring and retention begins and ends with culture. Based on 2020 research, there are specific attributes A Players are enjoying now, which cause them to be fully engaged and excited about their current role, and therefore not willing to look at another opportunity. These attributes, to the extent they exist in your organization, will enable you to attract and retain A Players:
- Great Culture
- Meaningful, Challenging Work that Makes a Difference
- Great reputation
- Great Place to Work: Fun, interesting
- Great Leadership
- Being a part of a great organization
- Having a voice and making a difference
- Compensation (Not just cash)
- Learning and development opportunities
My apologies in advance for not presenting an easy solution. There is a solution, and it’s very doable, but it’s not easy. Great hiring, like great culture cannot be delegated to human resources, or even to the Chief People Officer. A peak performance culture, which in my view is the only sustainable competitive advantage, is everyone’s job and it has to start at the top. At the top of every organization we’ve examined, that outperforms its competition by a wide margin, sits a CEO and a unified leadership team with a relentless commitment to culture and the principles and processes that support it.
At organizations like QuikTrip, where 100 people apply for every position filled, the employee funnel overflows. Because the culture at QT is so well defined, and their purpose, to provide opportunities for employees to grow and succeed, is so crystal clear, people who want to be a part of QT’s recipe for success flock to apply. Chet Cadieux, who spends one third of his time interacting directly with his workforce, is intimately involved in crafting the hiring process and nurturing a culture which has been a work in progress since September 25, 1958. At Jones & Carter, founded in 1976 and led by CEO Bob Aylward since January 1, 2015, there now exists a great culture and a list of engineers waiting to join the team, where a repressive culture, a massive number of open positions and tremendous mid-level turnover existed six years ago. At Southwest Airlines, where Herb Kelleher and Gary Kelly have driven a purpose driven and fulfilling employee experience, workforce turnover is the lowest in the industry and they’re well known for having fun while serving a very loyal customer base.
Companies of this ilk are very rigid about hiring for culture and performance. They know precisely what kinds of behaviors are needed to achieve their purpose, live their values, and achieve their mission. As Howard Behar, former President of Starbucks says, this is a binary determination. People fit or they don’t. Just because they don’t fit at one company doesn’t mean they won’t be superstars at another. The behavior revered in one company gets you fired in another. Organizations that are outstanding at for-purpose hiring are far less rigid about the “haves”. Unless they’re hiring for a highly technical position, they care less about specific degrees, industry experience and other background imperfections. In peak performing organizations, you’ll find exceptional leadership focused on hiring for cultural fit and specific performance, not a list of “haves”, which may or may not matter.
The purpose of this blog is to share what we’re learning about building cultures of peak performance. In future posts, we’ll dig further into how leaders who have undergone reinvention are building companies that dominate their sectors. These are organizations that practice the nine principles we’ve observed in organizations that outperform their peers: Unified Leadership, Disciplined Hiring, Leading with Purpose, Stakeholder Engagement, Cost Leadership, Measuring Everything that Matters, Customer Experience, Clarity in Everything, and Staying Ahead of the Curve. If you’d like to talk about how we can help your organization, or if you’d like a thought partner, please give us a call.
Consultants in Retained Search & Leadership Advisory