Financial markets are in turmoil and the credit crisis is creating economic havoc. Credit has tightened to the point that even good companies are finding it nearly impossible to get the necessary credit to run their day-to-day business. While this scenario is playing out in the capital markets a similar crisis is developing in human capital markets.

Talent more crucial than ever

Cash may be king, but when it comes to human capital - talent is king. And in bad times, talent is even more important. Talent has become the key differentiator between success and failure.  Ultimately, companies without sufficient talent will fail.

Yet companies looking to fill key leadership positions are finding it ever more difficult to locate and attract serious talent. This is a systemic problem that has developed over decades. Without an immediate, concerted effort to remedy this situation, many companies will find it impossible to attract the necessary talent and will fall into downward cycle to a place called “mediocrity.”  Once there, companies will be in a constant battle to just hang on.  Victims of a profound talent squeeze. The only cure for individual companies is an intense focus on talent acquisition, talent development, and talent retention. And it must begin now!

Demand is up, supply is down, it’s that simple

The need for talent has grown dramatically as the global economy has expanded. But little has been done to replenish or grow the talent pool. In some industries and job functions the talent pool has been diluted to the point of crisis. And this situation will only get worse. Just one example is the lack of sufficient, talented, aviation and aerospace engineers. Across the board, companies are finding it difficult to fill key engineering leadership positions.

It’s gotten to the point where a decreasing number of talented engineering executives are simply being shuffled around, while nothing is being done to rectify the lack of engineering management talent. Recently Airbus announced it finds itself unable (shockingly!) to find sufficient qualified engineers and engineering managers within the EU and that it is engaging in a global effort to recruit talent from around the world.

What happened?

Talent dilution! And talent dilution coincided directly with advancements in transportation and telecommunications that made executives extremely mobile.  In 1959 when the first passenger “jet” aircraft took to the air in North America, the executive search business was a tiny cottage industry. Twenty years later when over 2,400 jet passenger aircraft were flying over North America, the search business had turned into a billion dollar industry.  Twenty five years later, with 3,500 jet aircraft flying in the skies, the executive search industry had grown to over $7 billion in annual revenue.

Connect the dots

As it became easier and easier to poach talented executives, companies became weary of needlessly training talent for fear of losing them to competitors. In the spirit of “if you can’t beat them, join them” many companies began cutting their investment in talent development and over time, relied more and more on external recruiting to fill leadership roles.

This trend was only exacerbated when corporations began aggressively cutting extraneous costs. Let’s face it, costs that aren’t directly enhancing profits inevitably become expendable.

Even companies that rarely use executive search began slashing development budgets, thus putting their companies in a precarious situation. It’s just not sustainable to rely almost entirely on internal promotions while simultaneously cutting development efforts. Over time, fewer and fewer positions are filled with real talent. Instead positions are filled with long time, well connected bureaucrats relying exclusively on their relationships rather than their talent.

For companies that do rely heavily on external recruiting and no longer produce talent in-house means these companies have willingly sacrificed their self-reliance.

While the shift to external recruiting has worked reasonably well for several decades; today the need for talent outstrips supply. Without replenishing the talent pool, there just aren’t enough talented executives to go around. And companies need to adapt.

Act now!

Companies are gambling with their future if they do not act. There are a number of things companies must start doing now:

1. Shore up the talent. Good enough just isn’t anymore. And companies cannot rely on the open market indefinitely to recruit talent. So get the talent you can, while you can.
2. Make mentoring and coaching skills a key requirement for all executive hires. These are unique skills that not all of us possess. Great executives with mentoring skills will help grow and groom other talented executives. This is only possible if a serious focus is placed on such competencies during the recruitment phase. Unfortunately, when talented executives without mentoring skills leave, companies are typically forced to go outside for replacements because nobody was groomed to take over. This is a travesty.
3. Adjust to the rising cost of talent. The cost of talent today is a bargain compared to what it will cost when talent becomes even more scarce.  The market determines the rate for talent, not a company’s internal salary scale.  Companies need to refocus their compensation parameters from a simple cost consideration to a value consideration. Get comfortable paying people commensurate to the value they provide the company.
4. Start investing more time, effort, and money on internal development.  Just putting a high-level priority on grooming talent can create a fundamental shift in the amount of time and effort spent on such activities. And recruiting and elevating natural mentors is a very efficient way to grow talent.
5. Talent retention is imperative. Everyone knows that it’s much easier to hold on to an existing customer, than it is to gain a new customer. So too with talent.  Acquiring new talent is much more difficult.  So work hard to keep talented executives motivated, challenged, well compensated, with a real opportunity for advancement.

Recently we were asked to conduct a secret search for a position that was currently occupied by an incumbent who had no idea he was about to be replaced. We declined.

Dealing with a hire before you fire situation is very touchy. My advice is to be extremely wary of using such an approach and to restrict its use to only the most extraordinary circumstances.

The simple truth is that a “hire before you fire” approach hurts companies more than it helps. Not only does it send a poor message to candidates, it sends a horrible message to current employees.

Your conduct is symbolic of who you are

How a company conducts a search for new employees creates a snapshot of the kind of company it is. Is it an open, honest, ethical environment? Is it a company people can respect? These questions are answered in part by the way you conduct your search.

The real question you need to ask is what kind of company are we? And what kind of company do we want to be? This should guide your actions. Even though a crucial employee may decide to leave prematurely if they learn they are going to be replaced, it’s the honorable thing to share this information. Of course, making contingency plans in case that employee does bolt prematurely is part of what good companies do. But attempting to actively go on the open market and fill the position in advance is another thing altogether.

Searches cloaked in secrecy create unintended consequences

Companies that engage in hire before you fire searches are usually oblivious of the unintended consequences. Secret searches are often difficult. Primarily because confidentiality is paramount. Often recruiters may not divulge essential information to candidates such as the company name, location, or other crucial details.

Mediocre or desperate candidates might accept this level of secrecy, but great talent definitely does not. “Come back to me when you can divulge all pertinent information,” one typically hears from talented professionals. And to their credit - it’s the answer I want to hear from them. Why? Because if they’re too interested in a position shrouded in secrecy, it makes me question if they’re really that good. Additionally, if they learn that an incumbent is unaware of the search and they see nothing wrong with it, it makes me wonder what kind of ethics and values they would bring to the company. Let’s face it, if a company is doing something sneaky, I have to assume willing candidates are quite willing to be just as sneaky.

One thing companies must understand is that every word, every behavior, every action, is evidence to potential candidates of the kind of organization they are dealing with. Everything communicates.

Our practice has turned away several hire before you fire assignments. What we have been willing to do in certain cases, is to prepare the search, conduct necessary research, identify the people we would want to approach, etc, so that we can jump into the search, full-speed, as soon as the incumbent has been informed of the company’s decision to replace them. Only then will we typically contact anyone about this search. Taking this approach frees us from maintaining secrecy and allows us to perform the best search possible, while reducing the lead time for bringing in candidates.

Search is more than just finding an executive

Of course the primary goal of any search is to find a suitable placement, but how you conduct a search is a a public display of the kind of organization it is. Don’t believe that simply because a search firm is running the search that your company won’t take a hit. The search firm you select and the way they run the search is equally telling as the interactions a candidate experiences with your company. After all, you hired this search firm, so the expectation is that you endorse their work and stand by how they represent you.

What’s more, engaging in a hire before you fire search is extremely damaging to your employees. It creates uncertainty and distrust. Don’t be surprised if a number of your employees start wondering if they might not be next.

But if all these factors don’t dissuade you from pursuing this approach, consider that such searches are often flawed, resulting in candidates who are not the strongest. Typically they are only incrementally better if that. And what kind of victory is that?

So think again and realize the upside to tackling the situation with integrity. Doing so will result in better results and a better reputation.

I just read an article touting the use of a mentor programs as a good way to help new hires integrate into their new company and to develop people long-term. However, it’s been my experience that such programs yield limited results, often creating more busy work than results.

Some common problems with corporate mentor programs

Finding natural mentors

The real key is to identify natural mentors within organizations as well as to look for strong natural mentoring skills whenever you are conducting an external search to fill key executive positions. Natural mentoring skills aren’t easy to learn and it takes a certain kind of personality.

Perhaps the best way to develop new mentors is to have talented people work with the great “natural” mentors you identify within your organization. My experience is that some of the very best mentors are those people who were once under the wing of a great mentor themselves. But this is a long process that results in long term benefits. In a world driven by a short term focus - this is not something many companies deem important.

Jump start the number of good mentors in your organization

One way to expand mentoring is to encourage and reward “productive” mentoring, not just busy work, and to steadfastly seek mentoring skills with every key executive search you conduct. With most hiring managers this is nothing more than an afterthought and often not part of the selection criteria at all.

The most important thing to realize is that the best mentor programs are not the result of institutional processes developed by corporate and pushed out to managers in glossy manuals. That would be akin to taking glass and putting it under man made pressure and calling it a diamond.

Far better is to have the real thing and it starts with looking for them.

Also read “Re-discovering the value of mentors” for more detailed information.

It wasn’t so long ago when companies would throw gobs of money into developing managers. Management training programs, job rotations, international assignments, institutional mentor programs, education assistance - all were once common. Over the years many companies have pared down such programs due to the inherent high costs and in part to keep other companies from poaching these expensively, well trained executives.

Why stress? We’ll find talent on the open market

It just seems easier to go on the open market and recruit people who already have the requisite experience and expertise. And that has worked reasonably well for decades - but as the demand for talent has risen and the number of talented executives has shrunk it’s become harder and more costly to recruit talent on the open market.

The pendulum is shifting and the importance of developing talent internally is growing. There are benefits to developing managers that goes beyond a well trained executive - development is becoming a recruiting tool. How? Great talent is looking to grow. They want to learn and develop new skills and gain necessary experiences.

Talent wants more than money and a title

In many cases, money and title alone are no longer enough to draw talent. Joining a company that offers great development opportunities is a huge draw for talented individuals. Creating a development minded environment will draw motivated and talented people to your organization, while repelling those that aren’t. For companies and driven professionals, it’s a win-win.

The real question is how do companies create development programs that are both effective yet cost efficient? Of course the simplest solution is to bite the bullet and throw money at the problem. However, the reality is that a good chunk of the work developing talent does not require expensive training programs, but rather “attention” and “time” from talented superiors.

The value of natural mentors

While costly training and education programs should continue to be performed selectively, many development needs can be met with a powerful yet cheap method, one that many companies seem oblivious to – that being naturally gifted mentors. No doubt every company should work tirelessly to encourage mentoring. Yet, most companies have few if any exceptional mentors and natural mentoring skills aren’t easy to learn.

Case in point. I know a truly exceptional senior executive working for an international corporation who really understands how to motivate, lead, and grow people. She has a knack for identifying talent and giving them challenges that allow them to grow. She informally advises and counsels many staff members on an ongoing basis. Much of what she does comes naturally to her. She treats people like she wants to be treated, she gives people opportunity to tackle challenges, similar to the way she was exposed to challenges along the way. Most of all she is willing to take risks and give her direct reports duties that her peers would never give up.

After being voted the company’s most admired manager several years in a row, the company was anxious to figure out how she did it. So in typical corporate fashion they had industrial engineers tagging her every step. Thinking all along that there was some magic bullet. Something they could institutionalize. She laughed as she told me…it’s really so simple, but for it to be credible with the company it has to be complex.

Don’t take their word for it

One surefire way to develop internal mentoring capabilities is is to diligently push for external hires to possess good mentoring skills. During interviews don’t just take the word of the candidates. Seek specific examples and then follow up with in depth references.

Obtain concrete information about how well an individual actually mentors people. How many direct reports have been promoted? How many have been recruited to bigger positions elsewhere? How long were those individuals under the sponsorship of your candidate? Have positive results within your candidate’s organization correlated with the development of key staff? How do the more talented staff members assess their boss’ mentoring skills? Can these staff members provide concrete examples that shed light on their boss’ mentoring skills?

Skills that keep on giving

Good, natural mentors possess valuable traits - they are good communicators, willing to share insights and give people chances, confident to hand over important work to direct reports and junior staff members, know how to provide constructive criticism and active support, and care deeply about the welfare of those who work for them. These people have qualities akin to teachers and coaches. And these are skills that companies would be wise to add to the requirements for most key vacancies.

When you have people like this in your organization it’s amazing how much developing is going on that doesn’t cost the company a dime. It’s just a natural part of the way such people work. From my experience, such people also rub off on the people they mentor. In other words, good mentors seem to create good mentors in the process.

Unfortunately, mentoring skills are usually the last thing companies look for when hiring key executives. Yet, there is never a better and faster way to develop important competencies as when a company is filling a vacancy. Ensuring that openings are filled, not only with talented professionals, but ones who have strong, natural, almost instinctive, mentoring skills is important and over time will reduce the need to go to the open market to bring in talent.

The writing is on the wall

Companies can no longer rely solely on the open market to supply all the talent necessary to propel a company forward. Companies must focus on developing more people internally. Bringing talented mentors into the organization will go a long way to ensure that existing employees with potential are properly developed and prepared to fill key vacancies. It’s time to create balance between external recruiting and internal promotions…and the key is to develop potential from within.

I’m both perplexed and amused by the number of queries I’ve received in recent months from business journalists writing articles on how to on-board new hires into a company’s existing culture. The premise is that cultural misfits are inevitable and the inherent challenge is to turn misfits into good fits. Kind of like focusing on risky treatments for a disease that’s easily preventable. Why they don’t want to focus on preventing the disease is anyone’s guess.

Fit happens, it’s not manufactured

To me it’s obvious that the best way to handle “culture” integration is to hire people who fit your culture to begin with. I know this is less sexy than a comprehensive on-boarding program. But, why assume the risk of bringing people on-board who may fail to integrate culturally, when you can avoid it?

Corporate on-boarding has it’s place

This is no attack on the evolving practice of on-boarding. I believe on-boarding to be a valuable service to help speed the integration of executives into a company - but it’s best when focused on helping create a rapport with co-workers, providing insight on the operating dynamics, and speeding up the general learning curve so that new hires can be productive more rapidly than if left to their own devices.

But culture is altogether different. If you’re compatible with the prevailing culture your cultural integration will occur quickly and quite naturally. If you are incompatible with the prevailing culture, an on-boarding program will do little more than help cover up the disparity for a while.

Culture is not something you can learn in a week or two. If team work and integrity are core to your company’s culture - you have to look for these things in your candidates and not hope that an on-boarding program can teach these qualities.

Three simple steps to recruiting candidates who fit your culture.

1) Identify the core characteristics that define your company’s culture. You can’t begin to determine culture fit with a candidate, until you can define your company’s own culture. Isolate the key characteristics that define your culture and then prioritize them as best you can. Typically you will identify two or three core characteristics essential to fitting in with your company’s culture and a few less crucial characteristics that cement the culture fit.

2) Identify the behaviors and actions that best exemplify the characteristics you are looking for. Candidates should embody what you are looking for. Behaviors, in particular, are like “markers.” What kind of behaviors would you expect from somebody who embodies the characteristics you are looking for? List these key behaviors.

3) Assess candidates using behavioral interview techniques and thorough reference checks. The most effective way to ascertain key characteristics is to look for the behaviors you identified by creating open ended, behavioral questions that encourage candidates to express themselves with specific examples of how they did or would respond in certain situations.

A second important evaluation tool is the use of references. Tapping the knowledge of former co-workers and superiors provides important insights. Who better to know the characteristics and behaviors of a person than the people who have worked for years with a particular candidate?

Assessing culture avoids on-boarding risks

Many hiring managers wrongly believe that liking a candidate or having a good rapport with a candidate is a sign of a good fit. It’s not. I know this all too well. It happens I really like Porsche Carreras, but with a baby daughter and a wife who’s well aware of my history on Germany’s autobahns, a Porsche of any kind is not a good fit with our family. Don’t mistake “liking” a candidate as proof of a good fit.

A simple, objective process is more accurate. I’m not an advocate of complex solutions when they’re not needed. When it comes to assessing a candidate’s culture-fit, even a modicum of attention focused on this subject and a simple process like the one described above can greatly improve the odds of landing a good culture fit.

I was recently reminded how important the simple act of keeping candidates informed really is. A talented corporate Vice President I’ve known for many years is currently on the job market. He’s voiced his frustration with companies that show great interest and then at some point just seem to fall off the face of the earth. Shockingly, this is a common experience, because it’s something I hear from executives all the time.

Granted, time is tight. But the simple act of staying in touch with a candidate is not only the decent thing to do, it’s beneficial to you, your company, and your current and future searches. Here, in no particular order, are reasons why:

1.) Every inaction and action is emblematic of the kind person you are and the kind of organization you work for. How you are perceived is very important, regardless if a candidate is deemed right for the job or not. Why? Word gets out. There is no telling the people who will hear how you and your organization treat people. When it comes to recruiting talent, what better “behind-the-scenes” information does a potential candidate need to know than how people are treated by your organization.

2 .) It’s the professional thing to do. As long as a candidate is still in the mix they deserve to know where things stand. If they are no longer in the mix, they deserve to hear it as soon as that determination is made -and not infer it from the fact you haven’t returned their calls for two months.

3.) Keeping a candidate properly informed gives you an important leg up. As executives pursue competing opportunities, your actions provide valuable information about the quality and professionalism of your company and the people that work there. When two competing companies vie for the same candidate it can come down to the smallest detail. Like - the way you treated them during the process.

4.) It keeps the process organized and flowing. Nothing is worse than having calls you need to make piling up. Then realizing you haven’t contacted a candidate in over 6 weeks and having to face the uncomfortable task of figuring out what to say after so much time has passed.

5.) It’s a courtesy that really helps candidates remain sane during stressful times. Most are fine if a company decides to pass. It just helps to know and to check that job off their list. Being kept in limbo can be mentally draining. And, for those who remain in the mix, it helps to know what is going on. Candidates can remain interested for a long time as long as they are kept aware of what is going on during the process.

Staying in touch with candidates throughout the hiring process is important. People will remember your professionalism and courtesy for as long as they will remember the poor behavior of others. In this competitive world, goodwill is worth the effort.

Here are some basic tips to staying in touch.

Timing

Staying in touch does not mean having to contact candidates weekly. The general rule is that contact should be made immediately whenever something pertinent has occurred that changes a candidate’s status. Otherwise, if it’s a matter of keeping a candidate informed as other candidates are being evaluated, then touching base every two to four weeks is fine. But establish clear intervals for touching base.

Forcing regular contact will also encourage you to deliver bad news sooner. Why? Because you don’t want to have to continue calling candidates who are no longer under consideration.

Method

Typically any definitive news should be delivered by phone or in person and not left to an email. If a person is to receive an offer or is no longer being considered an email is just not enough. Otherwise, if it’s a matter of keeping ongoing candidates informed of where things stand, emails are a quick and appropriate way to stay in touch, though a phone call is always a nice touch.

Sometimes it’s easier for a busy hiring executive to field a quick call than it is to find time to make the call yourself. In such cases, it’s reasonable to suggest that candidates call or email you at regular, predetermined intervals in order to check in.

Candidates love to know they have your blessing to contact you. Otherwise they might spend hours wondering if it’s alright to contact you and slowly get upset that you haven’t contacted them yet. This kind of mental dilemma should be nipped in the bud and it’s up to you to set guidelines that make it simple and easy for candidates to remain informed.

Material information

When it comes to what to share with candidates I’ve always been impressed with Vinny Stabile, the SVP, People at JetBlue who simply suggests telling candidates the truth. It’s amazing how the simple truth is usually the best way to communicate with candidates. It’s not about sharing a high level of detail, though it helps to provide enough detail to make the situation logical and understandable.

If there is another candidate who can’t be interviewed until four weeks from now, it’s better to share that, than convey something nebulous about needing another month to figure out what you want to do. Given the details, it makes sense and is logical why it will take at least four more weeks, without that information a candidate is left to wonder what is really going on. Is there something they did wrong, or is there something they need to do? Even the most accomplished executives can fall into this trap. This won’t happen if you give them sufficient information.

If another candidate has come to light that appears to possess more of the critical requirements for the job, that too is something most people can handle. “It’s not that you are out of the running, but clearly we need to take a closer look at this other candidate.”

The great majority of candidates will just appreciate being informed of what is going on. And it will pay dividends for you down the line.