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It's a buyer's market, but making smart hires remains far from easy.
Scott Leibs, CFO Magazine
February 1, 2009
David Bronson is ready to pounce. Other companies may be laying off workers by the hundreds or even thousands, sending the U.S. unemployment rate to its highest level in nearly two decades, but at PSS World Medical, a $2 billion medical equipment distributor and services provider, the door is open to new hires — if they can make the grade.
"We see an opportunity in this economic climate to improve our bench and upgrade our talent," says CFO Bronson. "Not only in finance, but across the board."
It certainly helps that PSS is growing twice as fast as the markets it serves, but even companies in less-rosy business sectors can take heart from one aspect of the current downturn: it's a buyer's market for talent. For the past five years, finance, in particular, has been hard-pressed to find all the qualified people it needs, ever since the Sarbanes-Oxley Act stoked demand for anyone who could lay even modest claim to accounting or auditing expertise. Salaries have risen and job candidates have been firmly in control, with prospective employers wining and dining them as if they were star athletes or Hollywood's flavor of the month.
Now, with the unemployment rate surpassing 7 percent and expected to rise through the rest of the year, the pendulum has swung hard in the other direction. The dilemma, of course, is that the very economic forces that have made so many job candidates available would seem likely to impede most companies from hiring them.
But even companies conducting their own sizable layoffs should keep an eye out for potential new hires, many experts say. "Sometimes the back door is open for people to enter, even as others are being pushed out the front door," says Dan Kilgore, a principal at human-resources consulting firm Riviera Advisors.
Or at least, Kilgore says, it should be. "The decade-long war for talent won't be affected a bit by this momentary economic blip," he says. While this description of the economy might seem overly — perhaps even wildly — optimistic, Kilgore's contention that companies should "opportunistically maximize this misfortune" is worth considering. "The term 'right-sizing' has been a euphemism for 'layoffs' for years," he says. "But when originally coined in the 1980s it described something useful: a combination of layoffs and hiring that allows you to reshape your workforce to meet current and future conditions."
J. D. Sherman, CFO of Akamai Technologies, an Internet managed-services provider, agrees that the time is right for executives to reevaluate their talent rosters. Akamai took a $4 million restructuring charge in the fourth quarter of 2008, laying off 110 workers, or about 7 percent of its workforce. But the move was less about hoarding cash simply to survive and more about "determining which areas need to grow and which need to shrink" as the company's strategy evolves, Sherman says. Last month the company was looking to fill more than 75 positions.
Barry Salzberg, CEO of Deloitte, says his company has no plans to change its recent course, which includes aggressive recruitment and training and an emphasis on "mass career customization," or allowing employees to shape their careers in ways that match their individual aspirations. "I've heard that in the current economy companies are putting the talent agenda on the back burner," he says, "and I can understand why. But I think it will continue to be difficult to find finance talent." One factor at work, he says, is an anticipated decline in the number of accounting majors.
A Delicate Proposition
Finance executives may well feel that there are two very good reasons not to hire in the current economy: perception and reality. The near-universal need to contain or cut costs furnishes the reality. The perception problem has more to do with a gut feeling that the time simply isn't right, and with fears that the company will look bad if it hires at the same time that it's laying off workers. Kilgore says companies need to get over such fears. "It can sound cutthroat to lay off 12 to 14 percent of your workforce, rather than 10 percent, in order to free up resources to make some key hires," he says, "but you need to do that to get ahead of the curve." Kilgore says he once worked for a Fortune 100 company that hired 3,000 workers even as its massive layoffs made front-page news.
Still, Kilgore and others caution that companies need to hire carefully, for a variety of reasons. First and foremost, hiring the wrong person is always a costly mistake, and wider availability of talent does not guarantee that you will hire the right one. "The real talent does not get laid off as readily as other staffers," says Lynne Morton, founder and principal of Performance Improvement Solutions, a talent and change management consultancy. "They also tend to know their value, so you need to avoid haste and you need to resist believing that you can bargain-hunt."
As Bronson of PSS surveys the field, he notices that entry-level employees seem well qualified, but adds, "what I see less of today than I did 8 to 10 years ago are people with the skills and competencies to run a business. The ability to see around corners, plan for contingencies, and balance priorities such as customer satisfaction with profitability, those are the qualities in shorter supply. When I see them, I snap them up."
Perhaps the most challenging aspect of hiring in a recession, particularly at a company that is reducing its workforce, is striking a balance between boldness and prudence. On the one hand, "you should move now," Kilgore says, "because if you wait to hire you'll be competing with every other company that waited until conditions improved, which means you'll have to act more hastily and risk an overall decline in the quality of talent available."
On the other hand, companies looking to add staff have to be judicious as well. One technique that may help is to add additional levels of approval to any hire; it may slow the process, but it increases the degree of vetting and helps ensure that new hires pass muster and are truly needed, rather than simply filling an open slot.
Approaching talent acquisition with a longer-term view can also help management teams determine how much hiring they should aim to do now. "Investing in talent is like investing in undervalued stocks," says Kirk Hallowell, principal of MatchPoint Coaching. "It all comes down to your time horizon. If you're looking several quarters out, now is a phenomenal time to acquire the talent you need." The companies most able to do that are those that have developed high-level talent-management plans that complement the company's overall strategic plan. "Design the org chart that you'll need to get where you want to go," Kilgore says. "Then look to fill the gaps," and, where necessary, cull the surpluses.
Finance executives also need to be sure that the candidates they interview truly want to work for their organizations. As the financial-services sector shed jobs at a furious pace last year, the market filled with people who are used to — and may prefer — a certain kind of corporate culture. Having been burned by Wall Street, many former investment bankers may think that a more secure, if more sedate, corporate job is for them, or they may be seeking any port in a storm. Regardless of how qualified the candidates may seem, CFOs need to assess how well such nontraditional applicants will fit into a corporate-finance organization.
For management teams that do decide to hire in the current market, it's more important than ever to address the proper "onboarding" of employees. Even the most talented employees may flounder in their first days or weeks on the job if they aren't appropriately familiarized with their role, and few firms can afford any lag in productivity, particularly in the critical positions most likely to be filled in a recession.
Onboarding once referred simply to supplying the necessary personal infrastructure to a new hire — office, phone, E-mail, mobile access, and so on. But now experts frame it more broadly as equipping new employees for success by, for example, helping them to establish a network of peers and key contacts right away. "Often the relationships that matter most," Hallowell says, "are those that cross departments or even extend outside the company. So introducing a new person to the people who ultimately matter most to their day-to-day jobs is a critical aspect of helping them succeed" — as is, he adds, clearly delineating what they're expected to deliver. "Don't take the attitude, 'You're smart, you'll figure it out,'" he says. "They may not."
Guarding Your Flank
There is a flip side to this buyer's market for talent: some of the best employees may decide it's time to make a move. That may sound counterintuitive — with so many people polishing their résumés by necessity, why would a valued and presumably secure worker try her luck elsewhere? "In a recession, top talent moves," says Derrick Barton, CEO of the Center for Talent Retention in Denver. "They know they're the best, and they'll seek new opportunities if they don't feel they're being treated appropriately."
With their noses to the grindstone, Barton says, the best employees may feel overworked and underappreciated. To prevent that, leaders should make sure that key staffers understand their role in the organization's success.
Much of that involves listening closely to them and soliciting their ideas (see "How to Talk about Layoffs"). As one specific example of how to engage your most valued employees, Barton suggests asking them to cite two areas of their performance for which they would like more feedback. "People hate being judged, but they love feedback," he says. "By asking them exactly what they'd like feedback on, you send the message that you want to help them develop in the ways that most interest them."
Even David Bronson, on the hunt for more talent, admits that "whether to hunker down and conserve capital or be more aggressive [in hiring] is an issue that senior management and boards are hotly debating." Those companies that settle that debate by deciding that in a buyer's market you buy, may go a long way toward winning the war for talent.
Scott Leibs is executive editor of CFO.
You've got 10 solid résumés on your desk and you've booked interviews with the top candidates. How do you select the best person?
Most critically, assess past performance. The best way to get a sense of that, says Louise Tharrett of Collaborative Consulting in Westwood, Massachusetts, is behavioral interviewing. "The most successful hire will bring the right blend of knowledge, skill, and motivation. Behavioral interviewing is designed to give you insight into all of these."
Avoid clichéd questions such as, "Where do you see yourself in five years?" The responses rarely reveal much that's useful. Instead, stick to experiential questions that deal with specific past situations. Begin as many questions as possible with "Tell me…" in order to get a candidate to share more details. A few examples:
• about a project that finished on time and on budget. What role did you play?
• about a project that didn't meet expectations. What went wrong?
• about a time when you needed to influence co-workers who were resistant to your idea.
• about a situation where you didn't get what you wanted. How did you handle that?
Some questions will require time to answer. Tell the candidate, "Feel free to take a minute and think about this." Resist the temptation to fill the silence.
To assess a candidate's fit with the company's culture, try to uncover his or her attitude about a previous employer. Ask, for example, "You worked for Merrill Lynch. What did you enjoy about working there?" Interviewers may need to read between the lines, Tharrett says. "If the candidate immediately starts talking about the fast pace, advancing five salary grades in two years, and having lots of latitude, while in your organization folks tend to grow in place, move laterally, and be well supervised, that could be a red flag."
During the interview it's common to make a personal connection with a candidate. Don't be swayed by a bias or an unusually pleasant interaction (We both ski. She loves dogs, too). Focus on the qualities required for the job.
If no candidate seems ideal, remember that a strong but imperfect applicant can almost always learn a skill set. "A new hire who has the right motivation and an ability to build positive relationships tends to be the most successful in the long run," says Tharrett. — Melissa Hennessy