Tuesday, June 30, 2009

Executives At Bargain Prices

"It's a buyer's market!"

That's the phrase I hear almost daily, whether it's with regard to buying homes, cars, or hiring employees. The current market has created a plethora of goods, services and man-power. The basic law of supply and demand tells us that with increased supply and a decreased demand, prices will fall. In fact, the whole demand curve has shifted, resulting in the millions of job losses and the downward push on total compensation.

I'm not writing anything you haven't read already. So, why am I writing about it? I read an article on Wall Street Journal today that piqued my interest. It's titled "Only the Employed Need Apply". In it, Dana Mattioli describes how employers select new employees from the pool of the already-employed.

I can understand the thought process behind this. After all, reason dictates that in tough times, companies shed the least productive employees. With our current unemployment rate, that's likely the bottom 5 to 10%. So, if you're looking to hire excellent talent, why not go after the top 90% that are still employed, right? Dana is good to point out that the employed are risk averse these days. So, they're asking for guarantees of continued employment in the forms of severance agreements and higher salaries. So, they're not cheap. In fact, since they're so risk averse, it also takes a long time to convince them to jump ship. That's certainly an added recruitment cost that's tough to swallow in these times.

There's an assumption in this line of thinking: we're facing standard economic times. However, during recessions, many people lose their jobs for reasons other than lack of personal performance. You don't have to think hard or look far for evidence of this. In fact, cost centers are often the first group to be dissolved. For evidence, look at the the numerous HR, Marketing and IT executives in the market. Also, consider how the majority of open positions these days focus on sales, the revenue generation mechanism in a company.

But I detract. Let's get back on point. Even with the higher costs of recruiting an already-employed, I can see why a hiring manager would take such an approach.

I'm curious if there's another perspective that a hiring manager could employ. Let's use a hypothetical situation, one in which I'm a hiring manager. This isn't too far from the truth, given my employment history. If my organization is growing or just in dire need of a particular skill set, I would want a few traits in selecting a new employee, specifically an executive:
  1. Passion for my industry, business and the offered position
  2. Proven and documented track record of success in positions with similar scope within companies or departments of similar size as mine
  3. Ability to ramp up quickly on or, better yet, have subject matter expertise of my industry
  4. Ability to build and cultivate teams

These are in my order of descending priority. I think the majority of candidates on both sides of the aisle will be equally impressive when compared on bullets two to four above. The question of passion seems to be otherwise.

Given the large selection of applicants in today's market, I do have my pick of employees. No doubt, I'll find many who are passionate about my business. Understanding the context of the WSJ article, the employed will be more risk averse in these times. This leads not only to the negotiated severance agreements, but also to risk aversion or avoidance once employed. I'm going to make two assumptions here:

  1. My company's in need of a leader to help it grow or prepare to grow in the onslaught of business I expect to see as the economy turns
  2. Taking calculated, well-thought out risks is what leads to an organization's growth

Let's say I hire one of these currently-employed recruits. Given the new recruit's risk propensity, I've now a big problem on my hands: I have a highly-paid leader who doesn't want to lead, fearing failure and being singled out. Even with a severance agreement, likely this new leader won't want to stand out in any way, good or bad. After all, in times of high unemployment we revert back to the lowest level on the Maslow Hierarchy of Needs and focus on survival.

How about the unemployed candidate? Where's his mindset? I'll likely find a different attitude and breed here. My travels so far have shown that the ranks of the unemployed don't necessarily include just the bottom rung of professionals. There are some non-performers, no doubt, but there are also many risk takers whose risks didn't pan out and their whole departments were dissolved. These are leaders who may have failed in their most recent adventures, but have produced results time and again.

In fact, they are now not only motivated and passionate about their next role and current industry, they've also learned valuable lessons on the previous employer's dime. These lessons of failure far outweigh any "risk averse" nature that the employed will likely possess. They continue to be risk-takers. They take risks daily as they search for their next employer by exposing their work history for the employer's scrutiny. Will they be cautious in their new roles? Most certainly. However, they'll bring the hard-earned lessons from past failures to my organization to reduce the risk of their own and my failure.

The current buyer's market has taught them other great lessons. If they are Marketing Executives, they've had to learn to be salesmen. If they were Sales Executives, they now better understand marketing plans and branding. If they worked on service or product delivery, they've earned their stripes as marketers and salespeople. So, when they decide to take risks in my organization, they know whom it'll affect and how. They'll also better communicate with all other departments in the organization as they now better understand each department's trials and tribulations.

So, If I were an employer in this market, I know I'd get an immense value, not to mention invest less time and money in my search, by reviewing and considering the plethora of unemployed candidates.