How to Recruit the Right Executive
Chief Executive Officers regularly grapple with how to recruit the right executive. I have recruited top executives and technologists for the past decade and a half. Over that same period of time, I have also made hires to my own team. I can tell you with absolute certainty that one of the most devastating mistakes a business can make is picking the wrong person for the job. Every hiring executive I know — myself included — has made bad hires. In fact, according to a recent Corporate Executive Board survey of hiring executives, every fifth hire is a mistake. A whopping 20% of candidates should not have been hired in the first place.
The Cost of Bad Hires
Bad hires exact a tremendous cost. Just how costly depends on whom you ask. According to the U..S. Department of Labor, the average cost of a bad hiring decision can equal 30% of the individual’s first-year potential earnings. The Society for Human Resource Management (SHRM) has estimated the true cost can amount to up to 5-times the first-year salary. The direct costs of replacing a bad hire include recruiting, training, onboarding, lost productivity, compensation costs, and employee dismissal expenses.
However, where hiring executives really feel it in the indirect costs caused by the problems the bad hires create. To start, there’s lost morale, lost worker productivity, and job burnout. If a new executive turns out to be a real disaster, team members may even quit. Clients may go elsewhere as overstretched teams make mistakes and are provide lower quality service. Bad senior engineering hires often become manifest in architecture, if not the very code of the software being developed.
Those technical mistakes create delays in product development and time-to-market. All told, when you factor these many costs into the equation and when you consider the combined impact of all the bad hires at a single company, the cost is truly stunning. The CEO of Zappos Tony Hsieh has estimated that his own bad hires have cost the company well over $100 million.
How to Hire the Right Executive
So what’s an executive to do? I would argue that we need to recruit more intelligently — something we evangelize at The Good Search and at our research division Intellerati. When you recruit smarter — and recruit differently than your competitors — you gain a serious competitive advantage in talent acquisition. What follows are my top tips on how to recruit the right executive:
Pursue the Best
If you don’t know who the best potential candidates are, you can’t possibly make the best hire. To start, develop that data to distinguish the top performers from the empty suits. Of course, you won’t find this kind of information on LinkedIn. Some retained executive search firms do a pretty decent job of identifying top-performing candidates. Just be sure to ask how they do their research. Far too often search firms recycle the same tired list of executives and miss less obvious top performers.
Reputation matters. It is an important data point. Before you meet with candidates, pre-reference them. I’m not talking about formal references, but checking discreetly through back channels to verify the individual is a top performer and that there are no issues of which you need to be aware. Ideally, three independent sources should verify that a senior executive one of the “best of the best”.
Look for True Grit
If you want to build a team of champions, then look for someone with the intrinsic motivation that it takes to be a champion. Look for someone with true grit – the kind of persistence and determination that it takes to do something that is incredibly hard to do. Candidates who were college athletes often have that kind of grit — getting up every day at 4 am to practice; getting up after getting knocked down and trying harder; having what it takes to go from underdog to top dog like the UConn Huskies — that’s what I’m talking about. Just one year after the Huskies were barred from March Madness because of grade problems, they captured the men’s NCAA championship title. That’s true grit. Look for evidence of that scrappy behavior in their achievements.
Doing TOPs Having
We already know that genius-level IQs don’t necessarily translate into more successful hires. The same goes for high GPAs and impressive degrees from the most elite schools. Googles SVP of People Operations Laszlo Bock has studied what makes for a successful hire at Google and discovered that credentials don’t matter. Instead, what does matter is the candidate’s actual behavior — what they have done in life — because it speaks to who they are.
More important, behavioral habits are pretty hard to change. According to the book The Power of Habit, Why We Do What We Do In Life and In Business, research shows that our behavior consists of mini-programs (habits) that run with little, if any, brain activity. Consequently, hire people with the right habits.
When you interview, listen. Get to know the candidate and what is important to that individual. Make sure the candidate’s values, goals, and ambitions line up with what is required for the role. Pay attention to your own instincts. Ask follow-up questions wherever there appears to be a disconnect or something that doesn’t entirely add up or make sense. On that last point, I am channeling Oprah from her Master Class, “When People Show You Who They Are, Believe Them”. To hire the best talent, you need to pay attention to what candidates are showing you. If you interview and listen well, candidates will reveal whether they are right for the role.
Imagine The Opportunity Cost
The difference between a bad hire and game-changing hire is vast. Bad hires, when they’re bad enough, break companies: the right executive makes them. In other words, the real opportunity cost is measured by the distance between the two. Don’t simply compare a bad hire with what an average one can do. Compare it to the difference an A-player makes. That difference is the reason our clients make recruiting the “best of the best” talent a top priority. It is how they became the most powerful and successful advertising, media, and technology companies in the world. (For more, check out our blog post How to Take Executive Search to the Next Level.)