Topgrading Is Most Crucial in a Sluggish Economy

During the past 40 years I’ve observed talent management practices in up markets and down markets, and have concluded two important points I’ll discuss in this issue:

  1. Almost all companies talk a good talent game, but most admit they over hire and tolerate mediocre talent in up markets; and
  2. A down or sluggish economy is the best time to Topgrade, because mediocre talent drags struggling companies down, down, down … AND there is more talent available at lower comp levels.

Background: Remember the dot.com bubble days? Of course you do! Talent was so scarce that any kid exhibiting basic knowledge of the Internet could walk out of his dorm, toss his Frisbee in any direction, watch it land in front of a business, walk in, and get a job. Cisco Systems bought entire companies, companies NOT necessarily in high tech, just to get staff. Companies paid huge amounts to entice candidates. EMC bragged that it paid its sales reps the most of all high-tech companies — up to $3 million. Then the bubble broke. Ouch! Déjà vu?

I talked to former CEO of General Electric Jack Welch about the go-go years of the 1990s, when a few GE companies had gotten a bit casual in talent management and B Players had received A Player ratings that were not deserved. Executives thought it didn’t make any difference to lower the talent bar, because the GE stock kept rising and GE was frequently regarded as the best-managed company in the world. But Jack knew that “carrying” less than A Players dragged company performance down and would make any company more vulnerable during the next downturn. So he spent a huge amount of time in talent meetings, selling, driving, and requiring top talent in every job.

Fast forward to the economic downturn that began in 2008 and continues today. There is a lot of talk these days of the “recovery,” but as soon as Federal Reserve Board Chairman Ben Bernanke hints that cheap money might dry up, the stock markets globally head south. We read about certain industries “coming back,” but in general, large businesses are still cutting back or only hiring on a limited basis, mostly to replace key people who quit. And small businesses, businesses which create 70% of new jobs, are a) extremely slow to hire; b) not hiring; c) going out of business; or d) not starting up until the economy is more favorable.

DURING A DOWN ECONOMY IS THE MOST IMPORTANT TIME TO TOPGRADE

I know of dozens of companies that have gone out of business because, as the company declined into red ink, the CEO just couldn’t let long-term, loyal, but mediocre employees go. So now everyone is gone.

And during the past few years every new Topgrading company measured the success and costs when hiring people … and even when hiring was limited, the mis-hires turned out to be WAY more costly to the bottom line than during up markets. If your business is struggling, and you’re looking at costs, please visit www.TopgradingCalculators.com and estimate the costs of mis-hires to your business. You’ll blanch at how costly mis-hires are in money and the time of the A Players who “carry” them. But the good news is, the calculators will tell you how much money and time you save as you Topgrade and reduce those mis-hires.

Five Top Reasons to Topgrade in a Down Economy

  1. More talent is available at lower compensation levels. This happens in every economic downturn — more people are out looking for jobs, A Players can be attracted more easily, and you have the luxury of being able to get better talent, cheaper. A client is recruiting a head of Human Resources, and despite the fact that their business is down, they have more — and better — candidates than they did before the 2008 downturn. Hiring is all about supply and demand, and when supply of talent is up (businesses folding or laying off people), and demand is down (most businesses not hiring), talent is cheaper to hire. When the economy improves, be sure not to underpay your people or A Players will go to greener pastures!
  2. Underperformers expect to be let go. If two out of 10 sales reps account for 80% of sales, and your business is barely profitable, the two or three lowest performing sales reps will not be surprised to receive a pink slip. You’re running a business, not a social service organization, so do what is right for the business. Following Topgrading methods, be sure you have Job Scorecards with measurable goals and accountabilities. When people fail to perform as well as they committed to perform, they generally quit before being fired.
  3. Talent is an investment, not a cost (despite what accountants say). Only Topgraders really believe this. Most managers hire 25% high performers, 50% “so-so” performers, and 25% lousy performers, so 75% of the people they spend money hiring turn out to be disappointments. But Topgraders achieving 75% or even 90% hiring success experience sky-high ROI when they hire.
  4. Sales is the most important area to Topgrade in a downturn. Two well-known companies who implemented Topgrading programs (based on the 2008 release Topgrading for Sales) told me they have replaced mediocre reps with top producers and those companies are not even lowering their sales targets for the year!
  5. Our online Topgrading hiring tools make it simpler and easier than ever to Topgrade. I know, it’s a bit tacky to insert a sales pitch, but our online hiring tools can help anyone literally hire better this week.
    I’ve outlined below a one-week Topgrading success scenario.

Hypothetical Hiring of an A Player in One Week

Acme gets 50 resumes for sales reps, so …

  1. Monday: All 50 candidates receive an email asking them to complete the online Topgrading Career History Form (with the “truth serum”).
  2. By Wednesday: 30 completed it (and 20 poor candidates dropped out because the truth serum made them realize their deceptive resumes would be discovered – good!); and when they pushed Submit …
  3. Wednesday: You instantly got the Topgrading Snapshot, a “picture” of their career with full comp history and accurate performance ratings by all bosses, so …
  4. Wednesday: You scan the 20 Snapshots and cut the pile to four candidates who look really promising, so …
  5. Wednesday: You call the four and screen them on the phone, and invite the best candidate to come in Thursday afternoon. Then you …
  6. Thursday: Select to print the Topgrading Interview Guide pre-populated with 100% of the detailed information the candidate supplied when completing the Career History Form; then you and a tandem interviewer conduct the Topgrading Interview; and at the end of the interview, you ask the candidate to arrange reference calls with former bosses.  Those calls are arranged by the weekend.
  7. By next Monday: You’ve talked with all the former bosses and others, in reference calls arranged by the candidate, so you …
  8. Hire an A Player.

Okay, in reality, there would perhaps be three finalists and the process might take several weeks.  The point is – these tools are the latest and best and very, very easy to use.

Recommended Resources

By the way, if you want to read an internationally published article on Topgrading, please click here to read “Hone Your Hiring Skills” from Construction Business Owner.

 

Published September 17, 2013

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