Twenty-five
percent of people hired and promoted by most companies turn
out to be high performers, but using rigorous methods some
businesses achieve 90% success.
Recently I met with the heads of human resources of Global
100 companies, and in a confidential survey they stated that
their companies mis-hired people 80% of the time and mis-promoted
people 75% of the time. That's right, HR's chosen methods
of selecting talent produce high performers only 20-25% of
the time. These appalling statistics have been confirmed in
our study of Fortune 500 companies (reported in Topgrading:
How Leading Companies Win by Hiring, Coaching, and Keeping
the Best People, Portfolio, 2005). And yet, many high performing
companies achieve 90% success using methods described later
in this article; it's taken over 30 years, and assessments
of over 6,000 managers for me to refine these methods.
Readers of Leadership Excellence know of Jim Collins' compelling
plea to "get the right people on the bus," and of
Jack Welch's passion for differentiating talent, of getting
all A players. I consulted with Jack more than a decade, assessing
and coaching senior managers, and he said, "there aren't
enough Brad Smarts around, so teach us your methods,"
- and I did. Two decades later, GE continues to embrace a
process that results in 95% high performers identified for
promotion. Companies like Lincoln Financial, MarineMax, Barclays
Bank, Honeywell, Hillenbrand Industries, and American Heart
Association have all improved their hiring and promoting success
from 20- 25% up to 75% and most, to 90%. That's 90% high performers.
Picture yourself inheriting 10 C players and you are determined
to replace them with all A players. Using typical "best
practices," you are only 25% successful, so you hire
40, fire 30 of your mis-hires, and finally - after a blood
bath - have your A team. That scenario is too bloody, and
that's why otherwise talented leaders tend to keep their As
and Bs, and only replace Cs. But using topgrading methods,
you would enjoy 90% success, so you would hire only 11 people,
fire 1, and have your 10 A players. Note that is a 30-1 advantage
for the topgrader.
What are those topgrading assessment methods? Before describing
them, let's return to the Global 100 managers, and the methods
used in those companies. Almost all use round-robin, competency
interviews, looking for behavioral indicators. Almost all
the competency interviews last an hour or less.
Topgrading assessment methods are simple to describe, but
were hard to do - until Jack Welch approved an innovation.
A bit over-simplified, the topgrading method is a 4-hour,
chronological interview, with 20 questions about every job
- scrutinizing every success, every failure, every key relationship,
every performance appraisal, and every method of achieving
results. Following the topgrading interview, the candidate
organizes reference checks with a minimum of all bosses in
the past ten years, and get this: 90% of those references
talk, if the candidate is an A player. As Mark Sutton, former
Chairman of UBS North America said, "how can a one-hour
competency interview compete with a tandem, 4-hour topgrading
interview?"
What was Jack Welch's innovation? I designed the chronological
topgrading interview for GE and trained managers to use it,
but Jack initially was a bit disappointed in the quality of
reports by GE interviewers. Asked what could improve quality,
I said, "simple - use two interviewers rather than one."
Topgrading professionals do not need a tandem partner, but
for all other leaders, two heads are truly better than one.
Jack didn't hesitate to approve the tandem interviewer method,
and to this day it is used at GE. Over the years the word
got out that "Jack Welch uses the tandem chronological
interview," and hundreds of companies have embraced the
approach.
Do psychological tests work? No, not for hiring upper level
managers. There are now 20 topgrading professionals, and we
would love to have any test that would add even a little incremental
value to the interview. However, most of us are psychologists
who used to use tests, and we've all tossed them overboard.
With two interviewers, that four-hour interview consumes eight
managerial hours, and is it worth it? Our research indicates
that the average cost of mis-hiring someone earning $100,000
is $1.5 million. Calculate your own costs of mis-hiring someone;
we have yet to hear of a conclusion that the 25% successful
competency interview is more cost-effective than the 90% successful
topgrading interview.
Topgrading companies like those mentioned use the topgrading
interview to assess people and systematically ratchet up talent;
their stock performance reflects it. The main obstacle to
topgrading is the B and C players, Non-As. Our research indicates
that in most companies only 25% of the managers are A players
or A potentials, and the 75% of the Non-As fight topgrading
with more creativity and energy than they ever showed on the
job. It takes the courage of a CEO to drive the A player standard,
to hire and promote people who turn out to be As, to develop
Bs and even Cs to become As, and to redeploy those who fail
to become As.
CEOs of companies who have topgraded have learned these essential
lessons:
1. Topgrade from the top down. A players tend to hire and
promote As, Bs favor Bs, and Cs choose Cs. Topgrade your top
team, enable them to topgrade the next level, and A players
will gradually permeate the organization.
2. Constantly reinforce the A player standard. An A player
performance rating should not be for "outstanding performance,"
but "meets performance expectations." Don't permit
slippage in performance reviews, hiring, or promoting. Don't
let managers give three and four chances to Non-As.
3. Permit only A players to hire and promote people. Non-As
should know they fall short and only when they become As do
they get the authority to select talent. In practice that
means you conduct tandem topgrading interviews in your organization
until you can delegate it to A players.
4. Strive for 100% A players, but be satisfied with 90%. There
is always a bit of slippage. For example, a key customer might
demand full attention from an account representative, and
you want to delay assigning someone until an A player is hired.
If you delay any longer, you lose the account, so you put
good 'ol Charlie, a B player, on the account because he will
keep them happy until an A player is recruited.
5. Measure assessment success. Only 5% of the 600 senior HR
executives I've assessed actually measured hiring and promoting
success. Topgrading companies assign small teams to carefully
judge whether the person hired/promoted turns out to be an
A player. As topgrading methods are more broadly used and
success grows, peer pressure will assure topgrading methods
will be used. Similarly, it takes about half an hour to informally
guess at the cost of mis-hiring someone, and companies that
go through that exercise conclude, "when we cut corners
on topgrading methods we mis-hire more people, and it is very
costly!"
6. Train all managers in topgrading methods. There are books,
DVDs, and other tools available so that managers don't have
to "wing it."
In a Six Sigma world, companies have progressed from 100 underperforming
parts per million (ppm) to 6, 5, and even 0. And yet those
same companies tolerate 750,000 underperforming people, or
75% mis- hires and mis-promotions. There is absolutely no
reason for such massive waste and human pain. Any A player
manager willing to team up with a tandem partner and conscientiously
apply the tandem topgrading interview methods can enjoy a
more successful career and a much happier work life working
with an A team rather than a mixture of As, Bs, Cs. And their
employer will enjoy a talent advantage over the competitors.
Brad completed his doctorate in Industrial Psychology at Purdue
University, entered consulting, and for more than 25 years
has been in private practice as President of Smart & Associates,
Inc., based in the Chicago area. Brad is frequently acknowledged
to be the world's foremost expert on hiring. He has conducted
in-depth interviews with over 6,000 executive. He is author
of seven books and videos. Brad has helped companies topgrade
by assessing and coaching teams, conducting topgrading workshops,
and providing books, handbooks, and videos to help clients
topgrade on their own. The resulting improvements in company
performance have been featured on the cover of The Wall Street
Journal and in many Fortune articles.
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