What does it mean to run a great company?
Is it year-on-year revenue growth? Sky-high profit margins? Helping your employees and shareholders enjoy the ride? Making the world a better place?
Whatever your driver, it’s impossible to achieve any of these outcomes without a great team of people. In the knowledge economy, the success of your company is a result of how good you are at hiring the right people into the right roles, engaging them with your business strategy, and driving high performance.
Companies that excel at these three fundamentals of people management grow 180 to 350 percent faster, and achieve profit margins 160 to 200 percent higher, than their competition1.
This guide aims to help you build the foundations of your own winning people strategy.
“… the success of your company is a result of how good you are at hiring the right people. @Checkside_Perth”
Hiring the right people into the right roles
Management experts like Peter Drucker have long estimated the hiring success rate of managers is a dreadful 50 percent. And, the more critical the role you hire for, the more it costs when you get it wrong. For CEO and senior executive positions, the destruction of profitability, business value, relationships, and culture, can cost you up to 15 times the salary of your bad hire2. That’s $3 million of pain for a $200k employee!
A key reason so many companies fail to reliably hire high performers is they continue to rely on a ‘surplus supply of candidates’ mentality when approaching recruitment. They think of hiring high performers as a numbers game, with the objective of getting as many people as possible to apply so there is a better chance of finding a good person. This approach is fundamentally flawed.
High performers are in scarce supply. Companies must consider the hiring process from the perspective of a high performer who is currently employed, highly engaged, and has multiple job opportunities to choose from.
High performers don’t look for work the way average people look for work. High performers won’t just fire off their resume at the first hint of a job. They want to learn about the potential upside first. They aren’t interested in sideways moves — they are interested in career progression. They want growth, a chance to maximise their abilities and to become better at what they (want to) do.
If your current recruitment approach is not set up to achieve this, we recommend you reconstruct it to incorporate the following:
- Start by outlining the key outcomes the successful candidate will need to achieve in the role. Using an outcomes focus will open the opportunity up to a wider range of candidates, some of whom would ordinarily be excluded by traditional selection criteria.
- Identify how your company — and the job opportunity — is different in a way that matters to a high performer. Make sure this is highlighted in your promotional material and when interacting with candidates.
- Plan your promotion strategy. Use your networks — don’t just rely on job boards. Existing employees are often a great untapped source of high performing candidates. You should implement a system that incentivises your employees to refer the best and brightest people they know.
- Have an effective screening and selection process in place. Conduct thorough competency-based selection interviews, cognitive assessments, work simulations (or work trials if possible), and reference checks to make sure you collect as much evidence as possible to support your decision to make a hire.
- Onboard your new hire in a way that is both fun and informative. Your company’s first impression is incredibly important. You need to engage your team members early and often with a specific plan and performance objectives in mind.
“Only 13 percent of Aus employees are fully engaged… roughly 1 out of every 8.” @Checkside_Perth
Engaging your people with your business strategy
According to employee engagement specialist Marcus Buckingham, only 13 percent of Australian employees are fully engaged (meaning wholly committed to their company and its objectives). That’s roughly one out of every eight employees.
At Checkside, we believe team leaders — not foosball tables or social events — have the biggest impact on employee engagement. Research by the Gallup Organisation suggests as few as one in 10 people have the innate ability to lead and manage others. Companies must ensure team leaders have the attributes necessary to lead an engaged team, and provide them with the resources to create an engaged team.
We recommend your company put the following in place to support team leaders in driving employee engagement:
- Engage team members by having, and regularly communicating, an inspiring purpose.
- Develop and promote a shared set of core values.
- Build camaraderie and trust by providing regular opportunities for team communication and collaboration.
- Develop systems for recognising great work outcomes in a timely manner.
- Invest in learning opportunities for each team member so they are constantly developing themselves and progressing their careers.
In addition to the above, we recommend conducting periodic employee engagement surveys to measure and track how effective your team leaders are at creating engaged teams (there are a number of useful tools available online).
Driving high performance
I’ve spoken to company owners and executives who have been so captive to the poor performers on their teams, that they couldn’t take a holiday. High performance teams, on the other hand, take the pressure off you so the company operates smoothly and sustainably, allowing you to spend more time working on your company, than in it.
We recommend your company put the following in place to support team leaders in driving high performance:
All employees should have simple, important and measurable performance objectives for the current review period (aligned with company strategy).
- Effective performance reviews (linked to individual performance objectives) should take place on a regular basis (quarterly or six monthly).
- A quarterly theme (company-wide goal) is in place for the company, and all employees are updated regularly on progress.
- The company should document and communicate a remuneration strategy, and all employees should understand the basis on which their remuneration is set. Where relevant, a self-funding incentive scheme(s) should be in place, motivating increased productivity.
We recommend that you use these insights to deconstruct your current approach to HR and reconstruct the foundations of a winning people strategy. There is no one size fits all approach, but if you focus on these three foundations, you’ll grow faster and achieve higher profit margins than your competition (and enjoy the ride a whole lot more than you otherwise would).
And maybe, just maybe, you’ll make the world a better place.
Scott O’Hehir is director of consulting at Checkside. Checkside is a management consulting firm that specialises in strategic HR and executive recruitment. checkside.com.au
1The Boston Consulting Group, Inc. and World Federation of People Management Associations, 2012.
2Geoff Smart, Who, 2008.