Magazine

‘Topgrading’ in a Down Economy – A Good Time to Hire!

By Brad Smart

During the past 35 years, I’ve observed talent-management practices in up markets and down markets, and the two conclusions I’ve reached and discuss in this article are:
1. Almost all companies talk a good (talent) game, but most admit they fall short.
2. During a down economy is a good time to “topgrade,” as I call it, because there is more talent available, at lower compensation levels.
Almost all companies talk a good (talent) game, but ...
I talked to Jack Welch recently about the go-go years of the 1990s, when a few General Electric companies had gotten a bit casual in talent management: B players had received A player ratings that were not deserved.
Is there any chance you became a bit casual in your talent management processes during recent up-market years?
“Making Talent Management a Strategic Priority,” an article in the fall 2008 issue of The McKinsey Quarterly, revisits “the war for talent” a decade after their first ground-breaking research. These quotes might disturb you:
“... Respondents ... regarded finding talented people likely to be the single most important managerial preoccupation for the rest of the decade.”
Yet: “Too many firms still dismiss talent management as a short-term, tactical problem, rather than an integral part of a long-term business strategy. …”
And: “To a considerable extent, management must blame themselves for their current talent woes.”
During a down economy is a good time to ‘topgrade’ ...
Sorry if I seem like a nag with trite admonitions. Your investment advisor might be saying, “The market is down, buy now! Buy low, sell high, right?” You know that when your portfolio is down 25%, it probably is smart to cash in some bonds and invest in equities. But most of us are chicken, fearing the worst is yet to come.
Similarly, if your business is down, the idea of incurring the cost of hiring is painful, so limping along with some underperformers seems best. Yet, we’re talking to managers every day who are “topgrading” now, right in the midst of an economic slump. I should have a teleconference in which they talk, but if you don’t mind my speaking for them, here’s why business leaders who are topgrading in this down market would say now is a good time to topgrade:
More talent is available at lower compensation ...
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 more talent cheaper. A client is recruiting a director of human resources, and despite the fact that its business is down, it has more and better candidates than it did just months ago (when the economy did not appear so bad). 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!
Underperformers expect to be let go.
If two of 10 sales reps account for 80% of sales, and your business is very profitable, the two or three sales reps selling practically nothing will not be surprised when receiving the pink slip. You’re running a business and not a social service organization, so do what is right for the business.
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 return on investment (ROI) when they hire.
Sales is the most important area to topgrade in a downturn.
Executives with two well-known companies that implemented topgrading programs (based on the 2008 release “Topgrading for Sales”) recently told me they have replaced mediocre reps with top producers, and those companies are not even lowering their sales targets for the year!
These will be case studies in future articles.
You can improve talent in your organization cheaper (because compensation is down) and easier (because zillions of candidates are available) in a down market.
Brad Smart is one of the foremost experts on hiring. He can be reached through his website: www.smarttopgrading.com.

Article Abstract from April, 2009




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