Charlie, the family firm’s sales manager, isn’t cutting it. He needs to be replaced, probably from outside. The CEO acknowledges the problem but refuses to do anything.
Why the reluctance to take action? My guess—based on several dozen similar cases I’ve observed—is that the CEO suffers from “recruiting fatigue.” He hired Charlie with considerable effort. Now the mere thought of recruiting someone else all over again is so exhausting that continuing to live with under-performing Charlie becomes, for the CEO, a viable alternative.
As a consultant, I begin my conversation with the business owner or chief executive in such cases as a discussion of a people problem. This may involve Charlie’s weak results: What he was expected to contribute isn’t happening.
Or it could involve Charlie’s troublesome behavior. Maybe he’s just a poor fit. Perhaps his immediate subordinates don’t enjoy working with him, or his executive peers don’t see him as a welcome member of their team. Usually, by the time I’m involved, this situation has festered for a year or more.
After a full discussion of the details—often with up to a half-dozen people who are affected and care intensely—we arrive at an understanding of the situation. There’s a mismatch. Charlie shouldn’t be in that job. It’s a no-win situation. But what to do about it?
In a large corporation or agency, the problem is referred to human resources and Charlie is transferred to another job where he’s a better fit and more likely to succeed. But a family business, with fewer executives, usually lacks that option. So instead of acting, the top executives talk a lot about “problems with our culture,” “the devil you know is better than the one you don’t,” “perhaps it was a mistake to go outside,” etc.
For the many family businesses that have never brought in a stranger at an executive level, the inertia is compounded by fear. It’s a big step, and it’s expensive if it fails.
Those family firms that have learned how to confront this problem have enjoyed the benefits of fine additions to their corporate gene pool. But for the CEO or firm with light outside recruiting experience at the senior executive level, a failure is frightening.
So we review the hiring process the company used the first time around. Most commonly, the hindsight reveals that someone made a selection error in one or more of these three areas:
1. It was a yes-no decision. The overriding question was, “Shall we hire this person or not?” This pro-and-con method is weaker than working with at least three alternative choices. Comparing Charlie against two new potential replacements will raise more questions, sharpen the decision and improve the likely outcome. My advice: Insist on three choices.
2. The job was do-it-yourself. Sometimes the company tries to retain complete control of the recruiting process, usually to avoid the large fees (and, sometimes, the bad experiences) involved in dealing with executive search firms. Some of these fears may be valid, especially when the agency works for a contingency fee. Still, very few CEOs have much experience at recruiting senior executives, nor do they usually employ an H.R. person with heavy experience in that area. So some form of outside, independent advice is desirable.
The recruiting process has been segmented in the last few decades. Related tasks that had been handled by one specialist now may be performed by several firms. This separation of tasks has accelerated with the rise of the Internet. For a company that prefers to manage the recruiting process itself, it’s possible now to choose to do some pieces and to contract out others.
Specialty recruiting firms provide Internet access to job descriptions, comparable compensation figures, résumés of people in the job market and advice on how to use these services. Others will provide screening interviews, background investigations, credit checks, medical exams, reference checking, aptitude testing, psychological testing for compatibility within the executive team, salary negotiations, employment or termination contracts, and search services.
Search services involve active identification of likely successful executives who may or may not be known to the hiring firm. The search specialist approaches them without initially identifying the client sponsoring the search. The desirable person often isn’t actively in the market for a new job but may become interested after a discussion. Confidential initial screening is conducted by the search consultant without identifying the company looking for the right executive.
In short, there’s a reason all those search firms and agencies are out there. If they weren’t adding value, they’d disappear.
3. Due diligence was inadequate. Before Charlie was hired, did the company have him tested by specialists? Was a physical exam required? Have specialists checked his references as well as his credit and public records? Did competent independent sources conduct interviews to probe for Charlie’s professional and management competence? Was information gathered to forecast how he would fit into the team?
The plain fact is that every month, senior executives are hired with less investigation than goes into buying a $10,000 copy machine.
What’s the cost of this slipshod approach to recruiting? Some calculations of dollar cost are possible, with more to come for severance payments and recruiting a successor. But the intangible costs are larger: the hundreds of hours of distraction for everyone involved, and the opportunities lost when Charlie didn’t or couldn’t perform.
Some companies take half the cost now. They proceed with Charlie’s severance and then replace him by promoting from inside someone who’s under-qualified. Consciously or not, this promotion is the CEO’s silent mea culpa for having committed the “sin” of going outside to hire Charlie in the first place. Usually this shortcut leads to another crisis within a few years. At that point the company finally gets professional help, searches outside and solves the problem.
To the CEO who knows this must be done but cringes at the thought of family shareholders screaming, “Why did you hire Charlie?,” I offer this simple advice: Get on with it. Get some help and hire the right person. And tell those shareholders: “It seemed like a good idea at the time.”
James E. Barrett (jebcmc99@ aol.com) heads the family business practice of Cresheim Consultants in Philadelphia.