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Saturday, August 16, 2008

I obtained this image from; a great resource for inexpensive royalty-free (but copyright valid) graphics.

This intriguing and important blog posting by Bruce Lynch at the PSMJ Resources Blog, Solid Hiring Advice in Any Industry, raises some important yet complex questions. I'll stretch copyright here and repeat the post for clarity:

For the past 20 years, my wife has worked for a firm that provides financial software products to the structured finance industry. It’s a great story – a couple of MIT guys working out of modest digs in 1985 are in 2008 the undisputed leaders in the cashflow modeling industry – managing a firm of over 100 people on three continents.

So what’s their secret? I’ll let a long-time employee tell it:

When we hire people, we try to bring in candidates that have some connection to the company – a friend, former co-worker, colleague in a client firm, etc. – and see if they are what we are looking for. A few years ago, I had a friend-of-a-friend who was an assistant to a fixed income money manager before he was laid off so I had him come in for an interview. Our hiring manager told me that he totally bombed on the problem solving questions so they didn't bring him back for a second round. The candidate called me a couple weeks later for a postmortem but was completely baffled about why the fact that he couldn't answer a question about how to efficiently weight 9 pennies had anything to do with whether he was a good bond analyst or not. I tried to explain that our philosophy in hiring is that we're looking for good generic problem solvers and finance knowledge coming in the door isn't important. I knew that he still didn't get it when we hung up and the next couple times I talked to our mutual friend, she pressed me on it and couldn't get her to understand that one of the keys to our long-term success over the years has been our hiring process. We haven't hired that much dead wood and while we've probably passed on a lot of people who ultimately would have turned into great employees, we've minimized the number of people on board who are useless. She didn't get it and still doesn't.

Makes sense to me, what do you think?

Intriguing, indeed, because this hiring policy seems to have two apparently contradictory elements: You need to know someone in the organization to 'get in' -- but your pass or fail will depend less on your technical knowledge than on your ability to answer a seemingly irrelevant (to the job) question (and I would expect they have more than one of that sort of problem-solving question to get around the problem of interview prepping.

Nevertheless, I can see the approach working well here for businesses with a critical mass and size of employees -- if you have a hundred or so people, the network is large enough that good employees will know others who are potentially suitable; and the base of candidates worthy of consideration is large enough that enough people will present themselves ready to work for the business (knowing it is viable, profitable and a good place to work). And a person working at a healthy organization will generally only recommend people who would seem good at first sight, because you wouldn't want to bring in deadwood or irritating people to work with you just because they are friends or family.

I've spent much of my mental energy in the past couple of years developing and 'tweaking' our own hiring system because effective and successful hiring is, I believe, your most effective marketing resource. With the right people, the business will operate in harmony, and current clients will be served well -- creating the ambiance and spirit that attracts new business and high quality relationships.

We'll certainly invite current employees to suggest people for opportunities and will give referred candidates a plus on the evaluation matrix. For other considerations, we rely on a combination of evaluation tests, the most important being the short-term working assignment, perhaps more accurately described as the working interview. We want to see how well people handle the work -- and the relationships within the organization -- before we rush to hire anyone.

For salespeople, we've relied on for our preliminary screening. A poor score on this test meant you were 'out' even if other indicators suggested you should be given a chance. Last week, I changed the policy (actually in line with the test organizer's own recommendations) and decided that while the test is important, it should be seen in context of other variables. For example, if a person has an exceptional track record of experience, or specific qualifications relevant to our business, or a highly qualified recommendation from someone within the company, we can proceed to the (paid) working evaluation regardless of the test results. But if the person lacks experience, or we aren't sure of the relevance of the individual's experience, a good score on the test is essential. But we won't hire anyone, no matter how well they score on the test, or how eager they are to work with us, unless they complete the working assignment satisfactorily.

I continue to believe that a systematic, fair, and disciplined hiring policy is essential for any business which wishes to grow to greatness. But we must constantly review, revise, and adapt the policy -- it is a working process, not a static structure.

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