Acquisitions Anonymous - #1 for business buying, selling and operating - Why are hiring processes broken? With Brad Smart Topgrading Founder & CEO - Acquisitions Anonymous Episode 84

Starting point is 00:00:00 Brad, we're so glad to have you here today. I love to get started with just take about a minute and give our guests an introduction of how you got to do what you do today and what you do, especially with the top grading system. Okay, thank you. Well, it was an awkward start to get into this that in college, business school, so forth you heard. Talent is all important. Talent is the most important thing. Jim Collins comes up with books. It's it.

Starting point is 00:00:28 Get the right people on the bus. So I joined a group of management psychologists. Okay. They screen candidates for upper level positions. They told me to get a PhD. I did at Purdue. And then I got started. So I was Dr. Brad Smart, expert in interviewing.

Starting point is 00:00:49 But I had never interviewed anyone. So I got it in it with the company that had been nice enough to get me summer jobs. And I was kind of shocked and disappointed. because I asked how good are we doing this? What do you mean? What percent of the people we interview and recommend for hire to executive positions turn out to be high performers? Not just okay performers, high performers. The senior partner told me, I don't know. You're the new kid on the block. Go ask our clients. I did. And they said on their own, only about 25 percent of the people they hire to upper level positions turn out to be high performers. But using us, it went up to 33.

Starting point is 00:01:29 percent. Then I went home and told my wife, if I were a medical doctor and two-thirds of my patients were leaving the hospital and body bags, I don't think that would be too cool. And so, okay, I'll try to figure out what the problems are and what the solutions are, and I devoted my life to that, found them, frankly, the kinds of solutions that we'll be talking about today matched the problems way back then. I don't think I want to tell you how many decades ago. Same problems exist today so that hiring is basically broken for almost all companies. It's disappointing and worked out of the solutions, think we have them, and be glad to share them with everybody. What we do is, we are professionals, we interview candidates for high-level

Starting point is 00:02:19 jobs, found solutions, we write about them. And fortunately, some of the keys to top grading are simple enough, the people listening to this podcast is start using them today and they're free. That's great. So you touched a little bit about what the problem is, right? Like most, if not all hiring processes are broken. So could you kind of double click on that? So what are the things that are commonplace that people are doing and hiring that just don't actually work in your opinion? Yes. To begin with, most companies use screening tools of some sort, personality tests or bots. And the trouble is, they just don't work as well. They're fine for team building or onboarding. But when candidates want to put their best foot forward, they're so easy to fake that they end up eliminating as many A players as C players.

Starting point is 00:03:20 That's problem number one. Problem number two is candidates foolish. Candidates fool you. That's a nice way of saying it. That candidates know that most companies prohibit their managers from taking reference calls. So what they have in their resume and what they say in interviews, it can't verify that by talking to bosses. Well, that was a big, big problem.

Starting point is 00:03:47 It still is today. It still is today. So candidates know, they can just go online. to say how to pass selection interviews, how to take these different tests and so forth. And they can con us. That's a little harsher way to say it. But I have a summary of research that I put together in the new book that shows, according to the Wall Street Journal and companies like Chexter, University of Massachusetts, Stanford University, all this research suggests 50% of the resumes that candidate send you have significant lives. They really didn't get that degree

Starting point is 00:04:19 or that certification. They hid jobs where they failed and so forth. So you don't know if you're talking to someone who's shooting straight with you or not. That is a big, big issue. I've already mentioned the third issue, which is verification. It's very difficult to do. Sure, you can do a background check, pay for them, and they can get some basics confirmed for you. Or if you were to call managers of the candidates, because you want to talk to them, which everybody does, They would say go to human resources, and human resources will confirm the dates and the title. And that is about it. Yeah, totally dig it.

Starting point is 00:04:59 Well, what, you know, as you think about kind of those three kind of big problem areas, right, which is, you know, screening tools only give you a certain amount of things, right? You have candidates that lie, and now I'm doing a third job of remembering the third problem. But like, so what is the, you know, what are the answers to that? So this is where the top grading system comes in. Like what are the solutions that we should be doing differently instead of kind of trusting resumes and, you know, and depending entirely on screening tools and that sort of thing? Best selection tool actually uses a truth motivator.

Starting point is 00:05:34 What you, Mike, have probably read to be the torque technique, T-O-R-C, threat of reference check. In most recent couple of books, we started calling this the top-gritting truth, motivator, right? Because torque, a threat of reference check, it's not really a threat to A players, it's an opportunity. A players love to arrange for those calls and millions have over the years. So instead of having interviews that are a game where you have to be pleasant, but you're really looking, maybe trying to trick someone into admitting some mistakes or failures and they're not doing that and it's an uncomfortable game. Early in my career, within three months, I almost quit. I said, I don't like playing this game. We're supposed to be experts and experts and we're only 33% of the time

Starting point is 00:06:31 recommending people who turn out to be A players. All that goes away just overnight. When you do the truth motivator tell candidates that a final step in hiring that they'll arrange reference calls when they're comfortable doing that, you know, when there's an offer on the table, all right? And then you do it at the end. Just before just before hiring them, you make those calls, but there's no phone tag because your candidate arranges it. And we know that for this pre-screen snapshot, their guesses as to how bosses would rate them are very accurate because literally millions of times those bosses have been talked to you. And you know, as a company who's interviewing and then screening people and reference checking them, you know it's accurate because you actually talk to those bosses. So this is

Starting point is 00:07:25 really solid. It brings honesty and thoroughness into the process. So those are, I think I hit most of the solutions. Yeah, it's great. It seems like you've done this before. That was great. Well, you know, having done those interviews, like that behavioral interview and the chronological thing, you know, there were two huge rise for me. One you talked about, which was I've never had candidates talk about an interview and at the end of two hours be like, that was so much fun. Like, I just really enjoyed talking about myself because people love talking about themselves because they're an expert in it. And they're flattered that you want to know, like, tell me about your first job, your first boss. What was college like? All of that, you know, is something that really flatters them.

Starting point is 00:08:11 And then the second thing, which I would add to what you said, like, I've found so powerful, you get to know these people so well in that interview that you can craft the role so they increase their chances of success. Like, you can know where they're strong, you know where they're weak, you start to build the systems around them and the people around them. And it can really increase, again, their chances of being that A player when they come into the company. Sorry, I know you're supposed to be doing the talking. No, but well, since you're top creator,

Starting point is 00:08:40 I'm happy to have you confirm some of these things that the consultants is saying. Yeah, so I love to dig in a little bit to how, you know, how people can deal with this top grading. Because when I talk to people about it, they're like, oh, that system's too expensive, are like, there's no way in terms of time. there's no way I can get candidates to agree to, you know, giving me four or five or six references.

Starting point is 00:09:12 Like, like in a market like we have today where people are scrambling for talent and candidates get 20 offers and get to choose one, like how have people started to change how they use the system? Because I know when you wrote the original book, it was still written at a time when the employers had all the leverage. And now we're very much in an employees have all the leverage kind of situation. Like how do you see people using the system best and the ideas that you have, which I love, but how do you see them using those ideas well in the context of our current conditions? All this can be done in a couple or three days. Maybe the top-grade interview of someone at a high level, they would expect to not just have a 15, 20-minute interview and you give them a job offer. They know that's stupid, you know.

Starting point is 00:10:01 But if companies are desperate, they tend to be making those side of those compromises. But the things we've talked about, that screening tool, it can be done today. And a phone screen interview can be done today. And the pre-screen snapshot has a recommended phone screen interview guide covering the most recent two jobs. It has the truth motivator in the instructions. So that motivates A players to stay in and others probably drop out. And if you have the resume, you can still call them, but that's just a waste of time. So now that the time-consuming top grading interview, prior to the pandemic, it was thought everywhere in the world.

Starting point is 00:10:52 It was an executive position that has to be face-to-face live in person. No, because that literally was not going to be possible. It had been illegal during the pandemic. And we and clients found that the interviews can be done virtually with Zoom, and that is good enough. So it's easy to schedule. And then for arranging reference calls, after having conducted the top-creating interview, you've heard about every boss.

Starting point is 00:11:22 Well, you're not going to want to talk to a boss from 15 years ago. But the most recent bosses, like in the past 10 years, sure. And the candidate is already agreed to arrange as many calls as you want. Maybe three bosses that really stood out in the most important jobs, the most important accomplishments and successes and so forth. So they'll be very prompt for the reference calls. So all that stuff take place in a couple of days, at an executive level that would be super fast. But top graders can do it. You go to a mid-manager level

Starting point is 00:11:57 or an individual professional. Everything can be shortened up. Maybe you only want to do two reference calls. They arrange them. You can simply do the whole thing in one day, right? Literally in one day. Yet more candidates, small business owners who might be watching this podcast. You've got to get in the recruitment business. All right. And what that means, the easiest but most difficult ways to do that are one in your team. Okay, maybe you have 20 employees in your company. And consider it maybe part of your marketing budget. What does that mean?

Starting point is 00:12:35 Were you thinking of how much to say, Brad? Brad, I was hoping to jump in here because we used top grading at my business to have really enjoyed it. And you were talking about getting a ton of resumes. And one thing that I find very interesting about top grading is how it really tries to go beyond the resume. You spend a lot of time talking particularly about some of their early life, their college, like what made them as a person. But I think for sometimes for some of the folks at my company that do top grading interviews, they have difficulty trying to figure out, well, what am I really looking for in this person's early life? You know, they're going to tell me some stories about college, but like, what's a good answer? Like, what do I hope to see?

Starting point is 00:13:22 Because as interviewers were so trained to focus on the most recent stuff, but top grading still puts a lot of weight on sort of the whole person and their deep history. So what should we as interviewers be looking for in a person's early life? How they were hardwired in the first 18 years of life in a way that it affects their working business today. But even where there are weaker points, you'll get a sense of what they are in the response to that question. I've written 6,500 reports after four or five-hour interviews.

Starting point is 00:14:02 Every one of those reports in the interpretive career history section answers that question bill. Here's how this person was hardwired. And by the time I see them, you know, they were found by a search firm. and they went through some things with the company. And for eight players, it tends to be mostly strengths, but we all have weaker points. Eight players have weaker points.

Starting point is 00:14:24 They have areas for improvement, all right? And you get some early insights into that by asking those questions. Then as you go through jobs, of course, you ask for this. Their accomplishments, but you also ask for their failures. You see how this is all related. It comes together. So by the time, well, I'm telling you, Bill and Mike, but you know this because you've been through it.

Starting point is 00:14:44 By the time you're at the end of that interview, chances are pretty good. Even the candidates are going to recognize some patterns. You know, they like most of the patterns, but they probably see some patterns of things they've been working on and should probably continue working on, which to your point, Bill, then as soon as they join in top grading, the encouragement is for human resources if they're there, but mostly the hiring manager to give the feedback. Here's what we learned in the interviews and the reference calls. and you put together an individual development plan.

Starting point is 00:15:18 What do you think is important to work on to maximize your strengths and to minimize your weaker points? That's helpful. That's super helpful. In terms of, I'm just thinking about this idea of kind of inverting things. Top grading is a business. And you, in theory, have competitors, right, who maybe are not completely on par with top grading. But if you couldn't use top grading, Brad, what type of system or methodology would you use for hiring?

Starting point is 00:15:45 that's very important for people to really get it by participating in it. All right. And some of the things that are most important, if the person who's watching this podcast just does two things, you will hire better. You're not going to get 85%. Eight players hired. But one is use a top-gritty motivator.

Starting point is 00:16:08 Let candidates know that a final step in hiring, they'll have to arrange reference calls with bosses. players who love to do that. The Sers won't, and they'll probably drop out. And the other is make those calls. You'll want to make those calls. So we do whatever you do for interviews, and we recommend that chronological interview covering each job, same basic questions, but then ask the Kennedy to range the calls just with the

Starting point is 00:16:37 people that you've heard about in the interview that you want to talk with. Brad, one of the things, you know, this is a small business. and M&A podcasts around small business. A lot of times our listeners are people that are buying businesses or have just bought one. How would you see top grading being used when you're acquiring a business that's bringing on 20 brand new people and you need to evaluate them? Like, how does the system fit in there before you even own the thing? Do you see people be using it as well to kind of evaluate teams and that sort of thing?

Starting point is 00:17:09 Yeah, a lot of acquisitions, of course, are done with the numerical analyses, analyses, analyses. And on the people's side, it's really important. All that we've had private equity firms as clients forever, and it's undone as well. So there are professional interviews of the managers within companies that, are that might be purchased and much shorter interviews with others the interviews of of those 16 other people if they're four managers and what they like and just like about about their company all right and you can do this as it as a business owner or some of your company interview everyone

Starting point is 00:18:00 you should check out their company online now there there are a lot of different ways you can find out what the organization culture is like what decisions are like and talk to the bankers they've worked with and so forth. But the top grading interview using the truth motivator and the candidate arranged reference calls, the best way to get a handle on managers. If you don't have professionals doing it, who've held in thousands of interviews, do it yourself and get a much better handle on who it is. and maybe you want to keep managers, maybe not, and all that you have some idea about,

Starting point is 00:18:42 but have an idea on which managers you want to keep or not keep based on doing all the top grading steps because it could be big regrets out there. It might have been the right company, but the wrong people and so forth. So the recommendation is to use it and make it just a condition of acquisition of the company. Yeah, I love it. Switch to another topic that I've noticed a lot is, you know, a lot of my friends are CEOs, small business owners, and they are all complaining universally. They can't hire, can't find talent.

Starting point is 00:19:15 And we've talked about some of the things that you recommend. But, you know, one of the things I, when I dig into them and I'm like, well, what's going on? They show me their job descriptions. And I'm like, well, do you think anybody really wants this job the way you describe it? So I'm curious how, you know, how you're seeing people make mistakes around kind of that top of the funnel aspect of recruiting and especially the job descriptions. Like what sort of things are you seeing people doing? And then what would you recommend people who want to hire better, like do in terms of

Starting point is 00:19:44 that job description? Okay. All right. I said early on creep into some other top grading solutions. And you, Mike, and Bill know what I'm about to say is the start point for top grading is typically a job scorecard. A job scorecard nails down the measurable accountabilities. Okay, so it kind of sounds a little bureaucratic, but do it, you're going to do it anyway. Even a small company, wants to be a great small company, are going to have some

Starting point is 00:20:17 sort of performance management system. You'll be providing feedback to people of how they've done in the job. And so often we found over the years, this is so common with new clients, that they hire on the basis of job descriptions that are vague, they're unexciting, their career section of their website is blah. So let's kind of jack that up, make it more exciting, and work with the team to determine as best you can. If you're a fast-growing company, they're moving targets out there. Understand it.

Starting point is 00:20:52 But A-player candidates want to know more than the job description, which is too vague from their standpoint, so you're more apt to persuade an A player to join you if you've taken the step of identifying measurable accountabilities. Here's what we expect, and that's A-player performance, and it's about the sales, it's getting in marketing or fixing things in IT, just kind of spell them out so that there are no surprises if, you know, three or four months later, you're doing performance reviews. You're not talking about things that are surprised, to the person. So it's the measurable accountability and how the job is to be performed. Will I be traveling or not? Obviously, this is virtual or not. But what a shame, and this is why we got into

Starting point is 00:21:42 recommending job scorecards is, darn good people quit within the first two or three months. I had no idea that as a sales manager, that I was going to have to deliver all these reports and I was going to have to travel 80% of the time. If I had known that, I wouldn't have joined you. You can avoid that by taking the converting vague job descriptions to put solid job scorecards. Yeah, I always saw I'm in the e-commerce business. We do a lot online advertising.

Starting point is 00:22:17 I try to tell my people, we got to spend as much time on the job ads as we do on the product ads because we're trying to recruit people and they're going to sell the products. So it's like so yeah good that's like part of your marketing budget think of recruitment as part of your a third of your marketing budget rather than own expense now it's an investment to get leads to join the company. Yep. So you mentioned in the last answer, you know, that a lot of jobs are are being virtual now. It's certainly something we've experienced. And I'm sure when you wrote and developed top grading, you developed it. And one of the fundamental assumptions that you didn't realize was these.

Starting point is 00:22:56 interviews are being conducted in person, right? Because that's how we used to do all of our interviews. I find that we're doing almost all of our interviews now virtually. And I wonder if you have any thoughts on how that impacts the top grading process. I'm laughing because I was discussing this topic with my son who is his top grading company, GH Smart. And he and I agree, we're to old school. We talk with people at the time, but to do a top grading interview, we'd still prefer to be in person. But frankly, the technology has gotten to be so good. If you remember, remember go to meeting and the technology was not that good at all. It was breaking down and visually it was not very good in the Oreo quality. You know, suck. But the people were hiring and he's

Starting point is 00:23:53 I aren't very comfortable with doing the virtual interviews. And eventually for senior people, there'll be something in person. But I think the kind of interviews that you've done virtually are good enough. They've proved to be absolutely good enough. Something else is about a surprise. Mike you asked about surprises. And for training, we have several people. My president, Chris Mercer, continues.

Starting point is 00:24:23 to get 9.5 ratings on a 10-point scale doing virtual two-day top grading workshops, moving people into practice rooms and taking breaks and all that sort of thing. That would drive me nuts. I watch him do that sometimes and a couple of his professionals doing that. I say, good for you. Glad you can do it. So virtual is becoming the norm more and more. And we've always been a virtual company.

Starting point is 00:24:50 My sense company is about 100 people. They're virtual. all over the world. We have people in India. Virtual is nothing new to us. And so we've, we've always been into doing the, um, the communications virtually. We're just so happy that with Zoom that's getting so much better. You find the same thing here. People are definitely getting much more comfortable doing remotely. Yeah. Go ahead, Bill. Yeah. Yeah, I was going to say it's, it was a skill, though, because we went from virtual, from in person to virtual. And I felt like, right off the jump, I was not as good virtually as I was in person. And it's been a skill that I've had to

Starting point is 00:25:30 practice, you know, building that connection. And I do find, so when we do top grading special for senior hires, we really do try to bring them in in person because also a four-hour Zoom, you just want to gouge your eyes out either way. And you just, so we do try to do it in person. But I'm glad to hear you say that the system, you know, does still work virtually and you haven't really seen any any breakdowns. Michael, you can go ahead. Yeah, great. You know, Brad, so, you know, I'm Gen X. So, and just for context, I've spent the last like two weeks nerding out about generational differences and stuff like that. And, you know, one of the challenges I've kind of deployed the system and run into it is, you know, as a Gen X, I'm very mission oriented. So like, the top grading is very good

Starting point is 00:26:16 about selecting mission-oriented people because they're like, shit, I want to be on a, I want to be on a team that's going to get some stuff done. But, you know, millennials and younger folks, like, their priorities are very different, right? They're bringing their whole self to work. Like, they're bringing their politics to work. They want to be a member of a tribe. And I'm generalizing, but like, like, this is a real thing. And a lot of the things that used to be, you know, default in the top grading system that I would use, like asking salary history and stuff like that. I don't ask that anymore just because I got so much pushback on that kind of stuff from younger people, especially who are like, I'm not even going to consider this anymore,

Starting point is 00:26:50 because that's wrong for you to ask me that. You know, your generation, my generation, like, we thought that was okay. The younger people are like, forget you, boomer, and they say that to me. So, like, how do you think about customizing, top grading and using the process in a way that's going to speak to, especially younger people who have different sensitivities than maybe some of the older generations like us? Yeah, that's a good question. We'll start with. legalities and have a little chapter on that in the next book. Small companies should have access to an employment attorney. It's illegal in a number of states and separately different cities to even ask salary history.

Starting point is 00:27:38 For all the bigger clients we have, if you're doing business in New York or California, you can't ask for salary history. That's not a huge impediment, by the way. What is a huge impediment is trying to impose, maybe we'll call it traditional values on people who aren't going to go along with them. Got to be flexible. And so the discussions, the top-grading interviews,

Starting point is 00:28:08 will get into more things that the traditional say, well, that's not that related. to the job. You know, EEOC loves top grading because of the structured interviews. People are asked the same questions. The top grading questions, as Bill, you know, are broad enough that you'll get at those things that they like, like in an organization culture, what they're looking for. You get that job after job after job. Why did you take that job? Well, they permitted me to work virtually or wear certain clothes or part of the tribe they like, they like, they like that continued. Maybe they assume it's going to be continued with you. Oh, right. So having a whole lot of

Starting point is 00:28:50 business owners who are just flexing, kind of pulling their hair out at the same time, but flexing in order to attract A players who have a different set of values. Not that they're wrong values. They're just kind of weird. If it's talking with a woman who has about 50 people in her company, just the other day who said, they'll just not show us. They'll just not show us. up sometime and say they just take it a personal day. But let us know. So in a nice way to let people know that even though you had a previous job where you could just not show up, right, because we're having meetings where your input is considered very important, we need you there. Right. Just kind of reminders like that and just expect to have to be flexible to change in order to

Starting point is 00:29:43 attract the people you really want, the A players. And so as you're evaluating people, maybe you want to change in a direction. And so what you have is your stated mission and values is starting to let you down. And so do you need to hire disruptors, people who are A players who will come in and help others change? okay so hiring disruptors for the future not for how they fit you right now is really important if they're effective in a change sort of way and luring people to adjust to a slightly different side of a group of values those are the people you want and top grading is ideal for that because you get where they've

Starting point is 00:30:34 been maybe it's a 10 year career where they started at what is important now and so that you'll have a much better chance of having an A player who fits your task moving culture. Yeah, totally dig it. Well, Brad, we're out of time. Thank you so much for doing this. I'm so grateful not only if you've spent the time with us today, but, you know, putting forth the system, I can't believe how much value I've gotten just from the cost of a, you know,

Starting point is 00:31:01 a book that I bought, you know, a dozen years ago. So thank you. Thank you so much. In closing, is there anything? that our listeners can do to support you? I know that you have a consulting business that you guys operate. There's also, you have a new book coming out that I'm excited to read when it does come out. What kind of things can our listeners do to best support you?

Starting point is 00:31:22 Yeah. I would love to have your listeners take advantage of the free trial, the pre-screen snapshot. It's right on the homepage. You can click on it or read down C. much more about that. My mission is to top grade the world. What that is, I want these keys that we've talked about today for every manager to use them. Instead of having only 25% eight players, have 75% plus eight players. Your career would be most successful. It would be a heck of a lot more fun. And I'm getting pushed back, you know, from others saying, why in the heck of you

Starting point is 00:32:03 giving away the IP? Well, did that today. Do that in the new book. easy, common sense, try it. And in addition to being a free trial, if you want a license to do it, I think for a small company, it's like $1,200 a year, avoid one miss hire and the ROI is through the ceiling. But we have also guaranteed. If for some reason you want your money back, you get your money back. So I'm doing everything to get it out there. Many decades into my career, the keys to top grading haven't stayed, haven't gotten the traction that I want. Yeah, there's traction. I can make an argument for why it is, but not nearly enough. The biggest kick that we get is hearing from companies. Yeah, they're making more money because of top credit. Sure,

Starting point is 00:32:48 but it's really more on a human level. My life is better with 75% A players than 25% A players. And by using the truth motivator and doing those reference calls and doing something approximating a top grading interview, it's there. So that's what I would ask of you. But thank you for asking me. I'm going to ask of you and your viewers. Super cool. Well, thanks again for being here, and we'll get this one out. I know I'm excited about it, and I hope our listeners get a lot out of it, too. So thanks. I hope so too. Thank you for inviting me. Enjoy meeting you guys. Great to meet you, Brad.

Acquisitions Anonymous - #1 for business buying, selling and operating - Why are hiring processes broken? With Brad Smart Topgrading Founder & CEO - Acquisitions Anonymous Episode 84

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