Brokerage Ops the June 2010 issue

Who’s on First

Smart hiring gets you an A-team. Who is always on first. What is on second. You’ll have to read the book to find the fate of third.

Isn’t that a perfect axiom for the insurance industry? In our business, where people are our only real asset, the “who” decision is the ultimate factor between success and mediocrity.

We all know that insurance continues to face significant economic, market and political challenges. These issues come and go in cycles, and even though they occupy an amazing amount of our worry time, we have only a limited amount of control over them.

However, the whoissue is one we face constantly, and it’s one where I believe we can really make a difference. The low number of young people entering our industry contributes to bad hires that we all make at one point or another. None of us would debate the value of recruiting the right people and the true cost of a bad hire.

How do you hire smart and avoid the pitfalls that many agencies experience? It’s always amazing to hear the horror stories about bad hires, and I’ve often wondered how bright people can make such boneheaded decisions. I was recently discussing this with Paul Hering, CEO of Barney and Barney, and he recommended a great book, Who: The A Method for Hiring, by Geoff Smart and Randy Street (Ballantine Books, 2008).

Paul shared this bestselling book with his leadership team to help them make great hiring decisions. Now, Barney and Barney is one of the leading privately held agencies in the country, and they have built their reputation by growing organically and hiring the right people. I knew I had to read the book.

A basic concept of Smart and Street’s approach echoes what Jim Collins said. The “what” in Collins’s quote refers to the strategies you choose, while the “who” refers to the people you put in place to make those decisions. It’s starting to sound like the old Abbott and Costello comedy routine, but it’s no joke. “Who’s on first” is really the defining statement of your agency’s direction.

But the book takes the idea much deeper, adding research to make the business case for the book’s proposal, which is to take a measured approach to hiring only the best. Smart and Street, the executive leaders of ghSMART, a management consulting firm, used extensive research to identify four parts of the hiring process and pinpoint where failure typically occurs.

A key to good hiring is finding “A-players.” But A-players are more than just top performers. They also need to fit in with the culture of your agency. Smart and Street define an A-player as a candidate who has at least a 90% chance of achieving a set of outcomes that only the top 10% of possible candidates could achieve.

Smart and Street define an A-player as a candidate who has at least a 90% chance of achieving a set of outcomes that only the top 10% of possible candidates could achieve.

So how do you get A-players? GhSMART calls its solution “The A Method for Hiring.” And to honor the mohawked muscleman Mr. T (you saw this coming, didn’t you?), I pity the fool who doesn’t study the A Method to build an A-Team for his agency.

The A Method has four steps: scorecard, source, select and sell. I’ll describe each one of them and put my own spin on how I think these can be used to build an A-Team for your agency (or, if you’re fed up with insurance work, to build a commando team to tackle special missions and defeat bad guys).

Scorecard

The scorecard is a document that describes exactly what you want the person to accomplish. It is not a job description, but rather a set of outcomes and competencies that define a job well done. It is your blueprint for success. It takes the theoretical definition of an A-player and puts it in practical terms.

Scorecards describe the mission for the position, outcomes that must be accomplished, and competencies that fit with both the culture of the company and the role.

The mission is an executive summary of the job’s core purpose. It has to be written in plain language. The mission statement is a key element in your plan because creating and following this helps you avoid one of the most common traps, which is hiring the generalist, not the specialist.

The outcomes section describes what a person needs to accomplish to be considered successful.

Competencies define how you expect a new hire to operate in the role and the achievement of the outcomes.

A shortened version of a scorecard for the position of sales manager in an agency might look like this:

Mission for Sales Manager

To double commission revenue over the next four years by developing new business and cross-selling within our existing client base.

Outcomes

1.      Grow revenue from $20 million to $40 million by the end of year four (20% annual growth).

2.      Generate 20% new business development annually from prior year commission and fee income.

3.      Hire two new producers per year that validate within 24 months.

4.      Increase cross-sell of services from 20% to 50% within four years.

5.      Develop a training program for both new producers and existing producers.

Competencies

  1. Proactive/Creative—Bring new ideas to the agency.
  2. Communications—Demonstrate an ability to communicate goals and objectives effectively throughout the sales force.
  3. Mentoring—Effectively mentor new and existing producers.
  4. Accountability—Hold yourself and others to desired goals and objectives.
  5. Integrity—Always do what is best for the client.
  6. Teamwork—Effectively work with the overall agency management team.

A properly constructed scorecard will help set expectations for new hires, monitor employee progress over time and enable objectivity in the annual performance review.

Source

Sourcing is the second step in the A Method. Great candidates don’t just show up. It takes significant effort to recruit them. That’s why many agency owners and CEOs should consider recruiting a top priority, up there with the most vital management duties.

The key is systematic sourcing before you have positions to fill, which will ensure that you have high-quality candidates waiting when you need them.

In other words, identify the who before the when. The typical approach is a passive one. It involves waiting until you need to fill a position before starting the recruiting process. This approach often takes three to six months. I’m sure anyone reading this has done it this way before—or maybe that’s standard operating procedure.

What I do differently is constantly hunt for talented people to bring into my company. I set a goal of personally recruiting 30 people a year to Aon, and I ask my managers to do the same.

Next time, take a more active approach. The most proactive way is to continuously ask for referrals from your personal and professional network. This has proven to be the most successful approach.

Patrick Ryan, former CEO of Aon, was quoted as saying (shortened for the purposes of this article), “Am I really smarter than the next guy? There are many smart people in the business. What I do differently is constantly hunt for talented people to bring into my company. I set a goal of personally recruiting 30 people a year to Aon, and I ask my managers to do the same. We constantly ask people we know to introduce us to the talented people they know.”

No one would question that Aon, which has been around since 1964, has been a success story. It is a simple sourcing lesson that we all can learn from.

Select

Selecting talent, the third step in the A Method, involves a series of structured interviews that allow you to gather the relevant details about a person so you can rate your scorecard and make an informed hiring decision. Most traditional job interviews are not predictors of job performance. The A Method uses three candidate interviews to collect facts and data about a candidate’s performance record.

·         The Screening Interview—a short telephone interview designed to clear out B- and C-players from your pool of candidates. It saves time by eliminating those who are not appropriate for the position.

·         The “Topgrading” Interview—a technique developed by ghSMART that involves a chronological walk-through of a person’s career by asking five simple questions about each job held in the past 10 to 15 years. These questions are:

1.      What were you hired to do?

2.      What accomplishments are you most proud of?

3.      What were some low points during the job?

4.      Who were the people you worked with?

5.      Why did you leave that job?

·         The Focused Interview—The Topgrading interview will get you most of the way toward making the right decision. The focused interview becomes more detailed and gives you a last look and a final chance to pursue additional questions. It also gives you the chance to involve other team members directly in the hiring process. It should be focused on the outcomes and competencies of the scorecard. Questions should be directed to answering any lingering concerns about the candidate’s ability to succeed according to the outcomes identified in the scorecard. Finally, it should provide you with additional information about the competencies you’ve identified that will spell success with your agency.

Sell

Many interviewers fail to sell A-candidates, which is the fourth step in the A Method. This step requires you to persuade the top candidate to join your team. The key to selling candidates on your agency is putting yourself in their shoes. Smart and Street identified the five F’s of selling that you should consider, depending on the position you are hiring for:

1.      Fit—This is the most important. It ties together the company’s vision, needs and culture with the candidate’s goals, strengths and values. Explaining to a candidate where you’re going as a company and how they would fit in is the simplest approach.

2.      Family—Change scares many people, particularly when it requires relocation. Ask how you can make this job change as easy as possible for the candidate and his or her family.

3.      Freedom—As warranted, make sure the candidate will have autonomy to make his or her own decisions. This is critical for senior-level positions or when hiring a producer. Remember, the outcomes were already outlined in the scorecard.

4.      Fortune—Make sure the candidate understands the upside of coming on board your firm. In my example of a sales manager, indicate, “If you accomplish the outcomes, we would expect that you would make X dollars over the next four years,” or, “If the agency accomplishes its goals, we believe that you could become an equity owner in the firm.”

5.      Fun—Work has to be fun. Describe the culture as hardworking, but also as people enjoying each other and having fun at work. You cannot assign a dollar amount to employees enjoying their job.

Without a doubt, the incorporation of talent management into your business strategies is a springboard for success. Smart and Street summarize the key steps to installing the A Method in any company, including these:

  • Make people a top priority.
  • Follow the A Method yourself.
  • Build support among your team about the strategy.
  • Train your team on best practices.
  • Remove barriers that impede success.
  • Implement new policies that support the change.
  • Recognize and reward those who use the method and achieve results.
  • Remove managers who are not on board.
  • Celebrate wins!

It will take a team effort from senior management to put the A Method into place in your hiring strategies. It also will take an active, not passive, approach to seeking talent, and one key is finding it before you need it. Another is building a scorecard for each position, identifying the key mission, outcomes and competencies. That is no small task. Then, implement a disciplined selection process and sell your desired candidate on your firm. If you pursue the talent through these steps, you’ll be sure to get the best in the business.

One last thing to always remember: In our business, who’s on first and what’s on second.

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