eBook Edition

Mis-Hires!
Hire 90% High Performers with Best Practices
by Dr. Bradford D. Smart

Avoid Costly
Book Cover

Brad helped us develop the tools to differentiate talent at GE. Jack Welch, author of Winning and former Chairman, General Electric Topgrading is the definitive manual for becoming an A player and for recognizing those traits in others. Larry Bossidy, author of Execution and former Chairman, Honeywell In the fight against cardiovascular disease and stroke, Topgrading helped us raise an additional $50 million over the previous year. Cass Wheeler, CEO, American Heart Association Of all the changes Ive made to improve our company, none has been more important than Topgrading. Jon A. Boscia, former Chairman & CEO, Lincoln National Corporation If you read it with the right kind of attention, Topgrading is the most important book ever written. Recruiter magazine At American Power Conversion (APC), Topgrading has dramatically increased our success hiring high performers. Our commitment to the Topgrading process is greater than ever! Andrew Cole, Senior Vice President Human Resources, American Power Conversion Topgrading is a continuous process of identifying and developing top talent to enhance overall organizational vitality. Bill Conaty, Sr., VP Human Resources, General Electric Company MarineMax is a huge fan of Brad Smarts Topgrading system. We began the process in 2002 and were totally convinced Topgrading has significantly improved our bottom line. William H. McGill, Chairman & CEO, MarineMax Inc. Brads Topgrading workshop introduced a comprehensive set of toolsmuch more revealing than approaches Ive used in the past. Highly recommended for any manager looking to sharpen their ability to identify the right candidate for the job. Fred Harding, Vice President, Global Alliances, Taleo

Avoid Costly Mis-Hires!

Hire 90% High Performers with Topgrading Best Practices
by Dr. Bradford D. Smart

About the Author

Dr. Smart is an internationally renowned management psychologist and consultant to many Global 500 companies. Brad completed his Ph.D. in Industrial Psychology at Purdue University, entered consulting, and since the 1970s has been in private practice as President of Smart & Associates, Inc., based in Wadsworth, Illinois, a Chicago suburb. Topgrading: How Leading Companies Win by Hiring, Coaching, and Keeping the Best People is Brad!s fourth book, typically #1 of over 1,300 books in its category. Brad is generally regarded as the world!s most experienced executive interviewer and coach, having conducted over 6,500 chronological Topgrading Interviews. Advisor to CEOs of leading companies, Brad was described in a front-page Wall Street Journal prole as probing the executive mindsthe software of business. His Chronological, In-Depth Structured Topgrading Interview has been embraced as the best practice by companies such of General Electric, Honeywell, Barclays, and American Heart Association. Dr. Smart helps CEOs pack their teams with high performers by:

implementing Topgrading Interview-based selection, to achieve

90%+ success in hiring,

coaching people to become and remain high performers, using Topgrading Interview methods to achieve 90%+ promoting
people, and

offering Topgrading tools, speeches, and workshops to help

managers learn methods.

Table of Contents
Introduction.............................................................. 1 Chapter 1 .................................................................. 5
Why Picking Talent is Your Most Pressing, Frustrating Challenge

Chapter 2 .................................................................. 9
Why Commonplace Hiring Methods are Poor

Chapter 3 ................................................................ 15
Why Topgrading Hiring Methods Are the Best

Chapter 4 ................................................................ 23
Ten Topgrading Best Practices

Topgrading Resources .......................................... 43

Trademark and Copyright Notice

The marks Topgrading, Topgrader, and Topgrade are registered marks of Bradford D. Smart and Geoffrey H. Smart. The copyrights to the Topgrading forms and guides, listed below, are owned by Smart & Associates, Inc.: Topgrading Interview Guide Topgrading Interview Guide for Sales Representatives Topgrading Career History Form Self-Administered Topgrading Interview Guide Topgrading In-Depth Reference Check Guide Topgrading In-Depth Reference Check Guide for Sales Representatives Topgrading Interviewer Feedback Form

Avoid Costly Mis-Hires!

Dr. Brad Smart

Introduction
Whether you are an owner of a 10-person company, CEO of a Global 500 company, or a manager of a department, heres a scenario you probably can relate to: You have a mixture of talent, and marginal performers cause you the most frustration. You value talent you really do, but you only have about 25% high performers. You try to coach the poorer performers, but it rarely works. You occasionally replace one, but:

recruiters dont send good

enough candidates,

the resumes of candidates

are full of hype,

your

competency interviews are not very revealing, erally worthless,

reference checks are gen-

Most companies hire high performers only 25% of the time.

too often the person hired disappoints you, and that mis-hire was very costly.
Welcome to the club! Tens of thousands of case studies plus surveys of Global 100 companies show that most companies hire high performers only 25% of the time! Using commonplace 50-minute
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round-robin competency (behavioral) interviews, 75% turn out to be disappointments. Sure, if managers are willing to live with adequate performers, most are okay hires. But you know in your heart that adequate and okay are not good enough. You want true high performers, the best available, for what you are willing to pay. Chapter 4 of this book (starting at page 23) will highlight 10 common-sense Topgrading practices that have enabled thousands of managers and many leading companies to double, or triple the number of not just adequate performers but high performers. Many Topgrading companies hire high performers 90% of the time! Topgrading leaders state unequivocally Chapter 4 (page 23) that their companies are performing better has practical recombecause Topgrading mendations to at tools have helped their managers pick least double your better people. hiring success. Theyre Topgraders. What exactly is a Topgrader? We define Topgrader as a leader who hires or promotes high performers, the top 10% of talent available for the compensation level. So, if there are 10 qualified candidates waiting at your door and eager to take the job at the pay level you offer, you pick the #1 best candidate. Most companies have unsuccessful hiring methods because they pick just average or adequate candidates, not the best available for the pay. What do high performers look like? Heres an abbreviated, though representative summary:

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Summary of Critical Competencies: Upper Level Manager

HIGH PERFORMER
Overall Talent Level Problem Solving Leadership Top 10% of those available at this salary level A quick study: able to rapidly perform complex analyses. Executes needed change; highly adaptive and able to inspire the organization. Very high energy level; fast paced; 55 (+) hour work weeks (plus home email); driven to succeed. Impressive ability to find ways over, around, or through barriers; can-do attitude. Selects high performers and employees with potential; redeploys chronic underperformers. Successfully counsels each team member to turbo-boost performance and personal/career growth. Creates focused, collaborative, resultsdriven teams. Consistently excellent performance. Iron-clad. Excellent oral/written skills.

ADEQUATE
65th-89th percentile available at this salary level

LOW PERFORMER
Below the 65th percentile available at this salary level Has difficulty coping with complex situations. Prefers the status quo; lacks credibility so people dont follow. Dedicated; inconsistent pace; 40-49 hour work weeks.

Smart; average insight.

Favors modest change, so there is lukewarm followership. Motivated; energetic at times; 50-54 hour work weeks.

Passion

Resourcefulness

Occasionally finds a solution; relies on others to figure it out. Selects a few high performers.

Defeated by obstacles; constantly delegates to bosses. Selects mostly underperformers; tolerates mediocrity.

Topgrading

Coaching

Performs annual performance reviews; "spotty" coaching.

Inaccessible, hypercritical, stingy with praise; late/shallow with feedback. Drains energy from others; actions prevent synergy. Sporadically meets expectations. Bends the rules. Mediocre.

Team Building Track Record Integrity Communication

May want teamwork but does not make it happen. Meets some (not all) key constituency expectations. Generally honest. Average oral/written skills.

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If youd like to become a Topgrader, you can start today. This short book will teach you the essentials, which are easy to understand (but require some discipline and practice to achieve 90% success!). At the risk of oversimplifying, Topgraders keep the commonplace round-robin competency interviews (which are better than Tell me about yourself interviews), but do a better job than most managers at:

nailing down exactly what

theyre looking for,

The silver bullet for 90% hiring success is the Topgrading Interview.

developing networks who refer talented candidates, conducting getting

very thorough, chronological Topgrading Interviews, and candidates to arrange personal reference calls with former bosses.

The silver bullet, by far the single most important skill assuring hiring success of 75%-90%, is the Topgrading Interview. Why? Because when you conduct a Topgrading Interview, you follow a road map, an interview guide that helps you learn about every success, every failure, every key decision, and every key relationship for every full time job. No wonder this interview is so revealing! There, you have itsome of the secrets to joining the Topgrading club.

Avoid Costly Mis-Hires!

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Chapter 1
Why Picking Talent is Your Most Pressing, Frustrating Challenge
The toughest decisions in organizations are people decisionshiring, firing, and promoting people. These are the decisions that receive the least attention and are the ones that are the hardest to unmake. Peter Drucker I dont want to preach to the choir, because anyone reading this book is a member of the choir of talent-oriented leaders. You know talent is all-important, but if you are like most managers, you are frustrated with too many costly mis-hires. Youve read the survey resultswhen CEOs or any managers convene, they say picking the right people is their biggest headache, most pressing problem, their most frustrating challenge. Why? Because despite the importance of hiring high performers, most managers pick them only 25% of the time. Let me give you a little different slant on thiswhere Im coming from. Ive conducted 65,000 face-to-face case studies that have made it glaringly obvious that the single most important factor in a managers success is the talent of the team assembled. I wish some academic types would study this scientifically, but from these 65,000 case studies, the conclusion is crystal clear: Create a
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team of high performers and youre likely to succeed, but keep a lot of low performers and youre apt to fail. Duh, you say. Of course its possible to have a lousy team that produces great results, because you have a monopoly, patent protection, colossally weak competitors, or lobbyists who (ahem) give you some competitive advantage. And its possible to have all high performers but your team fails, because the CEO insists on Create a team of high the wrong strategy, performers and the organization culture is in-bred and you!re likely to suclame, someone steals your IP, or markets ceed, but keep a lot dry up with a burp in of low performers the economy. But you know that most and you!re apt to fail. of the time, talent wins. For years Ive studied the frustration associated with hiring low performers. Every manager experiences that pain! For example, one of our studies showed the average cost of a management mis-hire to be 15 times base salary. Chapter 4 provides additional documentation of how frustrating, painful, and costly it is to mis-hire people.

Why it Was Smart For You to Keep Some Adequate Performers

For most managers not exposed to Topgrading, all that frustration, wasted time, lessened job performance, and high costs of mis-hires are very understandable. What?? Yes let me explain. Suppose your mixture of talent is similar to what thousands of managers Ive interviewed described in their teams:
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a few high performers a lot of disappointing but adequate performers a few low performers If your track record is typical, and only 25% of the people you replace turn out to be high performers, it would be too risky for you to replace disappointing but adequate performers. You are very sure they are not as good as the top 10% of talent available, for exactly the same pay, but if your hiring batting average is only 25%, then there is a 50% chance your replacements will be adequate performers. And, to make things worse, there is a 25% chance your replacements will be worselow performers. So it was (and still is) smart for you to give your high performers a lot of support and coaching, because they prevent your headaches. And it was (and still is) smart to replace your chronic low performers, the ones that cause the biggest problems and keep you awake at night. And it was (until you learned about Topgrading) smart to retain your adequate performers because you were only 25% successful picking high performers. Aah but this scene changes when youre a Topgrader. When 90% of the people you hire turn out to be high performers, its smart and rational to replace not only low performers, but those adequate performers. To drive home this point, please take this short mindteasing quiz:

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Topgrading Mind Teaser Q: If you inherit 10 low performers and want to replace all 10 with high performers, how many people do you have to hire if your hiring success is 25%? A: 40 You hire 40 people. Q: How many do you have to fire? A: 40 the 10 you inherited plus the 30 you mishired. Any manager would be nuts to fire 40 people when the team is only 10 people. The revolving door would be chaos! Q: How many would a Topgrader have to hire, with a 90% success rate? A: 11

Q: How many would the Topgrader have to fire? A: One which gives the Topgrader a 30:1

This little game is better than any drug for reducing your frustration and the costs of mis-hires. That sounds more flippant than it should. Topgraders experience less frustration and lower costs than others, becauseyou just did the numbersthey enjoy much more success hiring high performers.

Avoid Costly Mis-Hires!

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Chapter 2
Why Commonplace Hiring Methods are Poor
The ability to make good decisions regarding people is one of the last reliable sources of competitive advantage, since very few competitors are good at it. Peter Drucker Every week one or more companies supplement their existing hiring methods by adding Topgrading methods. Why? Because the hiring practices embraced by most companies are so inadequate; they are demonstrably mediocre at picking high performers. Here are some data points:

I met with just the #1 human resources executives of Global

100 companies, and they completed a survey showing 80% of the managers they hire turn out to be disappointments. And they said that 75% of the people promoted turn out to be disappointments. How can Human Resources be respected, with such appalling results?

McKinsey

Quarterly (January 08) published another article (Making Talent a Strategic Priority) in The War for Talent series, showing how the image of HR is mediocre. Line managers say the so-called best practices of HR just dont work, and they complain that HR is not accountable for quality of
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hires. Worse yet, in the past 10 years the image of HR has declined. For HR to improve its image, Topgrading can help. Its the easiest way I know for HR to become highly valued.

Go to any of the human resources benchmarking company web

sites, and see if they measure percent of high performers hired. Not one does. None, zip. HR frequently measures hiring costs and time to fill jobs they hire the wrong people 75% of the time, but they do it inexpensively and quickly! Whats wrong with that picture?

On a conference call the head of HR at a pharmaceuticals company told me they use round-robin competency interviews and achieve 97.5% hiring success. Skeptical, I asked how the measurement is done, and he said, The hiring manager is sent an email 30 days after the person is hired, asking, Does the person hired have the skills to do the job? Its a yes/no question, with 97.5% responding yes. Great! Why not just ask if the person recently hired has a pulse? I asked, What percent of managers hired turn out to be the high performers expectedand the only other category is mis-hire? Oh, he said, probably only 20% turn out to be high performers, and 80% are mis-hires.

Two hundred CEOs reported to us that they felt they got their
moneys worth from executive search firms only 21% of the time.

I was Special Advisor to an American Productivity and Quality

Center study (published in 2008) in which 19 companies participated as case studies, sponsors, or both. Only one companya Topgrading company, Lincoln Financial Groupstood out for both measuring quality of hire and actually achieving 90% high performers hired (in upper levels).
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Business today is run on metrics. Everything under the sun is measured... except what is arguably the single most important factor, quality of hires. Companies embrace TQM, Six Sigma, re-engineering, a zillion financial metrics, Sarbanes-Oxley, Toyota methods, lean manufacturing, dashboards, and Black Belts, but there are only feeble efforts to measure quality of hires (except by Topgraders). Why? I believe poor hiring is so widespread that the business world suffers from widespread self-deception. No one wants to acknowledge that lousy hiring is the huge pile of elephant poop stinking up results. Bad hiring is the Its like steroid use in huge pile of elephant baseball: widespread and everyone knew it poop, stinking up but no one wanted to results. face it. Well, maybe its time to face it, to confront the reality that hiring practices in most companies are terribly ineffective. Topgraders face it. They rigorously measure quality of hire and adopt methods that clearly improve hiring success... oftentimes achieving 90% high performers hired.

Keep Commonplace Best Practices But Don!t Expect Better Than 25% High Performers Hired Without Adding the Topgrading Interview
What are the typical best practices of global companies, Fortune 1,000 companies, and smaller companies that copy big companies?

A job analysis is conducted that produces a job description with perhaps six competencies identified
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that are investigated through six round-robin competency (behavioral) interviews, each 50-minutes long, with verification of conclusions through...

reference checks which are marginally useful because most

companies dont allow managers to take reference calls, and besides, reference sources are provided by candidates (who salt the mines with buddies). These basics are not all wrong, but they are insufficient. For example, competency interviews are easy to fake. They are supposed to identify behaviors, but candidates simply pick the behaviors that make Competency them look good.

interviews are easy to fake.

I recently reviewed a global companys published competency interview guides and rewrote them. Here are questions I considered too leading:

Whats an example of when you were a very good team player? Whats an example of when you successfully drove change? Whats an example in which you resolved a conflict?
Even when competency interviewers ask for times that werent so successful, the candidate simply offers examples that were insignificant and where good lessons were learned. Competency question responses lack context, so follow up questions too often are shooting in the dark. Thats why they are so easily faked and why they produce only 25% successful hires. Look at the case studies on the web sites for companies selling competency (behavioral) interviewing approaches. I have stacks of those case studies sitting on my desk. Theyre not very impressive. Too many of those case studies simply show that managers are happy
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with the interview training but give little data about the quality of hires. Some case studies suggest there are more adequate performers hired rather than low performersokay, thats goodbut I havent seen one case study from any company selling competency interviews that credibly shows a significant increase in high performers hired. In all my books I recKeep competency ommend keeping the job analysis, job description, interviews but and even the roundadd the Topgrading robin competency interviews Ive criticized. Interview. After all, talented candidates want to talk to more than Topgrading interviewers, and competency (behavioral) questions are better than idle chit chat. But to improve from 25% high performers hired to 80% or 90% success, add the Topgrading Interview.

Personality Tests
Do tests add to hiring success? Yesability and technical/skill tests, but not personality tests. There now are a couple dozen Topgrading professionals, and weve all tossed personality tests overboard because they just dont add value. If we could use tests and shorten interviews to 1 ! hours, we could assess three executives per day, rather than two. Wow, that would add 50% to our income! But personality tests are blunt instruments, extremely easy to fake. After getting the rich information from a Topgrading Interview, looking at personality test profiles is a waste of time.

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If youd like to read a bit more on this, read Personality Tests are S h a m s , a n i s s u e o f To p g r a d i n g Ti p s . Just go to www.SmartTopgrading.com, sign up for Topgrading Tips, and read the article in the Topgrading Tips Archives.

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Chapter 3
Why Topgrading Hiring Methods Are the Best
No company can expect to beat the competition unless it has the best human capital and promotes these people to pivotal positions. Topgrading is the definitive manual for becoming a high performer and for recognizing those traits in others. Larry Bossidy, author of Execution, and former Chairman, Honeywell Topgrading methods are regarded by many respected leaders to be the best because they:

Require intellectually honest measurement of quality of hires. Set the bar high with the total focus on hiring and promoting
people who turn out to be high performers, not just adequate performers.

Have proven, again and again, to double and triple hiring success. Youll read case studies in which companies improved from 25% to even 90% high performers hired, and please note: the CEOs of the case studies signed off on the results published.

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How did these methods evolve? For over three decades Ive been on a mission to discover methods that achieve the one most important goal: hiring high performers. Quality of hire is most important to you, too, or you would not be reading this! For all of my career Ive studied what companies and individual managers have done that worked and what didnt work. Ive been happy to adopt ideas others succeeded with, and I frankly dont claim that Topgrading methods are much more than common sense. Early in my career I asked companies to tell me how successful my recommended candidates turned out. Sounds like bragging, but when I achieved 90%+ high performers hired, and the company I worked for achieved far less with tests and 1 ! hour interviews, I launched Smart & Associates, Inc. How did I get the results? In my singleminded quest to achieve 90%+ high performers hired, I started out with a competency interview approach, trying to elicit behaviors that would reflect key competencies. Forgive my English, but I knew I was being BSed. So I began asking candidates everything important about every job. Gradually I developed the most thorough interview approachthe Topgrading Interview. Other chronological interview methods were around, but I turbo-boosted the thoroughness. As Mark Sutton, head of UBS commented, How can a bunch of short competency interviews compete with the systematic and much more thorough Topgrading Interview? They cant! As far as I know, the only published case studies of hiring processes, where high performer is the standard, are Topgrading case studies. In the 2005 version of Topgrading: How Leading Companies Win by Hiring, Coaching, and Keeping the Best People I provided representative Topgrading case studies across a variety of companies, many of which achieved 90% high performers hired or promoted using Topgrading methods.
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New case studies are popping up all the time! Microsoft and Johnson & Johnson launched Topgrading programs, and Barclays is rolling out Topgrading throughout the entire company.

New Case Studies Large Companies Lincoln Financial Hillenbrand Hayes Lemmerz Barclays Capital Mid-sized Companies Marine Max American Heart Association Small Companies Virtual Technology

Revisited Case Studies General Electric HEB Nielsen

Dominicks

ghSMART

Kennametal, a $2.5 billion supplier of tooling, engineered components and advanced materials used in production processes, launched Topgrading in 2003, managers participated in workshops, and Kevin Walling, VP & Chief HR Officer, said, Kennametal has used the concepts of Topgrading for over five years now resulting in significantly greater success in hiring the right person for the job across the globe.

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This is a short book, so if you want a lot more details of the case studies, please read Chapter 5 of Topgrading: How Leading Companies Win by Hiring, Coaching, and Keeping the Best People. Many of the companies are much bigger today, because Topgrading helped them grow profitably.

Topgrading ROI
Unlike any other hiring approach, Topgrading is trying to produce analyses of ROI for entire companies. Most companies simply conclude that if they avoid one costly mis-hire, their ROI is high and if half the managers avoid one mis-hire in the next five years, Topgrading costs will be paid for... for a hundred years! In Topgrading for Sales: World-Class Methods to Interview, Hire, and Coach Top Sales Representatives (Portfolio, 2008), co-author Greg Alexander contributed a conservative scenario that would pro18

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vide an increase in shareholder value of $75 million for a $200 million company. Here are the base financial assumptions for a company with 400 sales people:1

Income Statement Revenue Cost of Revenue Operating Expenses SG&A Cost of Sales G&A Expense R&D Other Expenses Earnings

Amount ($) $200M $92M $94M $70M $40M $30M $24M $4M $10M

% of Revenue 100% 46% 47% 35% 20% 15% 12% 2% 5%

Shares Outstanding ...................... 10,0000,000 Share Price .................................................. $22 Earnings Per Share ....................................... $1 P/E Ratio ........................................................ 22 Market Cap ............................................. $220M

1 The source of the financial ratio data is the 541 companies according to Yahoo Finance that are in the Information Technology sector with revenues greater than $100M based on 2006 financial performance.

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If this company reduced its mis-hire rate from 40% to 20% in just the sales area, their financials could look like this after just one year:

Income Statement Revenue Cost of Revenue Operating Expenses SG&A Cost of Sales G&A Expense R&D Other Expenses Earnings

Amount ($) $216.8M $99.7M $100.8M $74.8M $42.3M $32.5M $26M $4.3M $12M

% of Revenue 100% 46% 47% 35% 20% 15% 12% 2% 5%

Shares Outstanding ...................... 10,0000,000 Share Price ............................................. $26.40 Earnings Per Share .................................... $1.2 P/E Ratio ........................................................ 22 Market Cap ............................................. $264M

Pages of data are provided which support the data above and lead us to this conclusion: Through the P/E leverage, Topgrading produces a 20% shareholder revenue increase, generating over $44M in shareholder wealth in the first year, and a total of 34%
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shareholder return16% compound annual growth rate creating $75M in shareholder wealth, in the first two years of Topgrading deployment. As more companies measure quality of hires and study methods that improve both quality of hire and the real business results from improving hiring, the more Topgrading methods stand out. I hope you appreciate the fact that Topgrading methods are not mysterious, but they are unique in their emphasis on hiring high performers and honestly measuring hiring success. And in the next chapter youll learn the abbreviated version of key Topgrading methods and, I hope, help you immediately hire better.

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Topgrading is the single most important and relevant business book that I!ve ever read. As a result of our Topgrading efforts at Lincoln, we have become a talent magnet in all areas of our business. We use all of the best practices of Topgrading. We do the tandem Topgrading Interviews. And hiring managers themselves, me included, do all of our own personal reference checking. What I would say to any CEO starting out on Topgrading is to be prepared for the corporate antibodies that are going to tell you it!s just another fad, it!s just another program. It!s not; this one works. This one will pay dividends.
Jon A. Boscia, former Chairman & CEO, Lincoln National Corporation

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Chapter 4
Ten Topgrading Best Practices
Those who build great companies understand that the ultimate throttle on growth for any great company is not markets, or technology, or competition, or products. It is the one thing above all others; the ability to get and keep enough of the right people. Jim Collins, author of Good to Great

Here it is sort of the Cliff Notes version of Topgrading. Entire books, articles, and video tapes have been created on the 10 tools in this abbreviated Topgrading manual, but there is enough meat here to enable you to immediately hire better performers. You probably will want to do better than just improve; you probably want to achieve 90% success. Hey, first things first! Ive studied hundreds of companies hiring methods and asked thousands of managers about their hiring mistakes and successes. The 10 mistakes (and 10 fixes) are presented in chronological order, from the beginning of a job search to the end. Its like a hiring chain, and there are dozens of links. The 10 mistakes (and fixes) are only the most rusty or non-existent links in that hiring chain.

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HIRING MISTAKE #1: Failing to Replace Low Performers Every manager Ive interviewed in depth has acknowledged carrying some underperformers. The sharpest managers ratchet up talent by replacing the weakest with high performers, but as explained, if you have a typical 25% success rate, youre smart to live with the disappointing adequate performers. After all, you have only one chance in four of replacing them with high performers. So Mistake #1 is understandable until youve learned there is a method that routinely achieves 75%-90% success: Topgrading! Practical Fix: To Begin Topgrading, Perform an Annual Talent Review Just as you periodically review your personal investments in order to make adjustments, do the same with your team ideally a couple times per year. The purpose is to get a better fix on who are your high performers and those with potential, and who are the chronic underperformers. First rank everyone from your highest performer to lowest, and then rate each High Performer, Adequate, or Low Performer. Circle the names of Adequate or even Low Performers you truly believe have the potential to become High Performers in a reasonable amount of time (usually one year). A sample form2 follows:

2 Thanks to Geoff Smart of ghSMART for use of this Talent Review form he created.

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With your belief in Topgrading, you are confident that you can replace adequate performers with high performers. So, convert your evaluation into action itemsways to retain your best people, coach all, and replace chronic underperformers. When client companies first do this exercise, we hear: This reminds me to make special efforts to keep the high performers Ill be dead without. I realize Ive been making excuses for the people at the bottom. HIRING MISTAKE #2: Incomplete Job Descriptions Job Descriptions tend to be boiler plate, with generalities about responsibilities and competencies. Consequently, square pegs are too often hired for round holes. Job descriptions lack real teeth. Im sure of this because we Topgrading professionals have interviewed tens of thousands of candidates for executive positions. Typically we read a long job description and notice some unclear accountabilities and incomplete competencies. If the five managers who have the most at stake in this job all think the person should be measured on different things, any hiree is doomed! Practical Fix: Write a Job Scorecard Instead of job description we call it a job scorecard because firstyear performance goals are spelled out. Be sure all the people with a real stake in the hiree agree on these accountabilities. And of course be sure the candidate is confident of achieving them! Here is a much abbreviated sample:3
3 Thanks to Geoff Smart of ghSMART for use of the Job Scorecard format he created.

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In the complete three-page Job Scorecard (in Topgrading for Sales: World-Class Methods to Interview, Hire, and Coach Top Sales Representatives) there are two dozen additional competencies, including personal attributes such as integrity, etc.

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The sales manager should establish a baseline, a Minimum Acceptable rating for each competency, and after the phone screen, competency interviews, Topgrading Interview, and reference calls with bosses, give a final rating for each competency. If the candidate gets all ratings at or above the Minimum Acceptable, great! If not, the hiring manager can think carefully about whether the candidate can be successfully coached. A candidate should not be hired if coaching success is unlikely. Note too that by nailing down the accountabilities, not only are results spelled out, but ways to achieve them. For example, the sales rep in the above scorecard is expected to make seven in-person sales calls per week. If a candidate is accustomed to making only three, youll find out in interviews! And by nailing down Revenue Conversions, Transactions, Talent and Time accountabilities, interviewers will be paying special attention to each of these measurable accountabilities as all sales jobs are scrutinized. Thats how Topgraders get such accurate insights into candidates. Make sense? I hope so, because I have had hundreds of conversations with clients in which a person hired failed, because we didnt have a clear picture of what we wanted. Figure out what the person would really be held accountable for and youll be far more likely to put round pegs into round holes. HIRING MISTAKE #3: Underestimating the Cost of Mis-Hires Every manager has a sense that mis-hires are costly, but theyve never actually computed those costs. Companies thoroughly analyze the costs of a failed product launch or the purchase of office machines, but dont estimate the costs of mis-hiring people who cause them. Weird, right? Our research in over 50 companies showed the average cost of a mis-hire of a manager earning $100,000 is $1.5 million, and its $560,000 for a mis-hired sales rep earning $100,000.
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Mis-Hire Costs for Sales Reps
Compensation 28% Maintenance Hiring Costs 3% 4% Disruption Costs 19% Opportunity Costs 46%

Dr. Brad Smart

Assumptions
Hiring Costs ......................................... $23,500 Compensation .................................... $151,000 Maintenance ......................................... $14,000 Severance ............................................. $25,000 Opportunity Costs ............................. $250,000 Disruption Costs ................................ $100,000 Total..................................................... $563,500

We recently surveyed 500 managers, who estimated they waste 150 hours on each mis-hire.4 Estimate the dollar and time costs youve incurred and youll be more motivated to use Topgrading tools and methods! Practical Fix: Calculate the Cost of Recent Mis-Hires In workshops we ask managers to complete a Cost of Mis-Hires Form. It only takes a few minutes to calculate the costs of a mishire. Even if the costs estimated are less than 15 times salary, youll be shocked at how high they are. Do this exercise with underperformers identified in your Annual Talent Review (Practical Fix for
4 Details in our Topgrading Tips archives at www.SmartTopgrading.com.

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Hiring Mistake #1) and youll be more apt to make the hard decision to replace someone. HIRING MISTAKE #4: Relying Too Much on Ads and Recruiters Over the years Ive been impressed when a manager Im interviewing was able to pack the team with mostly high performers. Unless the manager was a Topgrading devotee (more and more common) the managers method was to hire high performers the manager worked with in the past. My son Geoff (CEO of the largest Topgrading company, Free Cost of ghSMART), is coauthoring a book in Mis-Hires Form which dozens of bilwhen you register for lionaires, Global 500 CEOs, and other suTopgrading Tips at per successful people SmartTopgrading.com helped solve their talent problems by hiring high performers theyd worked with or met (among other things). In 2007 the American Productivity & Quality Center met in Houston for the final report session in which 19 companies got the results of their latest study of hiring best practices. There was a collective slapping of 200 foreheads as the participants realized, We get our best people from our best people, but we dont do enough to incent them to recruit high performers!

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Practical Fix: Develop Your Virtual Bench

Dr. Brad Smart

Every sports team has a bench, so when they replace someone on the field, they pick someone from the bench. You, too, can develop a Virtual Bench of talent, so that when you have an opening you can pluck someone off your talent bench and not have to run ads or pay recruiters. Specifically, you and all your managers can seek out and keep track of 10-20 likely high performers you might hire and 10-20 connectors who can refer high performers to you. Ann Drake, CEO of DSC Logistics, says of her management team, We recruit all day, every day, with everyone we meet. Hiring from your Virtual Bench is quicker, cheaper, and better than running ads on Monster.com quicker because you already know Jennifer, who worked for you in a previous job, cheaper because there is no recruiter fee, and better because you know she can be a high performer. Keep your PDA, Rolodex, and Address Book updated, We recruit all day, noting who is every day, with everyhighly talented. Pay bounties to one we meet. incent your high performers to refer Ann Drake, CEO high performers DSC Logistices they know. And dont be cheap! If $1,000 bounties dont motivate your high performers to refer high performers, increase it. A professional services company we work with offers $25,000 bounties $5,000 when the person is hired, and $5,000 annually for four years.

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HIRING MISTAKE #5: Wasting Time on Unnecessary Phone Screens You want to screen out weak candidates very early in the process, so you spend your valuable time only with the best candidatesthose you might hire and, if not, at least people to add to your Virtual Bench. Suppose your Virtual Bench didnt produce anyone to hire, so you resort to running ads. Two hundred resumes are emailed to you. Ugh. Resumes, as you know, are incomplete at best, and too often contain misleading information. You cut the 200 resumes to 25, but then spend maybe 15-20 hours playing telephone tag and phone screening them. Double ugh! Because of this bottleneck we developed a Topgrading tool, the Topgrading Career History Form. Practical Fix: Use the Topgrading Career History Form to Get Crucial Information Before the Phone Screen Ask your AA to email the 25 candidates whose resumes looked the best, thanking them for their resume and asking them to complete a form that requests:

full compensation history, months (not just years) in each job (so short-term jobs cant be
omitted),

likes and dislikes in each job, name of every boss (and permission
agreed upon time),

to contact at mutually

estimate of overall performance rating in jobs, motivation to leave (quit, fired, or mutual), and a legally binding signature that says that falsehoods in the career history form are grounds for termination.

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Now were talking! In one hour you can look through completed career history forms and identify the six or eight candidates youll phone screen. You just saved 15-20 hours by eliminating more than a dozen phone screen interviews! Following phone screens, you will probably have four outstanding candidates youll invite to come in for face-to-face interviews.
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By the way, Topgrading companies generally ask candidates to complete the Career History Form at the company web site. HIRING MISTAKE #6: Not Including a Topgrading Interview In Chapter 2, round-robin competency interviews were shown to be worth keeping, but also shown to be the sort of approach that results in only 25% high performers hired. Thats because any candidate can easily bias answers to questions such as: Whats an example in which you were well organized? What was a time when you were not so well organized? Keep the round-robin competency interviews, because candidates want to interview with several people and these interviews are better than tell me about yourself chats. But you need to include a far more revealing, powerful hiring tool, so Practical Fix: Add the Topgrading Interview This is the silver bullet of successful hiring. Every manager and every company achieving 90% hiring success we know of uses the Topgrading Interview Guide, a 30-page road map with the questions and spaces to write answers. Heres what one of 30 pages in the Guide looks like:

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The Topgrading Interview Guide greatly simplifies the inherently complex interview process. A much abbreviated guide would ask, for every full time job:

What were your successes (and how did you achieve them)? What were your mistakes and failures? What talent did you inherit and end up with, and what happened (replacing, coaching, etc) in between?

What would your boss say were your strengths, weak points,
and overall performance? If the chronological interview was hiring breakthrough #1 and the Topgrading Interview Guide was breakthrough #2 (enabling managers to improve hiring success to 50%), breakthrough #3 is the tandem method, the use of two interviewers. Years ago Jack Welch, CEO of GE, said he was happy the interview guide was helping GE pick people better, but he wanted 90% success and asked me for a suggestion. I said, Use the tandem interview, and he approved it in one second. Every manager achieving 90% success we know of uses the tandem chronological interview for mid to upper management jobs. Solo interviews are quite adequate for entry level jobs and with experienced Topgrading interviewers assessing candidates for low level management positions.
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What? you say, Its too time consuming for two interviewers to take three hours for a chronological interview. Lets run some numbers. Suppose you calculate a mis-hire costs $600,000 and you waste 150 hours, and suppose you mis-hire three sales reps, and fire all three, before hiring a good one. After all, your hiring success is averageone success in four. Your results are typical for sales managers. You waste $1.8 million plus 450 hours with your three mishires. Six hours for a tandem interview with 90% success would, according to your own calculations, save $1.8 million and about 450 hours. (Excuse me! If your former style was to conduct a two-hour interview, then the tandem Topgrading Interview lasting three hours would consume six person-hours... so Topgrading wouldnt save you 450 wasted hours, it would save you only 444 wasted hours.) The sentence that makes absolutely zero sense is, I dont have time for a three-hour tandem interview that will at least double or triple my chances of hiring a high performer but I can afford to waste $1.8 million and 450 (excuse me, 444) hours. HIRING MISTAKE #7: Betting People will Change My, oh my, how weve all been burned betting that just because candidates promise it, in the next job theyll:

get better organized listen better be a better team player etc., etc.
Actually, we all know people can change. Wed like to think we can coach people to change, but lets not be naive. I sifted through thousands of files of people I interviewed, and noted weaknesses that had been overcome, usually with extensive coaching. This chart emerged:
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The Ease of Changing Competencies

Relatively Easy to Change Risk Taking Leading Edge Education Experience Organization/Planning Self Awareness CommunicationsOral CommunicationsWritten First Impression Customer Focus Political Savvy Selecting High Performers Redeploying Underperformers Coaching/Training Goal Setting Harder, but Doable Judgment Strategic Skills Pragmatism Track Record Resourcefulness Excellence Standards Independence Stress Management Adaptability Likability Listening Team Player Negotiation Skills Persuasiveness Team Builder Very Difficult to Change Intelligence Analysis Skills Creativity Conceptual Ability Integrity Assertiveness Inspiring Followership Energy Passion Ambition Tenacity

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We also learned this simple maxim:

Dr. Brad Smart

Bet on people changing when they have proven they can change.

If a candidate has scrambled to get organized in increasingly complex jobs, but has gotten organized and achieved results, its probably a good bet she can do it again. But the person who publicly belittles subordinates and is not trusted by peers, and who has not changed despite coaching in three jobs, is not apt to change in your job. HIRING MISTAKE #8: Calling References that Candidates Supply Most companies prohibit managers from taking reference calls, fearing a law suit if a former employee claims unfairness in negative statements. So interviewees hype positives and they provide references who are their buddies, not fearing being found out. Practical Fix: Ask Candidates to Arrange Personal Reference Calls with Bosses in the Last 10 Years It works 90% of the time! I wish Id thought of it, but about 20 years ago a high performer told me he did this, so I started recommending this approach to clients. High performers easily get former bosses to talk, because those bosses will be saying positive things, and they (correctly) figure there is no risk of a law suit.5

5 Do you feel hypocritical if your company prohibits managers from taking calls but you ask candidates to ask their former bosses to ignore their company policy? Check out the February 2008 Topgrading Tips (in Press and Articles at www.SmartTopgrading.com) for six specific suggestions.

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Better yet, tell all candidates that in order to get a job offer they must arrange personal reference calls (at the appropriate time) with former bosses, and they will be more truthful in answering interview questions. And even better yet, when this requirement is widely known, low performers will not apply. Perfect! HIRING MISTAKE #9: Asking Illegal Questions You read about it every weeka law suit claiming discrimination because interviewers asked forbidden questions. I hope they enjoy their vacation in a minimum security prison (just kidding). Practical Fix: Stick with the Interview Guide The Topgrading Interview Guide has the wording for all basic questions. And when you compose follow up questions, do not ask about race, religion, pregnancy, or the many other forbidden areas. Read Chapter 12 (Avoiding Legal Problems) of Topgrading: How Leading Companies Win by Hiring, Coaching, and Keeping the Best People, for it was written by the largest employment law firm in the U.S., Seyfarth Shaw. Every manager should peruse this chapter, which gives details showing how Topgrading methods are legally defensible throughout the world. HIRING MISTAKE #10: Not Measuring Hiring Success Early in this book I bemoaned the fact that hiring success is one of the very few stats not often kept. A survey of large companies showed only about 5% measure hiring success with real rigor. But almost all Topgraders do it. (Perhaps the measurement does not take place in most companies because hiring results are so awful it would be embarrassing!) Practical Fix: Measure Hiring Success At the APQC final report meeting in 2007, Lincoln Financial Group described how they measure hiring success. Emulate Lincoln. They have clear, measurable accountabilities for high (not just adequate)
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performance and one year after a person is hired the hiring manager, HR, and two others meet to determine if the person really, truly turned out to be a high performer. A simple chart is all you need:
Topgrading Methods Used High Performer Hired High Performer Not Hired Not Fully Used

Showing this chart to managers once per year will reinforce Topgraders (Im doing it right!) and inspire laggards to embrace Topgrading.

CONCLUSION
Avoid these 10 common hiring mistakes and you are certain to hire better, your higher performing team will make your career soar, and your shareholders will be very pleased. The beauty is, when all the Practical Fixes are implemented, mis-hires plummet steadily to 10% or less! This book began with a typical hiring scenario. Lets revisit it, but show how Topgrading transforms typical to a much more effective process, with much better results:
Typical Hiring Recruiters dont send good enough candidates The resumes of candidates are usually incomplete and packed with hype Topgrading Hiring Your Virtual Bench produces many excellent, prescreened candidates The Career History Form adds the facts you need to efficiently and effectively pre-screen candidates

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Typical Hiring Your interviews are not very revealing

Dr. Brad Smart

Topgrading Hiring The tandem Topgrading Interviews, using the Topgrading Interview Guide, are extremely revealing Candidate-arranged reference calls are revealing and motivate the candidate to be honest in the interview Your results are: 90% High Performers Hired

Reference checks are generally worthless

Too often the person hired disappoints you. Your results are: 25% High Performers Hired

But Topgrading is more than good hiring! Of all talent management practices, the single most important, by far, is hiring and promoting high performers. Companies consider themselves Topgraders when they have 75%-90% high performers. And they report that the other parts of talent management become relatively easy:

Reducing
a pain.

turnover is a breeze when Topgrading assures a close-to-perfect job fit.

Coaching high performers is fun; coaching underperformers is Succession planning is easy with a solid bench.
And when entire companies soar in revenues and profits, growth opportunities open up, people earn more money, and as a bonus, Topgraders have such strong teams they can delegate a lot and enjoy balance in life!

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Topgrading Resources
Want to learn more? Please go to www.SmartTopgrading.com and the Topgrading Shop.

How to Get Started

1. Sign up for Topgrading Tips on the Home Page. This free 90second read helps you implement Topgrading successfully. 2. Read (free) Press & Articles and the Topgrading Tips Archives. 3. Get the forms Starter Kit ($120.80). Try out the breakthrough Topgrading Career History Form and Topgrading Interview Guide. Use each just once and youll see how costly mis-hires can be avoided. 4. Use the 1-Hour Topgrading video, The Topgrading Advantage: World-Class Interviewing and Hiring ($395 for hard copy or $95/ person/month), to receive my personal coaching.

More Advanced Topgrading Resources

1. Attend a one-day Topgrading Workshop ($2,750). In addition to leaning the basics, youll get the latest insights and case studies. With a 7-1 attendee-to-Topgrading professional ratio, youll get all your questions answered. 2. Use the 7-Hour Topgrading DVD Toolkit ($1,250), to train your managers. The kit includes the classic Topgrading book, hand43

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books, audios of the DVD, and quarterly conference calls with me. 3. Invite a Topgrading professional to make a speech.

How to Roll Out Topgrading in our Company

Scenarios (with costs) are spelled out in simple terms, detailing how small and mid-sized companies typically roll out Topgrading with in-house training licensed Topgrading forms and guides

Get Your Questions Answered

1. Email questions to Brad.Smart@Topgrading.com and well get back to you promptly. 2. Call 847-244-5544 and well talk in person.

SMART & ASSOCIATES, INC. 37202 North Black Velvet Lane Wadsworth, IL 60083 Phone: 847-244-5544 Fax: 847-263-1585 www. SmartTopgrading.com

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We really do believe that Topgrading had a great deal to do with our success. And that for the American Heart Association doesnt just translate into the bottom line; that translates into saving more lives. Almarie Wagner, Executive Vice President, American Heart Association Brads second opinion interviews and Topgrading tools have helped us pick the right executives, which is key to making money in private equity. Earl Powell, Founding Partner and Chairman Emeritus, Trivest Partners, L.P. Topgrading has definitely helped the companys overall performance. The tandem chronological interview is the best approach I know of for picking high performers, and we use it for external hires and internal promotions. Curt Clawson, President, CEO, and Chairman, Hayes Lemmerz, International Having read the book several years ago, I was intrigued. Now after implementing Topgrading for all new hires and promotions, I am thrilled. Our organization has embraced the philosophy and process and we are seeing the results.....the right people in the right positions. Timothy T. Tevens, President and CEO, Columbus McKinnon Corporation Our executives and customers rave about how the Topgrading interview tools and processes consistently swing the odds in favor of selecting only high performers.....resulting in innovation, incremental revenue, and increased operating income throughout the enterprise. John H. Dickey, Sr. Vice President, Hillenbrand Industries, Inc. and Hill-Rom Company When I look back at the dramatic success of our company, I can clearly point to the implementation of Topgrading as the pivotal moment that made our success possible. I implore every business owner to make Topgrading mandatory in their company. A Topgraded team is the ultimate secret weapon to crush the competition. Richard Rossi, Co-Chairman, EnvisionEMI

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