People are still at the heart of our industry
Every couple of years we like to remind readers about the importance of people in our industry. We have said for years that we operate in a people-intensive industry and that the highest-performing wholesalers have assembled good to great teams.
For all the systems, procedures, computers and new technology that we have seen, all, without exception, are better when operated by teams comprised of the best and brightest people.
So here is our thought list for your consideration:
• Seldom are good to great teams a serendipitous act of providence — When we see a great team, we try to understand how that great team came to be. The one constant seems to be an implicit or explicit process for finding and screening good candidates. In smaller companies, it is often the owner who personally interviews each candidate. They use their experience and judgment to select the best candidate for each opening. In larger companies, it is a corporate commitment to hiring excellence driven from the top. While your company may not want to conduct Google-style interrogations, you can raise the bar in your company to bring in top-notch people.
• Most companies' growth is limited by their ability to staff for their expansion — In this economy, many wholesalers are looking to grow. The smart ones curb their enthusiasm until they have a team to manage the expansion properly. This applies to both green-field expansion and to acquisitions. Wholesalers who grow by starting-up new locations can, with relative ease, find real estate and stock a location with product. The challenge is to then get a team in place who can, in short order, run it so as to have money pouring out of it back to the corporate coffers. This is relatively difficult.
Smart buyers know that a company’s value is seldom in the real-estate or inventory since there is a free market for both. The real value is, instead, in the operating team that can be retained post-closing to run the business going forward. Rightly so, these properly running, profitable golden geese are seldom for sale. When they are for sale, the price is often astronomically high.
• It’s not always about big dollars — As long-time St. Louis residents and Cardinals fans, we have watched as their management team has done an amazing job of assembling great teams without the benefit of a mega-market budget. They are able to identify good players who have been passed over or not valued by the other teams. Our industry often cannot compete against the dot-com companies or large national company compensation and benefits plans but there are a lot of fish in the sea. As we hire for openings in our own company, we are always amazed by the wide spectrum of resumes we receive for openings at all levels.
Some very smart people are smart enough to know that their talents will not be appreciated by a large corporation. They would rather use their talents to make a huge difference in a smaller company.
• Hire promotable people — Our industry has an admirable policy of promoting from within and a miserable policy of hiring entry level people who are not promotable. This is the proverbial predictable accident on its way to happening. After you have the right raw material, put together a process for shaping them to fit their new role. Even the brightest people have a better chance of success in a role if they are properly trained for that role.
• Put in the time and be patient — Finding good people is like panning for gold in that you might need to process a lot of sand in order to find the nuggets that are out there. They are out there but your process must allow you to quickly separate the nuggets from the sand BEFORE you hire them. Frankly, in our experience, this is where many companies fail. They get impatient or tired of reading resumes and job applications. This results in wanting to find a warm body to fill the position. Hires from this “warm body” mode of hiring statistically tend to fail.
• Pre-employment testing is a cost-effective way to separate nuggets from sand — Gold miners must process a lot of sand to find the gold they want. Some companies put people on the payroll, then determine whether they are any good. That’s like the gold miner hauling 27 tons of sand to his house then separating out the 6 ounces of gold. We have a policy of giving every applicant (no matter the position) the Wonderlic Employment test. We have found it to be a cost-effective tool for finding nuggets.
• Hiring under-smart people has very little upside — One hard fact we have learned over many years is: when Johnny can’t read, Johnny can’t do most of the tasks that you need Johnny to do in your business. If Johnny can’t read, Johnny is not promotable. If he can’t read, he can’t reliably understand your rules, procedures and training materials. When Johnny can’t count, he cannot manage inventory. This all seems like no-brainer, common sense…Right? Yet most companies don’t have a reliable way to determine if Johnny can read, follow instructions, and add two numbers together prior to hiring them.
Some benevolent wholesalers allow candidates to take job applications home. In some cases, the application is completed by their spouse, child or mom because the individual does not have the ability to read or write well enough to complete a basic job application. This is your first clue that Johnny cant’ read. Some readers might be thinking, “That discriminates again people who cannot read.” As we write this, we believe you are allowed to reject people who cannot read when the job requires that they are able to read.
Of course, you should review this with your labor attorney since we heard a rumor that one western state was considering a law that makes it illegal to reject any applicant for any reason.
Further, if Johnny does not have the intellect to perform his targeted job, he will often have problems doing that job reliably. Studies have shown that all the training and coaching that you can slather onto someone who is under-smart will have minimal impact on the outcome. There is an old story of a guy who has a trained monkey who can drive his farm tractor. While it’s a great candidate for Ripley’s, there are umpteen billion other monkeys who cannot drive a tractor. Always hire people who have the intellect to succeed at their job and ideally are smart enough to be promoted.
Of course, there are always other factors like Johnny’s work ethic, his substance abuse issues and that he wants to have his mom accompany him to the job interview. Most basic testing may not uncover these challenges but hopefully your interview and reference checking will expose some of these.
• Create your process. We think the process should include interviews, testing and reference checks. These screening tools help to get your odds up to about 50/50 in our experience. After you have established the process, the next challenge is to find someone in your company who can and will reliably apply the process over and over and over again.
a: Active, real-time conversations: Supervisors who are working with their group should be providing constructive suggestions along the way as situations arise. Ideally, the only delay will be when privacy is required for the discussion. It seems to work best when the content of these ongoing discussions about the job is mixture of praise, recommendations and, as needed, corrections. Safety and legal issues should be addressed immediately.
b: Reviews: Are a mixed bag since they are seldom done properly. They are often a bucket of things that the individual has done wrong over the last year often presented months after the event and after both the supervisor and individual have forgotten the details of the situation. Ideally these will be an opportunity to reflect on the discussions over the last year and initiatives for the coming year. When an individual is surprised by the topics in the review, it often indicates a failure of the ongoing active coaching process.
• Hire slow, Fire fast. This is always a tough topic. Some companies, mostly in other industries, use what was once called the Jack Welch approach where every year they rank the team and then cut the bottom 10% loose. We do not advocate this approach but we do believe there must be a process for addressing non-performers in two areas:
a. New team members who aren’t working out. Review new folks at 30, 60 and 90 days. Be honest with yourself and if they just are not cutting it, cut them lose immediately. We think it is good to tell them that you will be assessing their progress along the way. In most cases, you know whether someone is making good progress after 30 days.
b. People whose performance has declined. This seems to be the toughest for our industry. Since we are people focused, we tend to think of our team like family. Some people lose their edge for a variety of reasons. They are not bad people but the company has an obligation to the owners and other stakeholders to move the person out or to adjust their compensation to reflect their contribution.
• Phase out obsolete positions: This is also tough. In our industry we seem compelled to keep roles that are no longer relevant or right for the company so that we can retain or protect people. If your company has grown and it would now be more cost effective to outsource invoicing, it makes little sense to keep that task in house so that Rich still has a job.
The people challenges for our industry have been around forever and we think the situation is becoming even more interesting with “Generation Y” and “Generation Z” so consider creating a process for finding good candidates for your company.
(As always, review any hiring, testing and human resource processes and policies with your labor attorney prior to implementation since the laws are always changing and since some state and local laws may more nonsensical than commonsensical.)