Episode 11: Why You Are Always Hiring
Hiring is often a reactive event based on immediate need, but it doesn’t need to be. Companies can start building their bench and plan for the known need of certain positions based on the historical turnover of that role. Harry gives some ideas and insights into being a culture of proactive hiring.
*Disclaimer: This transcription was automatically generated so we would like to apologize for any misspellings or grammatical errors in advance
In today’s podcast we’re going discuss the importance of having the mind set ‘always hiring.’ We’re going to go over some of the pain points every retailer experiences in hiring and employee retention. And the actual cost of replacing your team and what percentage of turnover you should expect versus what it actually may be?
We’re going to give you some tips on interviewing, in recruiting in general and a very powerful metric that every retailer should understand; what is their quit to fire ratio.
Justin: Harry welcome back. I would love to chat today about the idea of always hiring, isn’t that important?
Harry: Justin, good morning to you.
Justin: Good morning.
Harry: I came to the realization a few years ago that there were two issues; one was we keep losing people in retail. So employee retention is a big huge part of the antithesis or the counterbalance to the whole recruiting thing. But there’s always people telling me that we can’t find quality people and we can’t find competent people and qualified people. I’ve always thought you could; you could find anybody you want. The caveat is that you just can’t find them quickly. And retail seems to be in this position where they lose someone and then they go on the hunt, so it’s always a little bit behind the eight ball instead of in front of it. Can you imagine a baseball team losing a third baseman and not having anybody to replace him? The team from the south has eight players today because their recruiting effort was really pretty poor.
Justin: Isn’t that the analogy that every company uses; who’s on your bench, build your bench, right?
Harry: Well it’s a colloquialism but does it mean that anybody is really paying attention to it?
Speaker1: Probably not.
Speaker 2: Well, ok. So let’s start with a different kind of a premise; what is the cost of losing someone? and when you start thinking about the amount of time that your floor is being under-served and then you think of the time and the expense to run ads or whatever you’re doing to recruit and then somebody’s time to interview them a couple times and then you’ve got a new guy and this person is not producing at a reasonable level for X number of months. We’ve done the calculations as many many many many times and even at the lowest level, it will cost about three to five grand to replace somebody. So that’s a big number when you start multiplying that by 30, 40, 50, 60 percent turnover rate in your organization; it’s really kind of mind numbing.
Speaker 1: So when you’re saying three to five grand, you’re taking into account lost revenue and time that someone is taking recruiting, training and hiring that individual, correct?
Speaker 2: It’s the whole picture. It’s the whole picture. so you have a new employee that doesn’t produce very well at the beginning because they’re in training and learning the ropes, you’ve got all the time invested in the people that are doing the interviewing and caring and shuffling paper in the main office and tying some of those people up and the cost of the ads; all that’s very expensive. It really is expensive. So whenever we talk about recruiting, first I’d like to talk about employee retention. Because the more people you keep the less people you need.
I’ve talked about this before and I don’t know if we have it on the podcast or not but we have this thing called Employee values assessment and it’s really wonderful. It’s this concept of what are the things that are valuable and important to the employees on the floor in any category. so you’ve got sales people, managers, district managers, cashiers and so forth; these are all categories of employee and the assessment that you do for them are different. So the assessment for a district managers values are different than a manger or sales person.
Anyway, we have a list of 15 – 20 different items that people find valuable and we did this through tremendous numbers of surveys. And every time we got a lot of traction on a particular one we added it to the list. There’s always someone coming up with something odd ball but these were the really most important things that employees looked for in their employer. And so we put them on the list and then we rated them, I can’t remember actually, you could rate it at 1-10 or 1-5 actually, it doesn’t really matter as long as you have a consistent scale. And 5 being it’s really valuable to me or ten being really valuable to me and, 1, not so valuable to me. And so you rate it as ‘what’s valuable to you personally’. And then there’s the company side, you say well this is how well I believe that the company is providing me with that. So if one of the things, we’re transferring that advancement, that’s always on everybody’s top 10 list and say well, that’s really important me it’s a 10. I want to go far in this company and then they rate the company at a 2. They say, well there’s no real good chance that they’re going to notice me and there’s no real career path for me and so forth. So you do that and it’s really quite wonderful.
And now it gets interesting, now you take the managers, district managers, regional executives and as a separate population – you don’t mix them up. So you say how do the managers feel about what the salespeople feel and then every other category. So what you’re saying is that as a district manager, how important do you believe this is to the employees? Not to you but to the employees. And then how well do you think we provide this? And I’ve got to tell you Justin, the disconnect here is absolutely remarkable. And some of the things that the employees want are so easy to achieve and yet because of a lack of consciousness or knowing about it, we didn’t put any attention and focus on it.
So this is where I start with my recruiting program and it turns out to be a very interesting exercise as I’m sure you can imagine.
Justin: Well, if you go through the exercise and you have a bunch of 2s on areas that are extremely important to employees, is it too late for that group of people?
Harry: No, listen it’s never too late. You are where you are anyway, right. So this is the idea that you need to make these improvements. And if they are major improvements and if they are significantly good improvements then of course you can sell it to the staff and let them know that you’ve looked at the survey and you’re making changes to make the company more attentive and more exciting for them to work for and have a career with. It’s a big deal. Employee turnover is a big deal. And this is the single best way I know of trying to get a handle on where people are. By the way, the survey should be anonymous. You could put this up online and you can do it with Survey Monkey or you can do it with a whole bunch of people and hopefully people will be real straight about it and you can go from there.
On the other hand let’s talk about recruiting.
Justin: Let’s do it. just to be clear, are you assuming now you’ve gone through this exercise but you’re still in the process of always recruiting but at least you know what are the most valuable items that your employees care about in the company.
Harry: Yes it’s so easy to say ‘always recruiting, it’s easy to say that. I found very few companies that really take this as a serious side of their business. If you’re talking about hundreds and hundreds of thousands of dollars in expenses a year for a medium sized company and tens of thousands of dollars a year for small independent retailers, I think this is time to start paying attention. I mean we would pay more attention to a half a point a margin or a sixteenth of a point increase in payroll cost percentage and not put the time energy and you know real fur behind the idea have recruiting really great people. So there’s a lot of issues here Justin.
So when you’re recruiting, set up what this whole game is all about and the game is to not only attract talent that’s equal to if not better than anything you’ve got on the floor now but you also have to provide an environment where they can flourish. So we don’t want to stay on this road. Of course we expect a reasonable amount of turnover. You know, a great retailer will experience somewhere around 25% of sales people, about 15% of managers, I think I can live with that. I just can’t live with 50s and 60s of salespeople and 25 and 30s of managers. I just can’t do it. It sucks the life out of everyone. And we get this back off, ‘we’re not keeping anybody anyway, we’ll just manage the turnover.’ wow they’re managing the turnover instead of trying to reduce it, it’s really quite crazy.
Harry: Yeah. So there’s another thing that we really need to take a look at and this is one of my favorite inventions actually, I used to own a chain of stores many years ago. We were in the electronics business. We sold the very very high end stereo equipment, television and so forth. I had four of the stores. And I had a district manager because frankly I was busy doing the Friedman group. So I would have weekly meetings and try to stay on top of everything and best as I could. And we did a pretty good job but one of the interesting things happen to me was, I did a store visitation thing, it was over a couple of days and I noticed something really bizarre that there was like 50 or 60 percent of the people in the stores I had never seen before. So I go, what the heck is going on here; your turnover must be remarkable, give me a full report. And the D.M. gave me a report that we have turned the staff over completely within the year. We had one hundred percent turnover rate. And I went, my god that is absolutely horrendous. What the heck is going on? And I realized that the turnover report was not enough information for me to do anything. And I said ok, I need you to go back and take that people that have left and give me the quit to fire ratio. And he said what’s that? And I said well out of one hundred percent, what was the percentage of people that quit and what was the percentage of people that were terminated? Wow. It was amazing. So guess what, it kind of surprised me; what’s your guess Justin? Did we have more quit or more fired?
Justin: I would assume the regional manager and the manger are terminating people based on performance.
Harry: The highest ratio by far was the terminations, it wasn’t quitting. They weren’t quitting, we were terminating. So what does that tell us. So as we dug into this, we realize that if people are quitting, they’re quitting for any number of four or five reasons and very rarely interestingly enough it’s not for money. The number one thing is who they work for. They’re just not shucking and jiving and hipping and hopping with the person that they’re working for. They’re not quite there. They also may or may not like the merchandise, maybe some of the company policies, the chance to get ahead, the ability to be listened to and a variety of other soft things until it gets down to pay, which is somewhere around six or seven. We all think we work for money but people take the job knowing how much they’re going to get paid. So it’s not such a surprise. They kind of know what their future is. So it’s not the biggest issue.
When you terminate people, you’ve got to look at who you’re hiring. And so we went back and reviewed all of our hiring practices. All the questions that we asked the recruits and changed it up virtually one hundred eighty degrees. And we started looking for different kinds of attributes, different questions that would elicit more responses that we could deal with down the road. and you know it was remarkable, we cut our turnover rate by I think it was about fifty or sixty percent the first year and then we drove it down further as we paid more attention to what was going on. If you’re firing people you’re hiring the wrong people. If they’re quitting, you’ve got an environment where people don’t believe they could flourish. So when you start taking a look at the global, the twenty thousand foot picture of recruiting, you’ve got to get all your ducks in a row well in advance and start thinking about what the impact is all around before you just start trying to hire people. Who wants to hire someone that’s just going to quit anyway in a couple of weeks.
Justin: Harry, a question for you, a friend of mine who owns a group of automotive stores once said to me that nobody graduates college thinking they’re going to go work in the car business. And I sometimes feel like retail falls in the same boat. You sit there and go, well is it possible to find good people, are they always hiring from a poor quality pool?
Harry: That’s a great question. I have a client in Texas, maybe one of the great auto dealership, now that you brought up auto. One of the great auto companies in the United States, one of the best reputations in the on the planet, they’re just super stars, super studs, they’re really amazing. And they recruit, this is to sell cars, they recruit only college graduates. They have a tendency to recruit Aggies which is kind of interesting. In any event, starting wage is $75,000 and a brand new car. That’s pretty appealing for a brand new guy out of college. But here’s the truth, the biggest thing is ‘Mom. Dad, I just graduated college and I’m going to go sell cars. I think that’s what you’re saying; it’s a toughie. It’s not a matter of retail doing a bad job, we’ve earned everything that we get. So the mere fact that people don’t admire retail sales people make sense just because we’ve earned it.
On the other hand, at the lowest it’s an entry level position and very low wages, correct. On the high side you have guys making six figures in a heartbeat. I know way many people that make $150,000 to $200,000 a year in retail. Not a bad living. And it’s a beautiful job. the idea that you get to meet brand new people all the time and make wonderful presentations and connect them with the terrific selection of merchandise that you have; it’s all pretty cool stuff for sure. We’re just not really good at telling the story, that’s all.
But being as it may, I don’t know that you and me and a couple of retailers down the block are going to change the world’s opinion of a retail guy. So this is a battle that’s a tactical battle that has to be won out in the field, one person at a time. But we can say and do things to recruit people that’s different and engaging and so forth. So it all starts with a battle plan, a strategic plan. And the plan says ‘look we’re going to have more applicants than we have jobs for by ten to one every month. So you actually set these goals down on paper and you say ‘ok, now that I’ve got the burden of getting one hundred applications or hundred fifty applications, if you’re a certain size, ten to fifteen if you’re smaller size, eight hundred if you’re a big size; what are all the ways that we can attract applications?
Now if you notice what I said here, I didn’t say attract good people, I just said applications. It starts with, first of all your ability to attract applications, people that are interested. And in our management course and in some of our masters’ courses we talk a lot about this. And when you get people in a room talking about how you can get applications, some of the ideas that come out are really wonderful. First of all a lot of people advertise. Now some people still do print, that’s fine. But one way or another we’re letting the world know who we are. So it’s everything from print advertising to Facebook to Instagram to your front windows of your store, to other methodologies which are unique, which we could talk about unique recruiting methods. But that the idea is that you’re always hiring. So that you’re always letting people know that you have careers available. Let’s not say Help Wanted, let’s say careers available and let’s spend a little money on the graphics and make it look really really appealing. I love the idea of having a recruiting brochure, it’s just an 8 1/2 by 11 piece of paper, folded landscape into a threefold where you talk a little bit about the company, the benefits, the reasons it’s so cool to work there and all that. There should be a permanent, gorgeous recruiting brochure. Business cards of every employee on the back should say we’re always hiring, if you’re interested give me a call. and when you meet people out in the world that you think might be a great fit, you hand them a business card tell them not to forget the look on the back. We can get very very clever about how to recruit if we put our mind to it and decide that it’s really a cool thing.
Let me give you another example. There are retail stores all over your neighborhood that are recruiting as well and they’re in different categories. So if you’re a mid-range women’s fashion retailer, the guy who sells some other sporting goods, different kind of business. They’re seeing people come in as you do and you just pass them along. He said well you know I don’t have a spot for you but I have a guy down the block that’s hiring, go see Joe. These recruiting partners have done by with ten or fifteen or twenty other retailers in your community works really wonderful. You could also have a little community job fairs which are really terrific. Go find a place in the park, go get ten of your buddies, set up little tables, advertise it together and you’ve got your own controlled job fair. There’s so many things that you can do if you just decide you’re in the recruiting business. Now what happens is, say they’ll do a job fair and want someone to do it again for another ten years. This is something that is an ongoing funded process and you’re prepared. You’re prepared with the brochures. You’re prepared with what happens when someone calls, what’s the routine, how do you take them through the process? And I may add real quickly that you take them through the process quickly. When people are looking for work they’re looking for work. And if you don’t bring them in quickly they may find another job on the spot. I mean, I’ve lost people because I said why don’t you come in next Tuesday and by that time they’re ready have a job. So I don’t make that mistake anymore.
Justin: So you’re talking a different ways to refer each other some new hires. Are you a fan of employee referral bonuses?
Harry: Yeah, it doesn’t work. It’s always been a terrific idea. I think I’ve been doing it for thirty years with all my clients, it doesn’t work. I mean it every once in a while somebody will recommend someone but is it a good idea? Yeah. I mean, do lots of people use it? Absolutely. Does anybody pay off because it works? Not really.
Justin: Interesting. We talk about job fairs, I remember in the last company I was with we used to set up booths at college job fairs at the local colleges. We always got great great candidates but it was always reactive. We were hiring right then. And so we set it up right then. we didn’t stay present which when you’re not present and not there all the time, people forget about you and you need to build a reputation within that community or in this case within the university but we always got great candidates out of there. And you know, people are looking to work. It’s not like jobs are just being handed out of college to every graduate. So you can get some really exciting people from even something as simple as a college unfair.
Harry: Yeah so we set up with one of my clients in South America, I said look you need a whole new generation of managers that are going to really take the company forward. why don’t we set up a thing with university grads where we promised them a one year accelerated management program, and man it was fantastic. We recruited plenty of people because we were saying ‘here, you could go into management. So we had a whole schedule. They were going to be a salesperson for you know four or five months then they became an assistant manager. When it to management training and then we gave the store and they were absolutely, stunningly good, sharp, young college grads. And that’s one way to go.
So I’ve always thought people are pretty smart but they lack some creativity. And the whole idea for us is to pay a lot of attention to it. In a meeting and it’s got to be a reoccurring kind of dynamic in your company. So the whole idea of applications is the easiest statistic to measure, right. So you measure how many applications we get in this month? Well we got in sixty. Well, let’s get it to a hundred.
Then you’ve got subordinate statistics after that. Of the hundred applications did you get, how many did you actually call for the first telephone interview, how many people did you bring in, how many people were hired. You could take a look at the subordinates that this takes after the global stat of applications.
You need quantity, you need choice. There diamonds in the rough without any doubt and you have to take a look at what kind of attributes do you want, what do you want them to feel like, be like, act like. I mean these are really really important considerations. It’s not that difficult. It’s not that difficult when you put your mind to it.
Like I said we have a big chapter in this, in our project gold star and some of our advanced stuff and I don’t know why people are so surprised that some of these answers are simple yet so effective.
Justin: I’m sure there’s some listeners out there that the anxiety is building thinking about who’s going to read all the applications and who’s going to call these people and do I have enough time to do it. And I’m sure that actually a lot of their interview processes are, I would say too drawn out…
Harry: Stop stop stop. You just did it man, you made my point. You just made the point beautifully. If a company is worried about who’s going to read the applications, who’s going to do the interviews and all that you’re not in the business of recruiting. I’m serious you’re not in the business. So if you had someone nominated to do that; it was part of a fulltime job to do that and care about that, then they would go ‘wow I need more applications because I could read through this very quickly.’ So there’s always been the question is the glass half empty or half full. Well I just pick up the glass and drink it and I don’t have the problem anymore. Problem solved.
Justin: Question, do you have a recommendation on the recruiting process, you know reading the application to actually going to you in person? I feel like companies are kind of all over the place with how many times they call somebody, how many times they come in for an in person, who they meet with.
Harry: Yes, I do have an opinion on that. What a surprise. Yeah. Well, what I’m not going to do this podcast is get into the actual interview itself because I think that’s a whole separate podcast. We happen to do that and we could play in that arena. But I can give you the outline sketch. So first of all, you read the applications very carefully and there’s a checklist of nine or ten items that you’re looking for. Ok? Gaps in employment, I don’t know what the current state of convicted of a felony thing is if those things are important to you, military service. Somebody says I was in the military for six months and you go ‘wow, that doesn’t sound about right, usually it’s two to three years minimum. And six months is not right. These are opportunities to ask questions. You could look at payroll history and all the little bit of P.R. that they put on there. There’s a lot of P.R. application, you know that. I mean they’re picking and choosing the right things to say and do and you get experienced about all that.
As you read through this application with some of these check list items you start to see a pattern and if they look pretty good you put it you know in one pile and you take all the other ones and you put it another pile. So the first thing you do with the rejected pile is you send them an e-mail; every single one of them. And say ‘although we really enjoy your application, somebody with a little bit more appropriate experience was hired. Here’s a coupon for a ten percent off next time they come in the store.’ So we’re taking all these people that apply for a job, that have some affinity for the company and try to make them feel good about that instead of feeling rejected and bad about that. So that pile of people that you’re not going to hire is very valuable to your P.R. effort. I don’t think there’s one in five thousand companies that pay attention to those applications. I know I do.
And then when you have the good pile of people that you’re interested in, the second phase to this whole thing is a telephone screening. What’s important to note is that it’s short; it’s let’s just say five questions. And those five questions are exactly the same with every single person. And the reason is that you can’t compare people when you do original interviews. Most people do original interviews. They sit down and ask random questions, they go with the flow and they don’t stick to one agenda. So I’m very firm about those five questions. And what are you doing? You’re trying to see if they can communicate well, if they’re articulate, they could string a sentence together, they speak English well enough to be able to work on your floor, they have the enthusiasm and motivation and so forth; try to get that out of five questions.
And then you’ll set up an interview. So we’ve got screening, telephone screening and first interview. So the first interview is interesting. In the Friedman process we look to disqualify people, not qualify them. So we’re looking for people that won’t fit. it’s a very interesting thing, I’m not looking to hire anybody I’m looking to disqualify the people that I’m talking to. So my questions are very pointed at disqualification. And again we’ll talk about that some other time. But this is all part of it. Then they’re brought back in for a second live interview. This is crucial. Nobody gets hired on the first interview or even screening. They go to a second interview and this is an interview to qualified people. and now you’re talking about high accountability, high performance, playing the game, absenteeism and all this other kind of garbage and you get that all out in the qualifications and whether they’re competitive as human beings because salespeople are competitive, so forth and so on. And then when you’re done with the qualification process you make a pile and these are people that are qualified, at least through this process. And then you apply another third and final thought which is the selection process. And that’s where you again just a little bit, the bar gets raised a little bit and you see who can get over that bar and then you make deals. You make deals. You don’t just hire someone, you make a deal. You say ‘you know what, I like you, it seems like you like us, let’s give this a go for a couple weeks. And at the end of a couple weeks I want you to come back to the office and tell me whether you want to continue and I’ll tell you whether I want to continue and then we’ll set up a gig.’ but those kinds of things work out really really well. That’s the system Justin. In any event. So just to review; review the application, telephone screening, disqualifying interview, qualifying interview and then the selection process.
Justin: Got it. And in those disqualifying and qualifying interviews, how long should they be or should they not be, I guess?
Harry: Well I think that’s a good question actually. The first interview look something like this. They sit on some chair somewhere and we ask them to read a piece of paper. And in the piece of paper it says, hi you’re being interviewed by Justin. It’s going to be a short interview, the first one, because we just want to meet and say hello and get a sense of who you are before we do a more serious interview. This is the job, these are your responsibilities, this is how much you get paid, here are the benefits, here’s the vacation policy. And you put that all in a letter for them or a memo or whatever it is for them to read in advance of coming into the first interview because you do not want to sit there and go over that kind of information in an interview. And it’s kind of cool because frankly, they have an answer to a lot of their questions before they actually walk in.
But one must understand that you’re interviewing them, they’re not interviewing you. So when they start asking about the company and all that other kind of stuff, it takes away from the actual interview process itself. Those first interviews should be no more than fifteen to twenty minutes max. And you actually tell them that in the letter. Because if you’re anything like me, when the person walks in sits down within fourteen tenths of the second you already know you’re in love or you’re in hate. It’s not correct but you kind of know, right?
Justin: You have a feeling.
Harry: Yeah, and you go to the interview and I’ve been surprised as many times as I haven’t been surprised, you know I mean, where I was dead wrong and let the interview process. But it is always kind of fun. You know you’re not supposed to judge anybody but I defy you not to.
Justin: No, I think everybody that’s hiring has an idea of the feeling they’re looking for, the vibe they want to get from the individual, since that’s how they’re going to represent themselves to the to the clients as well. So yeah, I totally get it.
Harry: It’s the ability to communicate.
Justin: Well Harry tell me any final thoughts on ‘always hiring?’
Harry: I would either stay away for from it and pretend you didn’t hear the podcast or recognize it for what it truly is and that is the opportunity to add staff that can really rock your business. You can really up your game. I mean, we have all these sports analogies all the time; ad nauseum, football, baseball – all sorts of analogies to sports. And it makes sense, you have a coach, you have players you have accountability and you have training. all of these things make sense as analogies but I could just tell you this, if it were true that sports at a high level is a good analogy for salesmanship and retail management, then I assure you, you might want to take a look at their recruiting programs because they do have people that do this for a living.
You’ve been listening to retail revisit. If our conversation today inspired you please be sure to rate us on iTunes or shares with your friends. You can see a full list of all our episodes at www.thefriedmangroup.com. And for more information on how the Friedman Group can transform your business, you can contact us at email@example.com A special thanks to Harry J. Freidman for sharing his thirty five years of unbelievable experience for all of us to hear.