Dr John Sullivan Talent Management Thought Leadership
CEO Measurement and Reward Criteria
After money and sports analogies, the next element of CEO language to develop covers the board of directors' and the CEO's reward factors. CEOs are not unique in that everyone pays a lot of attention to what they are measured and rewarded on. But because the amounts of their rewards are so high, CEOs are particularly focused on meeting their goals.
Know the top five problems your CEO is currently facing (listen to their speeches, track their meeting agendas, ask their direct reports or their admin, or just ask them). If you want to act like them you must know the performance criteria that are used to determine their bonus and against which they are evaluated by the board of directors. In order to identify them, either ask their direct reports, their administrative assistant or ask someone in compensation. The head of finance or any large business unit manager would also know. They might even be in the annual report.
It's also important to know the board of director's evaluation criteria because CEOs strive to make their bosses happy. If all else fails, look closely at the annual report, for it contains a narrative description of the major goals and accomplishments of the corporation.
Lessons Learned
Everyone likes people who share the same priorities, so recruiters need to focus their time and resources on impacting the CEO's primary goals and rewards.
For example, if a CEO is rewarded based on excellent corporate customer service ratings, it is important for recruiters to focus their time and resources on key customer service jobs in order to hire "top performers" in customer contact positions. Smart recruiters will go even further and begin to measure customer satisfaction among their applicants and hiring managers in order to emulate the behaviors that senior management considers important. If CEOs are rewarded for high margins, it is also important to demonstrate the "performance differential" (output differential) between average employees and your new hires in order to demonstrate that recruiting is having a high impact on margins.
Key words to adopt: CEO/BOD (board of directors) reward criteria, CEO strategic goals, strategic measures, increasing stock price
Increasing Shareholder Value
CEOs can get highly repetitious with their language. They follow certain word fads for months on end. I know several CEOs that sound like a broken record (or a skipping CD for the younger set).
It seems like every sentence that they use contains the phrase "increasing shareholder value." They repeat this mantra like it's the only thing that matters. And in most cases, that actually is all they care about! Not only do they themselves care about adding value, but they expect everyone in the organization to focus on activities that increase shareholder value and to minimize activities that don't impact this important value area.
When it comes to defining shareholder value there is no need to be subtle. It means increasing the firm's stock price. Stock price comes even before profits for a variety reasons, but mostly because the CEO's bonus for high profits is relatively small compared to the huge economic value of their stock and stock options. CEOs listen to, admire, and fund anyone who can make a direct contribution to increasing the firm's stock price. Raising the stock price is the Holy Grail of capitalism.
Another way to visualize the stock value of recruiting is to imagine yourself as a recruiter for a major league sports team. If you worked for a football team and you were recruiting new team members, it would be crystal clear from the outset that recruiters and the recruiting process would have a significant impact on the team's future success. Recruiting even a few superstars would not only make the fans (customers) happy, since watching a losing team costs the same as watching a winning one, but it would also clearly raise the overall value of the team if it were to be put up for sale.
Lessons Learned
Some in recruiting would argue that we can not impact either share price or customer satisfaction. I find that argument irrelevant, because whether you believe it or not, it is still prudent to continually use these words in your everyday business and recruiting conversations.
Most corporate recruiters assume they can't impact the stock price and as a result, they don't even try. Unfortunately for them, that can be a career limiting decision. The consulting firm Watson Wyatt HCI demonstrated a direct connection between firms that do excellent recruiting and increased stock price. You don't have to look to an external source to identify the economic impacts of recruiting. An organization with even a 10% turnover rate will turnover half of its workforce within five years. If you hire bottom performers as replacements, your organization could be well on its way to bankruptcy within a five-year period.
If you wish to increase the shareholder value of an organization, the place to focus your recruiting efforts is on mission critical jobs and senior-level executives, because they both have a greater opportunity to impact the stock price (some market analysts value senior management recruiting and retention at contributing up to 20% of the value of the company). Other key jobs that impact profits and shareholder value directly include product development, marketing, branding, sales, and research and development. Recruiting managers can also work on increasing the company's "employment brand" strength and recognition, which in turn can not only improve recruiting and retention but also significantly impact product sales and the value of the overall product brand.
The final, but most important, lesson to be learned is that recruiters need to constantly talk about increasing shareholder value. The use of these two words alone demonstrates a clear understanding that the primary mission of any corporation and its CEO is to increase the stock price.
Key words to adopt: Stock price increase, market value, market capitalization, brand value
Increasing Customer Value
CEOs like only one phrase better than increasing shareholder value, and that is increasing "customer value." The two phrases are related, so feel free to utter them in the same sentence.
When CEOs speak of customer value, what they mean is that it is essential to the corporation's success that you continually meet or exceed the customer's needs. Some CEOs even have higher expectations, in that they first want to educate their customers about expanded possibilities that the customers might not have anticipated (new kinds of services and products you can provide that they have yet to realize they can use or need). After educating your customers, a CEO expects you to meet those "educated" customer needs.
When CEOs speak of customer value, what they generally mean is an increase in product features or services that would differentiate your company's products from its competitors. It's difficult for any firm to maintain a lead in product features because competitors can and do copy them so quickly. CEOs are leaders and they like to be first in almost everything they do. As result, anything that recruiters can do to improve product development and cut time to market is something of high customer value.
Lessons Learned
Few recruiters pay much attention to adding customer value. Some recruiters even define their customers as managers and candidates rather than external customers. This is a serious mistake, because managers are sometimes hire inferior people to make themselves look good. Instead, recruiters need to keep the needs of the external customer in mind when identifying the best candidate for the firm (rather than one individual manager). Great recruiters also hire for the long-term needs of the firm, often in spite of a manager's desire to meet their selfish short-term needs only!
Recruiters can positively impact time to market (a key customer and shareholder satisfier) by minimizing the time that priority jobs are open. You can shorten this time by developing candidate pools for these critical jobs. In addition to minimizing vacancies, it is also important that the very best people are hired into product development, customer service, and time-to-market-related jobs.
Recruiting can also increase customer value by identifying and screening in creative and innovative individuals in jobs related to marketing and product development. Even though every job description invariably includes the word "innovation," it is critical that the recruiter and the manager provide more accurate assessment processes (most assessments processes are so rigid that innovators are screened out for being "too different"). It takes a radical shift to insure that the people you hire are not only qualified and experienced, but also capable of producing more innovation and advanced product features than current employees.
Another step for the recruiter is to look at all elements of the time-to-market chain to see if any of the weak points are caused by slow or weak recruitment. Focusing on "customer value" jobs is quite often difficult though, because these customer impact jobs are not always easy to identify. Another problem is that these jobs are, in many cases, not managed by the most powerful managers in the corporation. For example, finance and IT managers might be relatively powerful within the corporation, but they generally have a small impact on product development and customer value. In contrast, call centers and counter help might be low paying jobs, but their impact on customer value and satisfaction is extremely high :— so recruiting needs to focus on hiring great employees here.
Recruiters need to continually talk about increasing customer value. The use of these words alone demonstrates a clear understanding that no corporation can prosper over the long term without making their customers happy.
Key words to adopt: JD Power, customer satisfaction, customer loyalty, economic value added, and customer delight.
Prioritization
CEOs are bombarded with requests for meetings, advice, and the use of their limited time. As a result, CEOs learn rapidly that you can't do it all. Instead, you must identify priorities, ignore some requests, and delegate the rest to others.
The first step is to identify a CEO's direct reports. For example, if HR doesn't report directly to the CEO, then it obviously is a low priority with the CEO because CEOs want control and input from only the highest priority areas. Other high priority areas might be highlighted in their annual employee message or in the annual report.
Another indication of corporate priorities can come from the budget, where obviously the managers and business units with budget increases are the ones that the CEO sees as high value. A final way to identify the CEO is by looking at whom they spend most of their time with. Anyone whom the CEO meets frequently with is a high priority, and vice versa.
Lessons Learned
One of the first things that I see when I visit recruiting functions is that there is little or no attempt to prioritize jobs, managers, or business units. It's such a direct contrast to the corporate offices, where everything is prioritized. If recruiters are to learn to think and talk like CEOs, they also need to prioritize their efforts, resources, and budgets, and make sure that they are in line with the priorities of the CEO.
I recommend that you go directly to the CEO (or senior management) and show them the jobs, managers, and business units that you are focusing on. One 10-minute visit can save you hundreds of hours of wasted time on recruiting low priority jobs. In a highly political organizations, you probably will have to go through channels, which can sometimes results in a blurred message. If all else fails, identify the corporate priorities and make your own judgments about which business units and which jobs that get a top priority. Once you prioritize, be sure to assign your best recruiters to those high priority jobs. Give them more budget and handle their requisitions immediately.
Recruiting must demonstrate that it thinks and acts with its priorities aligned with those of the corporation and the CEO. The first step is to" talk the talk and make sure everyone is aware of your high priority areas. The second step is to ensure that your recruiters don't "peanut butter" their time by spreading it evenly over every job. Individuals who can not prioritize should be labeled as "socialists," not "capitalists" like all CEOs are proud to be called. As a result, you must enforce priorities and even demand that low priority jobs get little or even no resources. All of this might seem harsh within HR, but it's quite common for low priority items to get a zero budget allocation form the CEO's office.
Jobs that are frequently prioritized by the CEO often include their direct reports, product development, branding, marketing, R&D, and sales. Recruiters should also attempt to recruit senior executive jobs rather than outsourcing them to search firms. The advantage of doing it in house is that you not only get exposure among senior executives, but it also becomes clear to everyone that when you bring in top talent whom no one thought it was possible to recruit, you can become a visible hero very quickly. Lower level, low priority jobs can be outsourced with little or no negative impact on your image.
Key words to adopt: Prioritization, the 80/20 rule (20% of the people produce 80% of the results), zero-based budgeting, aligning priorities
