The Hiring Formula for Success with Lou Adler

Lou, a massive welcome to the Lead on Purpose podcast.

Hey, happy to be here with you, James. And thank you so, so much for inviting me.

Oh, it's a pleasure. I just, I mean, there's a couple of things I want to do to get started, and I know the listeners are going to be asking this in the back of their minds as well. So first things first, let's look a bit at what's brought you to this point. There was a couple of really interesting things that I look back and look at your life and go, wow, that's quite unique. So a nuclear missiles engineer. How does a person become that?

Well, actually, how I became that is really a benign story. I do have an engineering background. I was in guidance and control systems. I went to engineering school upstate New York. It was really cold and it was the middle of March, which in New York that's winter. And I was my senior year in college, so I was like 55, a lot of years ago. And I get a call from somebody in Southern California, and it was the. It was Vietnam. I mean, this was Vietnam era, and they were getting rid of deferment. So I could have gone into Vietnam, but I would have been an engineer. So it wouldn't have been bad. But so I get a call from somebody, no interview. They said, oh, Mr. Adler, it looks like you've got a good background in engineering. How would you like to work on this program? And I wasn't really paying attention. It was snowing outside. And I just asked the guy, what's the temperature? And it was snowing in upstate New York, 15 degrees Fahrenheit. And he said, it's 72 degrees. So. And that's whatever, you know, 20 centigrade or so. I said, oh, and what's the offer, the salary offer? I had no interview. It was like 10, 10 minutes. And he told me it was a good offer. It was pretty similar to I had other engineering offers. Then I said this was the key that got me to become an engineer on nuclear missiles. I said, is there a relocation package because I don't have any money to get to California. And he said, yes, we'll give you 12 cents a mile. So I'm quickly calculating that. He said, that's about $400. And I said, when do I get that $400? He said, A day after you start. That was it. I said, I'll take that offer now. And that's really what happened. So I went home and bought a Volkswagen. And two months later, I'm driving to California. It turned out the job was working on Minuteman missile, nuclear guided missile. And I didn't have much background in that, but I learned how to do it. And my first job was when do you. When will this missile go off course and when should you blow it up? So that was my job as a 22 year old engineer and I took that. And in some ways it affects how you should do hiring. There's a point in time when you go off course. You got to just blow it up and start over. And I'll make the statement here and I'll obviously have to prove it is hiring has never blown it up. It's been off course for 30 years and yet we still try to do it faster and we're not going to get any more accurate. So in some way that experience from 50 plus years ago still affects my mindset today. Hey, if you're off course, you don't and you can't fix it. You gotta blow it up and start over. So let's talk about how we start over again. I'm sorry, James, for that long story, but that was the answer.

That was great. That's fascinating. I love it and it's really interesting because hiring. So let's talk about recruitment and retention is such a big conversation right now. But as we chatted before we went live, it's actually been a big thing and a big challenge forever. It's not a new thing, it's not a Covid related thing.

No, definitely not. I'll go back and go on, ask the question and I'll tie a story together with it.

So I love it. So what for the person listening right now that does want to hire the greatest person that they can hire, where do they start? What's the process that they need to start thinking about?

Well, of course. So I have this methodology called performance based hire, four parts. And I've been training managers since 1990 and is generally hiring managers. We got training recruiters afterwards. But because recruiters started hiring managers, hey, you got to use this. But I so let's assume I have a room of hiring managers, business leaders, company presidents, anywhere from 10 million to 500 million. And that was the groups that I spoke with. I always ask these people, hey, how many people here want to hire a great person? How many people you think rose their hand? Obviously everybody. I said, well, if you want to hire a great person, which is your question, you better offer them a great job. And I'm looking at your job postings, they're boring. No great candidate wants a list of must have skills, experience and competencies that at best looks like a lateral transfer. So if you want to hire a great person, you can't offer these jobs. You're offering lateral transfers, not great job. So we got to change right there how you define work. So that really is the essence of it. Everybody wants to hire a great person, but what they're trying to do is find great people who are willing to take lateral transfers, make the decision quickly, without giving a lot of thought, and hopefully they apply and go through the demeaning process. It doesn't work that way. Great people don't take jobs that way. So. So to try to do that process faster isn't. Doesn't make sense. So in a nutshell, that's why I say, hey, we got to blow the system up. You want to hire a great person, you're not going to do it the way you're doing it today by posting boring, ill defined lateral transfers.

So how do we. I love that. So how do we actually create a really compelling job offer?

Well, let me kind of go back to the first assignment I ever had as a recruiter. So as you said, my first job was an engineer on guidance missile misguided ballistic missiles. True, it was. And, and then had another job in a different missile area. Then I got a master's degree in finance and I became a financial analyst. But then I quickly got into manufacturing and wanted to run a manufacturing company. So I did that pretty quickly. But I hated my boss, literally hated my boss who was the group president. I was running a little division. I was 32 years old and I quit four times. Every time he showed up, I quit because he and I just butted heads. But his boss made me come back. And then eventually I couldn't take it, so I just quit and became a recruiter. But I had a real deep background in manufacturing because of all that background I had from manufacturing automotive electronics. So I was very comfortable in manufacturing. So I had an assignment, my first assignment as a recruiter which was before you were born, James 1978 the preserve of the company made automotive components was in Southern California. And he had a, he gave me a job Description. I've had 10 years experience had. I have a manufacturing engineering and I have background in high speed machinery and this and that and chroming and all this other stuff. And I said Mike, this is not a job description. A job description doesn't have skills, experience and competencies. A job description is what people do, not what people have. So let's put the job description in the parking lot and tell me what you want the person to do in order to be successful. He said, I want the person to turn around the plant. I said, how long will that take? Well, six months, 12 months to a year. I said, fine, let's go out in the plant and see what we have to do. We spent an hour walking through the plant and we found eight or nine things that were wrong. We put them in priority order and I said, okay, I'll find someone who can do these things. Relay out the manufacturing line, upgrade the procurement system, improve the labor performance and reporting system, upgrade the forecasting with a bunch of stuff that people needed to do. And we found a person. Three weeks later found a person could do that work who thought that job was a career move. I have never used a job description listing skills, experience and competencies since that day. I owe and I worked on 500 to 1,000 assignments. I always ask the hiring manager, what does this person need to do that you will not compromise on? And if we prove they can do the work, then they'll have a different mix of skills and experience. The best people get promoted faster. They come from different backgrounds. But if they can do the work and they see the jobs or career move, it's a win win. You, the company, get your job done properly. And the candidates use this work I want to do. And I think that's in a nutshell, that's the key to hiring a great person. You have to have a great job. And a great job is what the person needs to do. And that person has to see it as a worthy career move in an area where they aspire to grow and develop.

I like that as a differentiator, I really do. So this four step process, what are the four steps that was the first part of the process?

Well, the first step is to define the job as a series of performance objectives that define success. The second step is sourcing. You got to go out and find good candidates who would see that job as a career move. I call them find semifinalists. The semifinalists. Someone who can do that work, can't do the work. They're not even in the game. Semifinalist is also someone who has clearly been recognized for being exceptional at doing that work. Because they meet those two requirements, they can do that work and are exceptional. The hiring manager will absolutely interview the candidate. On the other hand, the candidate has to see the jobs or career move or he or she won't respond to an outbound message or even an interest. Hey James, would you be open to talk about this job, if it looks like a career move, of course I will. Well, it better be a true career move. So those are we pre qualify candidates on two sides. Pre qualifying that they can do the work and they're good at doing that work. And the candidate would see the jobs or career move. So it's a lot of pre qualifying the candidates before you talk to them. The third step is, and then you don't need a lot of candidates if they're pre qualified. The third step is you got to interview them properly. And the interview is two way. You, the hiring manager have to see the candidate as capable of doing that work and fit with the organization. And the candidate has to see the job as a true career move. Not just a good package on the start date, but a good package on month one, first quarter, second quarter, year one and even year two. And then you got to close the deal. But you'll never have enough money in the budget. So you're going to be a good recruiter and closer. I mean, yeah, you probably could pay more, but the candidates got to see the job as a full one or two year commitment. And here's why this job makes sense. The offer package is competitive. The work life balance is appropriate. The job itself is intrinsically motivating. They fit with the company and they can see that they're going to learn and develop and make a bigger impact. You get all those pieces right. But it all starts with a great job. So it's great job, great sourcing, excellent interviewing and good closing. And then you got to deliver on the promise. That's what I call this performance based hiring.

That's great. To me that's so logical, yet so powerful. So this logical.

So people have to do it, right?

Yeah, well that's right, because people over complicate things. They add the complexity in and they want to make it really difficult and drawn out. So the interview process.

What would you say is a really empowering and powerful way to interview? And what's the opposite? What does that look like?

Okay, so let me go back to the first talk I ever did to a bunch of recruiters. And I'm going to say it was probably. I had it. My first book was called higher with your head and the first edition came out in 1997 and I think it was a year after that somebody read the book. Hey Lou, how would you like to speak at our recruiters convention? I said happy to do. Turned out that there's 1800 people there. And it was in New York City at the Javits center. And I was scared. I'm so scared. I never talked to 1800 people. I was scared. There's no question. I couldn't even do it. My son was kind of going through film school, so he kind of gave me some instructions on how to overcome the nervousness. But I opened up and I asked everybody in the room, how many of you want to hire a great person? A thousand. Eighteen hundred people raising their hand, yelling and screaming. I said, great. So we had a bit of a talk, and I said, okay, I'm now going to ask every single person in this room one question. I'm going to interview 1800 people at the same time. I said, this is a challenge if you think just talking to each other, interviewing all of you at once is bigger challenge. So I then said, and I brought a chair up here. And I said, okay, I'm going to ask you a question. I'm going to have to sit down. So I brought the chair and I sat down. So I'm sitting on a chair in front of 1800 people, and I asked everybody. I want everybody here to think about the greatest accomplishment in their entire career. The one thing that. If I could spend 15 minutes with each of you and ask you to tell me about the greatest career accomplishment of all time, what would you like to talk about? Well, I'm going to interview each of you now for 15 minutes. Obviously, please don't speak out loud. I'm going to ask you a series of questions. But the question was, tell me about your greatest career accomplishment. And if I can find it here I have what I call a magic card. But this podcast is not video. It's all audio, right?

Yes. Going to be. There'll be a video component over on YouTube.

Most of our listeners, you can show this magic card to him on the video. You can't see it because.

Oh, yeah.

So this is a magic card. This magic card has the most important interview question of all time. And if you go on LinkedIn and ask for the most important interview question of all time, you'll find that was my first post on LinkedIn seven or eight years ago. 1.4 million people read it. It's the same question I asked 1800 people in 1998 or 1999. I'm not exactly sure when, but I said, tell me about your greatest accomplishment of all time. And then I said, imagine If I spent 15 minutes peeling the onion, finding out why you got assigned to the project, if you volunteered or someone assigned you. And if you volunteered, why, if someone assigned you why? Obviously they signed you because you're good at that work. What was the challenges you faced, the two or three big things you faced? What was the biggest problem you had to solve? Walk me through how you solved the problem. What was the single biggest decision you had to make? What? Walk me through that decision. Who was on the team with you? What was your role on the team? And how did you influence people on the team? Did you put. How did you put the plan together? What did the plan look like? Did you make the plan or not make the plan or how did you manage to the plan? Walk me through the skills you used and how you learn new skills. So the idea was you really peel the onion and understand in great depth 15 minutes, what that person actually accomplished, the environment in which they accomplishment, and the area in which they excelled. And then I finally asked at the end, so you imagine I'm sitting here on a chair with 18, 15 people, 1800 people in New York City, Javits center, which is a huge convention center. And very quietly I say, and obviously they're just thinking this out loud. I said, this is my last question because 15 minutes is up. What kind of recognition did you get for that? And it was. And given this is the best thing you've ever done in your career, it should be pretty significant. And in your mind, was this recognition appropriate given all the work you did?

That's the most important interview question of all time. And that's what I asked. And it was pretty cool situation. I've asked it thousands of times since then, of course, and I do it on radio shows. But it's a very important question. The real idea is you keep on asking questions related to the job, related to the performance objectives, and you start seeing a trend line of performance over time. And that really is the clue. So you compare that trend line of performance to what you want done. Remember I said the job was a series of performance objectives. I compare those major accomplishments to the performance objectives, and that's the heart and soul of the interview.

Wow, that's powerful. Like, really powerful. So for the person that's listening right now, that's either recruiting or getting a recruitment firm to do that. What you've just heard is gold. And I would say it's more of a gold standard like that. That's just brilliant. How have you seen interview processes done poorly?

Oh, most of. Well, number one.

There'S two levels of poor. One is, hey, I really like you, James. So if you really like someone, let's assume that we're talking about Rugby or some sport. Oh, James is great. So if I really like the candidate, I go out of my way to prove that he's good. And if I hear you come back with a bad answer, I said, no, don't worry about that. Tell me about this. And I. I seek information that confirms my original opinion. On the other hand, if I don't like you, I guess all black is a New Zealand rugby team.

That's right.

Assume I'm from Australia and I don't like that. I, James is no good. So I look for facts to prove that you're incompetent. Because I got to tell somebody in HR why I either liked you or didn't like you. So you go out of. If you like someone, you go out of your way to prove whatever you believe. And both are wrong. So that's the first step. The next one is everybody believes that behavioral interviewing is the standard interview and behavioral interview. And a lot of people, oh, I love behavioral interviewing. Well, behavioral interviewing. And it's a fair. It's fair where it says, hey, give me an example, James, of when you've been results oriented. Give me an example of when you've worked with a team. And that's the traditional interviewing that people get trained and you start peeling the onion to try to understand it. The problem with that is if you don't compare to the real job, it's you're just getting a isolated point in time if the person's been good. Everybody's been results oriented at one point in time. Everybody's been committed and work with a team at one point in time. But can they do it in your environment at the current point in time? So it's that they miss the time frame. So the worst one is just making judgments on first impressions unprepared, going in. Behavioral interviewing is a little bit better because it takes out some of that emotion, but it doesn't get into the real depth of is this person going to be competent and motivated to do the work in the situation I actually need done? You can be perfect. I mean, I was perfectly. I was running a manufacturing company when I was 32 years old. I was perfectly competent to do it. I'd have been a little bit stretched, but my boss and I just clashed. So every day he showed up, I got pissed off. The next day I was demotivated. Luckily, he didn't work in the same building, or else I would have quit long ago. And if you have a boss that's demotivating, it doesn't matter how good you Are if you have work that you can do that you don't like to do, you're just not going to be enthused about it. So there's a lot of variables that determine performance and most interviewing systems don't take in those variables. The hiring manager, the work itself and the company, company environment and culture.

That's really very, very interesting. And the one thing I want to just unpack a little bit is the whole idea of confirmation bias. So a lot of us have that and it's unconscious, but we have this confirmation bias and we're trying to confirm our own thoughts and ideas. How can someone who's recruiting, first of all become aware that they do have confirmation bias and then secondly, how can they actually work around it and avoid it?

Well, it's like you must have been to our class because that's the first thing we say in our class. So we have a whole segment in our training. And if you go to hirewithyourhead.com you'll find some training and other stuff. But we have one course where we actually get into overcoming bias. And it starts by just asking everybody said, how do you feel when you first. And I'll ask you this question, you can answer it. How do you feel when you first meet someone whom you really like? How do you physic, you know, just describe how you feel?

Yeah, so I feel.

I would feel happy. I'd feel that I wanted to be curious with them. I'd feel safe. I'd feel there's some, there's some connection of some description that I can't even put my finger on. But we feel connected.

But you just feel relaxed too, right?

Yeah.

Yeah, this is a good person. So how do you feel when you don't like somebody? Someone comes in whom you're interviewing and you just don't like the person. How do you feel then?

Uptight and standoffish?

Yeah, I mean it's just very high. And that's actually called a friend versus foe response. It's, it's hey, if I don't like somebody who this is not going to be very good. And if I like, hey, just kind of relax. So that's the beginning of it. So just recognizing that that's the case, we have a bunch, we have like a 10 step program to overcome it. Number one is wait 30 minutes before you ever make a hiring decision. That's the first rule. Wait 30. Just ask a series of questions. Pretty much what I have on my magic card here, I'll have to show here my magic Card here. Just ask those questions. Have a script, a semi scripted interview. It's not perfectly scripted, but they just go through some basic steps and use the interview to collect the evidence to make the decision. Don't make it during the interview. That's a rule. Recognize your biases. So if you like somebody, recognize you're being seduced a little bit because you're very relaxed. Ask the questions, but don't make a decision. Yes, I want to hire this person until you collect the evidence. On the other hand, if you don't like somebody, you have to go out of your way to prove the person's good. Just ask the same questions. Don't make a yes or no decision to at least the 30 minute mark. So now I want to kind of give you a story which I think highlights this whole thing about unconscious bias. Well, it's conscious too. Now. You got to first bring it to the conscious level. So this had to be 20 years ago. I had a candidate for a search assignment for his vice president of sales.

And I had this rule, and I had already written my first book, high with your head. So it was wait 30 minutes. And I had started teaching a lot of managers this question. So a guy walked for VP Sales, selling to big. Some of the big stores and big box stores. I don't know if you have Costco, but at the time it doesn't matter. You have the big department stores that were selling hardware and doesn't matter, but that's what it was. And this guy comes into my office and he was a big, big guy, very, very heavy. He was five, maybe five feet tall, five and a half feet tall and weighed 300 pounds. It was a big guy. And all of a sudden. And I know a sales guy has to make a good first impression. And I was devastated because this is a very difficult search. Very different. And I had worked a couple weeks on it, and this is the first candidate I had. And he sounded pretty good on the phone. So I was kind of wrong. I mean, literally, it was so uptight, as you said. I was just feeling terrible. I'm almost confused. This is 25 years ago and I'm still almost feeling that same thing coming back. But after about three or four minutes, I kind of got. He was in the. He was in my office. So I had to be there. Nothing I could do. I had to be there. And after a few minutes, I started relaxing a little bit and said, okay, I can just suck it up for a half hour, 45 minutes and end the interview. And I'm thinking of my client being unhappy and all this. But then I remembered I talked to the candidate on the phone before I brought him in, and I asked him, tell me about your biggest accomplishment. And it was selling a new product line to a big store chain. And I remember him telling me about that.

And then I'm starting to think, you know, this. And so I kind of forgot how he looked. I started just asking questions about the guy, and then somehow we talked about college. And I said, oh, what'd you do in college? And he played football, American football. And he was a. He was a big guy, but he. But it turned out after 30 minutes, the guy was not 5 5, 300 pounds. He was probably 5 9, 5 10, about 270, looked like an American football player. And it was, like, fascinating, because I know 30 minutes ago, he was heavier and shorter. So this is how your mind plays these tricks. So I call my client up and said, I think you got the perfect. He was a good guy. Really a good guy. I tell my client on the phone, I said, but the guy is a big, big guy. And he said, how big? He said, oh, he's big. He's a real big, big guy. And I'm just trying to soften my client up. I said, he played football for San Diego State, which is a college in the United States, in Southern California. So he went out, he said, well, I'll talk to the guy, but hope he's not too big. I mean, that was his comment. He met the guy and he said, oh, he's great. Not that big a guy. He's a football player. So it was interesting how bias is so critical in how to control it. I would have lost that candidate if I didn't go through that exercise. He was a good guy. He was an excellent guy. But we put all our biases and filters and preclude this. You just got to go out of your way. Wait 30 minutes, use the interview to collect the evidence to determine if he's good or bad. Don't use it to exclude someone. And I think that's really the key that you have to go through here. It is important, but recognize it. And a minimum. Wait 30 minutes, use the interview to collect the evidence. Don't make the decision during the interview.

And what I hear as well there, Lou, is your perception really shapes your reality. And when you can.

Kind of change that perception, it really changes what you see in front of you. I had.

I was totally wrong with the guy. I have a brother who was very. Had a brother who's very, very heavy. So that bothered me and I realized I put that personal bias on this candidate and it was totally wrong. He was a great guy. He was a great guy and clients loved him. And the thing is that we put our own. But what's a good first impression? Well, that's my judgment. And just like they say, a lot of companies say, well, it has to have good communication skills. And so then they don't like people with a different kind of an accent. So me, I always say this. Okay, I understand that communication skills are important. What does that look like on the job? Who do they have to communicate with on the job? They have to make quarterly reports of the engineering executive team. Fine. Then that's the answer I've got. So if I'm talking with someone who has a strong accent, I just say, have you ever made presentations to a group of engineering executives who have different language skills? They said, sure, I did it here, here, and here. So as long. So it's not my interpretation of communication skills, it's what they do on the job. And I think that's the idea of a performance based job description, is you have to look at all that stuff as what it's really like on the job to try to eliminate bias before it even comes into play.

And it's interesting as we talk more about that. So a few months back, I connected with Todd Corley. So Todd started with Abercrombie. So Abercrombie brought him in after they went through a massive systemic racism and diversity court case back in the day.

Is this the retail store? Is that the retail store chain Abercrombie?

Yep, in North America. And so they brought him in as their very first global diversity officer. And he's now with Carhartt, another American Apparel brand. And we're just talking about hiring with diversity, equity and inclusion as your filter. So how do we do that when we're recruiting and we want to recruit and give everyone a fair crack? How do we do that and make sure that those biases are not kicking in so that we, you know, if someone is a minority, a different ethnicity, how can we hire again, come back to performance and remove all these other things that we see?

Well, I think that's the issue. So it goes back to what I said. If you define the job as years of experience.

Skills, academic background.

And that's your initial bias, you must have these things. We've already added bias to the system. It's not 10 years of experience. It's not this background, it's not this academic Background, it's work that the person needs to do. So by defining the work as a series of performance objectives. The idea is as long as a person can do that work, he or she deserves an opportunity to for that job. Unfortunately look at job description. Say says must have 10 years experience. It doesn't say must be able to turn around a manufacturing plant. It says must have five years of good communication skills, must be results oriented. So right away you create anti diverse job descriptions by filtering people on stuff that doesn't predict performance. So I actually, and I'm going to say it was probably 10 or 15 years ago, but it was certainly part of the first book, but certainly about 10 or 15 years ago bigger companies really started using performance based hiring. And they asked exactly the question that you asked about diversity. And I knew that the product, as long as a person could do the work, he or she had the right background, didn't matter if they were older, young, black or white, green or yellow. But I had to get some legal people to agree to that. So I had the number one labor attorney in the United States, number one labor attorney read one of my books and I said David, would you just read this book and write a white paper if you agree with it or not? He said as he read the he said at first he didn't think it was going to work. When I told him after he read the book, he said this is the most important book ever written about anti diversity. By defining work as a series of performance objectives, you open the talent pool to everybody, old or young, black or white, green or yellow, because it's colorblind. It's about performance as opposed to filtering people on skills that don't exist. You can't hire a diverse person who's got 10 years experience, a degree from this college, this kind of background work for these kind of companies because they don't exist. But if you take away, hey, a lot of diverse candidates exist doing that kind of work. You just have to reach out to them and define your jobs differently. And that's one of the big reasons why job boards are in my mind haven't made any progress. And that's why I say if you're not getting the right answer, blow it up. Don't try to correct mid course. This goes back to my first job as a nuclear engineer. I Knew went at 22 years old. I figured it out and it was interesting that nobody else could figure it out. I figured out because I wasn't that good and I wasn't that narrow and deep. I was actually kind of playing around with it. And I said, hey, you know, you got to get the engines, you got to get the guidance system, you got to get electronics all working together. And I kind of saw it more general and I said, okay, now we have to blow the thing up if it didn't meet this situation. But I think this goes back now to hiring being faster. Doing the wrong thing doesn't make it better. Blow it up and start over. And the way you blow it up is you define work based on performance objectives, not a list of skills, experience and competencies. That's the game changer. Companies find that very reluctant to do because they've spent so much money on writing job descriptions based on competencies and skills. And yet that's the cause of the problem, not the solution to the problem.

And as we get into larger companies, hundreds and thousands of staff. So how do we ensure when we're recruiting and hiring that we are creating a diverse team, like a large team, hundreds to thousands of staff. What in your experience is a great way to approach that to make sure that you've got diversity across the entire team?

Well, you got. It's got to start at the. So let's kind of take that problem.

At the top level. It's a lot of talk, hey, we want diverse teams. Bunch of bull. Let's be real frank because you do it at the bottom level. Every individual hiring decision is how that occurs. And if every single hiring decision is based on skills, experience and competencies and bias during the interview and an assessment process that is effective, it's all bull. It's not going to happen. So you got to say, okay, what's the root cause of the problem? The root cause is we write job descriptions that are not. That don't open the talent pool to diversity. And they're then. Then they say, well, we want to have some standards. Well, the standard is performance objectives. They got to meet a. So until they do that, it's all talk and it's just a money being spent and people feel good thinking they're doing it, but the end result, it won't happen. So that's where I'm a very. A super cynic. Super cynic isn't. I'm going to show you something. I don't know if you can show a picture. I'm going to. Can you hold on, I got to find my mouse here.

For anybody, Anybody listening on Spotify or Apple podcast, if you want to see what's being shared, you can hop over to the YouTube channel and check it out there.

There's a lot of talk about the war for talent. And at the time, the Internet was getting real big. Job boards were getting huge and becoming. And everybody was saying, oh, we're going to. We got job boards now. We don't need, we don't need to pay for recruiters. We'll hire our own internal recruiters and we'll be able to hire people easily. So that was in 1997, 1998. And I had written a book, high with your head at that time. And the book, this talk about the war for talent was A study by McKinsey, the Big Consulting firm. And I said, no, it's a bunch of bull. This was 19. I want you to just say this cartoon, James, was drawn in 1997, 1998. Excuse me. And I said, no. And I didn't draw it. I had a cartoonist draw it. I said, you know, we're spending a lot of money on boring advertising. Nobody can find jobs. We got people, poor interviewers. We got recruiters who've got too much work to do. We got bad hiring systems. We got boring postings. Oh, boring is an understatement. It was a can of worms. And I said, doing this. This is 1998. I made a contention doing this stuff faster isn't going to get hiring any better. So I've shown. And now let me just say in 1998, $500 billion has been spent in trying to solve this problem. 500 billion, maybe more.

On technology and AI. And this is new. And all this stuff, oh, we got it. We finally have the solution. Finally have the solution, finally have the solution. And then VCs put more and more money into it. No, you don't have the solution. You got. The problem is you're just trying to do the wrong thing faster. And I. This is. So the whole idea is that how do you scale it? You don't scale it by doing the wrong thing faster. You blow it up and start over again. This is that engineering, when you're off course, and you're off course, nothing has actually made it better. So then you got to say, why are we still doing it? And this goes back to my first job as an engineer at 22 years old, thinking being in Southern California was better than being upstate, cold winter New York. I said, blow it up and start over. But it's easy to blow it up. You just write job descriptions that define the work a person needs to do. You find semi finalists who can do that work. You dig deep into their accomplishments and compare them and you give them the best career move, not necessarily the best starting package, although it could have the most money. But more important is all the factors that drive on the job performance. Post hire. You do those things, you'll be able to actually hire great people every time.

That's really powerful. Thanks for sharing that image as well. I'll make sure that we share that up on our YouTube recording as well. So for the individuals who are thinking, do we do in house recruiting versus having a recruitment agency because they want to save money, time, whatever, what's your thoughts? Where would you weigh in and say, you know what? From my experience, this is what you should do if you want the best results?

Well, it depends. If the job is a strategic position.

Then you got to say, okay, I can't afford just having an average performer. And if it's a critical engineer, almost every single manager in any function, certainly directors and vice presidents. But if it's a critical position that will impact the company's success, you can't afford to compromise. Now, should you pay a fee for that? That's a different question. If you have a very good internal recruiting team that can do that work, that's fine for them to do that work. But then if you look at the internal recruiting team, if you're a recruiter, you can handle 10 or 15 assignments or 20 assignments at any one time and be very effective at it. And that's the problem. You know, recruiters were brought in to handle 15 to 20 assignments at any one time because they thought the technology would make it easy. And that's the fundamental flaw. Technology didn't make it easy. You're just giving all these people too much work to do. So what you've done is you've just taken an administrative job. You made recruited administrative. What's happened is you open up the spigot once you turn on the job posting. Let's assume that 25 years ago, before job boards, you had a job posting. You put in a newspaper. Maybe you got 20 to 30 people who applied. Now you got three to 500 or a thousand people to apply because they just apply, apply, apply. And LinkedIn and monster and career builder and zip recruiter and indeed are making money like crazy. Ah, more people apply, the better. We're making more money. Let's have do it. So their job is to get more people to apply and have people change jobs. So they, they push you, you go to LinkedIn and they call me, hey, Lou, I got five jobs for you. I don't want my job. Well, Apply here, apply here. So it's their job to go to these sites and get you to apply because they make more money. They're not trying to help the company. They make more money by the more job postings you have. So but again you think about where the money is. The money is in job postings, it's not in doing this right. And then what all the technology comes in and said, oh, we can make all this stuff more efficient for, for you. Well why would you make this more efficient? And I've talked to a lot of people in artificial intelligence. I said, you focus. The best people aren't the ones who applied, they're the ones that networked or knew the hiring manager. Hey, I work with James and James knows this guy. So I got a referral. It's a different kind of a market. So you start thinking they're automating the process. They're using a technology, the date and AI understand how it works. They're looking at big data, they take look at trends in the data, they see what's, what's happening and they say, okay, let's take a look at the best people who apply and hire well or figure and automate that well, that's not the best people don't apply, you're getting the worst. I don't want to say because they're not terrible people. So I don't want to say that. But the trends of people who apply, it's much more circumstantial than it is predictive in terms of the future. So again I kind of going off on a high horse here though. But I just see the, the point where people making how to scale it is they have great vision, great hope, but unless they blow the system up and start over, and I don't even start over, just they know how it works, they just, it's hard work to reinvent a system that's embedded in our culture, which is job boards and job postings and all this other stuff. And I recognize that's not. But we work with mid sized companies, let's say 500 to five to 2,000 people, where they can really make change. Oh, I'm actually, right now we're actually working with some huge companies that.

Are changing, isolated by division by division, particularly in technology companies where they realize that hey, these are critical positions at all levels and they've got to do things differently. So I think so it's, change is slow. But I think people starting to say hey, performance based hiring actually does work. When you look at it from A business system.

And if you think back to something in recent years, a company that you've worked with and you're like, you know what? Performance based hiring has just been incredible. What's an example of that that you've thought that this has been such a success and you've seen it really work well?

Well, I can't, number one, I can't reveal the names of the companies. They wouldn't want to because they don't want to put competition. But it's where it's really been effective, is where I've actually been able to talk one on one with the president of the company and the CEO. And I tell this to CEOs, I said if you want. And I just talked to one, let's say six weeks ago, the woman who's a president of a company, big retail, mid sized retail chain in this United States.

And I said, Laura, if you really want to implement this company wide, you as the CEO have to make two decisions. Number one, you will not approve a requisition unless it's created as a performance based job description, listing the performance objectives for the job, defining what a person needs to do over the course of the year. And number two, you don't accept a judgment. We have a form called the Quality of hire scorecard. You don't accept the hiring decision list. The whole team has reviewed this candidate and gone through the process and shared their evidence in a formal manner. You do those two bookends, they'll figure out how to get there in between. So that's where we've seen it to be very, very successful. I know I had one client, it was a, it was about a 300 million dollar company. United States had tooling, it was tooling and testing equipment. And I became real good friends with the president. He wrote in my first or second book, I can't, a story that I put in there where he said, I've hired at least 20 people using Lou's process. I only made one mistake. It was because I didn't do a performance based job description. I trusted my judgment too much. He said I'll never, never happen again. And it really. So that's pretty much that's the story. The problem is we get it to work with individual managers who are committed to make it happen. But once you get bigger companies, they have other things going through. HR isn't totally committed. They think, hey, they've got to do this whatever they're doing faster. So it then becomes a bureaucratic nightmare to make it happen. So our best Success has been when somebody has gone through it and really understands it. But we have had a lot of great success, so I'm proud of that. But it certainly hasn't achieved worldwide success for every single job in the world.

And what do you feel are the costs associated with a company that's not willing to hire this way when they hire old ways and they, they hired based on experience? And what's the, the costs involved for that company?

Well, you can look at it because again you probably, I mean I know you mentioned it earlier is my background is a financial analyst. After I became an engineer, I became a financial analyst and worked for a couple years on maybe 100 different investment projects from acquisitions or new business ventures. So I look at one statistic that's easy to measure and maybe I'll give it as a story. No, I don't want to give that story. I'll say you can make the financial decision based on what I'll call revenue for employee. You can just look in the financial statistics. And a company like I'm going to say Ford might be this number. So let's say Ford Motor Company. I think the revenue per employee public information is $600,000 per employee. The marginal profit for that is about 40, 45%. So let's say 200 to $300,000. Let's just say $250,000. And that's a good average number. Revenue per employee and profit for employee for a staff, a two to three year engineer, managers attire, rank and file, it's lower. But so if you're hiring an engineer each, you know, and maybe that person's salary is 100, 150,000 or so. Well, that person should bring in another $100,000 in profit. So if you hire a below average engineer, it's costing you. They're not even covering their salary. If you hire a great engineer, they're covering their salary two or three times. So rather than getting all the financial statistics, James, one way to look at it is revenue and profit for employee. The other one is, and this is a story from long ago.

A company asked me, Lou, we don't have a budget to implement performance based hiring. So I asked the woman, I said, well, do you have a, what's your budget for bad hiring? She says, what do you mean? I said what's your budget for bad hiring? I said what percent of the people underperform in your company or turnover? And she said, ah, probably we have turnover about 15%. There's probably another 15% of the people who underperform so I said, so 30% of the people you hire are off. I said, so just tell me what, how many people did you hire? And I wasn't 100. But she said probably, let's assume she said 100. So it's 100 people. Average salary for all those hundred people is $150,000 US with overhead. So that's $15 million of salary you've paid these people. And 30% of them underperform. So 30% of 15 million is $4.5 million of wasted money.

I said, and you don't have a $150,000 budget to train people. She said, I'll find $150,000. But it was the idea now is it? So that's the way you can look at the cost of. Think of all the money away from just in pure salary and not getting things done. But then a bad hire affects everybody, demotivates the manager, demotivates the peers. So the cost of a bad hire is more than just money, but the money is huge. So you just take the percent of people who are underperforming, 20 to 30% who turn over and at least you're paying in their salary if you just say, hey, this is a waste of money. So that's one way to look at it. Probably two to three ways of looking at it, but it's a big number.

I love that. And recruitment, I see at one side of it and retention at the other. So from your experience with the companies that you've dealt with, why do people leave companies? Why do people jump ship, this great resignation as they're calling it, why do people not stay?

Well, I think they don't. Okay, so let me go back another give. As you can tell, I give a lot of stories. I make up stuff, but I usually prove it with facts. So I had a search firm, I don't do search, we just do training now. But I had a search room from 1978 and that was a full time recruiter for 25 years. So 20, 23, 2003. But there was a point in time where I for a 10 year period where we actually tracked the people who implemented performance based hire and it was probably seven or 800 placements and this is where they did all the things we said to find a job, find the right people, closed it on career move. So after about, I say 7 or 800 placements over a 10 year period, we calculated how many left after the first year and it was only 75. So 75 out of 800 is 9%, 8 or 9%. So then we went back and we talked to those people of why they underperformed. But not just those people, but we also talked to the managers and the candidates themselves. Half, I'd say maybe 5 of the 75 were incompetent. Most of them could do the work, they just didn't want to do the work. And half of the 75 didn't like the hiring manager. I mean, so it was really the hiring manager. And a lot of them just, and I would say 30 or 40 of them didn't like the company. Maybe let's say half of the other remaining didn't like the company, didn't like the values, but a good portion didn't. The work wasn't internally motivating to them. So let's assume that I was an engineer and 10 year mark and I could still do guidance systems and all that stuff. But if I, I didn't want to do that work anymore. The fact that I'm competent has nothing to do with it. Am I motivated to do that work? And I think that's really the issue is we hire people who are competent to do the work because our job board say, you must have this background, must have this background. You've gone through behavioral interviews, said, oh, I'm results oriented, but I'm not results oriented doing that work in this environment. So you got all these mishmash of stuff coming together. But generally speaking, I would say it's not lack of ability to do the work, it's lack of motivation to do the work. And that relates to the hiring manager and the culture of the company. I'm going to show you another document here that I'm going to share with you. I call the Hiring Formula for Success, which ties all of that together, if I can find it.

While you're finding out there, just thinking about what you do, you're arguably the world's global expert on hiring. So that requires a lifetime commitment, dedication to understanding it, to developing frameworks and methodologies around it. Where did your passion for hiring begin? And how has, how have you sustained that for so long?

Well, that's a good question. I don't know that. I know.

That's a real good question. I think so. If I go back to that first job I told you about, they gave me that assignment.

I was scared. I didn't think I could do it here, 22 years old and in fact, when I first took that job and I. The story I told you is a true story. I didn't know what the job was, I just took it because it was in California and the weather was better and I. And I know you know the Beach Boys. I thought I misunderstood a Beach Boys song which was California Girls. I thought you had to go to California to find a California girl. So that was my whole motivation. Get to the ones and find it. I mean, it was nothing to do with this job. So I'm going to California, buy a Volkswagen, I drive cross country, go to California, I get in the job, I meet my boss, who I never interviewed, Remember, I didn't have an interview. I just took the job to get out of Vietnam and to get to California and find a California girl. Which let me tell you, the truth is I found a California girl a year later, met her at a bar, and we're still married. So that did work.

I love it.

That, that story, that story worked. But when I took this job and he said, oh, you're not an electrical engineer, you're a mechanical engineer. And I was a mechanical control systems engineer, not an electrical. Which is if you're a guidance and control system, you know what that means. But it doesn't matter. My background was mechanical stuff, not electrical stuff. They said, oh, well, you have to be here. We'll do, we'll deal with it. So I was scared, but I learned. Three or four or five months later, I figured it out. I just studied and figured it out. I said, oh, it's a system. You have a business, you have a system here of different parts and different components. And this is where I said I wasn't the best electrical engineer there. I wasn't the best mechanical engineer there. I wasn't the best rocket engineer there. I didn't. But I could understand how each of these things work together and put them together. So I understood, ah, this is a system. And they couldn't believe that a 22 year old could figure this out. Even the guys in the Air Force were giving me high five is pretty cool. You figured it out. Because I wasn't good at anything. I was just good at all the pieces. So I take that story. As I started getting into manufacturing and into business, I could see that the system is what mattered. So when I got into hiring and my job as a recruiter, I got my first placement in three weeks, almost doubled my income. I did double my income the first year. So I quit a good job to become a recruiter and made nothing. But I made a placement in my first week, which was 25% of what I made. I didn't make another placement for about six months. So I said, okay, this is not for me. But then I figured it out and I, the first year I doubled my income. And then the second year I said, you know, that I still, I might have doubled my income from running a factory. I think I can do it again if I take all the slop out of the system. So I started studying why this, why are people making mistakes? Why does bias do this? Why does this happen? And I, the second year, I'm gonna tell you, the money, it was a lot of money in 1979. It's a lot of money today, but it was a lot of money. Then I said, you know, and I got started figuring it out. Another year I said, I think I can do it again. And I started trying and testing different things, like an engineer. What if I did this? What if I did that? What if I pulled this off? So after a while I just said, you know, it's a business system. Hiring is just like a factory. If you have bad parts, you don't keep on making bad parts. And you figure, you stop and figure out why the bad parts are coming out and figure out how you get better parts. The way the job is defined, the way the candidates are defining the work. So it took about three or four years to develop the concept of performance based hiring. And that I thought was pretty cool. So I started writing articles about it and then people asked me to speak about it. So I got excited about the human nature. So here you got technology, human nature, behavioral economics, human economics, technology, AI. All these pieces come together. I said, that's pretty fascinating. This is pretty cool. So then eventually I developed this formula for hiring success which basically says ability to do the work. And that consists of technical skills, team skills, problem solving skills. In relationship to fitness drives motivation. Because motivation so important, you square it, that equals results equals MC squared. You know, the guide sign developed that long ago, but pretty much, hey, motivation is the key. But motivation is a variable depending on if you like the job, you like the environment, you like the culture, you like the manager. If any of those things fail, motivation drops to zero. And it turns out ability is not easy to measure. But it's pretty easy to measure. Variable is the fit. It changes almost every day, six months you get a new manager, changes. Somebody buys a company, it changes. You get assigned a different project, that changes. You don't get promoted, it changes. So just because you're intrinsically a great person, if the situation changes underneath you, your performance will change. And to me, that's what we figured out is okay. I got to measure the fit factors as part of the assessment and that became the difference as I really studied. And it was really the number one is I had to understand the hiring manager and his or her style. And when I now all of them were important, but the candidate had to be motivated to do the work, had to understand the pace and intensity, had to understand the culture of the company, how decisions were made and how to work well with a manager. And you still had to define the job. So you asked me why this is fascinating because it's I don't know, but I get excited about it, even get excited talking to and I'm an old guy, I'm 76 years old, but I still get excited about it and I understanding it and what I really get satisfaction is not when a company tells me Lou really works. It's when an individual candidate has read one of my books and calls me and says, lou, you've changed my life. I read the book and I got a real job because I really help candidates define a job and accept and compare different offers. And that really to me is the real value of this from a human. I don't want to go overboard on it, but that's the real value is if people look at their work as not just what they get paid, but the work they do and how who they do it with and make the decision that way, they'll be a hell of a lot better off or heck of a lot better off. Unfortunately, too many people overvalue what they get in the start date, not the work they're doing.

Yeah, that's so what you've just shared has landed really powerfully for me and I know there'll be a listener listening right now going, wow, I need to implement this level of thinking, the hiring formula for success. I'm going to share that certainly on YouTube and also what I'm going to do, Lou, after this, I'll make sure because there will be listeners that want to connect with you, your brand. So I'm going to make sure and put in the show notes, your LinkedIn details, your website, make sure people can get through and connect with you. But before we finish up, I've actually got one last question for you and I want you to fast forward and it's towards the end of your life, it may be your last week.

Thanks a lot.

I'm an old guy, so I don't know that I like that. But keep on going with your question. We'll see if I want to answer it or not.

Though you've got a young person in your life that you care dearly for. And they say, hey, Lou, how could I go through my life and lead it with a sense of purpose? How would you answer them?

Yeah, it's a good question. I don't. I didn't. Let me say this. I didn't grow up thinking, I want to become a recruiter. So that was not my intent. Never even occurred to me. On the other hand, I talked to an old fraternity brother from college about a month or two ago.

And we just talking. I hadn't talked to him 55 years. So this has been a long time. And I just said, andy, how you doing? We just got connected somehow. And he told me, I said, what was your first job at a school? And he said, oh, I got on a rotation program at General Electric. And in that rotation program, I spent six months in manufacturing, six months in finance and accounting, six months in software development, and six months in product design. And he said that gave me an opportunity to understand each of those functions and to do what I wanted to do. And then I had a choice to get from that. They gave me an opportunity to go to a master's program, either in business or technology. And I decided to go in technology. And I think about that as an idea, and I don't think they do that anymore. It was the idea that and a lot of young people, I want to be entrepreneur. I want to do this, I want to do that. And I said, no, maybe you don't. Maybe you wanted a broad exposure to a lot of things to find out what your passion is. You don't know what it is. At 22, I didn't know my passion was going to be this. I didn't know it was going to be. My passion was finding a California girl. Because the Beach Boys. Because I misunderstood the Beach Boys song that was, you know, you don't really know, and I don't. And I. There was certainly that job that I had in manufacturing that I quit. I really liked that job. I really. I would have stayed. My life would have been totally different. It wasn't for that. My president. So your life has a lot of changes, but by being exposed to a lot of different things, being exposed to what I would call a professional way of doing it, then you can decide logically, hey, does this make sense to me or not? And I think that's probably the only advice I can give. The one advice I probably would give is, I think we overrate education too much in degrees. I always thought being Smart was critical, but I had an opportunity to work with literally hundreds of people who founded companies and it wasn't. And they were all relatively smart, but what they really had was a work ethic and a desire to excel. And they wouldn't give up. They just, hey, I'm going forward with it regardless of the task. I'm not going to make any excuses. I'm going to make it happen. And that's the probably the advice I give. If you take on something, don't make excuses. Just get it done. And that to me is the core element of success. I got to get it done. I'm going to commit. I made you a commitment. I'm going to live to my commitment. And I still look for that trait in candidates today. And to me, that's a universal trait of success. No excuses. Just get it done.

That's outstanding. Lou, I just want to say a heartfelt thank you for sharing your time today, for sharing your wisdom. I know there'll be so many people that have got so much from what you've shared and I'll be sure to put all of your contact details in our show notes so people can actually connect with you and your company.

Great. I appreciate that. And if I just say out loud, if you just want to figure out the book, hire with your head. If you go to hirewithyourhead.com you'll find all the stuff about the book and you can join our book club. You don't even have to buy the book to join the book club, but we talk about a lot of these aspects, a little bit more detail at the monthly book club. So James, I appreciate you having me. Hopefully this was helpful. I certainly enjoyed it as well.

That was fantastic. Thanks a million, Lou. Hey guys, if you enjoyed the content today, please smash that subscribe button below. And if you want to become part of my community, I've got an amazing free Facebook group. Please come and join us.

The link is in the description below.

And also if you've got any questions about today's session, I'd love to know know.

Just comment below and I'll be sure.

To get back to you guys. Have the most amazing day.