Published October 20, 2019
For professional services firms, hiring experienced talent (defined here as executives from other organizations within your industry with career ladders that parallel yours) has always been a challenge. Luring talent away from competitors, and then onboarding and training those individuals to work successfully within your firm’s parameters isn’t easy. Plus, cultural fit can be elusive for “outsiders” joining a firm where colleagues have worked alongside each other since college. That’s why retention rates for experienced hires at many firms are abysmal; as much as two to three times higher than typical industry averages ranging between 15-25%. These issues illuminate why some firms have eased efforts to hire experienced managers and partners, relying more and more on homegrown talent.
But that doesn’t make any sense if you want to grow your firm. Over-reliance on internal talent is a problem in and of itself. In today’s tight labor market and within virtually every sector of professional services, firms cannot afford to ignore the need to hire managers and partners from the outside. Demand outstrips supply, making hiring from the outside an imperative, not a choice.
The way I see it, the solution is to revamp your approach to hiring by trading experience for potential. More specifically, firms need to expand their perspective; take the risk and hire executives who may lack direct experience but exhibit potential from outside of normal channels. What exactly is meant by “potential”? It describes individuals who, in their current workplace, consistently and significantly outperform their peer groups in a variety of settings and circumstances. They also “show a strong capacity to grow and succeed throughout their careers within an organization—more quickly and effectively than their peer groups do.” (Source: Harvard Business Review)
It’s a tradeoff but the benefits are often far-reaching. In addition to filling seats on your bench, there are several other compelling reasons to hire for potential, as opposed to experience:
Increase innovation. By hiring talent via non-traditional channels, your firm will benefit from fresh thinking, ideas and skills. If your team is wallowing in bad habits or a “group think” mentality, new players with new perspectives may be just what you need to shake things up.
Broaden the reach of your employment brand. As many firms struggle to hire and retain specific groups of employees, whether women, minorities and/or millennials, hiring talent with potential from those groups will only increase in momentum as your firm becomes known for hiring outside of the typical “box”.
Expand your firm’s customer base. People hired from “the outside” will bring their contacts “inside”, thereby expanding your firm’s networks to do business with an even larger audience.
The main objection to hiring for potential, which I hear often, is that it’s fraught with risk. That’s really not true. Hiring for potential – when done correctly – is not any more risky than hiring an executive from your competitor down the street. I advocate careful assessment of any hire and especially when hiring people from outside of the usual channels. This will require a shift from the usual way we screen candidates using behavioral interviews with multiple colleagues to implementing more front end assessment tools and technology like Artificial Intelligence and Machine Learning. (For more on this, go here.) I’m also a fan of onboarding and assimilation coaching for the first 90 days, particularly for the more senior level experienced hires. The reality is that any firm that does campus hiring is already hiring for potential, despite the fact that hiring untested recent grads is a great deal riskier than betting on the potential of a candidate who’s already been in the labor market for a few years.
Isn’t it time to start hiring for potential and stop exclusively hiring laterally from direct competitors? Let’s put an end to trading staff back and forth. This is a bad practice for several reasons, including the fact that the individuals willing to jump ship for a lateral move may represent less-than-stellar talent. Plus, the net result tends to be salary creep with, frankly, little impact on the caliber of talent that we offer up to our clients. Sure, there are always trade-offs. But faced with an imperative to grow, we need to turn to the benefits of hiring for potential. Many are already recognizing this. In fact, our most recent poll shows that more business are hiring for potential over credentials. When asked what steps they are taking to become more effective in finding qualified candidates, the top response, “hiring people with potential, as opposed to credentials”, was selected by 18.5% of respondents.