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Brief the attached article in one page of 250 words A R T I C L E Hiring Without Firing by Claudio Fernández-Aráoz Included with this full-text Harvard Business Review article: The Idea in Brief—the core idea The Idea in Practice—putting the idea to work 1 Article Summary 2 Hiring Without Firing A list of related materials, with annotations to guide further exploration of the article’s ideas and applications 15 Further Reading Product 5351 Hiring Without Firing page 1 The Idea in Brief The Idea in Practice C O P YR IG H T © 2 00 0 H A R V A R D B U SI N E SS S C H O O L P U B LI SH IN G C O R P O R A T IO N . A LL R IG H T S R E SE R V E D . Astonishingly, between 30% and 50% of all executive hires end in firing or resignation. Why is hiring particularly problematic—and critical—today? Global hypercompetition, the breakneck pace of economic and tech- nological change, and ever-shifting organi- zational structures are key reasons. Also, today’s work success depends increas- ingly on intangible competencies—like flexibility and cross-cultural literacy—rarely found on résumés. And as demand for tal- ent is sharply increasing, supply is steadily shrinking. Most companies make ten dangerous mis- takes during the executive-search process, including having unrealistic expectations, believing references, and conducting seat- of-your-pants interviews. Here’s how to systematically avoid these traps. TEN DEADLY TRAPS 1. Reacting: hiring someone too different from the problem person just fired. 2. Unrealistic expectations: demanding many contradictory qualities, like “high- energy doer and thoughtful analyst.” 3. Evaluating people in absolute terms: “Joe is a good manager”—without clarifying that he manages processes well, but not people. 4. Accepting people at face value: not get- ting the full story of a candidate’s background. 5. Believing references: trusting references’ input without determining their credibility. 6. “Just like me” bias: highly rating candidates who are like you. 7. Delegation gaffes: assigning critical steps in the search process to ill-prepared staff. 8. Unstructured interviews: no prepared questions to reveal candidates’ competencies. 9. Ignoring emotional intelligence: failing to assess candidates’ self-awareness, motivation, empathy, and social skills. 10. Political pressures: inappropriate agen- das, such as pressure to hire a VIP’s friend. HIRING WELL Successful—and systematic—hiring requires these three steps: 1. Define the problem you need to solve through hiring. • Clarify the position’s current and future re- quirements, driven by your firm’s strategy. Translate them into needed skills (e.g., comfort with uncertainty). • List required competencies in behavioral terms and get consensus on the list (e.g., “strategic vision” means the ability to in- spire and guide others). 2. Creatively generate a candidate list. • Contact people who can recommend sev- eral quality candidates (e.g., a major sup- plier CEO to recommend sales leaders). • Consider unconventional candidate sources. (One president hired a director whom his predecessor had fired!) 3. Methodically evaluate the candidates. • Conduct structured interviews in which you assess candidates’ competencies through behavior-based questions (e.g., to measure team skills, ask, “Tell me about a time you led a particularly chal- lenging team project.”). • Meet with references in person if possi- ble. Describe the open job and ask pointed questions (e.g., “How has the candidate performed while facing similar challenges?”). Hiring Without Firing by Claudio Fernández-Aráoz harvard business review • july–august 1999 page 2 C O P YR IG H T © 1 99 9 H A R V A R D B U SI N E SS S C H O O L P U B LI SH IN G C O R P O R A T IO N . A LL R IG H T S R E SE R V E D . Hitting the hiring bull’s-eye is one of an executive’s most important— and most difficult—responsibilities. Ten common mistakes can get in the way, but a pointed and systematic approach can virtually guarantee success. Hiring has never been easy. About two thou- sand years ago, officials in the Han dynasty tried to make a science of the process by creat- ing a long and detailed job description for civil servants. Archaeological records show that those same officials were frustrated by the re- sults of their efforts; few new hires worked out as well as expected. Today business executives trying to fill senior-level positions carry on the unhappy tradition. Using interviews, refer- ence checks, and sometimes even personality tests, they try to infuse logic and predictability into hiring. Still, success remains elusive. Sev- eral recent surveys conducted by both busi- ness academics and independent consulting firms have found that between 30% and 50% of all executive-level appointments end in fir- ing or resignation. If hiring has always been a daunting task, to- day’s economy makes it more so. The global scope of business has increased the demand for talented senior executives in the corporate ranks. Meanwhile, supply is shrinking as more and more people—in particular, promising M.B.A.’s—choose to work for startup ventures or go into business for themselves. At the same time, the nature of work itself is in flux. Until the 1990s, jobs were pretty uniform. In the classic, functional organization, everybody knew the responsibilities of the CEO and other senior executives. Most organizational cultures were relatively comparable, too—formal, hier- archical, and based on individual achievement. But with the advent of new organizational forms such as joint ventures and strategic alli- ances, and with the growing prevalence of teams, free agents, and networking, finding the right person to fill a job has become more com- plex. What competencies, after all, do these new kinds of companies and cultures require? Indeed, nowadays the CEOs of two companies in the exact same industry may need entirely different skills and personal styles to succeed. For the past 13 years, I have conducted the searches of about 200 senior executives—most auspicious, some not—and have participated in the hiring of about one thousand more. As leader of professional development at Egon Ze- Hiring Without Firing harvard business review • july–august 1999 page 3 hnder International, I have learned about and discussed the prescient details of several thou- sand executive searches conducted by my col- leagues around the world. Our collective experience confirms what the Han officials discovered in 207 B.C.: it is impossible to turn hiring into a science. The process is often undermined by ten common mistakes, or “hiring traps.” But we have also found that a systematic approach greatly im- proves the chances of hiring the right person. The approach, it should be said, requires time and discipline. But then, most matters of con- sequence do. The Art of Hitting a Moving Target Two recent cases illustrate the varied chal- lenges of hiring in the new economy. The first case is well known—in fact, it was front-page news around the world. Last December, Franco Bernabè was hired to run Telecom Italia, a large, recently privatized conglomerate with a poorly performing stock price and a history of management turmoil. At the time, Bernabè ap- peared to be the perfect choice for the job: be- tween 1992 and 1998, he had led the transfor- mation of one of the world’s largest energy companies, ENI, into a highly respected and profitable publicly traded business—and it, too, had a legacy of extreme senior-level upheaval. Bernabè’s skills were considered so appropriate for his new position that Telecom Italia’s stock rose 5% the day his appointment was an- nounced—a multibillion dollar increase in market value. Only two months later, Bernabè’s job changed drastically when Telecom Italia be- came the target of a hostile takeover attempt by Olivetti Corporation. It became irrelevant, for instance, that Bernabè excelled at leading cultural change. To fend off Olivetti, he quickly needed to improve short-term financial results; rapidly assess the value and synergy of core and noncore business combinations; and al- most instantly construct intricate investment and business obstacles that might thwart a takeover. In the end, it wasn’t enough. Olivetti succeeded in its efforts, and Bernabè stepped down only six months after he started. The second case also concerns a telecommu- nications company, this one based in the United States. It was seeking a CEO for its new division in Latin America. The division was not a start-up, per se, but a joint venture between two established local companies that had both been purchased by the U.S. business. As often happens, the former CEOs of the two acquired companies were appointed to the board of the joint venture and remained large shareholders. The board agreed that the new CEO would cer- tainly need expertise in strategy formulation. The marketplace was getting crowded; it was now or never for entrants to establish their po- sitions. And because the new venture had no marketing plan to speak of, the new CEO would also need expertise in high-tech sales and distribution. An international search was launched. Three months later, the board hired an in- dustry veteran who appeared to be tailor-made to run the new division. He had been ex- tremely successful at the helm of a telecommu- nications company in the same sector, al- though in a different part of the world. He was an effective strategist—some said brilliant— and a proven marketing expert. He understood the company’s technology, products, and cus- tomers far better than any of the other nine candidates. But his run lasted less than a year and was nothing short of a disaster. The simple reason was that he lacked the two skills that the job really required: negotiation and cross-cultural sensitivity. This new CEO had to answer to three bosses with different agendas. The U.S. parent company wanted to use the new entity to push its own products and services in a new region. One former CEO-shareholder was more focused on the bottom line; he wanted to maximize profits by increasing prices. And the other former CEO-shareholder wanted to cut prices; volume was the key to success, he said. The new CEO was eager to make every- one happy—which turned him into everyone’s enemy. The bickering was exacerbated by cultural differences in communication styles. The Americans were confrontational. The Latin Americans were deferential, but only in public. Behind the scenes, their anger and frustration brought the company to a standstill. Senior ex- ecutives, caught in the cross fire of warring bosses, started leaving the company in droves. Key distributors quickly picked up on the fric- tion and abandoned the joint venture, seeking its products from other sources. By the time the CEO was fired, the company was close to bankruptcy. Claudio Fernández-Aráoz is a partner at the executive search firm Egon Zehnder International in Buenos Aires, Argentina, a member of its executive committee, and the leader of profes- sional development for consultants in the organization’s 53 offices worldwide. Hiring Without Firing harvard business review • july–august 1999 page 4 But the next CEO had the company back on track—even thriving—within six months. While he had no experience in the telecommu- nications industry, the new CEO was a native of the Latin American country where the joint venture was based, and he was known and re- spected by its principals. He had also worked for ten years in the United States, which gave him special insight in understanding and deal- ing with the parent company’s executives. His bridge-building skills quickly unified the new venture under one strategy. Like the story of Franco Bernabè, this case il- lustrates the hazards of hiring in today’s busi- ness environment. More and more, success de- pends on competencies that are intangible and rarely found on a person’s résumé, such as flex- ibility and cross-cultural literacy. Previous ex- perience, once the “sacred cow” of successful hiring, can be meaningless in an era when or- ganizational forms are continually being in- vented and reinvented and job responsibilities sometimes change overnight. It’s no wonder that a recent survey conducted by the Interna- tional Association of Corporate and Profes- sional Recruitment found that the main reason some external searches weren’t completed, ac- cording to clients and consultants, was that the positions were either eliminated or redefined in the
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