What’s the most effective way to bring people on and let people go?

More often than not, hiring goes hand in hand with firing. So what’s the most effective way to bring people on and let people go?

Well, here are some helpful pointers:

Employee retention shouldn’t be used as a metric of hiring success; the only yardstick for successful hiring is how talented your team members are.

Most companies believe, erroneously, that retention is a fantastic way to measure their team-building success. But here’s the thing: companies must constantly adapt to the ever-changing demands of the market, and it follows that employees who no longer fit well with a company’s new direction or approach must be let go.

So, regardless of how much you like a person or the excellent job she’s done, you must continuously reevaluate whether that person is truly the perfect fit for her position. Netflix is an unwavering proponent of this philosophy, which has been central to their growth and ability to innovate. They school all hiring managers in it, and you should too.

Netflix also makes sure that everyone in HR commands a deep understanding of the business, even when things get technical and complex.

As you doubtless know, it’s HR’s task to find and suggest potential hires to hiring managers. And so, if HR has no clue what the business is truly about, one shouldn’t be surprised when they fail to suggest quality candidates for specific positions.

Many companies forget to make HR an integral part of their overall functioning. But remember: HR is responsible for finding the people that will serve as a company’s foundation, and this central role shouldn’t be ignored.

Netflix certainly understands how fundamental HR is to future success; indeed, one of their hiring recruiters once saved the day when the company was negotiating a deal with Nintendo.

Netflix only had had eight months to finalize a product for the Nintendo Wii, but no current team was up to the task, meaning a new one had to be formed. With a mere eight months until the deadline, this was no small challenge.

Luckily, Bethany Brodsky, a dedicated recruiter, went the extra mile for the company: she familiarized herself with all the technicalities of the task and, armed with this knowledge, was able to build the perfect team, enabling the product to launch on time.

Have you ever tried to resell anything? Maybe an old smartphone or laptop or car? It’s not so hard to calculate an asking price, right? All you have to do is go online, figure out how much that particular model is worth and – presto! – you’ve got a price tag.

People are a bit harder to put a price on. But here’s a tip to make the calculation of employee worth a little bit easier.

First, don’t merely consider the salary itself; rather, determine how much value an employee will create later on.

Let’s say you’re looking to hire a new engineer, but your top choice has been offered way more – let’s say $20,000 per year more – by your main competitor.

That might seem like a massive difference, but, before you politely decline to match the competitor’s offer, consider the future. Does this engineer possess a rare set of skills and experiences that will significantly increase revenue? Or maybe your second-choice candidate, unlike your first, can’t begin immediately? Or perhaps it’s worth spending an extra $20,000 to deprive the competition of this brilliant talent?

When hiring, you’ve got to take such things into account. Basing your compensation offering on a simple salary survey is a mistake because it won’t give you the full picture – just a baseline figure. It’s up to you to adjust that figure to accommodate added value down the road.

Furthermore, it might seem logical, and fair, to use performance reviews to determine a person’s pay.

But here’s the wrench in the works: such systems – with a good review meaning more money and a poor one leading to less – usually rely on automation. A computer, after being fed the performance-review information, calculates how much a person should be paid, a number that falls within preset pay ranges and is relative to other company results.

This method of calculating remuneration is inherently unfair since it utterly fails to take into account skills that are rare or in high demand, among other factors.

This morning, you gave the presentation of a lifetime – and you nailed it. The audience was utterly captivated, laughed at your jokes and shouted and applauded when you finished. Now it’s evening, and it suddenly hits you: they were laughing at you, and those shouts were taunting, that applause derisive.

Well, to avoid employees having such unpleasant and delayed realizations, you need to give employees feedback constantly.

Instead of doing an annual performance review, hold one-on-one meetings with employees on a semi-regular basis.

Giving a single, annual review means that managers and employees only get one chance for real improvement per year. It’s much more effective to give people the opportunity to adjust whenever needed rather than informing them in December that, back in April, they did something wrong.

Unless there’s clear data indicating that annual reviews are benefitting your business, you’d do well to jettison the annual review system entirely.

Frequent one-on-one meetings also make it easy for you to assess employee qualifications and abilities, and decide whether anyone is failing to adapt to company changes. If someone no longer seems to be a good fit, he should be let go.

Here’s a tough truth: a person needn’t be a sloppy worker or a total jerk in order to be a poor fit. Indeed, he might be a solid worker and a great guy – but that doesn’t mean he’s still right for the job.

Perhaps changes in the market have caused tasks to change and, because of this, he’s no longer a top performer and doesn’t have the wherewithal to become one. If this is the case, you needn’t create a plan for improvement. It’s best to simply let the person go and find someone else who can be a high performer.

You can create a high-performance culture in your company by getting rid of traditional top-down management hierarchies and senseless bureaucracy. Encourage debate and communication, build teams with the future in mind, surround yourself with top talent and go beyond salary surveys to calculate compensation. By implementing these principles and instating a work culture of freedom, responsibility, transparency and honest debate, you’ll be well on your way toward happy employees and a successful business.

Good luck.

Check out my related post: Have you read Abundance? – Part 3

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