Don't fear hiring the 'wrong' person; fear not making good people great

By Neil Patrick

Fear is the new greed. And catching a dose of it is more life threatening to more people than any terrorist or viral epidemic.

Tomorrow’s UK referendum about staying in or leaving the EU has been dominating the media now for what seems like forever. Watching media interviews with the public on this topic reminded me of an old truth - many people fear change and the unknown more than anything else. Most people will stick with a terrible spouse, a toxic employer and a collapsing career rather than face up to the unknown. Their default is to stick with what they know, even to the point of it harming them.

Banks know this human failing well and even have a name for it and make a great deal of money from it. They call it customer inertia. It's what stops customers switching to another bank even when they are really unhappy about their current one.

And this fear is becoming the norm for organisational behaviours too. Risk management has become a profession which has expanded its death grip from sensible steps to mitigate calamity to an all-pervasive mind set which hampers any organisation seeking to do the sorts of things they aspire to yet often fail to successfully implement. Risk avoidance has become a surrogate for good practice.

Things like becoming agile. Being flexible and responsive. Being customer centric. The reason these management buzzwords cause me to retch every time I hear them, isn’t because they are unworthy aspirations, it’s because so few people who espouse them actually practice them, or have even figured out a way to make them a reality instead of a pipedream.

And nowhere is this commitment to mediocrity more prevalent than in the decisions around hiring people. The whole sorry process has (not unlike the EU) taken on a life of its own. It has grown from a sensible desire to avoid hiring totally unsuitable people for jobs, into an over-rigid and over-specified set of requirements which mean hardly anyone can meet such demanding criteria.

This is why so many vacancies remain unfilled. It's why employers claim they cannot find the people they seek. HR and hiring managers are so terrified that they might make a bad decision that they make no decision. So the post remains unfilled often for months, because no-one suitable can be found (allegedly). In the meantime, the organisation limps on, other employees carry extra burdens, and the whole environment becomes more toxic, more pressured and less productive.

Yet these thousands of person shaped holes are not because no-one can be found. It’s because the specifications and requirements are so extensive that almost no-one could meet them. In my career I have interviewed and hired hundreds of people and watched their careers develop. The thing I learned from this was that an average person can outperform a superstar every time if they are provided with a good environment. Put a superstar in a poor environment and the reverse happens.

And the responsibility for creating a good environment is down to employers not employees. Some employers know this and work hard at it. Too many abdicate responsibility and pass the buck for their failures to their employees.

Employers want good people. But good people are made not bought. And if your organisation is capable of turning good people onto superstars, you’ll not only have a more loyal and productive workforce, you’ll enjoy the benefits of people staying with you longer and critically, acquire the capability of attracting more good people more easily.

It’s time for organisations to stop talking about talent acquisition and start practicing talent manufacturing.

Why qualifications won't guarantee you a job anymore

By Neil Patrick

Research says there's an abundance of skilled technical workers in the US. Employers say they can't find enough people with technical skills...so who's right?

Last week I was sent a report by a friend. It was a lengthy research piece which reported an oversupply of STEM (science, technical, engineering and maths) qualified workers in the US.

Since he’s an engineer who’s been engaged in a very lengthy job search, he couldn't square this report with the constant allegations from employers that they can’t find the right people with the right technical skills. He thought something didn’t add up. And I agreed with him.

The findings in the report were consistent with other examinations of the STEM labor market. These found no evidence of a general shortage of STEM workers. (That’s because they weren’t looking at the right things as I’ll explain shortly).

STEM jobs remain scarce not workers

In 2012, in the US, there were more than twice as many people with STEM degrees (immigrant and native) as there were STEM jobs — 5.3 million STEM jobs vs. 12.1 million with STEM degrees. And only one-third of US natives with a STEM degree that hold a job do so in a STEM occupation.

Further, one-third of STEM workers do not have a STEM degree, suggesting that absence of a STEM qualification isn’t an insurmountable obstacle to many jobs in the sector.

Perhaps most tellingly, real wages for almost all categories of STEM workers have shown almost no growth for more than a decade. None of this is consistent with the idea that STEM workers are in short supply.

So why are employers reporting the opposite?

At the root of the problem is the fact that the researchers were academics. In other words, out of touch with the real world. In fact it was quite possible, they’d never even set foot in it, such is the way that universities often hermetically seal their research people away from business and industry.

So where’s the error?

The researchers had used the number of people holding STEM degrees as their prime metric to measure the total available workforce of techies, and on this basis they concluded that the supply was ample to meet the needs of employers.

Here’s why that’s a mistake…

Employers do not view educational qualifications as their key measure of suitability for employment. It’s a hygene factor. It qualifies you for consideration, not for hiring. So it’s perfectly possible for employers to say they have a skills shortage because educational qualifications alone do not make candidates automatically employable. They also require (rightly or wrongly) evidence of relevant previous work experience and personality fit.

Introducing the latest bubble…it’s higher education

We all know that the recession means that business growth has been in short supply over the last 5 or 6 years. Meanwhile the educational fat cats have continued to happily make money by churning out people with qualifications, even though suitable jobs have been too scarce to allow sufficient numbers to gain relevant work experience.

It’s a pipe, connected to a tap – the tap has been left turned on and the pipe has contracted (at least for the past few years), resulting in an inevitable blockage.

Source: ONS

The higher education sector has become big business. And like all big businesses, it’s hungry for constant growth. As the graph above shows, the proportion of graduates in the UK population has more than doubled since 1992.

The educational ‘export’ market has been a particularly lucrative business as the aspirational middle classes have massively expanded in the far east economies. Every time I set foot in a UK higher education institution, the place is packed with overseas students.

This bubble  is unsustainable...

My good friend and bubble expert Jesse Colombo has done a great deal of forensic work examining the education bubble in the US. I’ll just quote a little of his analysis here:

Even more alarming than the rate of tuition growth is the blistering increase in total outstanding student loans, which grew 511% since 1999 to $1 trillion (surpassing total credit card debt for the first time), with today’s average student graduating with 50% more student debt than graduates in 2001.

Student loans made by the federal government rose a white-hot 31.9 percent in the 12 months through November 2011. Even Moody’s is warning that student loans may be the next financial bubble to burst, while a recent FICO survey shows that two-thirds of bank risk managers are seriously concerned about the student debt loads held by students in the country.

For more of Jesse’s detailed analysis of this topic just follow this link.

When I went to university here in the UK in 1981, well under 15% of my peers did the same. And the state paid for it by means of a modest, means-tested grant with a contribution from my parents (thanks Mum and Dad) which I had to supplement by working at (instead of drinking at) a bar.

Back then, universities were not businesses. For better or worse they were state institutions. And they acted like it…they were slow to change and whilst they could spell "innovative financial leverage", they didn't really practice it.

But that was all set to change when government decided that it was a good idea (i.e. vote winning) to proclaim that university education was elitist and it was socially just to get more young people from less privileged backgrounds into the university system. It also appeared to be a handy way to reduce the growing numbers of the young unskilled unemployed. Instead of a glut of young people signing on for state benefits as soon as they left school, this would create a new generation of educated and aspirational young people, eager to take the economy to hew heights. Except this had to be paid for by them signing up to government debt, using what I can only describe as career mortgages.

The trouble is that whilst I agree with its egalitarian principles, this vision missed the vital recognition that this expanded output from the education system needed to dovetail precisely with the ever evolving needs of business and industry.

And that's where everything went horribly and tragically wrong.

So do we have a more employable population? Not quite. While the elite universities have expanded only modestly, protected their brand value and retained their high quality standards, there’s been an absolute explosion of less selective, lower quality degree courses made available to almost anyone who is willing to pay for them.

Young and old alike are both losers in this game. Oversupply of university educated people has created a glut of unsatisfied aspirations and debt for the young, and done little to provide businesses with the skills they seek in their workforces.

For the mature and experienced, it’s seen the perception of the value of their years of accumulated know how crumble in the eyes of employers who place the highest value on the most recent qualifications (provided this is backed up with recent and relevant experience).

Oh and of course the UK and US governments have also burdened each and every one of us with another massive government debt that will sooner or later have to be written off or bailed out...

How a failure in selection processes can bring down a bank

By Neil Patrick

Poor governance allows bad leadership choices. And bad leadership choices risk the destruction of a whole business.

This week has seen the conviction of former Co-Operative Bank Chairman Paul Flowers for possession of class A drugs. Specifically, cocaine, crystal meth and ketamine. The mass media has had a field day with the story, but the scandal isn’t the part of the story I am most interested in.

The most intriguing question for me is how was it that Paul Flowers, who had no experience in banking was ever appointed at all?

This drugs scandal is just the latest in a long series of misjudgements which beggar belief for a man who rose to hold such a senior position.

Here’s an extract from the Wikipedia entry about Paul Flowers:

Soon after the filming of Flowers’ purchase of non-medicinal drugs was released to the media, it was revealed that, while deputy head of Social Services at Rochdale Council, Flowers had known about the activities of paedophiles at a residential boys' school, but had neither informed parents nor taken measures to close the school, was responsible for rejecting allegations of child sex abuse by the late Cyril Smith, and that, in 2011, while working at Bradford Council, "Inappropriate but not illegal adult content was found on a council computer handed in by Councillor Flowers for servicing. This was put to him and he resigned immediately."

Several newspapers reported allegations that he communicated with rent boys using his work email account while he was in charge of the Co-operative Bank, and was convicted of carrying out a sex act in a public toilet. After the bank lost £700m in the first half of 2013, and a £1.5 billion hole in the bank's finances was discovered by the new Chief Executive Euan Sutherland in May 2013, Flowers resigned in June 2013.






At the root of this crisis is bad governance and weak HR

How can it be that a person with such a background was appointed to lead an institution whose core ethos is supposedly based on fairness, transparency and good ethics?

He was voted in unanimously by his peers, but also was judged by the FCA to be a fit and suitable person to be a non-executive director of a bank.

According to some of his former colleagues, the former Reverend Flowers allegedly got the job because he did well in psychometric tests, despite lacking the financial knowledge of other candidates for the job.

Rodney Baker-Bates had experience of banking but lost out to Flowers because of the tests. A review of the bank’s governance decided leadership was more important than financial knowledge.

So Baker-Bates became one of Flowers’ deputies alongside David Davies, both appointed to keep an eye on the chairman and provide financial expertise.

When questioned, they told the Treasury Select Committee that they were ignored, and both said they would quit the board after the lender voted to buy 632 branches from Lloyds in 2012.

Baker-Bates said, “I set out to convince the board that the Lloyds branch acquisition was a giant step too far, and it was over-laid on another major error, Project Unity - which was intended to bring bank and group leadership together.”

How can it be that Paul Flowers passed the psychometric tests?

The most reliable form of psychometric testing, the five factor model (FFM) quantifies the extent of each of these personal characteristics:

• Openness: intellectually curious, prefer variety and novelty, active imagination
• Conscientiousness: dependable, prudent, methodical, achievement striving
• Extraversion: sociable, talkative, excitement-seeking, warm
• Agreeableness: sympathetic to others, cooperative, trusting
• Neuroticism: emotionally unstable, anxious, irritable, impulsive

If such tests were applied properly and evaluated correctly in the case of Paul Flowers, then why was he ever appointed? Someone, somewhere either got this wrong, or was overridden, with disastrous consequences.

What does the future hold for the Co-operative Bank?

Last year the Co-op Bank had to be rescued after it was left with a £1.5bn capital shortfall, with many of its troubles stemming from the merger with the Britannia building society in 2009.

Despite this bailout, the cumulative impact of this mismanagement means the capital position of the bank remains precarious:

This week we learned that the Co-op Bank will pay four of its largest hedge fund and institutional investors nearly £2m to support its £400m capital raising effort to ensure the deal goes through without a hitch.

A failure in this capital raising attempt could potentially bring about the collapse or at least drastic restructuring of the entire organisation.

If the Co-op Bank were for some reason not to be able to raise the money, the Prudential Regulation Authority could put the lender through a wind up process that would likely see it split into a “good bank” and a “bad bank”, with the continuing operations handed to another major lender and the toxic assets put into run off.

So it’s been a tough week for the social media team at The Co-op Bank. And their customers are not impressed with the situation either:

As I have contacts with institutional depositors at the Co-operative Bank, I spoke with them about this today and learned that they are pulling millions out of the Bank as a precaution against its possible collapse. Such a collapse would be a sad end to a once ethical and genuinely different type of bank.

And it can all be traced back to poor governance and leadership selection processes. This isn't the first and it won't be the last example of why proper governance is critical to large businesses. But it is perhaps the best example yet of the catastrophic damage that can be done through the incorrect use of psychometric profiling.

Why you should be truthful about your qualifications

By Neil Patrick

As many as one third of job applicants admit to lying on their job applications. But if they got away with it before, it’s about to get a whole lot harder.

A couple of weeks ago I posted here about the issue of people being ‘liberal’ in how they presented themselves on their LinkedIn profiles. It’s a dumb move and one which can lead to disastrous outcomes for employees and employers alike.

While I was researching for that post, I came across some interesting news that alleged that ‘degree fraud’ in the UK had been found to be most prevalent amongst older job applicants.

The types of fraud I refer to range from non-existent qualifications in some cases through doctored certificates to show higher grades to awards from non-existent academic institutions.

I had assumed (wrongly as it turns out) that it was simple for an employer to verify an applicant’s qualifications through a central database.

Not so.

Amazingly until now there has been no central database of information from academic institutions that allows simple checks to be made.

But that is all changing. The Higher Education Degree Datacheck (HEDD) is intended as the first port of call for any individuals or organisations seeking degree verification. It can be used to check that a UK higher education provider existed and was approved by the UK government at a given date. It provides contact details to direct the user to the appropriate records office for their query.

It is particularly useful for employers and postgraduate course providers wanting to verify degree results, and for graduates to request transcripts and replacement certificates.

HEDD is funded by the Higher Education Funding Council for England (HEFCE) to address these issues and direct those seeking information to the correct body to answer their query. HEDD is managed by the Higher Education Careers Services Unit (HECSU) on behalf of Universities UK and Guild HE.

I contacted Jayne Rowley, Director of Business Services at HEDD as I was keen to know more. Jayne told me that:

“80% of major graduate recruiters rely on CVs and degree certificates. Only 20% actually check with the issuing university. For smaller businesses we think it’s even worse. Our office wall is a rogue’s gallery of fake or doctored certificates and we list more than 140 bogus universities on the university look up service on the website”.

When HEDD did their original research prior to the service being was set up, they questioned employers about why they didn’t check. The main reasons cited were that they weren’t aware that fraud was a big problem and that there was no easy central way to make the checks.

Jayne said, “Every HR survey we’ve seen shows that about 1/3 of people admit to lying on job applications and the most common lie is about qualifications”.

Clearly this is a massive problem. But according to Jayne, the highest incidence of degree fraud occurs amongst older applicants:

“Even though there are many more enquiries about recent graduates, there are more 'errors' in HEDD enquiries about older graduates and it is disproportionate to the number of enquiries when compared to the checks on recent graduates.

We also carry out research with employers about their verification practices. The conclusions we draw on older people not getting checked are because they are assumed to have been checked earlier in their career, or because the focus is on their experience”.

So the situation is clear. If you are ever tempted to lie about your qualifications, don’t even consider it; you will get found out. The loopholes that previously existed are closing fast. Play to your strengths, invest your time and efforts in your interview skills instead and win fair and square.

And if you are an employer or HR person hiring in the UK, I recommend you check out the HEDD service. Here’s the link: https://www.hedd.ac.uk/aboutHedd.htm

I’d like to thank Jayne Rowley and her team at HEDD for talking to me and wish them well in their important work.