Selecting Your Direct Reports

Selecting Your Direct Reports

Recruiting and retaining team members for the company you purchase can raise it from “good” to “great”. Getting the right people into the right positions should not be delegated to the HR department. As the leader, you have a singular responsibility to build a performance “culture” that will, in time, set your company apart from its competition. The cost of a mis-hire can be very expensive, so take it very seriously.

Be personally and fully engaged in this process

As CEO, you are the CTS (Chief Talent Scout) for the company. You, more than anyone can define the standard for “what good looks like”, in your recruitment process, and for every candidate you will consider for your team. As Paul Thomson of Scottish American relates, “No one will ever be as passionate as you are about the company. No one can articulate the vision and potential opportunity. The percentage of your time you spend on it is how important it is to you”.

As with any “process”, look for systems that can frame and focus your recruitment efforts. Max Sadler of Inman Square Capital found that the use of Topgrading, an online process tool, helped streamline the recruiting funnel and allowed the candidates to provide much of the information up front without a lot of administrative hand-holding. A more digestible Topgrading process is in the book “Who”, by Geoff Smart.

Searchers Mike Zani and Daniel Muzquiz of Phoenix Strategies purchased Predictive Index Worldwide ( a tool to determine the “fit” of candidates to various positions and to understand the interpersonal dynamics between team members. John Menzel, who purchased Fiberglass Industries, has used the PI for over a decade, feels “It is the most important hiring tool I have come across to support the candidate evaluation process.”

This does not necessarily mean that you have to do it yourself. There are outside professionals who are very skilled at the recruiting process. For executive and management hires, you want to spend a good amount of time with the recruiter explaining what characteristics you are looking for, your recruitment process, and reasons for previous failures. You also want to provide access to the new hire’s peers so the recruiter can get a sense of how functional your team is, and how the new hire will be on-boarded. Max Sadler at Inman Square says he succeeded by “Using excellent, retained recruiters whom I have a relationship with for key hires.” Others have had poor luck with recruiters, so don’t put all your eggs in this basket.

External sourcing candidates varies based on your industry

Job posting has moved far beyond placing ads in a newspaper., and all provide “two sided” on-line platforms to match employers “job openings” with candidates. Searcher CEO’s report that relying on just one of these is never enough to keep the pipeline full during the recruiting and there may be some additional resources specifically focused on your industry.

Another successful sourcing method was reported by Trish Higgins at Seabreeze Property Services, who explains, “We established a presence at local job fairs, with the best traction coming from Community Colleges and Department of Labor fairs, especially after we invested time in reaching out to the organizers to explain what we’re looking for.”

Be proactive within your community by reaching out to companies that are closing down, consolidating or laying off due to their own business challenges. Additionally, Paul Thomson suggests, “Find people who aren’t able to get promoted elsewhere due to hierarchies. They’ll be very motivated to move on.”

In some industries, utilizing Temporary Help agencies can be a good way to “evaluate” candidates while on the job. You will have to negotiate a more favorable “ability to hire” contract with the agency if you convert them to full time. However, you may find that temporary workers like the “freedom” of not having to be dependable all the time, so choose wisely.

Finally, as one searcher observes, “Just put up a big sign if you are on a busy street with slow traffic speeds”. It is not just one specific method that will attract new team members, the key is being flexible to trying out a variety of them.

You won’t get it right every time – hire fast, fire fast

When asking senior executives how successful they are in their hiring practices, I regularly hear a 50-60% success rate. When pressed further about how well it improved over the past decade, many say “not much”. Indeed, there are ways to improve the odds through best practices, it is still very difficult to get it right. For sales positions, there is a lower success rate, after all they are experienced in selling themselves. One professional “Talent Sourcing” company, The Recruiting Division publishes data suggesting the failure rate may be as high as 80%.

Don’t abandon your pipeline of candidates. If there is a significant difference between the first and second candidate, continue your recruiting process until the top 2-3 are all strong candidates for the job. A regular call every 3-6 months goes a long way to having someone who did not get the job feel good about the process, the personal “touch” and your company.

Change the people or change the people

Given the statistics, you certainly want to think differently about your key position hiring efforts, first by giving yourself permission to fail at it, and recognize that you will make errors. Recruiting, interviewing and negotiating are time consuming processes. Once you make a final selection, it is easy to just leave this behind and move on to the next challenge. The awareness of the of your own infallibility helps you recognize that the latest candidate that you think is “the one”, may not work out. Paul Thomson observed, “Accept that a 50% success is OK and 60% is great and don’t be gun-shy. It’s easy to get analysis paralysis.”

It is critically important to have early evaluation sessions, and observations about willingness to take direction, learn and fit into your culture. Most Searcher/CEO’s complain that they waited too long before taking action with a recent hire and fall into the trap of trying to fix the “person” instead of replacing them. Early in my career, I spent a lot of time on “people development” trying to “change the people”, only to discover that many were unwilling to change and struggled to get out of their comfort zone requiring that I “change the people” by removing them from their position! Projecting my own values and self-concepts onto them, thinking that they “should want to change”, was my problem.

Spending as much time with on-boarding and monitoring as you do in the selection process is important. Shorten the “honeymoon” time to 60-90 days where you give “the benefit of the doubt” on performance shortfalls. Listen carefully to peers and the people working at levels below them around “fit”, work habits and communication skills.

Within two weeks of hiring, hold a Manager Facilitation Session with the new manager and their staff direct reports to surface quickly expectations and uncertainties. The facilitator solicits ahead of time, lists of “What we know about Mary”, “What we want to know about Mary” and finally, “What we want her to know about us”. Then have the new hire come into the room and respond to the lists. These are great opportunities for the new manager to understand their staff better in a non-threatening way.

What to avoid

One searcher reports that they “Focused too much on “brands” contained within a resume. It’s easy to fall in love with somebody who appears to bring large-company management experience to the table, but it’s often the case that they don’t represent a good fit in the context of a much smaller, much more resource-constrained company”. There is a trade-off with any SME in finding staff level candidates who can be “generalists” and be willing to pitch in and knowing when to bring in specialists who can successfully thrive in a small firm.

While reference checking is a common practice, it is very difficult to get anything beyond employment confirmation. Paul Thompson found “Reference checking for very likable people, especially in sales positions, is hard. They tend to be very positive but not necessarily correlated with actually delivering outcome rather than making friends.”

One CEO cautioned about trying to recruit executive positions while the incumbent is still in place. While sensitive, there is a very high risk in not getting or listening to employee input at the early stages of the recruiting process. Better to be up front, have more input from the “keepers” on your Exec team and use the opportunity to demonstrate “trust” with your team.


Most CEO’s spend a significant amount of their time on “people” issues. Getting the right people on your executive team is as important as getting them to do the right things. Establishing systems and support processes can streamline this critical task and allow you to replace when necessary and satisfy the profitable growth needs your company has once you have purchased it.

Operate on!

Feel free to share some of your own best practices or experiences in dealing with these issues in the blog comments. I encourage comments and dialog, allowing all to learn from both my views and the views of others – a virtuous learning cycle. Jump right in! I regularly update individual blog posts, add to the Reference section and Search tips, so visit the website regularly.

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Random Quote

45-“Strategic partners” are very important to the business searchers.You want to rely on some trusted providers to support your business, you can’t do everything yourself!(See Blog Post-Strategic Partnerships)

42-Start early on legal documents, they often delay closings while under LOIBoth the searcher and the seller are plowing new ground and it takes a while to comprehend the meaning of all of the legal details .(See Blog Post-Getting to closing)

63 Searchers make promises they can meet to build trust with sellers. It is important to provide incremental opportunities to show that you can be counted on to deliver.(See Blog Post-Building Trust with Sellers)

34 Searchers who get access to employees before closing are more likely to close. Once the seller begins to confide in their employees about the sale of the business and introducing you as the “new owner”, they are more likely to proceed to finalize the transaction than to change their mind at the last minute.(See Blog Post-Getting to Close)

07-You are not a PE firm, don’t act like one!
Potential sellers resonate with your taking over their legacy, a PE firm is simply adding to their portfolio. Make sure your website looks personal and non-intimidating.

04-Fight Seller Fatigue in Due Diligence!
Sellers get worn out in this process. It is highly emotional for them, probably their first time at relinquishing their “baby” to someone else. During LOI stage, make it a practice to communicate with them, in person or by phone, every 2 days.

53-Holding monthly “all-hands” meetings indicates your transparency. Trust employees with what is going on with the business and they will trust you more .(See Blog Post-Communicating with Employees)

06-Use metrics to drive decisions
Track what is most important for your search – getting in front of prospective sellers to make offers to buy their business. Track the number prospects, IOI’s, LOI’s and set goals for yourself! If you measure it, you can improve it.

22-When in conflicts arise, remind professional advisors they work for you.
Inevitably, you will disagree with some advice you are getting. After checking multiple sources, do what feels right to you and move forward. You will have to “live” with your own choices, not the professionals!(See Blog Post-Professional Support)

18-Every day that goes by during Due Diligence raises the chance that you won’t close!
Time is of the essence when it comes to moving from a signed LOI to closing on your business. Seller fatigue sets in as the closing date gets extended and the seller constantly re-evaluates their motivation to sell. Only you can push the process along.(See Blog Post-Due Diligence)

44-Plan ahead, give thought to the small details of how you present yourself as the new owner. The first introduction to the employees of the business has a huge impact so you want every word to be rehearsed!(See Blog Post-Taking over the business)

50-Don’t expect immediate “loyalty”, the previous owner earned it, it takes time. You will need to earn the trust of your employees by your actions, not your words. (See Blog Post-Seller Tranisition)

35-Searcher CEO’s need to be prepared to walk away from volume orders if margins will decline. It takes a forward thinking CEO to seek out higher margin, value added opportunities to grow profits, not revenue.(See Blog Post-Wearing the sales hat)

09-Learn from others – read case histories
Over 40 case histories have been written about funded and self funded searchers in a variety of industries and historical settings. Each have great “lessons learned” and are worth the $10 cost to read them. Searchers are learners!

39-The business seller is “hiring” you to run their business. The owner trusts you enough to turnover the “legacy” of their business to you. (See Blog Post-Searcher Profile)

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