"If you pick the right people and give them the opportunity to spread their wings-and put compensation as a carrier behind it-you almost don't have to manage them."

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Greetings!

A New York Times and CBS News poll conducted this past Friday indicates that a solid majority of Americans feel that creating jobs should be the highest priority for the government now. While the political rancor in Washington hasn't quieted a single decibel - there is now also a quiet but growing concern among Americans that we are facing the risk of a double-dip recession - and whether or not that happens to be true (and a number of the economists I recommend you follow - still feel it is not - see the Economic Update block below) the fact remains that consumer sentiment has a major impact on the overall direction of the economy, and jobs is front and center among the public's concerns.

While the President is campaigning for his American Jobs Act and congress prepares to square-off in what is likely to be yet another battle of partisan ideological will - the simpler matter is that most job creation occurs in the small and middle-market companies throughout our nation: the very companies whose CEOs my Vistage Chair colleagues and I work with every day. Overall I have found that the majority of companies I work with are experiencing some level of growth - or at least finding an upward trend from where they were during the worst days of the recession. Some have fully returned to pre-recession levels of business - but none are hiring to any significant degree.

One reason is clearly fear about the economy - or at least the ongoing uncertainty over the current state of the US economy and perhaps in particular, the global economy. It's as though we are waiting for another shoe to drop. The news out of Europe, changing realities in China, the gridlock here in Washington and the ongoing difficulty in borrowing all contribute to the collective hesitancy to make significant capital investments in either infrastructure or people.

(I suggest you read an article my Vistage Colleague, Jim Lucas published titled, Fear About the Economy - What "Years Ahead Leaders" Are Doing.)

You can download a PDF of this article by clicking here.

I suspect there is also another force at play as well. I think form many companies there is always a degree of hesitation in hiring. Jack Welsh, in a 2005 Newsweek article wrote, "Hiring good people is hard.  Hiring great people is brutally hard.  And yet nothing matters more in winning than getting the right people on the field.  All the clever strategies and advanced technologies in the world are nowhere near as effective without great people to put them to work."

For some CEOs it may amount to shying away from the risk of hiring mistakes. In fact, because the whole process of hiring good employees is often so challenging - I have seen many companies avoid firing employees that they need to. In some cases, they realize those employees shouldn't have been hired in the first place. Jim Collins, author of Good to Great quiteaptlynotes "people are not your most important asset. The right people are." (Read about Jim Collins forthcoming book "Great by Choice" below)

Improving the value of human capital is critical to any company's growth. Tony Hsieh, CEO of Zappos built a world-class and word-renowned corporate culture, in part by following the old adage about hiring and firing in order to build a great team and with them a legendary company.

Hire slowly, fire quickly.

I can't think of a single piece of business advice more often quoted - or more seldom followed. I suppose it's because most people truly have a hard time both firing and hiring people. The cost of a bad hire can be astronomical. Vistage resource and HR expert, Ed Ryan suggests that the actual costs can amount to upwards of two-and-a-half times the annual salary of the employee. It stands to reason. The process of recruiting, hiring and onboarding is expensive - and escalates with the employees level. Paying for employee who is underperforming is even more costly and the impact of lost productivity can be costlier still.

In my Fiscal Leadership workshops I point out that even a "good hire" doesn't often reach their full performance potential for a year or more - and in highly technical jobs - longer than that. In essence, you are investing in their future productivity for quite some time. Even a low-level clerk or laborer will take some period of time to produce at the level of performance they were hired for. All of this tends to reduce productivity and consume cash. This is true in good times. When facing difficult times, sensible hiring and firing can be the difference between surviving or not.

During the recession I witnessed a great many companies face the reality that staff and salary reductions were unavoidable. Realizing this didn't necessarily make the decision to do so any easier. I saw the CEOs I work suffer through the process. It's one thing to fire a recalcitrant employee, but reducing your workforce of good people who need their jobs - or even just reducing their income - placing some in economic jeopardy - is painful. Many delayed action until they had no choice - and well beyond when they should have. I believe some CEOs are holding off on hiring, at least in part, due to their wanting to avoid the possibility of facing those tough decisions again.

There are provisions in the President's American Jobs Act that would clearly be helpful in getting Americans back to work - and a number of the provisions would perhaps help many smaller companies pull the trigger on hiring - but I also suspect if America's small and mid-size companies got more comfortable with hiring and firing, it would help fuel a resurgence of hiring and help drive a level of consumer confidence that would fuel a sustainable economic recovery.

Apart from the macro-view of the economy - from a more micro-view of your own company - building an effective, productive company is the result of shaping the culture: making sure you hire those you need, fire those you should and learn how to maximize the value of the contribution those you have make. If only it was so simple.  

As always, wishing you a great and successful week ahead.  

Philip R. Liebman

Managing Director, Strat4

Group Chair, Vistage International

PS - NOTE to CEOs -  I have room for a few guests at a valuable workshop eventthis month.  This is an excellent opportunities to attend a Vistage meeting, as my guest, and discover why over 14,000 CEO members worldwide gain a measurable advantage when they join.

On September 27th - Robert Devine presents "Getting Lean and Mistaking-Proofing Yoour Organization" As the former CEO of Hartz Mountain - Bob addresses why and how you should bring "lean" into all your operations, "mistake proof" your organization and employ self-directed teams to realize change and drive performance. This is a must-attend for anyone looking to improve the performance of their company.