What’s worse than hiring a "bad" employee? Hiring a "mediocre" one

Truly great places to work only achieve that lofty status when they have the right people in the right jobs. And nowhere is that more true than in small and midsize businesses (SMBs) where a single employee can have a profound impact. With smaller teams and everyone wearing multiple hats, one bad hire can be expensive, at least in the short-term. Spot a bad hire and the path to separation is clear: within 90 days they’re out and the damage is contained. But what about the new hire who just isn’t the right match, yet isn’t a complete disaster? Hire a mediocre fit for a position and the long-term harm can be much more severe, hitting team productivity and employee morale especially hard–areas that often take longer and are costlier to repair.

Prevent mediocrity. Proven selection assessment tools are your first line of defense

Consider the case of “Ben.” A superstar sales pro with a great résumé who excelled in his last few jobs, he interviewed extremely well and came across as a solid team player. Hiring Ben as a sales manager to develop the company’s young sales team seemed like a no-brainer. No one impressed the hiring manager more.

Although Ben jumped onboard quickly and put his sales expertise into action, it became clear that the person the hiring manager originally thought he was getting wasn’t really who Ben turned out to be. His preferred work style was to go it alone, not as a team leader, and he struggled with budgeting and managing others’ performance. As his inexperience began to show, he became more and more withdrawn, alienating his team who became deeply resentful and frustrated. The company’s bottom line wasn’t yet affected, but it was clearly just a matter of time before that happened. Other department managers who could have provided coaching where Ben needed it most also pulled back from offering help.

If you’ve made a mediocre hire lately, you’re not alone

Hiring skilled people who will be the best possible job fit is hard to do, in part because it’s also hard to measure. In fact, when in 2016 LinkedIn surveyed nearly 4,000 worldwide talent acquisition decision makers for its Global Recruiting Trends Report, only 5 percent felt they have a best-in-class process in place for measuring quality-of-hire–a key performance indicator (KPI) they continue to agree is the most valuable.

Lessons learned to save you from the fate of Ben’s last employer

It turns out that Ben wasn’t a bad guy, just a bad fit. A bit too late, Ben’s employer realized that relying solely on impressions from interviews and résumés can be disastrous. The company, instead, could have done what many top-talent companies do. They could have turned to a validated selection assessment tool that adds the critical “human” element to the criteria used to evaluate candidates, making it simpler to hire the best fit for the demands of the job.

For Jim McKelvey, founder of Great Lakes Profiles, Inc., “Pre-hire assessment solutions help uncover a candidate’s thinking style, behaviors, and interests–critical criteria for making smart hires that you just can’t get from interviews or résumés. Great tools like PXT Select™, which I use daily with my clients, are critical for any organization that understands the importance of getting an accurate read on how an individual will approach workplace situations, not just how they achieved success in their last job. And armed with that knowledge and insight, we can all avoid making costly hiring decisions!”

Adding data to traditional hiring tactics can sound overwhelming, but it doesn’t have to be. Download the free white paper and learn more about how PXT Select™ can help your small or midsize business with a simple, human, and smart approach to hiring and deliver to you a competitive edge in attracting the best and brightest talent.

Learn more at www.PXTSelect.com.

Tech

'Pigs'

Now that it’s the weekend and I’ve got a second to breathe, I wanted to go back and revisit something one of my favorite traders wrote on Thursday.

If you read Heisenberg Report, you’re familiar with Richard Breslow. Richard is a trader who writes a daily post for Bloomberg and his viewpoint is, well, “cynical” to say the least. In fact, it’s probably fair to say that if Heisenberg is a solid five on a cynical scale from one to ten, Breslow is easily a nine.

Well, a couple of days ago, Richard proved yet again that when it comes to driving home a point he thinks is important, he has no regard for your delicate sensibilities.

Everyone knows this old market adage:

Bulls make money. Bears make money. And pigs get slaughtered.

In the pre-crisis world, that was a more appropriate way to talk about professional traders and didn’t generally apply to the retail crowd. It especially didn’t apply to passive investors because when it comes to buying and holding, the “bulls, bears, pigs” thing really doesn’t make any sense.

That changed after 2008. The tsunami of freshly printed cash that’s been funneled into markets by central banks and the way in which ETFs have allowed trillions of dollars to indiscriminately chase the rally higher have conspired to turn everyone into “pigs.” Here’s the above-mentioned Richard Breslow (full note here):

Unfortunately, policies relentlessly pursued post the financial crisis have turned everyone into pigs.

In a financial world characterized by central bank front running and put issuing, being a swine has been acceptable behavior. You can play the part and not get slapped.

Now before you summarily dismiss that as just another example of someone who has missed the rally and is now bitter, note that Breslow is not “that guy.” Breslow is a trader. If you read his notes every day, you know full well that he hasn’t “missed out” on anything. And he is by no means averse to riding the proverbial wave while not caring one way or another about who created it or why, as long as he’s making money. So don’t view Breslow’s commentary through the same lens as you view Heisenberg’s.

In fact, Breslow goes on to say that in reality, successful traders are indeed “pigs.” But it takes a real trader to understand how to be a pig and not get slaughtered. That’s where Richard thinks the problem comes in. In short: he doubts whether you are a professional with the skill set necessary to ensure this doesn’t end poorly for you in stocks (SPY) and other risk assets. Take this, for instance:

You should never enter a position without a clear exit strategy. Real exit strategies are fact-based and do indeed include consideration of whose money you are playing with. Earning the right to trade size is an important concept that all great traders employ before they press their bets to the max. It’s ironic that the best investors look like cowboys to the outside world, but are actually the most disciplined players out there. It’s hard to credit the belief that all of these enormous positions, in every market, regardless of liquidity, that have been built on the endless quest for yield, have an exit strategy associated with them.

In case you aren’t sure which markets he’s talking about there, allow me to give you a few ides: high yield (HYG) and emerging market credit (EMB) would be two good candidates, although Breslow doesn’t single them out.

Next is this:

Successful pigs spend an enormous amount of time analyzing entry levels. The ideal entry point is where you can scratch the trade or control losses even if you’re wrong. It’s hard to imagine that after a decade of mindless investing there are many portfolios with “location.” That’s why tapering risks student body left on a grand scale.

Right. When you think about “mindless” investing, don’t forget what Howard Marks and others have said about the inherent dangers of ETFs and other strategies that chase the dragon as the central bank heroine injections continue apace.

Richard wraps up with something largely meaningless about “home runs” and I won’t waste your time with that.

Rather, let me close by drawing your attention to something that I think might surprise you. You might recall that on Friday, WSJ reported that Donald Trump and Mnuchin have met with Kevin Warsh about the possibility that he will take over for Janet Yellen at the Fed. That immediately sent the dollar and yields spiking:

The White House spent the rest of the day scrambling around to make it clear that Warsh doesn’t have the spot locked up and that Trump is still considering other candidates, but it seems like he’s leaning in Kevin’s direction.

Do you know why yields and the dollar spiked the very second the WSJ story hit the tape? It’s because Warsh is a hawk. And he’s also someone who has, at various times, suggested in no uncertain terms that the Fed and other central banks are aiding and abetting a situation that leads Breslow’s “pigs” (i.e., you) to the proverbial “slaughter.”

So what I wanted to leave you with, in light of everything said above, are a couple of passages from a speech Warsh gave last year at the 15th BIS Annual Conference in Lucerne, Switzerland. To wit:

With high and rising global asset prices – aided and abetted by aggressive quantitative easing – we should subject the vaunted portfolio balance channel to stricter scrutiny. The guild is unwise to treat financial markets as some beast to be tamed, cub to be coddled, or market to be manipulated. Too many policymakers appear in thrall to financial markets, and financial markets are in thrall to policymakers, but only one of them will get the last word. Reconsidering the transmission mechanism of financial markets and the responsibility of policymakers is of a piece with a reform agenda.

The Fed directly purchased trillions of dollars of assets that would otherwise be held in private hands. And it took action with the ostensible purpose of managing financial asset prices, including bolstering the share prices of publicly held corporations.

We should take note of a simple, troubling fact: from the beginning of 2008 to the present, more than half of the increase in the value of S&P 500 occurred on the day of Federal Open Market Committee (FOMC) decisions.

Full speech from Warsh here.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Tech

The Senate Is About to Approve Commercial Sale of Self-Driving Cars (But Not Trucks)

You will soon be able to ride home from your local car dealership in a car that finds its way there unassisted while you nap or read. That reality came a whole lot closer this week, with bipartisan agreement in the Senate on legislation allowing self-driving cars to take the the roads. The law is expected to come up for vote in the near future, and pass.

The House passed similar legislation, also with bipartisan support, several weeks ago. That legislation allows car manufacturers to sell up to 25,000 autonomous vehicles the first year they offer them. That will go up to 100,000 cars a year if the self-driving cars prove as safe as human-driven ones. And that’s not all. The Trump administration also helped out recently by issuing voluntary safety guidelines for autonomous cars and at the same time requesting that states avoid writing laws or regulations governing self-driving cars and possibly hampering their introduction.

The senators who arrived at the self-driving deal note that autonomous cars appear to be safer than human-driven ones. “Ultimately, we expect adoption of self-driving vehicle technologies will save lives, improve mobility for people with disabilities, and create new jobs,” said Senators John Thune (R-S.D.) and Gary Peters (D-Mich.) in a joint statement. They may be right: When a Tesla owner died while his car was in Autopilot mode last summer, company founder Elon Musk pointed out that it was the first known Autopilot fatality in 130 million miles of driving, whereas there’s a human fatality for every 89 million miles of traditional driving.

But if cars with no one at the wheel will soon become a common sight, the same won’t be true of semi trucks. The Teamsters successfully lobbied for the House version of the bill to limit self-driving vehicles to 10,000 pounds or less. That could be a problem for the U.S. trucking industry, which was short an estimated 48,000 drivers at the end of 2015, a shortage that’s expected to grow to 175,000 over the next seven years. That will create enormous pressure to replace hard-to-find long-haul truck drivers with no-muss, no-fuss AI.

Tech