In a relatively young and rapidly growing industry with many changes and opportunities on the horizon, who you hire is one of the most important investments you can make in your business. However, recruiting and hiring today is more important than finding a person with the right skills and qualifications. Do the candidates fit your culture and strategic vision? Do they share your values and have the right behaviors to make them successful and provide your company a long-term return?
Warren Buffett is one of the most successful investors of all time and currently the third wealthiest person in the world. Regardless of one’s opinion of the “Oracle of Omaha,” it is hard to argue with his amazing track record. As the chairman and CEO of Berkshire Hathaway, Buffett has inspired millions of people and made billions of dollars through a philosophy of investing that can also be applied to successful hiring practices in your business.
Aside from utilizing financial ratios and other analytical tools to find undervalued companies he can invest in, there are other key considerations that Buffett and many other successful investors look at before making a decision. Never compromising on business quality, always taking the long view and listening to those you know and trust and are a few hallmarks of Buffett’s investment strategy.
How does thinking like an investor apply to hiring? When recruiting and hiring a person to join your company, you are making a major investment. That same hire can often be critical for the future success of the company. Time, training, compensation, benefits and other “rewards” for the people you employ are investments in growing your business. In today’s low unemployment, low retention “candidate’s market,” approaching recruiting and hiring as an investor could make the difference and lead to better decision making in this critical area.
Never Compromise on Quality
“It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”
— Warren Buffett
Berkshire Hathaway was originally a textile manufacturer when Buffett took control in 1962. He later said that entering the textile business was one of his worst trades ever, but he kept the name. The experience taught Buffett that “you get what you pay for.” He was no longer interested in buying something at a bargain in the hope of getting a nice, short-term return, especially when the long-term prospects for the business look terrible. He chose a path of “value investing,” in which he looks for prices that are low compared to their actual or future worth and often overlooked by other investors.
Never compromising on quality can also be applied to hiring. For example, Candidate A is a high-quality candidate that matches all the skills, qualifications, experience, behaviors and cultural alignment needed for great success in the position. “A” checks off all the boxes and has been thoroughly screened, and you can see a bright, long-term future. Candidate B also has many of the same skills and qualifications, but “B’s” behaviors and culture fit were not as strong and the references not as glowing, nor was there a projected long-term future with the company. Here’s the kicker: “B” wants 20% less in salary than “A.”
How many companies would automatically gravitate to Candidate B because they felt they were saving money or had to stick to a budget? Quality investments yield high returns and increase in value over time, similar to Candidate A in our example.
How does this apply to value investing? Over time, Candidate B will inevitably cost the company more and return less due to low engagement, poor cultural fit and eventual turnover — in other words, a lot more than the 20% saved in Candidate A’s compensation.
As Buffett has stated, “Price is what you pay. Value is what you get.”
Taking the Long View
“Our favorite holding period is forever.”
— Warren Buffett
Once asked how long he would hold a high-quality investment he made at what was considered a reasonable price, Buffett gave the answer above. Embracing a “buy and hold” investment philosophy, many of his investments have been held for decades. Buffett and investors care more about value than price.
As a business leader, you should care more about what a new hire can bring you a few years into the future instead of having them be able to “hit the ground running” and automatically start making returns on day one. Look for those candidates who are quick learners and can innovatively solve problems. They are the ones that have the experience and behaviors that will help them integrate quickly into your company and excel in the future.
Smart investors also continue to invest, just as companies need to keep investing in their people. While you may not have the budget to increase their compensation, look for other ways to invest in your employees. In a recent Udemy “Workplace Boredom Report,” 46% of employees are looking to leave their companies because of a lack of opportunity to learn new skills, and 80% agree that being given opportunities to learn new skills would make them more interested and engaged in their work. Do you offer continuing education, seminars, training programs and other developmental programs that will keep your employees learning new skills? There is a measurable return on investment to “upskilling” your employees, and often it is in the form of productivity gains, increased engagement, more profitability and reduced turnover.
Listen to Those You Know and Trust
“Management changes, like marital changes, are painful, time-consuming and chancy.”
— Warren Buffett
Buffett has always noted the importance of only investing in competent and trustworthy management teams. He knows that when he selects partners or managers, their actions and decisions will be felt for many years. As a business leader, you too must be cognizant of selecting competent and trustworthy people to join your organization. They could have a major impact on future performance and growth.
But this is easier said than done. Buffett has a huge network of resources and advisers he can utilize to find the best and most trustworthy managers and leaders just by word-of-mouth. What about you in this industry and at this time? Ask people you know and trust, especially in related industries, such as horticulture. There is also a lot of value in aligning yourself with a well-trained executive search firm or consultant that can help you find your next leaders and management team, as well as help you build your organizational and human resource strategy. These experts will take the time to learn your culture, successful employee behaviors, and can best find you candidates when you don’t have Mr. Buffett’s connections.
New Hires are an Investment
The financial world, akin to our industry, is filled with many characters — both good and bad. By not compromising on quality, taking the long view and listening to those you trust to find and hire the best talent will lead to less risk and a better fit for the position and within your company. When hiring, think and act as an investor — Mr. Buffett has several billion reasons why it works.
Chris Cimaglio has more than 30 years of horticultural and consumer products experience, including more than nine years as CEO of a family-owned industry sales and marketing firm in Chicago. He is currently the managing partner of BEST Human Capital & Advisory Group, a retained executive search and human resource consulting firm based in Indianapolis. He can be reached at email@example.com, and more information on BEST can be found at www.besthumancapital.com.
Sources: Simply Safe Dividends “Top 10 Pieces of Investment Advice from Warren Buffett”;
Udemy Workplace Boredom Report.