Will Your CEO Leave When Times Get Tough

If you want to know whether your CEO is going to jump ship when times get tough, look at what kind of relationships they have with other professionals, new research suggests. A study recently published in the Strategic Management Journal found that a CEO’s decision to voluntarily leave a company when it starts to fail is driven by the executive’s social capital – the personal relationships they have with business colleagues and key external stakeholders. The researchers found that executives who have strong social capital as well as those who have poor social ties with business colleagues are the least likely to quit when their organizations start to suffer. It’s those right in the middle who are the least likely to stick around and ride out the ship when times get rough.

Han Jiang, the study’s lead researcher and an assistant professor at the University of Arizona, said a CEO’s decision to stay or go is ultimately a cost-benefit dilemma. He said when a company fails, an executive’s reputation could suffer dramatically, which could prompt them to leave before things get too bad. On the other hand, if they leave, they risk losing out on access to valuable company resources and connections.

The study found that CEOs with low social capital are unlikely to leave a failing company because their minimal connections make quitting not a viable option. “If I don’t have strong enough social capital and I don’t know anybody in this business circle, even if I want to escape from my declining firm, I probably won’t be able to find opportunities that will allow me to do so,” Jiang said in a statement. “I probably will be locked up in my company, so I have no choice but to stay.” Conversely, CEOs with strong professional networks are also unlikely to leave struggling firms. Jiang said CEOs with strong social capital likely aren’t worried about the negative consequences to their reputation if their company fails. “Even if my firm does end up failing, I can still manage to leverage my strong connections to find myself a parachute that will allow me to land safely after that failure,” Jiang said. “More importantly, if I have very strong social capital, I’m probably more confident about using my capability and my resources to save my firm.” The research discovered that it’s those CEOs with a moderate level of social capital who are the most likely to bolt for the door when their companies start to head south.

“If I have a medium level of social capital, I can leverage my fairly established social network to find myself alternative employment opportunities,” Jiang said. “Compared to extremely socially connected executives, I’m probably not that confident about being able to save my firm, and I probably won’t be that protected from the consequences of a potential public failure. I have both the motivation and the capability to leave.” The study was based on an analysis of the social capital and voluntary job movements of 278 executives of declining firms in China. The researchers controlled for factors such as CEOs’ age, education, gender, compensation, executive shareholding and tenure in their current positions. Although the study looked specifically at firms in China, the researchers believe the findings hold true across cultures and industries. Jiang believes the research can provide some fresh insight into the operation of declining firms.

Culture of Fear for a Better Bottom Line

Company culture makes a difference for employees, which means hiring and retaining talent that effectively meets goals. If a company is leading with fear and lack of self-awareness, the company is more likely to have a high turnover. “If your organization doesn’t have a healthy culture, then two things can happen. First, the workplace environment can be unpleasant and friction-filled, which ultimately may lead to attrition by your best employees,” said Ken Staut, founder and CEO of GrowthFountain, an equity crowdfunding platform. “And second, your organization won’t reach its full potential, because not everybody within your organization shares the same values or buys into the company mission.” “People won’t stay [at the company],” said Lior Rachmany, CEO and founder of Brooklyn-based, Dumbo Moving + Storage. “If people feel overly watched or that they will get shouted out if they make a mistake, they will leave your company as soon as they can.”

That attitude comes at a price. It’s costly to replace employees. According to a CAP study, to replace an employee who earns $30,000 to $50,000 a year, it will cost a company 20 percent of that employee’s annual salary. For example, to replace an employee who makes $50,000 annually, it would cost the company $10,000.

“A negative, fear-based work culture can absolutely affect the bottom line of any company because replacing unhappy employees is expensive,” said Phil Shawe, founder and Co-CEO of TransPerfect,  a translation and content management company. “Each time you lose an employee, whether they were a high or low performer, it costs the company a lot to interview, hire and train each new hire.”

 

Positives of a healthy culture

It’s possible leaders of companies see “positive culture” as startup culture. You don’t need to provide employees with getaways or a beer tap if that doesn’t match your company’s values. Rather, making employees feel welcome and part of the process goes a long way.

“Life is too short. If team members aren’t having fun, if they don’t enjoy the environment where they spend most of their waking moments, they’ll look for something else to do,” Staut said.

The positives to having a good company culture are increased motivation to come into the workplace, Shawe said.

This means a larger emphasis on the creative flow of ideas and collaboration, along with a higher retention rate of employees and promotional hiring from within, he added.

“If you have a good culture, your employees will be more open to learning/being mentored because they will trust your leadership,” Rachmany said.

 

Fixing the culture

It can be an overwhelming task tackling such a sweeping problem. Fixing company culture isn’t an easy undertaking, but it can be done. It takes hiring and retaining the right people. [See Related Story: 4 Ways to Improve Your Company Culture]

“There’s an old saying: If you hire someone for a paycheck, they’ll work for your money. But if you hire someone who believes what you believe, they’ll work for you with blood, sweat and tears,” Staut said. “Passionate employees who believe in your company’s mission and share your company’s values will help you succeed.”

Matthew Gonnering, CEO of Widen, a digital asset management company, suggests these five approaches to move your company in the right direction:

  • Don’t hire emotionally ignorant leaders. Some leaders instill fear in people because they don’t know any other way to motivate; they are not self-aware and not empathetic to the needs of others. Keep them out; encourage self-discovery.
  • Leave your baggage at the door. New hires bring all kinds of behaviors with them that are not natural: At their previous job, they were told to not question, not share, don’t think, just do. Not only is that not normal, it pollutes the work culture of their new job. A business  needs inquisitive employees who are willing to question everything. We think on-boarding mentors can help with this.

Visa Program Faces Regulatory Changes

The H-1B visa program, which offers 85,000 visas each year to foreign skilled or specialty workers, is undergoing some changes. The program, which grants certain employers access to foreign labor when the necessary skills are not available within the U.S. workforce, is facing three major changes initiated by the executive branch to clamp down on perceived abuses. On March 31, the U.S. Customs and Immigration Services (USCIS) announced that computer programmers, typically considered the lowest qualifying position for the H-1B program, would have to demonstrate that they’ve attained at least a bachelor’s degree in their field; associate’s degrees would no longer be considered acceptable. As a follow-up to this change, the USCIS announced on April 3 that “H-1B dependent employers” (companies with a workforce composition of at least 15 percent H-1B visa holders) would be subject to more stringent screenings to ensure compliance with the law.

“This identifies heavy users of H-1B visas,” Dick Burke, CEO of Envoy Global, told Business News Daily. “What (USCIS) is saying is, ‘When we make site visits for compliance, we are going to focus on H-1B dependent companies or those with a high percentage of workers working off site … in a consulting capacity.'” Then, on April 4,, the U.S. Department of Labor (DOL) jumped into the game with an announcement that it would step up enforcement actions against companies that violated the law, particularly with respect to displacing American workers. “The H-1B visa program authorizes the temporary employment of qualified individuals who are not otherwise authorized to work in the U.S,” a U.S. DOL statement reads.

“In recent years, some employers have used the H-1B program to hire foreign workers despite American workers being qualified and available for work, or even to replace American workers.” According to Burke, these three measures taken together are targeting what is known as the “infotech industry,” in which companies employ large numbers of IT workers from abroad – most commonly from India – as consultants, which then support IT operations for other companies. “There are instances where displacement does occur,” Burke said. “And it’s undebatable that infotech gets a large percentage of the H-1B visas. However, the problem is that (discussions of displacement) drowns out the bigger problem, which is a skills shortage in U.S. STEM jobs.” On April 7, just five days after this year’s H-1B lottery opened, the number of applicants had already exceeded the limit. This has become the norm in recent years, with USCIS receiving almost three times as many applications as the limit in 2016. “Many employers have retracted from sponsoring prospective H-1B employees because the uncertainty makes it cost-prohibitive for companies to invest time and money in an employee who may not be able to work for them after all,” said Renata Castro, an immigration attorney at the Castro Legal Group.

 

How to Retain Increasingly Mobile Workers

As the economy improves and more job opportunities appear, workers are growing increasingly restless. According to research conducted by ADP, more than 1 in 4 people change jobs annually – an unprecedented frequency of job switching. Moreover, ADP found that 63 percent of the average employer’s workforce is open to leaving for a new job at any time, and 46 percent would leave for a job that paid the same or less than their current position. So, how can employers find and retain top talent? Sreeni Kutam, division vice president of major account services at ADP, said the findings boil down to two philosophies in conflict with one another: “me vs. we.” Employees, he said, often take the “me” perspective, asking themselves how much they can make, how they can advance and whether they’re satisfied. Employers, on the other hand, naturally take a bird’s-eye view of the organization, concerning themselves more with financial performance and overall organizational health.

“The question becomes due to the external factors – economic improvement, unemployment going down – would that tension be elevated to unprecedented levels?” Kutam said. “And we are seeing that in the marketplace.” That’s certainly alarming news for any employer who wants to hang on to their best employees. Luckily, there are significant steps employers can take to keep their employees happy in their current roles, rather than searching for greener pastures. Invest in managers’ skills Managers need to be more than just employees who once did a good job; they need to understand how to get the best out of people, while minimizing their weaknesses. When employees feel they are contributing and clearly understand their value in an organization, they are engaged in their work and more likely to stick around. “A lot of companies promote managers based on how good they were at their previous job,” Kutam said. “But actually, the people management aspect of leadership is the X-factor.

Great team leaders leverage the strengths of individual team members to get to the broader perspective.” Boost wages As the economy improves, productivity is reaching new levels. Generally, sales and earnings are going up, but wages are lagging. Everybody feels more appreciated after a raise, especially when so many Americans are working two or three jobs just to make ends meet. Making sure your staff is compensated well and happy with their paychecks is essential to keeping them on board. However, while good pay is an important puzzle piece, don’t expect compensation alone to keep top talent content in an otherwise disconcerting environment. Use performance management tools Performance management software is a great way for employers to keep an eye on the individuals in their organizations. Although employers are often susceptible to the “we” view, performance management tools help them drill down into the strengths, weaknesses and aspirations of individual team members. The good software even helps identify those who might be flight risks, helping you to address their concerns and keep them within the organization. [See our picks for the best performance management tools.] Offer career development opportunities A stagnant employee is an unhappy employee. While a good manager leverages an employee’s strengths, most employees want to feel like they are progressing not just professionally, but also personally. For those ambitions, internal career development programs and opportunities are key. In the end, your organization will also benefit from more content, well-rounded employees.

Business Automation Impact Workers in the Gig Economy

Two trends remaking the American economy are the growth of freelancers and independent contractors – the so-called gig economy – and an expansion of automated processes. But how do the two intersect? What impact will the breakneck pace of automation have on temporary workers in the gig economy? Morag Brand, a freelancer and certified automation expert, said automation and short-term contract work are a natural pair, and that the gig economy can expect a boost in activity as a result of more businesses employing automation-focused technologies. “Automation has to start somewhere, and that’s right at the initial concept stage … but it has to be set up by someone, and this is where freelancers enter the scene,” Brand told Business News Daily. “So, yes, freelancers and contract workers should expect more work as automation expands, but it will be short bursts of ‘set up and move on,’ rather than the traditional retainer model of old. This is also cost-effective for the business owner too.”

Cristina Escalante, COO of the web and app development company The SilverLogic, said the gig economy has grown exponentially with automation technology, which paved the way for the Ubers and Airbnbs of the world.

“The gig economy was created by the combination of automation and the birth of Web 2.0,” Escalante said. “[Many of these jobs] would have been completely unimaginable without both automation and web-based platforms.”

But the intersection of the gig economy and automation goes well beyond the common references. Freelancers are taking to platforms like Fiverr and Upwork to get their services out to the public at affordable rates. Writers and data analysts share these platforms to connect with potential clients all over the world, enabling them to spread their services to a wider audience.

“An Upwork data researcher or proofreader can build a reputation, maintain connections with clients, and use a gig platform as a launch pad for his or her own business,” Escalante said. “Although it’s conceivable that humanity will automate itself into unemployment, for the near future at least, gig workers capable of retooling and pivoting can expect more work.”

However, there remains a great deal of progress to be made when it comes to connecting freelancers and clients. Kristen McAlister, president and co-owner of Cerius Executives, which provides companies with temporary executives, said locating temporary workers is still a heavy lifting process for the would-be client. She anticipates further automation of this space in the future, which she predicts would lead to much quicker mass adoption.

“The overwhelming trend to finding contract workers on platforms is a ‘post’ rather than a ‘search’ process,” McAlister said. “This makes the connection process far more manual and flawed than most realize.”

A major complaint of clients searching for freelancers is that oftentimes the posts advertising their services are vague and ambiguous, McAlister added. She sees further automation as an obvious solution to this problem.

“Increased automation and AI to help improve the need identification and matching process will provide significant advances in this space,” she said. “It needs to get to the point of an Uber or Amazon AI model to remove much of the current friction and increasing mainstream adoption for businesses.”

 

Legal issues surrounding the gig economy

There are a few legal issues any company interested in hiring gig workers needs to be aware of. Jon Yarbrough, a labor and employment attorney for Constangy, Brooks, Smith & Prophete, said businesses commonly misclassify their employees, which can lead to severe penalties from government regulators.

 

3 Tips for Finding Entry Level Talent

With college graduation just around the corner, the job market is about to be flooded with entry-level talent looking for full-time jobs and internships. For employers, taking advantage of the influx of newly minted professionals can be as simple as having a good campus recruiting strategy in place. “College recruiting is a smart, predictable, scalable way to bring talent into any organization,” said Tey Scott, director of talent acquisition at LinkedIn. “Smart companies know they need to invest in early-in-career talent to compete in the long term. In tech in particular, getting early-in-career technical talent in the door may be the difference between being able to scale their company fast enough to deliver on product road maps or not.” The college career fair is the traditional method of on-campus recruiting, but based on LinkedIn’s success, Scott recommends implementing out-of-the-box initiatives that provide value on campus while also getting in front of targeted recruits.

“The question we asked ourselves was, what would it take to identify nearly all early-in-career talent without having to rely on physical on-campus events?” she said. “To start, we looked beyond focusing our efforts solely on specific universities and schools, which tends to result in a limited pool of applicants over time. We moved away from career fairs at well-known universities and began thinking regionally, which has allowed us to successfully engage with, train and attract various student groups on our platform.”

Scott noted that LinkedIn has also made it a priority to organize more unique, engaging events, such as offering students help with their LinkedIn profiles and taking their headshots.

“LinkedIn’s vision is to create economic opportunity for every member of the global workforce, so by focusing more on supporting students’ professional development rather than focusing on recruiting, we can empower students to hone their professional skills to help them land their dream job,” Scott said.

Creating a smart campus recruiting strategy

When you’re building a program to attract early-career professionals, branding is everything, said Scott. Mobilizing employees to attend on-campus events like career fairs and mock interviews can be time-consuming and expensive, Scott said — and more importantly, you may not come away finding the best, most diverse talent if you limit yourself to a few select schools.

“If you are a company looking to build your brand, we suggest getting out in front of as many students as possible to see what kind of talent you can attract,” she said. “Chances are you will find you don’t want to limit yourselves to the traditional model of campus recruiting and instead want to broaden your reach.”

In a LinkedIn blog post, Scott offered the following tips for employers looking to find great entry-level talent in the soon-to-be college graduate pool:

1. Focus on targeting by region, not by school. Scott noted that this broadens your pool of potential candidates and, in tandem, the diversity of your pool.

2. Host professional development events. You can engage potential candidates better by branding your efforts as a “development” event, rather than one designed solely for recruitment, said Scott. For example, LinkedIn hosts profile stations on campuses to help students take professional headshots and increase their job prospects.

3. Build and develop programs that encourage hands-on interaction. LinkedIn developed a new program called Accelerate U to provide promising candidates a forum to learn, engage and connect through daylong workshops around professional branding, networking and interview skills.

“The key to our success with the program has been placing emphasis on the importance of skill building through workshops around personal branding, networking and interviewing,” Scott said. “Our goal is to arm students with the skills necessary to put their best foot forward in interviews not just for our company, but for any professional opportunity they choose. By adding value for candidates and a sense of authenticity to our recruitment initiatives, we’ve seen our programs resonate more with on-campus audiences.”

The Age of Well Informed Job Candidates

According to the report, job seekers frequently research details about on-the-job lifestyle factors, including benefits and schedule flexibility as well as the type of work that will be expected of them if hired. The most important criteria, however, is compensation. Currently, 44 percent of candidates know compensation details about a position before applying, and this level of transparency is only increasing. “Easy access to information has changed the way individuals find jobs and jobs find individuals,” said Jim McCoy, vice president and global practice leader at ManpowerGroup Solutions. “As organizations across the globe continue to report difficulties filling roles, understanding candidate preferences is critical.” ManpowerGroup Solutions offers the following advice for employers and hiring managers to help with recruiting efforts. Reach the right talent where they are Understand that candidates are gleaning much of their information from your company’s website, so it’s important to prioritize the creation of content that is both brand relevant and high quality. Be open to new conversations and new ways of having them You must be willing to be fully transparent with today’s information-hungry candidates – especially related to compensation. Monitor the buzz Monitor conversations about your company on social media and career sites like Glassdoor, and be ready to jump in and respond to questions or provide additional information when necessary. “Organizations should be thinking about candidates as consumers,” McCoy added. “Managing the message to the market is key to building a successful employer brand and attracting the best talent.”

While job seekers have previously been at the mercy of employers who cherry pick the candidates that best fit their needs, ManpowerGroup Solutions, a recruitment outsourcing services provider, notes that the new era of well-informed job seekers has shifted the balance of power from employer to candidate. To help businesses navigate the current landscape and continue to attract top talent, ManpowerGroup Solutions recently surveyed 14,000 job seekers – many of whom gather extensive details on a prospective employer well before they ever apply for an open position.