By CARI TUNA

Boeing Co. cut more than 3,000 jobs in the first four months of 2009, most from its commercial-airplanes unit as airlines deferred orders. But the aviation giant added 106 employees in its defense arm, and is looking for hundreds more.

As layoffs mount, many of the same employers also are hiring — in other business units, in other places, or for other skills. Microsoft Corp., International Business Machines Corp., AT&T Inc., Yahoo Inc. and Time Warner Inc. are among the companies shedding some workers, while adding others.

The simultaneous hiring and firing highlights the dynamism of the economy and shows how employers are trying to adapt to changing needs. It also offers hints on how the recession is changing the work force, with some employers placing more emphasis on worker skills.

“It’s not just routine turnover,” says Lori Kletzer, an economics professor at the University of California, Santa Cruz. “Quite often the people being laid off don’t have the requisite set of skills or experience to move into the growth areas.”

The U.S. Labor Department Friday said employers eliminated 539,000 jobs in April, slightly fewer than in preceding months. But that bottom-line figure masks considerable turnover. In February, the most recent figure available, the government estimates that employers hired roughly 4.4 million workers; the total number of jobs shrank in February because more people quit jobs or were let go.

Some experts say the churn also shows changes in workplace policies. In past decades, many employers retrained and relocated underused workers, says Peter Cappelli, director of the Center for Human Resources at the University of Pennsylvania’s Wharton School. “Now they’ve discovered that you can restructure even faster by laying off and hiring.”
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Boeing, for instance, plans to cut roughly 10,000 jobs in 2009, including 4,500 from the commercial-airplanes unit. Those affected include thousands of contingent, administrative and support staff, as well as hundreds of hourly manufacturing workers. In mid-2010, Boeing will slow production of its large 777 airplanes, which could prompt more layoffs.

At the same time, Boeing has more than 1,500 current and anticipated job openings — in various stages of recruitment — most for mechanical, electrical, software and other engineers. Many of those hires will join Boeing’s defense unit, a large maker of military aircraft, which last quarter made more money than the commercial airplanes unit. The company is hosting a recruiting event May 21 for software engineers for defense projects.

Executives who are both hiring and firing often say they need different types of employees, who can do different things. National Public Radio has cut more than 70 jobs and two programs since December, but is hiring for its Web site, including bloggers and online news editors.

“A blanket hiring freeze was just not feasible,” says Chief Executive Vivian Schiller. “It’s not a smart way to run a business. The show must go on.”

Microsoft last week laid off a second group of workers, bringing its job-loss total to about 5,000, scattered across many departments. But the software giant plans to add 2,000 to 3,000 jobs in “key investment areas,” like online search and cloud computing, says spokeswoman Elizabeth Herrera Smith. Since April 1, Microsoft has posted more than 350 job openings, including 260 in the U.S., for software developers, program managers and others.

Likewise, AT&T this year plans to cut 12,000 employees, or 4% of its work force, including technicians and installers from its traditional wireline business. But it’s adding 3,000 workers in its growing wireless, Internet and television units. The changes reflect “shifts taking place in the industry,” says spokesman Michael Coe. Some laid-off union members will be retrained for the new jobs, he says.

IBM has cut close to 10,000 U.S. jobs this year, including some that were shifted overseas, according to people familiar with the matter. But the technology company recently announced plans to add 4,000 employees over the next three years for a new unit in its consulting division. IBM also is opening a center in Iowa to manage customers’ information-technology systems, which will employ up to 1,300 people by the end of 2010.

For the new consulting unit — Business Analytics and Optimization — IBM plans to open offices in New York, London, Tokyo and elsewhere. Many of the new jobs will combine technical skills, like software engineering or database management, with expertise in an industry, like health care or government, says Bill Pulleyblank, vice president of IBM’s center for business optimization. He calls the new effort “a rapidly growing need.”

By SAMUEL A. CULBERT

You can call me “dense,” you can call me “iconoclastic,” but I see nothing constructive about an annual pay and performance review. It’s a mainstream practice that has baffled me for years.

To my way of thinking, a one-side-accountable, boss-administered review is little more than a dysfunctional pretense. It’s a negative to corporate performance, an obstacle to straight-talk relationships, and a prime cause of low morale at work. Even the mere knowledge that such an event will take place damages daily communications and teamwork.

UCLA professor, Samuel Culbert, shares some managerial tips on improving an employee’s performance.

The alleged primary purpose of performance reviews is to enlighten subordinates about what they should be doing better or differently. But I see the primary purpose quite differently. I see it as intimidation aimed at preserving the boss’s authority and power advantage. Such intimidation is unnecessary, though: The boss has the power with or without the performance review.

And yes, I have an alternative in mind that will get people and corporations a great deal more of what they actually need.

To make my case, I offer seven reasons why I find performance reviews ill-advised and bogus.
Handling a Bad Review

TWO PEOPLE, TWO MIND-SETS

Let’s start with an obvious reason: The mind-sets held by the two participants in a performance review work at cross-purposes. The boss wants to discuss where performance needs to be improved, while the subordinate is focused on such small issues as compensation, job progression and career advancement. The boss is thinking about missed opportunities, skill limitations and relationships that could use enhancing, while the subordinate wants to put a best foot forward believing he or she is negotiating pay. All of this puts the participants at odds, talking past each other. At best, the discussion accomplishes nothing. More likely, it creates tensions that carry over to their everyday relationships.

Then there are second-order problems. A subordinate who objects to a characterization of faults runs the risk of adding another to the boss’s list: “defensiveness and resistance to critique.” And the boss who gets her mind turned around by a subordinate’s convincing argument runs the risk of having a bigger boss think she failed to hold the line on what had been decided and budgeted. Good luck to her when she next gets evaluated.

PERFORMANCE DOESN’T DETERMINE PAY

Another bogus element is the idea that pay is a function of performance, and that the words being spoken in a performance review will affect pay. But usually they don’t. I believe pay is primarily determined by market forces, with most jobs placed in a pay range prior to an employee’s hiring.

Raises are then determined by the boss, and the boss’s boss, largely as a result of the marketplace or the budget. The performance review is simply the place where the boss comes up with a story to justify the predetermined pay. If the raise is lower than the subordinate expects, the boss has to say, “We can work to get it higher in the future, and here are the things you need to do to get to that level.” Or the boss can say, “I think you walk on water, but I got push-back from H.R. and next year we’ll try again.”

In other words, too many lines spoken in a performance review are a cover story for the truth and have little to do with performance. Even when it’s a positive review, the words spoken are likely to be aimed more at winning the subordinate’s gratitude than at providing a candidly accurate description.

OBJECTIVITY IS SUBJECTIVE

Most performance reviews are staged as “objective” commentary, as if any two supervisors would reach the same conclusions about the merits and faults of the subordinate. But consider the well-observed fact that when people switch bosses, they often receive sharply different evaluations from the new bosses to whom they now report.

To me, this is just further proof that claiming an evaluation can be “objective” is preposterous, as if any assessment is independent of that evaluator’s motives in the moment. Missing are answers to questions like, “As seen by whom?” and “Spun for what?” Implying that an evaluation is objective disregards what everyone knows: Where you stand determines what you see.

The absurdity is even more obvious when bosses — as they so often do — base their reviews on anonymous feedback received from others. This illogic is highlighted in the contemporary performance-reviewing fad called “360-degree feedback.” Hate mail, I suppose, is similarly “objective.” People are told, “I can’t tell you who said this,” as if the alleged truth-teller has no ax to grind and the allegation is unrelated to a specific motive or a disagreement in a relationship. Come on! Isn’t “anonymous” just a slicker way for people to push what’s in their political interests to establish, without having their biases and motives questioned?

What will it take for people to really understand that any critique is as much an expression of the evaluator’s self-interests as it is a subordinate’s attributes or imperfections? To my way of thinking, the closest one can get to “objective” feedback is making an evaluator’s personal preferences, emotional biases, personal agendas and situational motives for giving feedback sufficiently explicit, so that recipients can determine what to take to heart for themselves.

ONE SIZE DOES NOT FIT ALL

Employees all come with their own characteristics, strong suits and imperfections that they orchestrate in every attempt to perform their best. Because no two people come similarly equipped, they draw upon the unique pluses and minuses they were endowed with at birth along with compensatory assets they subsequently developed.

And yet in a performance review, employees are supposed to be measured along some predetermined checklist. In almost every instance what’s being “measured” has less to do with what an individual was focusing on in attempting to perform competently and more to do with a checklist expert’s assumptions about what competent people do. This is why pleasing the boss so often becomes more important than doing a good job. Create a positive impression and the boss will score you high on any dimension presented.

Worse, bosses apply the same rating scale to people with different functions. They don’t redo the checklist for every different activity. As a result, bosses reduce their global sentiments to a set of metrics that captures the unique qualities of neither the person nor the job.

Maybe, for instance, there’s a guy who doesn’t voice his viewpoint when he disagrees with something said. Does that mean he should be graded down for being a conflict-avoider — as if the boss’s in-your-face way of communicating is superior? He may be seen as doing a bad job based solely on an incompatibility of styles that may have little to do with actual performance.

PERSONAL DEVELOPMENT IS IMPEDED

The drive for improvement goes on in big and little ways at work. You would think that the person in the best position to help somebody improve would be his or her boss.

Yet, thanks to the performance review, the boss is often the last person an employee would turn to.

Why is that?

The No. 1 reason for that reluctance is that employees want to turn to somebody who understands their distinctive talents and way of thinking, or knows them sufficiently well to appreciate the reasons behind the unique ways they are driven to operate. By contrast, people resist help from those who they believe can’t get them in proper focus, especially when they have tried on many occasions to tell them.

What’s more, people don’t want to pay a high price for acknowledging their need for improvement — which is exactly what they would do if they arm the boss with the kind of personal information he or she would need to help them develop. It could all come back to haunt them in the performance review. No wonder the developmental discussions the boss wants to inject at the time of a performance review so often get categorized by subordinates as gun-to-the-head intimidation requiring false acquiescence, lip-service agreement and insincere, appearance-correcting actions.

DISRUPTION TO TEAMWORK

Managers can talk until they are blue in the face about the importance of positive team play at every level of the organization, but the team play that’s most critical to ensuring that an organization runs effectively is the one-on-one relationship between a boss and each of his or her subordinates.

The performance review undermines that relationship.

That’s because the performance review is so one-sided, giving the boss all the power. The boss in the performance review thinks of himself or herself as the evaluator, and doesn’t engage in teamwork with the subordinate. It isn’t, “How are we going to work together as a team?” It’s, “How are you performing for me?” It’s not our joint performance that’s at issue. It’s the employee’s performance that’s a problem.

All of which leads to inauthentic behavior, daily deception and a ubiquitous need for subordinates to spin all facts and viewpoints in directions they believe the boss will find pleasing. It defeats any chance that the boss will hear what subordinates actually think.

Here’s a simple example: In a performance review, the boss cites a subordinate’s missing a high-profile meeting as cause for a reduced rating. What if the reason was something personal — perhaps a son picked up by the police — that the employee doesn’t want to reveal? Why not reveal it? Because one-way accountability inevitably creates distrust. Does the boss self-reflect and ask, “What did I do, or should I be doing, to build up the trust?” No, the boss faults the guy for secretiveness. It’s a vicious cycle.
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IMMORALITY OF JUSTIFYING CORPORATE IMPROVEMENT

I believe it’s immoral to maintain the facade that annual pay and performance reviews lead to corporate improvement, when it’s clear they lead to more bogus activities than valid ones. Instead of energizing individuals, they are dispiriting and create cynicism. Instead of stimulating corporate effectiveness, they lead to just-in-case and cover-your-behind activities that reduce the amount of time that could be put to productive use. Instead of promoting directness, honesty and candor, they stimulate inauthentic conversations in which people cast self-interested pursuits as essential company activities.

The net result is a resource violation, and I think citations should be issued. If it’s a publicly held company, shareholder value gets decreased. If it’s a governmental organization, time is lost that could be spent in pursuit of the public good. And what participants learn in the process has more to do with how to survive than with meaningful self-development.

I’ve often thought that every organization should be considered partially a public entity since they exist, in part, to provide meaningful activities for the people who work in them. Skills and mind-sets acquired at work go home with people to affect family, community, culture and even the world. The more positive an atmosphere we can create at work, the more positive an impact it has at home. In short, what goes around comes around.

SO, WHAT’S THE ALTERNATIVE?

The alternative to one-side-accountable, boss-administered/subordinate-received performance reviews is two-side, reciprocally accountable, performance previews.

Let me explain.

The boss’s assignment is to guide, coach, tutor, provide oversight and generally do whatever is required to assist a subordinate to perform successfully. That’s why I claim that the boss-direct report team should be held jointly accountable for the quality of work the subordinate performs. I’m sick and tired of hearing about subordinates who fail and get fired, while bosses, whose job it was to ensure subordinate effectiveness, get promoted and receive raises in pay.

Holding performance previews eliminates the need for the boss to spout self-serving interpretations about what already has taken place and can’t be fixed. Previews are problem-solving, not problem-creating, discussions about how we, as teammates, are going to work together even more effectively and efficiently than we’ve done in the past. They feature descriptive conversations about how each person is inclined to operate, using past events for illustrative purposes, and how we worked well or did not work well individually and together.

The preview structure keeps the focus on the future and what “I” need from you as “teammate and partner” in getting accomplished what we both want to see happen. It doesn’t happen only annually; it takes place each time either the boss or the subordinate has the feeling that they aren’t working well together.

Realistic assessment of someone’s positive qualities requires replacing scores on standardized checklists with inquiry. As a result, step No. 1 in giving effective feedback almost always involves “active questioning” inquiry. Inquiry contrasts with most performance reviews, which begin with how the evaluator sees the individual and what that boss has already decided most needs enhancing. Both participants need an answer to the most significant issue at hand: “Given who I am and what I’m learning about this other individual, what’s the best way for us to complement one another in getting work accomplished with excellence?” If in the process the other person decides to change and develop, so much the better.

Bosses should be asking all the questions that occur to them in inquiring about how a subordinate thinks he or she can best perform the job. Then, after they have exhausted their questions, they should ask the subordinate for what else they need to know. At a minimum, they should be asking “How will you be going about it?” and “Specifically, what help do you need from me?” Why not get it all when, at the end of the day, the boss still has the authority to play ultimate decider?

Some of you may also ask if the performance review goes away, how do we prepare the groundwork if we want to fire somebody? For the better, I’d argue: Take away the performance review, and people will find more direct ways of accomplishing that task.

Substituting performance previews for performance reviews promotes straight-talk relationships for people who are up to it. It welds fates together because the discussion will be about what the boss-subordinate team accomplishes together, which I believe is the valid unit to hold accountable. It’s the boss’s responsibility to find a way to work well with an imperfect individual, not to convince the individual there are critical flaws that need immediate correcting, which is all but guaranteed to lead to unproductive game playing and politically inspired back-stabbing.

There are many bosses who would like to change that game, but they feel handcuffed by the rules already in play. I’d like to believe that if given the chance, they would embrace a system that allows them just as much authority — but in a way that promotes trust, not intimidation.

Keep in mind, of course, that improvement is each individual’s own responsibility. You can only make yourself better. The best you can do for others is to develop a trusting relationship where they can ask for feedback and help when they see the need and feel sufficiently valued to take it. Getting rid of the performance review is a necessary, and affirming, step in that direction.

—Dr. Culbert is a consultant, author and professor of management at the UCLA Anderson School of Management in Los Angeles.

If you’re a business executive interviewing job candidates, here’s a little tip from the scientific community: Don’t read too much into a dead fish handshake. Or a clammy palm. Or an applicant who doesn’t look you dead-on in the eye.

First impressions matter, but could be —- and often are —- wrong, new research indicates.

Snap judgements based on first impressions could prove costly to businesses that must spend more time and money on new applicants after showing those with clammy handshakes the door.

“People make attributions about people that are not valid,” says Murray Barrick, a professor of management at Texas A&M, who with colleagues has conducted several studies on employment interviews. “What you pick up in first impressions does not predict later job performance.”

People in position to hire are biased against people with limp or wet handshakes, he’s found. Not only that, but interviewers often may rate women who don’t shake hands as firmly as men lower than would be warranted by their qualifications.

Interviewers should take into account what happens after the first three minutes, he said.

People who’re experienced at interviewing are practiced at handshakes, making eye contact, flattering the interviewer and knowing how to field structured questions, he said, but that doesn’t mean they’ll make good employees.

Most interviewers know these things intellectually, but still put too much stock in superficialities.

“It’s unconscious,” Barrick said. “It’s not rational. But it happens.”

Talent! It’s the rallying cry of hiring managers and CEOs everywhere. In good economic times and bad, companies compete for the best, the brightest, the hardest-working — the stars who outshine the merely competent.

But hiring top talent is not without risk. There is always the chance that the star won’t be able to replicate his or her success in a new environment. Managers need to think about how portable a job candidate’s performance is likely to be — and to a large degree that depends on the job. The more star workers’ performance depends on the people around them and on their familiarity with their company’s processes and culture, the less likely they are to perform at the same level on a new stage, at least at first.

To examine the link between job description and performance portability, we looked at a special kind of free agent — professional football players. The National Football League labor market is an ideal natural laboratory: All “companies” (teams) are engaged in identical work, the positions are the same in all teams, success can be quantified, and employee moves are a matter of public record.

We compared the performances of star NFL punters and wide receivers who switched teams with the performances of counterparts who did not.

Who’s Portable?

The performance of wide receivers is governed by complex interactions among teammates. Receivers not only must have sufficient speed and agility to escape defensive players and catch the ball, they also must coordinate the distance, direction and timing of their routes with quarterbacks who themselves depend on several teammates to protect them from charging defensive players. Punters, on the other hand, engage in the comparatively simple act of kicking a football. How far a punter kicks the ball is almost completely dependent on the player’s individual strength and skill.

Are punters’ talents, then, more portable than those of wide receivers? The data indicate they are.

On average, the wide receivers in our study declined in performance as the years took their toll. However, those who moved saw their performance drop much more steeply in their first year with a new team: The number of receptions, yards gained and touchdowns all declined more than the totals for those who stayed with their teams. Performance stabilized after a year, suggesting that after a period of adjustment the players were able to build the kind of cohesion with their teammates that had served them so well at their old teams.

Punters, on the other hand, can take it with them. No significant differences in performance were found between punters who changed teams and those who did not.

Hiring Strategies

The results of our study suggest there are some positions for which talent can be imported and others that are better filled from within.

At investment banks, for example, retail brokers, who handle individual clients, work primarily on their own. Institutional salespeople, who sell to major investors such as state retirement-savings systems and mutual-fund firms, are more likely to work in teams and to work more closely with research analysts and investment bankers. Retail brokers can easily be hired from the outside; institutional salespeople should be developed from within, and efforts should be made to retain them.

Managers who hire stars from outside for positions that require extensive teamwork and knowledge of the company should expect the newcomers to take a while to get their bearings, and should help them make the connections they need to thrive.

The performance of some stars relies mostly on a few people they work closely with, rather than broader connections to their company. Some stars ease the transition to a new company by bringing at least some of these team members with them. For example, a surgeon may take an entire operating-room team to a new hospital, and high-powered academics often take their research assistants with them to a new university. But legal issues, including noncompetition agreements and intellectual-property rights, may hinder the mobility of some teams. Another challenge of this approach for the hiring company is that a star who arrives with a team can just as easily leave with the same team. The star who has to forge new connections will have stronger ties to his or her new company.

By GEORGE ANDERS

Job cutbacks are proliferating, as a deteriorating economy alarms many top executives. But if bosses think sizable layoffs will be regarded as a sign of courage, they may be in for a surprise.

Two of the best-known champions of efficient, cost-minded management — Larry Bossidy, the former chief executive of Honeywell and James Kilts, the former CEO of Gillette — both say that smart head-count management requires constant attention, in good times and bad. Sudden moves to shrink payrolls aren’t what their playbooks are all about.

“It can take several business cycles before you really learn how and when to do layoffs properly,” Mr. Bossidy said in an interview. “At first, people always do them too late.”

In recent months, capital markets have been in turmoil, and the nation’s economic output has softened. But employment rates stayed relatively strong — until last month. The Labor Department reported this past Friday that the U.S. economy shed 80,000 jobs in March, the biggest drop in five years. The overall unemployment rate leapt to 5.1% from 4.8%.

Now, more job cuts are piling up. Advanced Micro Devices announced Monday that it is cutting 1,600 jobs, or 10% of its work force, in the face of weakening demand for its semiconductors.

Last week, Dell and Motorola said they planned to expand existing layoff programs.

Such companies might not have much choice at this stage. But Messrs. Bossidy and Kilts, who are both now involved in making private-equity investments, take the long view: They are more inclined to focus on what could have been done differently earlier in the cycle. Dell, for example, has been having trouble reworking its direct-to-consumer business model so that it also can be a major presence in retail outlets, Mr. Bossidy observes.

In general, both Messrs. Bossidy and Kilts said, CEOs can get trapped in an overly rosy view when conditions start to deteriorate. They may be so eager to be liked that they shy away from tough decisions until they have no choice. Or CEOs may be relying too much on upbeat advice from sales and marketing lieutenants, who tend to predict rapid recoveries.

Managers also can dawdle too long over shedding underperforming assets, waiting until a recession forces their hand, Mr. Bossidy said. “I like to sell when things are going well,” he said. “You get a better price.”

Mr. Bossidy’s remedy: focus mostly on financial data. If sales and order trends are disappointing, quickly come to grips with the reasons and formulate a response.

At Gillette, Mr. Kilts was famous for “zero overhead growth,” keeping head count down in headquarters jobs even as his overall business was growing. “The best time to pay attention to this is all the time,” he quipped in an interview.

“I’ve got quite a reputation as a cost cutter,” Mr. Kilts added. “But if there’s any mistake I’ve made in this area, it’s usually been along the lines of: ‘I should have gone further.’”

When companies do announce big job cuts, executives often hope investors will applaud. That’s because the company is trying to become leaner and more cost-competitive, even if the move means taking severance charges and enduring short-term reputational damage from mass dismissals.

But the notion of a layoff-inspired leap in a company’s stock price is usually a mirage, according to a yet-to-be published study by Gunther Capelle-Blancard, a professor at the University of Paris, Pantheon-Sorbonne, and Nicolas Couderc, a researcher at the same university.

On average, the two academics say, share prices of companies announcing layoffs do about 1.2% worse than market benchmarks in the three trading sessions after news of the job cuts is disseminated. Companies fare even worse — a 2.2% drop — if the job cuts are defensive and simply reflect a business downturn. They fare a bit better — but still lose ground — if the layoffs are part of a broader retooling of the business without obvious economic pressures.

Their study is a “meta-analysis” that combines the results of 40 published studies looking at stock performance in specific countries during periods from 1990 to 2006. Mr. Capelle-Blancard says he was surprised that the data show investors almost universally view layoffs as bad news, regardless of whether the focus was on the U.S., Europe or other markets.

A myth has grown up, perhaps inspired by the example of International Business Machines in the mid-1990s, that big job cuts can jolt a slow-moving older company into a renaissance of growth. That did work for IBM, under its charismatic CEO at the time, Louis V. Gerstner Jr.

But IBM’s turnaround increasingly looks like a rare, once-in-a-generation comeback that defied the odds. Companies slashing payrolls these days can consider themselves fortunate if they merely stop the erosion in their prospects.

by Joseph Daniel McCool

“Be exceptional and we’ll find you.” That’s how Gerry Roche—senior chairman of Heidrick & Struggles (HSII), who has conducted searches for some of the world’s largest companies—conveyed his confidence in his firm’s ability to uncover the top performers in any company, anywhere.

That confidence comes with experience as companies continue to rely on the skills of Roche and other headhunters to delicately separate talented external management candidates from their current employers, as they’ve been doing for decades.

A lack of corporate succession planning over the years has fueled the growth of the executive search business—it’s now a $10 billion global enterprise—while leaving too many talented insiders sidelined from further career advancement.
Significant Number of Promotions

Given the vast amounts of money and other corporate resources devoted to finding outsiders to fill top positions, one might assume executive recruiters only encourage companies to look elsewhere for the next generation of leaders. But executive recruiters also help build companies from within. More often than anyone has previously realized, the external search for world-class management talent has often led to headhunters’ eventual recommendation that an insider be promoted into the position.

While there are no data on headhunters’ role in facilitating what ultimately becomes an internal promotion, the experience of headhunters like Roche, and anecdotal evidence, suggest the numbers are significant.

“The number of searches, or let’s call them projects, which we have handled where we wind up recommending their inside person is enormous,” says Roche. “Inside is better than outside, all things being equal.” Sometimes the organizational culture and mission are such that an insider would have a huge advantage over even the most talented external candidate. Indeed, despite the fresh perspective and complementary experience an outsider would bring, under certain circumstances, the right insider can propel the organization to peak performance.

That has been the experience of organizations such as Coca-Cola (KO) and Walt Disney, which engaged Roche, and which both ultimately chose to promote insiders Neville Isdell and Bob Iger respectively into the chief executive role.
Changing Culture of the Search

If you’re thinking your only chance to advance is to leave your current company, you should realize assessing internal candidates as genuine contenders is taking on increasing importance during the course of any external search, especially with regard to succession.

And that’s a sea change from how things were done in leadership recruiting for most of the past few decades. At some point—perhaps largely over the past couple of decades, when a so-called cult of the CEO and corporate savior mentality emerged—searching outside the existing workforce became a reflex reaction for too many companies looking to fill the most senior positions.

So for many aspiring internal executives, their only way to the C-suite was to go to another company, often relying on an influential headhunter to help them make the transition. And as senior executives chose to go elsewhere, the idea of looking externally rather than internally reinforced companies’ reliance on outside searches.
Investing in the Next Crop of Leaders

Another factor that led to the rise in outside searches was the number of corporations that stopped investing in developing their next generation of leaders. If companies don’t bother to develop leaders, how can they expect to find them from within their own ranks? Developing internal leaders is key to preserving a winning organizational culture. It is also becoming a point of differentiation between the best-performing companies people want to work for and all the rest.

Good people want to work for a company where they can learn, grow, and realize their full potential. Whenever a company fails to invest in its next crop of leaders, it is setting itself up for a downward spiral in organizational performance and financial returns to shareholders.

Bringing in outside talent can be a way to disrupt an underperforming culture and help transform a company. Recruiting the right person, or people, from the outside certainly remains one way to achieve these critical goals.

But to do so at the expense of a roster of talented insiders is indeed a big mistake, and a lost opportunity. If you’re looking for top talent, don’t overlook the insiders. True, they often don’t have someone lobbying for them the way executive recruiters often do for outsiders. But as corporations, recruiters, and executives realize an outsider isn’t the only choice or even always the better choice, look for more insiders to rise to the top.

Joseph Daniel McCool is a writer, speaker and advisor on executive recruiting and corporate management succession best practices. He is the author of Deciding Who Leads: How Executive Recruiters Drive, Direct & Disrupt the Global Search for Leadership Talent, which has been recognized as “one of the 30 best business books of 2008″ by Soundview Executive Book Summaries.

By SARAH E. NEEDLEMAN

Recession fears are causing more than just stock-market jitters this winter. They’re also shaking some workers’ confidence in their ability to continue earning a paycheck.

In December, overall worker confidence reached the lowest level recorded in 2007, according to a monthly report from Spherion Corp., a recruiting and staffing company. Roughly 2,800 workers were surveyed on their confidence in their personal employment situation and the broader employment environment.

Past economic downturns have led to layoffs throughout corporate America and, at least temporarily, a tighter labor market. But some industries tend to be more vulnerable than others when the economy is in a slump.

Even if there isn’t an official recession, a number of areas are already seeing layoffs and hiring freezes. Industries affected by the recent mortgage crisis and home-building downturn, such as real estate, construction, banking and law, are among the hardest hit so far, say recruiters.

PROTECTING YOUR CAREER

• Job Hunting In A Recession: If you’ve been handed a pink slip, use these tips from career experts to land a position with a new employer when the economy is in a slump.
• Discuss: How secure do you feel in your job right now? Are you taking any measures to safeguard your career? Share your thoughts in an online forum.

Some employers in struggling industries manage to do better than their peers during downturns, says Dale Winston, chairwoman and chief executive of Battalia Winston International, an executive-search firm in New York. She cites Goldman Sachs as a current example. “There are certain companies that are counter to their cycles and making a fortune because they’re shorting the market,” she says. “Even in the midst of the [1920s] there were people making money.” But those were the exceptions.

While jobs in housing-related industries may be at most risk, a recession could reverberate to other parts of the labor market. Consumer-products manufacturers and retailers are usually the hardest hit in a downturn, along with travel and hospitality businesses, says Ms. Winston. Shoppers tend to cut back on their discretionary spending when finances are tight, she explains, and homeowners are currently grappling with high energy prices and mortgage payments. “People only have so many dollars to spread around,” she says.

In contrast, hiring generally remains robust during a recession in industries that serve consumers’ critical needs such as health care and energy, notes Ms. Winston. “We have an aging population in the U.S.,” she says. Plus, she adds, “nobody’s going to stop driving their cars or lighting their homes.”

Employers in what recruiter Chris Morgan calls “sin and comfort” industries, such as alcohol makers and distributors, gambling institutions and cigarette manufacturers, also tend to fare well during economic slumps. In addition, wealth-management firms stay in favor as people often become more protective of their finances, says Mr. Morgan, managing partner and founder of Lantern Partners, an executive-search firm in Chicago.

The hiring outlook varies for industries that aren’t characteristically durable or weak in a recession. Eighty-two percent of 1,400 chief information officers and 86% of 1,400 chief financial officers polled last month in separate surveys by Robert Half International said they foresaw no change in their staffing activity for the first quarter of 2008.

For people working in the industries that are most likely to be hit with economic woes, some strategic planning can boost the odds that they will stay employed or find new work, say career experts.

Here are some strategies for recession-proofing your career.

Stick around. If you work for a company in distress, your first instinct may be to jump ship. But if your new employer later decides to lay off workers, you’ll likely be most at risk of getting a pink slip, warns Ms. Winston. In many cases, “it’s last in, first out,” she notes.

Be a good sport. Following layoffs, you may be asked to take on additional work that was part of a former employee’s responsibilities. This may involve handling tasks that you dislike or are overqualified for. But expressing dismay could put your employment at risk should there be more layoffs, cautions Gary Rich, president of Rich Leadership, an executive-advisory firm in Pound Ridge, N.Y. Displaying a positive attitude is more likely to pay off in the long run. “Companies remember those who helped them out through a tough time,” he says.

Haven’t been asked to take on extra projects? Volunteer to help, advises Mr. Rich. You’ll demonstrate that you’re a team player committed to the company’s success.

Work harder. Act the way you did when you were gunning for a promotion, says Lantern’s Mr. Morgan. “Companies are less likely to get rid of star performers.”

Work smarter. Look for ways to help your employer overcome the specific challenges it faces most in a recession, advises Mr. Morgan. “Think about your company’s situation in the same fashion that your boss is thinking about it,” he says. “You can be more useful by identifying ways to reduce costs, increase revenue or reposition a product or service.”

Dust off your résumé. Prepare for the worst ahead of time by making sure your résumé is up to date, urges Shawn Graham, author of “Courting Your Career: Match Yourself With the Perfect Job” (Jist Publishing, 2007). If you rush to get it done following a sudden dismissal, the odds of making a typographical error or omitting important details will increase.

Network now. Don’t wait until you need help finding a job, says Debra Feldman, a job-search consultant in Greenwich, Conn. Make a special effort to reconnect in a meaningful way with past bosses, former colleagues, academic advisers and other potential advocates. Reaching out to them only in times of distress can be a turnoff, she says. Also, make sure to offer yourself as a resource to your contacts as well. The gesture will provide an incentive for them to reciprocate.

Take a pay cut. If layoffs are rampant at your company, consider offering to accept a temporary salary reduction, suggests Mr. Morgan, who speaks from experience. During the dot-com bust in 2001, he voluntarily agreed to an 18% decrease in his base pay at a search firm specializing in technology recruiting. “I was the last one left,” he recalls. The ploy helped him prolong his time at the beleaguered company while he began hunting for a new position, which he landed about six months later, he says.

Search internally. If you see a layoff coming in your division or department, it may be easier to search for another position at your firm because you’ve already proved yourself, says Mr. Graham. For example, if you work in media relations, you may qualify for a sales role because of your experience selling story ideas to news outlets, he says. Be sure to network with colleagues who work in those areas to learn about job openings before they’re advertised publicly and to see if you can secure a referral, he adds.

by Liz Ryan

In the business world we have a short list of traditional sources of interdepartmental friction. One of these “hot zones” is the intersection of HR and third-party recruiters, who can easily find themselves at odds.

HR departments often view third-party recruiters as obstacles, while recruiters know that if they can get their best résumés in front of a hiring manager, they’ve got a shot at making a placement. If recruiters are held up by HR bureaucrats whose own need to control the candidate flow overshadows their desire to bring talent in the door, headhunters are sunk. As a result, it’s common to find tension between internal HR people and outside recruiters. Is there a path that allows internal HR and external recruiters to work together for maximum gain?
The Recruiter’s Role

In my experience, the greatest service a third-party search partner provides to the organization, besides the strength of his or her candidate database and relationships, is the intermediary role a search pro performs during offer negotiation. I pride myself on good listening and negotiating skills, but if I’m inside the company, I won’t have the same credibility with a candidate that his ally, the outside recruiter, has.

So it makes sense to let the recruiter handle the delicate job (BusinessWeek, 11/26/07) of negotiating between the employer (“our offer is good enough already!”) and the candidate (“they’re dreaming if they think I’ll take this job for that salary”) when the stakes are high. We do it when we buy or sell a house. We know that our trusted Realtor won’t be as emotionally bound up in the negotiation as we very well may be. It’s the same in a high-level offer negotiation process—a place where the middleman can get us more quickly to a handshake and save egos in the process.

As a CEO, managing partner, or division president beginning a high-level search in your organization, it’s critical to sit down with your chosen search partner and your HR chief and work through the common issues that divide these two players. What can easily happen in the absence of such a kickoff meeting is that the search consultant creates a tight one-on-one communication bond with the business leader so that the HR person feels left in the dust.
A Profitable Partnership

Feelings are one thing, but the bigger issue is that without the input of your organization’s Minister of Culture—a/k/a HR chief—your search will be hampered by a lack of a critical perspective. At every stage of the process—initial screening of candidates, the interview process, or the delicate negotiation phase—the quality of the hire you end up with will be affected by the level of participation of your HR chief, the one person most likely to know more than anyone else (including top management) about how things work on the human side of the business.

When I was a corporate HR person, I learned to invite my search partners into the office once every six months or so for a check-in meeting. In this way I learned that partnering with trusted search colleagues is one of the highest-yield moves an HR leader can make. Search pros will tell you things that candidates never would (e.g., “no one will work for Jane Smith any more—she’s a terrible manager”) and will fill you in on the state of the local job market with a level of detail you’d never have time to acquire on your own.

To cultivate a partnership, however, an HR chief has to let go of many an HR leader’s favorite office tool: the presumption of control over the process. The fact is that in a typical, intense, high-level search, the HR chief won’t be the conduit for much or most of the information that is exchanged. If your No. 1 candidate is suddenly presented with a competing offer, your search pro is going to reach whomever he can reach first—whether that’s the HR leader, the CEO, or the CEO’s assistant.
Cooperation is Key

In an effective senior-level search, the time-honored paradigm, “all information passes through HR on its way to the hiring manager,” won’t hold. Communication has to take place instantly, and important decisions may happen on the fly. With a high level of coordination and respect for individual talents, this can work to an employer’s advantage. When hierarchy and bureaucracy creep in, typical responses run along the lines of, “I don’t care what you and our CEO discussed. All new VPs get three weeks vacation, and we’re not budging for this candidate.” And believe it or not, negotiations with candidates (BusinessWeek, 11/01/07) can fall apart over things as seemingly small as a week or two of vacation.

HR chiefs and recruiters can be pivotal in one another’s success. As one executive recruiter said to me, “Like most HR people, you chat with candidates maybe one or two hours a day. The rest of the time you work on other things, like executive comp or performance management or employee communications. All I do is cultivate talent and sell your company and my other clients to the talent marketplace. Isn’t that worth my fee?” With the right partner, it is worth the fee—and more.

Published: November 15, 2006 in Knowledge@Wharton

When Lakshmi Ramarajan worked for a non-profit organization several years ago, she noticed a high turnover rate among the employees. It wasn’t because of the work itself, but because of the organization’s management. “Employees were passionate about their jobs, but felt disrespected by their managers,” says Ramarajan. “The employees were belittled and patronized, and often publicly chastised for challenging the status-quo.” Complaints about the negative work environment “were met with inertia or rejected out of hand. Eventually a lot of employees left.”

That experience led to a research paper co-authored by Ramarajan, now a doctoral student in the Wharton management department, and Wharton management professor Sigal Barsade titled, “What Makes the Job Tough? The Influence of Organizational Respect on Burnout in Human Services.”

According to Barsade, “One of the biggest complaints employees have is they are not sufficiently recognized by their organizations for the work that they do. Respect is a component of recognition. When employees don’t feel that the organization respects and values them, they tend to experience higher levels of burnout.”

Or, as Ramarajan puts it, “it is often not the job that burns you out, but the organization.”

A Sense of Identification

While the researchers’ paper focuses on the health care industry — specifically on certified nursing assistants (CNAs) in a large, long-term care facility — their findings apply to a broader range of industries and individuals. Barsade, for example, cites a project she did for the real estate, accounting and legal departments of a large financial services agency. “The people in these departments were known as ‘non producers.’ That wasn’t their formal title, but it was what they were called because they were not revenue generators. Not only did they did not have as much power as the people who brought in the money,” but their contributions in terms of helping streamline and improve the company’s operations were not acknowledged. “This does not suggest a culture of respect,” Barsade says.

She also cites physicians allied with HMOs who are often told how many patients they must see each day, how long they can spend with the patients, and what diagnostic questions they must ask. “Doctors can’t offer customized care under these circumstances. They feel disrespected and are more prone to burnout” than doctors who work more autonomously, she suggests.

A company’s culture — which, for the purposes of the study, is defined as “the unwritten norms and values surrounding how employees are valued as individuals” — plays an important role in burnout, the researchers say. “We know that employees start identifying with an organization as soon as they join it,” says Ramarajan. “The more they feel respected as a member of the group, the more likely they are to have that sense of identification. Respect is a way in which employees get entrenched into the workplace and feel that what they do is meaningful. Conversely, if they observe that people around them are disrespected, they come to a consensus that the organization doesn’t treat people well.”

The researchers cite several ways in which the perception of organizational respect or disrespect can influence employee burnout. For example, “in situations where employees perceive that the organization does not treat employees with respect or dignity, burnout can occur from employee demoralization. Disrespected employees may need to mask their true emotional reaction regarding how their organization treats them while they assist their clients. This masking and suppressing could increase emotional exhaustion, a major component of burnout studied in the human services industry.”

Conversely, the researchers say, “individuals who feel respected by their organizations are more likely to expend effort on behalf of the organization” and are thus less likely to experience burnout.

“Negative Affectivity”

Barsade and Ramarajan were especially interested in health care because many of the lower-level jobs in that industry tend to be difficult, and because a lot of research has been done on the industry’s burnout rate, says Barsade. “In the existing literature, there are two factors that have predicted burnout and why it occurs. The first factor is the job itself. The second is the personality of the employees, and the presence of ‘negative affectivity’ — someone’s propensity to be high energy in their negative emotions, such as anger, irritability, anxiety or frustration. It’s not that people are always feeling that way, but that they are feeling that way more so than people who have less negative affectivity. We focused on those two factors.”

Within health care, Barsade adds, the CNA job was especially interesting because the work is so hard. “There are tough physical components involved in helping patients, such as lifting them, bathing and feeding them, cleaning up after them and so forth. And there are also emotionally taxing components, such as when the CNA gets attached to a patient who dies, or when patients demand constant attention and care. So what better place to see what impact the organization has on the burnout levels of its employees and what they can do about it?” In addition, she says, burnout can affect the quality of patient care.

One approach an organization can take to try and decrease burnout and reduce turnover is to hire people who aren’t going to be stressed out by the job. That, of course, is not only difficult to predict with complete accuracy, but is often not feasible given the labor market supply. Organizations can also try to change the job to make it less demanding; but, at least in the case of CNA positions, the ability to do that is limited because of the nature of the job. A third approach — one not addressed by the existing research on burnout — is to consider the organizational culture of the company, says Barsade. “Can the values of the company — including whether you treat employees with respect or with disrespect — influence how people do their work and whether or not they will feel burned out?” Although burnout can lead to higher turnover costs in any industry, health care is especially interesting because the nature of its work is more likely to result in burnout. “As our country ages, this will become a bigger and bigger issue,” Barsade says.

In conducting their study — which looked at CNAs from 13 units across three sites of a long-term care facility during two different time periods, 2003 and 2005 — the researchers measured several aspects of participants’ jobs. Under the heading “organizational respect,” for example, participants were asked to rank how characteristic, or how uncharacteristic, the following five statements were of their organization: “Staff members respect each other;” “Staff members are treated with dignity;” “Cultural diversity of the staff is valued;” “Supervisors pay attention to staff members’ ideas,” and “Staff members are encouraged to be creative when solving problems.” These were the characteristics that a committee of senior managers and employees thought best illustrated how organizational respect would be demonstrated in their organization.

Under the heading of “autonomy,” participants were asked to respond to the following statements: “In general, how much say or influence do you feel you have in what goes on in your unit?” “Do you feel that you can influence decision-making … regarding things about which you are concerned?” “Does your supervisor ask your opinion when a problem comes up which involves your work?”

Under the heading “trait negative affectivity,” employees rated their general tendency to feel irritable, upset, nervous, afraid and guilty. “Burnout” was measured by participants’ reactions to four statements: “I feel emotionally drained from my work;” “I feel used up at the end of the workday;” “I feel fatigued when I get up in the morning and have to face another day on the job,” and “I feel burned out from my work.”

Among the study’s findings:

Organizational respect influences burnout above and beyond the effects of job demands and negative affectivity. Because existing studies conceptualize burnout as stemming from the job or the individual, rather than the organization, “the ‘problem’ from a managerial perspective is the person,” the authors note. “Succumbing to burnout becomes a private affair of the employee, and not something of concern to the organization as a whole….This ignores the contextual sources of the problem.”Furthermore, the researchers say, “by conceptualizing job demands as a primary cause of emotional exhaustion,” the nature of the work is seen as the culprit, rather than “the multiple sources of an employees’ work experience.” Human service jobs — such as caring for elderly sick patients or working with mentally ill individuals — may be difficult, the researchers add, but the “presumption that the demands are due to client interaction means that very little can be done about changing the negative parts of the experience.” In fact, the researchers suggest, companies can take a number of steps to change the organizational culture.

The impact of organizational respect on burnout is felt most strongly when job autonomy is low. This finding confirms the researchers’ hypothesis going into the study about the importance of autonomy, which they define as “the discretion that one has to determine the processes and schedules involved in completing a task.” Autonomy, the researchers note, can act as a buffer on stress — and actually decrease job burnout — if autonomy is high, but not if it is low.

The respect with which an organization treats its employees “is a pervasive organizational-level phenomenon that employees can recognize and agree upon,” the researchers note.In addition, “respect can be a powerful signal to individuals regarding their standing not only as employees but as people…. As information comes from a variety of sources, one’s perceptions of respect and disrespect are not only based on how one views one’s own treatment, but also by how others are treated. For example, when team members see someone else on the team being treated unfairly, they alter their own perceptions of the fairness of the team. Likewise, the extent to which others, not just the self, are treated … can influence an individual’s own perceptions of respect.”

Ramarajan and Barsade carry this point further: Given the increasing importance of health care providers in aging societies, one aspect of burnout is especially crucial — the phenomenon of human service workers mentally “turning over” but remaining physically present. “In our study we found that being a longer-tenured employee was significantly correlated with higher burnout. From a managerial perspective, withdrawal behaviors are perhaps more important to human service organizations than turnover because withdrawal may be the response taken by employees who do not have high quality job alternatives,” they write.

In the worst case scenario, the researchers add, “disrespectful organizations can be left with neglected and neglectful individuals who have figured out how to cope or survive by mentally turning over while those with better job alternatives — or more commitment to their professions rather than the organization — end up leaving.”

Putting Work in a Broader Context

The authors’ research has a number of implications for managers. While it is likely, the authors note, “that disrespect is experienced across industries, disrespect for individuals may be particularly problematic in the helping professions where concern for individuals is supposedly paramount.” Because it is not just the demands of the job, or the personality of the employee, that drive burnout in human services jobs, but is also the organizational environment, “then there is a point of entry for human resource management. Good versus poor management, in the form of organizational respect, may therefore have a clear and critical role in stemming burnout in human service organizations.”

For example, Barsade suggests that HR departments make it clear they respect and value the work employees do, and recognize the difficulty of that work. “Employees understand that internally their work is very significant to how well the organization achieves its goals.” Companies like Mary Kay Inc. are based on the idea of “rewarding people to success,” she says. “Mary Kay rewards for everything. It uses respect as a powerful motivator for its sales force of independent contractors.”

Employers can also highlight to their employees how important their work is to society as a whole, Barsade adds. “Very often, caretaking work is not all that valued, but if employees in a daycare center, for example, understand that they are involved in early childhood education,” this puts their work in a broader context. In addition, she suggests that for people in jobs that don’t pay very well (and won’t in the future), managers can at least compliment employees, hold awards dinners and so forth, “just so long as these shows of respect are authentic.”

This doesn’t mean that managers “can’t look at employees’ performance, or can’t disagree with suggestions and demands that employees might put forward,” Ramarajan adds. “It just means that everything is done with an attitude of respect.” This approach won’t just make employees feel better. “It will help them stay with the organization and do a better job. So it’s not just about keeping your employees happy, but actually doing the job the organization exists to do.”

Does Ramarajan think employees would be surprised to learn that job burnout is not always “their fault,” but can also reflect the way the organization treats them? “I don’t think employees would be surprised, but I do think managers and/or corporate executives might be. And I think employees would be surprised to find out how widely shared this experience is.”