When firm owners make the decision to invest in their business by hiring financial advisers, there is risk in that investment just as with any other decision.
Human capital markets are similar to financial markets in that to get reward, one must take risk. In financial markets, there are things that can be done to reduce certain unsystematic risks, and there are other risks inherent with the investment.
Likewise, there are some steps that you can take to reduce the risks of a bad purchase in the human-capital market, and increase the likelihood of a successful hire and good fit.
When looking to hire, owners should consider these five traits:
Emotional intelligence. According to expert Daniel Goleman, there are four main areas of emotional intelligence: self-awareness, self-management, social awareness and relationship management. Skill sets in these areas are highly important for advisers to be successful, and consequently, it is important to evaluate them in a structured manner.
Here are some questions that you might consider asking during an interview to get a feel for a candidate's emotional intelligence:
• Describe a time when you faced a stressful situation that tested your organizational and coping skills.
• Give an example of a time when you had to convince someone to do something.
• Who has made the most significant contribution in the development of the person you are? What was the nature of the contribution?
• What have your career mistakes taught you?
Motivation. Getting to the source of what motivates a person can tell you a great deal about them. If you ask the candidate directly, you are likely to get the typical response: “Because I want to help people.” There is nothing wrong with that, but there is almost always more to it. It is up to you to find out so you know whether to hire the candidate and so you can manage him or her properly if you do make the hire. This is very similar to uncovering your clients' motivators so that you can accurately plan for them.
Consider asking these probing questions:
• If you won the lottery, what would you do?
• If you had more free time out of the office, how would you spend it?
Coachability. Once you have established that your new adviser wants to improve, and increase responsibility and income, you need to make sure he or she can accept constructive feedback. One of the best ways to do this, outside of asking for references, is to discuss his or her interests and hobbies. For example, if candidates have played sports, they are better positioned to handle any criticisms that you give them and more likely to succeed in a team environment.
Consider asking:
• Give some examples of times you have been criticized, how you reacted and why.
• What would your current boss and/or colleagues say are the areas in which you need to improve?
Attitude/Passion. When interviewing candidates, pay special attention to their attitude, passion and enthusiasm for their career and the industry. Initiative and desire for success go a long way in overcoming other shortfalls. These are important areas because they are the best determinants in foreseeing how well a candidate will fit into your existing culture.
Here are some questions to consider:
• What specific volunteer, philanthropic and career goals do you have?
• What has been your best and worst career choice?
Technical competence. This area tends to be overemphasized by firm owner/interviewers because it is what they know and typically is the easiest to measure. Candidates need to have a minimal level of competence to succeed as an adviser, but this area shouldn't be the primary deciding factor because technical knowledge can be learned and refined in practice. It is important, though, to have a metric (such as a competency quiz) built into your recruiting process to assess where a candidate's technical abilities are. I have come across several credentialed advisers who weren't at the level assumed for their career stage.
Recent research by Leadership IQ documents the fact that 46% of new hires fail within 18 months. The top reasons listed for failure are lacking the ability to be coached, the ability to understand one's as well as others' emotions, motivation to achieve full potential, temperament and technical competence.
Advisers who ignore these characteristics when hiring do so at their peril.
Caleb Brown is a partner at New Planner Recruiting LLC.
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