FMA Consilium

Best practices to mitigate biased hiring

Hiring the wrong person is one of the most expensive errors a sales leader can make. It negatively affects the new hire, the hiring manager, and the company. Despite understanding the negative impact, it remains a common issue across companies of all sizes and industries, and across functions. Even with very well structured recruitment processes, at the end of the day it’s us making a decision between candidate A, B or C. And those decisions are biased; it’s popular knowledge that we make decisions emotionally and justify them rationally. Confirmation trap, affect heuristics, and groupthink are just three of the many biases that can affect hiring. A candidate who shares the same sport as us will score higher in our subconscious mind. If a candidate is recommended by our CEO, it directly and consciously influences our decision.

Even though there’s no magic recipe to make logic-based optimal decisions, there are some tools and techniques that can be applied to improve our chances of successful hiring.

It is essential to agree on a standardized method for evaluating all candidates before commencing the interview process. This ensures fairness and consistency throughout the hiring process.

Set Clear Objectives: Determine if hiring is indeed the best solution for your needs. Consider alternative options such as outsourcing. Define the timelines for the hiring process to ensure that it aligns with your business needs and goals.
Define Evaluation Criteria: Identify the key attributes that are important for the role. These may include background and experience, network of contacts, technical knowledge, values, location, and other relevant factors.
Assign Weights to Each Criterion: Determine the relative importance of each criterion. For instance, if you are looking to enter a new market, the candidate’s existing network might be crucial and thus carry a weight of 50%. Conversely, if your portfolio is straightforward to understand, this factor might be less critical and could be assigned a weight of 10%. Apply similar reasoning to assign weights to other criteria.
Score the Candidates: Evaluate each candidate against the defined criteria using a consistent scoring system, such as a scale from 1 to 5. This allows for objective comparison between candidates.
Calculate the Overall Score: Use the formula to calculate each candidate’s total score. Total Score = (Criterion1×Weight1) + (Criterion2×Weight2) +…

By following these steps, you ensure a systematic and objective approach to candidate evaluation, increasing the likelihood of making a successful hire.

Second suggested practice is to ensure that all candidates go through the same interviewing process, so an apples to apples comparison can be made. Consistency is mandatory regarding questions asked, interviewers, checklists. On too many occasions internal candidates get a lighter process than external ones, which is usually a mistake. Human Resources typically provide big help with this, assigning different topics to the interviewers, and helping to structure the questionnaire to cover those areas.

Regarding the actual evaluation of the candidate once the interview is finished, I recommend that it’s not done as soon as you finish talking to the candidate, but let it rest for a day, review the meeting notes (hopefully abundant if you did a good job), and then provide your conclusions about that individual. Emotions tend to decrease after a day or two, allowing rational arguments to prevail.

And finally, once interviewers have submitted their feedback and it’s time to make a hiring decision, it’s a good practice to review the evaluations of all shortlisted candidates in one session, rather than making decisions on each candidate individually. This comparative evaluation offers valuable perspective.

While completely rational hiring is impossible and perhaps even undesirable, implementing these best practices will help you identify the optimal decision based on logic.

Stand Out or Fade Away: Crafting Your Unique Value Proposition

If you were to inquire about the Unique Value Proposition (UVP) of your company from various perspectives—your boss, your employees, your colleagues, or even your customers—you’d likely receive a multitude of responses, equal to the number of individuals you ask. While the concept of UVP is widely recognized, we often overlook it, resulting in challenges when it comes to articulating it clearly. While many companies prominently display their UVP on their websites, often thanks to the efforts of the Marketing department, it is seldom ingrained within the collective knowledge of employees.

Let’s deconstruct the concept to underscore its significance.

The term “unique” finds its roots in the Latin word “unicus,” signifying “only, single, sole, alone of its kind.” Essentially, it represents what distinguishes us from others, what renders our company distinctive. Peter Thiel, in his book “Zero to One,” posits that monopolies exhibit a blend of specific attributes contributing to their uniqueness: proprietary technology, economies of scale, network effect, and brand recognition. While most successful companies do not fit the monopoly mold, it’s helpful to consider these factors when identifying our uniqueness.

Value must center around the individuals we serve, primarily our customers, but also extending to other stakeholders such as employees and investors. Identifying value hinges on the benefits we deliver to our stakeholders, rather than solely focusing on product features, which is a common misstep. For instance, boasting about “hexa-core processors” may not resonate with customers unless we articulate how these processors enhance their performance, facilitate quicker decision-making, or bolster their competitiveness in their respective fields. It’s crucial to adopt a consumer-centric perspective and consider how our offerings empower our customers in tangible ways. Moreover, it’s essential to recognize that value is subjective and varies among different individuals. Therefore, when articulating our UVP, we must tailor our messaging to resonate with our target audience, rather than attempting to appeal to everyone universally.

A straightforward approach to defining the UVP is to identify what our customers require and that we can provide, while our competitors cannot. It’s essential to analyze customer needs through a lens of pain and gain, considering the problems we assist them in solving or the opportunities we help them seize. For example, even though a customer may explicitly express a need for a powerful CPU, their underlying requirement might actually be ultra-fast transaction processing to mitigate arbitrage risks. Understanding the problems we address for our customers can also inform our pricing strategy, although that’s a separate discussion. In conclusion, our offering must be communicated in terms of the benefits it delivers to our consumers. As a real-life example, Zoom’s corporate website emphasizes being “an intuitive, scalable, and secure choice,” conveying the message of simplicity and a low adoption barrier, a single platform suitable for both 1-to-1 calls and large audience events, and where customers can rely on privacy and confidentiality without concern.

Crafting the UVP isn’t akin to rocket science, but it does demand preliminary groundwork and substantial brainstorming involving various departments within our company. Conducting a SWOT analysis of our company, clearly defining the target market and the ideal customer profile, and performing a competitive analysis are crucial steps to ensure a successful outcome.

3 considerations for sales incentive plans

“Sales incentive plans are more of an art than a science,” used to say a former boss. He was pretty much spot on. Plans need to be scientific enough to allow a unique interpretation, achievements should be easily measured, and commissions should be straightforward to calculate. At the same time, they have to be built considering facts and expectations, internal and external, and here’s where art come into play. They must keep the sales force motivated and the financial director satisfied, and consider different elements such as the seasonality of sales, the launch of new products, the regulatory framework in each country regarding variable compensation, mergers between large clients, M&A activities in our own company, the different commercial models associated with the products, even the landing of new competitors in the market, to name a few factors that I had to deal with while leading commercial teams and their incentives.
To date I have not seen a perfect compensation plan, understanding by perfection the state in which all parties affected by the plan are 100% satisfied. Even those plans that may seem fair and sensible will be put to the test by unforeseen circumstances, and someone will not consider them acceptable anymore. One example that comes to my mind: by mid year one salesperson leaves, and since the company is in hire freeze mode, the position cannot be backfilled. How do you manage the impact of this situation on the objectives, and therefore commissions, of the sales chain of command of the person leaving? Do you adjust targets to lower levels, or do they stay the same? Is it managed differently if the person leaving had 40% of the company’s turnover on their shoulders, or only 5%? Good sense, good judgment, and unwritten rules come into play, as it is impossible to anticipate all scenarios.
Once it is assumed that the perfect plan does not exist, the goal is to develop a good incentive plan. Regardless of the product or service offered, the size of the company, and the business model, there are some basic factors common to any good plan. In the first place, the objectives that are defined, beyond the absolute values, must be aligned with the corporate objectives of the company. This is essential, and unfortunately many companies ignore it. An illustrative case of this dichotomy is the one in which the CEO commits to investors to expand the business into new vertical markets, and the salesperson’s commissions depend 100% on the top revenues, regardless of the clients that generate them. Frustration is almost guaranteed. As a second condition, Human Resources, Finance, and Sales must be involved in the design of the plan. Surely any one of these three departments with enough experience can put together a plan on their own, but all three need to work together to ensure compensation is competitive in the labor market while in line with other functions in the company, that it is flexible enough to adapt to different roles and objectives, and of course that it can be afforded by the results sheet. Finally, in line with the flexibility mentioned above, the compensation plan must be made up of several objectives which weight can be adjusted to the particular role of each salesperson. A hunter is incentivized to sign up new customers, while a farmer is incentivized to protect and increase existing revenue via cross-selling and up-selling. Likewise, specific incentives can be applied, either as multipliers or as SPIF programs, to strategic objectives such as the sale of a particular product or long-term contracts. In short, a common framework for all vendors, but with the ability to assign different weights to each objective.
In technology companies, and in the SaaS segment in particular, variable compensation, or commissions, can represent between 30% and 50% of the total income of sales people. As such, the sales compensation plan can help attract and retain talent, or on the contrary, it can scare it away…

Entrepreneurs desperately need a vision and a mission

For some understandable though wrong reasons, entrepreneurs tend not to invest time in developing a vision and a mission for their startups. It’s too early for them, they are too small. They have other priorities, much more compelling. They are building the car while driving it, which is alright, as long as they know their destination.

It’s common to find vision and mission statements for large corporations. But when it comes to startups and scaleups, it’s a different story. And it shouldn’t. On the contrary, they need that clear direction more than the established, large companies. The mission describes the purpose of the company, what they offer, and who they serve with their products and services. The vision is an aspiration, the world that the company would like to help build. It’s a long term dream.
In the early days of a startup, once the MVP is achieved and first customers start testing it, it’s not unusual that one big customer will start asking for bespoken solutions, some unique adaptations. And that’s one of the beauties of start-ups, being flexible. Especially if there is some attractive revenue justifying the effort. The risk is that those developments deviate the company from the original plan, and do not result in repetitive business with other customers. “Pan para hoy, hambre para mañana”, as we say in Spanish.
Having a clear vision and mission provides a framework for decision making, and it’s always possible to check if our choices are taking us towards that future that we have painted, or moving us away from it. Changing lanes within the same highway, or even taking detours temporarily, is acceptable and in many occasions even the only option. But changing the destination itself to realize some short term benefit, no matter how big, will have an impact on the long term business, including employees, customers and shareholders. And most probably not a positive impact. Vision and mission, along with values, constitute the corporate DNA of companies and as such, they are not optional.

The (relative) value of market forecasts

Last week I read a report saying that TikTok is projected to exceed the advertising revenues of Meta and YouTube combined by 2027. In sales language, that’s 20 calendar quarters from now. An eternity. Putting things into perspective, TikTok was launched internationally in 2017 but only started to get significant traction in 2019, so hardly mentioned in any market research reports prior to that year. By now they have more than 1 billion monthly active users, while 4 years ago they were only in a few radar screens.

Earlier this year we heard breaking news from Netflix stating that they would launch a new hybrid service including ads. The same Netflix that has historically insisted in sticking to the pure subscription-based video on demand (SVOD), commercial-free model. And Disney+ is making a similar move. Both services to be released in less than 12 months from announcement. Needless to say, none of them were previously considered in any advertising-based video on demand (AVOD) market reports. The key question is whether they will just change the advertising expenditure allocation in the coming years, or are they big enough to change the value of that market itself?

In Sales, Marketing, Business Development and other functions that include multi-year planning, we all love to look at market forecast reports, covering market size, key players and competitors, and then we set revenue and market share goals accordingly. Some markets are more mature, or with higher entry barriers, and hence the exercise is less difficult (I’d never say it’s easy). For some other markets, a 3 years forecast can be a brave bet. And the more granular you want to go, either geographically, by vertical, or by customer size, the riskier it is. The TikTok and Netflix cases above simply illustrate market changes that were difficult to predict wearing mid and long term glasses. But there are many others that could result from M&A, a disruptive solution, change in regulations, etc. So, as much as possible, stick to the big numbers, understand the dependencies, and constantly monitor the market dynamics. You never know who’s the next TikTok not shown in today’s reports though already born, and that could turn into your biggest opportunity or your toughest competitor.