Hiring in a Dysfunctional Job Market

business people conflict working problem, angry boss argue scream to colleague businessmen and women serious argument negative emotion discussing report meeting at outdoors cafe during the lunch.

For 2 decades, I have made a living deploying mathematical models to find hidden value in the securities markets. This is a difficult problem because these markets are very efficient, meaning that it’s very hard to do better than just showing up and stating your needs. Consider the stock market: If you want to buy a share of Microsoft stock, you can have your order filled within seconds, knowing that you are within a penny or two of the best price on the planet and that every share is identical to every other one.

On the other hand, you can spend months looking for the best house, because the real-estate market is inefficient. Each house is different, and you won’t fully understand your needs until you begin looking. Your reward for investing time in the search is the pleasure of living in a much better house than one you could find in an afternoon.

As employers, we are also in the market for human capital, which is even less efficient than the real-estate market. Many of the best people are almost impossible to find.

Searching résumé databases is tedious and yields few qualified candidates who are available right now. Recruiters are expensive, often add little value, and shy away from recent graduates and the unemployed. College placement offices are more interested in getting us to their career fairs in May than in finding candidates who meet our current needs.

Even the most targeted ad generates a flood of résumés from people who have not researched our company or prequalified themselves. Who can blame them? Employers often treat hiring as a process of elimination in a numbers game. A day spent researching a firm, crafting a letter, and customizing a résumé is wasted when a hiring manager or human resources (HR) person spends only a few seconds glancing at them.

Yet an inefficient labor market isn’t such a bad thing for those who are willing to dig a little deeper. Such a market can reward well-spent effort in ways that efficient markets don’t. I would like to share with you some of the ways my colleagues and I have approached hiring in a rather dysfunctional labor market.

We begin by advertising as broadly as possible—with a very general job description—hoping for a flood of résumés, which we immediately ignore.

Instead of poring over each submission (or scanning each one for 9 seconds), we automatically respond to everyone with an extensive description of our group, the firm, our industry, our needs, career prospects, physical location, commute, work hours, and so on. We avoid selling ourselves and err on the side of full disclosure, with particular emphasis on the problems and risks we face. In short, we arm our applicants with the information they need to eliminate us from their consideration.

We close by asking those who are still interested to write a letter making their case.

As we wait for their responses, we read those résumés as time permits, looking for exceptional candidates who we fear might not take the next step. We send them encouraging notes saying things such as, “Have you thought about how the Principal Components Analysis you’ve done might apply to stock market data?”

Typically, 10% to 15% of initial applicants send the requested follow-on letter. Of those, perhaps half make a case worth investigating.

We still might have a dozen or more candidates, so rather than scheduling interviews, we might hold an open house with beer and pizza or some other ice-breaking activity. Most appreciate the fact that we give everyone a chance to visit rather than eliminate three-quarters of them based on a résumé and a letter. We encourage them to talk to each other and swap job leads. This allows us to see how they interact. Continue reading “Hiring in a Dysfunctional Job Market”

The secret to a higher salary is to ask for nothing at all

i want more, 3D rendering, rough street sign collection

by Brooke Allen 

More than twenty years ago, I developed a powerful approach to negotiating that goes beyond “win-win.” It involves starting by offering the most and asking for the least. It works extremely well, but I was unable to explain why until I read Wharton professor Adam Grant’s excellent new book Give and Take.

Adam identifies three types of people: Takers try to get as much as possible from others, matchers seek an even trade, and givers contribute without expectation of return.

Previously, I’d thought of things more in terms of debt and honor.

My parents raised me to believe that borrowing and then not returning is the moral equivalent of stealing. Put in the language of giving and taking, borrowing is a form of taking where I get what I want now and put my honor at risk in the future. Repaying my debt later only elevates me to the status of matcher, but not giver.

Eventually, I came to see that getting paid a salary in advance of delivering value is a form of debt. In 1992, I accepted a job that came with a bonus guarantee. Almost immediately, the unit I worked for was disbanded and they paid both the guarantee and a severance. It was the first time in my career that I was paid more than I delivered, and I felt I was left with a debt I could never repay. That is when I changed how I negotiate contracts.

The typical approach is for both sides to demand something unreasonable—but not let on that they consider it unreasonable—and then negotiate a “compromise” in the hopes that you will end up closer to your side than the midpoint. Even when the final agreement is declared a “win-win,” this approach backfires because it begins with acts of unreasonableness, selfishness, and distrust.

The next time I had to negotiate a contract, it began in typical fashion with a prospective employer sending me a lopsided agreement and asking me to counter-propose. I said I was incompetent to do that and suggested they write a new contract as if they were me, putting in everything that would be in my best interests, and then taking out everything they would never agree to. Since that would be the best I could get, I would accept it subject to agreement on compensation.

We started with base pay. I wrote down the least I would work for and asked them to write down the most they would offer a perfect person, irrespective of whether I was that person or not. If when we exchanged papers, their number wasn’t higher than mine then we could stop there and save time. Their number was twice the best base pay I had ever received in past jobs, and my request was for $0. I explained that my goal is to live a debt-free life, and therefore I wanted to give value before receiving compensation. Continue reading “The secret to a higher salary is to ask for nothing at all”

How to find a calling instead of a career

Young nun in religious conceptby Brooke Allen 

In my Quartz piece, To get a job, write your story instead of a resume, I talked about the value of finding a purpose in your work, and suggested that in order to do that you reflect on your life and write your own narrative. I talked about how economics is about the scarce resource, and in this age of abundant goods, services, and knowledge the scarce thing is a reason to do what we do, a purpose.

You don’t want a job, or a career; you want a calling

That story was about how to get a job, but you don’t want a job. You don’t even want a career. What you want is a calling. This point is made eloquently in Aaron Hurst’s book The Purpose Economy that is coming out April 2.

The people who say they only do their jobs to pay the bills are the people who are working without a purpose—and they are the ones you want to hire last and fire first. People who say they want a career are often worse. They don’t care about doing the job; they care about how the job will advance their career. I don’t like to hire people who want careers; I want people who want to do the job.

But the people who say, “I cannot believe they are paying me to do this” are the ones who I want to hire first, pay the most to, and hold on to for dear life. These are the people with a calling who would do what they do anyway regardless of who is paying them and how much.

Previously, I talked about how to get a job. Now let’s talk about how to get rich bringing work and workers together with a purpose.

First of all, what role are you going to play in the market? An employer might do a better job of hiring, but the market for their innovation is limited to just them. A job seeker might do a better job finding work, but once they land a job they will do that job and not try to monetize their approach.

Innovation comes from the intermediaries

If sellers or buyers in the stock market find a better way of investing then it is in their best interests to keep it secret. But if brokers find a better way it is in their best interests to sell it to everyone. That is why, for better or worse, the brokers do all the financial innovation in the securities markets. Continue reading “How to find a calling instead of a career”

Stories from Germany

by: Brooke Allen
brooke@brookeallen.com www.BrookeAllen.com


luftwaffeA Luftwaffe Airman’s Daughter

In 1980, my girlfriend and I were traveling on a rail pass. We left from Milan bound for Frankfurt only because that is where the train went.

A German businessman sat across from us and asked, “Where are you going?”

“Frankfurt.”

“Why? Frankfurt is so boring. You should go to Wiesbaden instead.”

We asked, “Why?”

“Because that is where we live and you will stay with us.”

His wife spoke English with a perfect British accent. It turned out her father had been in the Luftwaffe and had been shot down during the Battle of Britain. He became best friends with a prison guard, and after the war during the summers they would swap children. She grew up partially in England.

She said the difference between the treatment of prisoners by the British and the Germans was astonishing.

We all cried.

We were there having dinner with them because they had decided to make it a habit of being kind to strangers; which is not a bad policy even when the stranger had recently been trying to blow up your country.

treblantwoman

Beautiful Women of the GDR

I won a British Airways contest based on my social entrepreneurship site, No Shortage of Work, and the prize was airfare to anywhere BA flies. I put a notice on my profile on Europe’s equivalent of LinkedIn called Xing. Dozens of people said they would love to meet me in person so I flew into Frankfurt, then Cologne, and flew out of Hamburg and for 11 days I spent my time meeting people in person I’d only corresponded with before on Xing.

Although my sample size is very small, I have the following observation:

The most interesting, dynamic, interesting, hard-working, fearless, and interesting people I met were:

1) Female

2) Beautiful

3) From East Germany, but were now in the West.

4) Were born under Communism, but grew into adulthood after the fall of the Wall.

My sample size was small and I am partial to young beautiful women so perhaps that is why I find them more interesting than old male businessmen like me, but I still think there is something to this.

What do you think?

 

germanunemployment

An Unemployed German

In 2004, in Nuremberg, I met Kai, a very talented 51-year-old programmer who had been unemployed for 2 years, so my wife and I took him to dinner. His attitudes were self-defeating and I attacked every one of his beliefs:

“The economy is terrible.”  So, are you just going to wait for it to improve?

“The government is incompetent.”  Are you going to run for office and fix it?

“I’ve only had 2 interviews and they both ended abruptly when they learned my age.”  People are prejudiced. Do you have a plan for how you are going to change them, or are you going to take a different approach?

“I don’t have a college degree.” That hasn’t stopped you for 30 years.

“Nobody cares.” There is a whole community of programmers just like you. Are you going to continue ignoring them or are you going to start caring about them and see if they care back?

“There is no work.” There is never a shortage of work even when there is a shortage of jobs. Find some work and do it even if you aren’t paid.

“I’ve built some amazing software on my own, but can’t sell it.” Are you going to learn to sell, partner with someone who can, or give up on doing what you want and start doing what other people want?

“There are no jobs in Germany.”  You’re in the EU now so you can go where there are jobs.

“My English isn’t good enough.”  Sure it is; I understand you perfectly. If you don’t understand me it isn’t because of your language skills, it is because of how you are thinking.

My wife kept kicking me under the table and whispered, “He just wants your sympathy.”

I said, “Perhaps, but it isn’t what he needs.”

We were living in London at the time and he even flew over to spend a weekend with me to get more of my abuse.

Soon he got unstuck and landed a job in Copenhagen (good pay, company apartment, flight home every other weekend) and a year later he moved to England for another job.

Kai and I have become good friends and my wife and I stayed with him outside London in November 2010.

He says he hates going back to Germany because too many people there think the way he used to.

I was speaking to a group of programmers, many of whom were looking for work. I asked Kai to write a short essay explaining what he learned, and how he changed his approach to what some call “networking.” Here is what he produced:

KaiStory

Rejection

208641140_a9a7f6da5b_b© 2009 Brooke Allen
brooke@brookeallen.com www.BrookeAllen.com
Originally published as Borders in International Family Magazine
Republished in Folks Magazine on 9/12/09.

Dennis and I had never been to Canada.

So, in February of 1971 we decided to hitchhike from Terre Haute, Indiana to Toronto by way of Detroit. A kindly gentleman in a pick-up truck offered to take us over the bridge to Windsor, on the Canadian side of the border.

He said, “If you are dodging the draft, don’t tell me, but I’m willing to try to get you across.”

At the border, the guards asked him who we were. “Just friends.”

We would have made it had our backpacks not been spotted in the bed of the pick-up. The three of us were interrogated in separate rooms. It was clear our driver knew nothing about us. “I’m sorry, but we are going to deny you admission to Canada. You must return to Detroit.” The official sounded quite official.

I felt like I’d been punched in the stomach. Then I felt guilty; I had just been treated as if I were a criminal. On top of this, I felt tremendous rejection.

Dennis seemed quite cheerful. “Great.” He said, “Would you write me a letter?”

“What?”

“I just want you to write me a letter rejecting me from Canada.”

“We’ve never done that before. I don’t even know what you are asking for.”

“Well,” He paused, “Since Junior High, I’ve been writing short stories and submitting them to literary magazines. I have not yet had a story accepted, but I have quite a collection of rejection letters from some of the world’s finest publications. However, this is the first time I’ve ever been rejected from an entire country. Would you write me a letter?”

The fellow laughed. “Why not?”

“Great. I’ll tell you what to say.”

——————————-

Dear Mr. ##########

Thank you so much for your submission to Canada. Unfortunately your offering does not meet our needs at this time.

We wish you the best in your endeavours.

Regards,

Canada

P. S. God Save the Queen

————————————

That night we managed to hitch to Oberlin, Ohio and spend the night in a house full of young co-eds. That was fun.

The next day we attempted to enter Canada for a second time, from Buffalo. The border guard spotted us immediately. A telex had been sent from Windsor describing two whackos.

As he pulled us out of the car, the guard said, “I suppose you’ll want another rejection letter.”

If you are going to go far, you’ll need to deal with lots of rejection. Start a collection.

Trade or Profession

© 2008 Brooke Allen
brooke@brookeallen.com www.BrookeAllen.com
Originally published in International Family Magazine

I have just returned from the annual meeting of the Chicago Quantitative Alliance (www.cqa.org) where one speaker made a convincing case that the brokerage and banking systems are bankrupt and another made the case that so is the Federal Government.

The world is going to hell, and we don’t even have a hand basket.[1]

At the lunch break I asked the fellow sitting next to me what advice he had for my children in college.

He said, “Drop out of college and learn a trade; they can always go to college later.”

That reminded me of a joke. A lawyer has a leaky faucet. He calls the plumber who fixes the faucet and presents a bill for $100.25.

The lawyer is livid, “How do you justify such an expense?”

“Twenty-five cents for the washer and $100 an hour for my time – one hour minimum.”

The lawyer says, “I’m a lawyer and even I don’t get $100 an hour.”

The plumber says, “That’s funny – when I was a lawyer, I didn’t get $100 an hour either.”

The joke reminded me of the advice my father passed on from his dad, “Develop both a trade and a profession.” Even as he rose through the ranks of management at United Press International, granddad maintained his skill as one of the world’s top telegraphers.

In 1990 we moved to Japan to advance my career as a securities trader, but in 1993 I was laid off and returned to the United States to find the nation in a recession. There was a dearth jobs that offered career prospects. Luckily, throughout my rise in management, I’d kept up my skills as a Pretty Good Programmer and quickly found that there was plenty of work for those who were willing to trade an honest day’s work for an honest day’s pay.

 

Don’t trade a chance at a trade for a profession – get both.


[1] For those of you who have not heard the expression, “Going to hell in a hand basket,” now you have.

Sally Would be Proud of Me

© 2007 Brooke Allen
brooke@brookeallen.com www.BrookeAllen.com
Originally published in International Family Magazine

In 1993 I lost a job in Tokyo and returned to the States with a wife and two young children but no work.

Most of my contacts were no longer at the phone numbers in my book and many were unemployed. It appeared our economy was in a recession. A friend arranged for a courtesy interview at a brokerage firm I’d worked at years earlier.

Let’s call the interviewer “Bob”.

Bob began, “I hope we aren’t wasting your time but we have no jobs; there is a hiring freeze.”

“You have no work?”

“We have plenty of work, just no jobs. We can’t hire anyone except consultants on short-term contracts.”

“I would work as a consultant.”

“Are you incorporated?”

“No.”

Bob smiled, “Well then, I’m sorry but we can’t do anything. We only hire people who are incorporated. Thanks for coming in, but I have another meeting to attend to.”

“OK. How long will the meeting take?”

“About half an hour.”

“Well, I have nothing else to do today so perhaps we could talk some more when you get back. I’d be happy to help you if I can… no charge. In the meantime, may I use your phone?”

After he left, I called The Company Corporation, a firm that specializes in incorporating people in Delaware: Cost: $240 on a credit card.

When Bob returned I gave him a piece paper with my Federal Tax ID, “I am now Bravo Alpha, Incorporated.”

“What? I thought you said you weren’t incorporated.”

“That was then. This is now.”

“Why did you do that?”

“Because you said I needed to be incorporated.”

Bob smiled again, “Now I’m afraid you’ve wasted your time and your money. We won’t hire someone unless they are on our approved vendor list and that process takes months.”

I borrowed his phone again and called my friend at Galaxy Systems, an approved vendor. In a few minutes I was his sub-contractor.

Bob began to look worried, “We’re really backed up with work, but how do I know you can do it?”

I said, “That’s easy. I begin doing the work and you decide if I’m doing it as you want it done. At the end of the month, if you don’t think I am worth what I’ve billed, simply cross off my number and write in your own which can be any number including zero.”

Bob seemed shocked, “You would work for free?”

“Not exactly. If it turns out that what I am doing is not worth anything to you then I will ask you what I’m doing wrong. Learning what I am doing wrong is worth a month of my time.”

“How much do you want to make?”

“One hundred dollars per hour.”

Bob sighed, “That’s too bad because we are only allowed to pay a maximum of $87.50 per hour.”

“I would accept that.”

“But I thought you wanted to make $100 per hour.”

“I do. But I would accept $87.50. I would even accept $25 because I would rather work than not.”

Bob was incredulous, “OK, I guess I don’t see a reason not to hire you immediately except that it will take us weeks to get a contract written and approval isn’t certain.”

“No problem. I’m happy to start right away and bear the risk that you are never able pay me.”

I began work immediately. It sure felt better than being unemployed. The contract was approved and I was paid in full.

If someone says they want to do something, remove all their reasons for not doing it and they will see no other choice.

If you know you are worth something but an employer isn’t sure, then work on approval.

When you are stuck, think “What Would My Mentor Do?”