“We pay less than you would make at a for-profit, but you go home knowing you’ve made the world a better place.”

“They deserve less than a for-profit person. They knew that when they decided to work for a museum.”

“If you don’t pay market rates, how do you get the best people?”

Each of these are real quotes. The first one I’m pretty sure I’ve personally said to dozens of job applicants. The second comes from a truly horrible budget committee member that I worked with years ago. It actually left me gaping like a fish.

I hear the third one from one of my Social Entrepreneurship students every single year. I usually answer with a joke: “Why would someone take a job at a discount? Because they’re not good enough to get a proper job?” This is funny because I’m the CFO for a nonprofit and clearly don’t get paid what a CFO of a similar-sized for-profit gets paid. I’ll admit it’s more awkward funny than ha-ha funny.

But in the June 2014 issue of Harvard Business Review, author Claudio Fernández-Aráoz gives nonprofits a little bit of hope. In his article 21st Century Talent Spotting: Why potential now trumps brains, experience, and “competencies”  he proposes that we might have been hiring properly all along, just by necessity.

TL;DR: The hiring marketplace is so competitive that most businesses have difficulty hiring the “perfect” candidate as determined by skills and experience. The solution is to hire people with enthusiasm and potential, and then give them stretch goals so that they grow into their roles.

The history of talent spotting

The author starts us off with the hypothesis that our current tendency for hiring  taller CEOs is an artifact of selecting stronger, fitter, healthier people for manual labor tasks. Next, the ability to certify intelligence with tests or educational achievements made it easier to sort applicants into qualified or unqualified buckets. And finally, competence and skills began to replace specific experience, as technology and the overall rate of change in business began to create jobs that were totally new(1).

Fernández-Aráoz proposes that we’re now in the next phase, where everything changes so quickly that even competency is no longer enough. He writes, “the question is not whether your company’s employees and leaders have the right skills; it’s whether they have the potential to learn new ones.”

How do you gauge potential?

Helpfully, the author lists five indicators of potential.

  • motivation, specifically a commitment to pursuing group (and not selfish) goals,
  • curiosity, including the desire to seek out feedback and embrace change,
  • engagement, in the sense of connecting with people,
  • insight, and
  • determination

None of which are worth anything if interviewers don’t know how to assess whether these indicators are present in a given candidate. Companies can increase their chances of identifying potential by providing training to the people doing the hiring.

Keeping and growing talent

In his book Drive: The Surprising Truth About What Motivates Us, Daniel H. Pink explains that in order to retain employees with high potential they must be given:

  • autonomy, or the ability to self-direct,
  • mastery, or the desire to excel at something, and
  • purpose, (nonprofits should have this one in the bag).

Fernández-Aráoz adds to this by suggesting that high-potential employees must also be given “stretch assignments.” In other words, they shouldn’t go straight up the ladder in one field or division, but should rotate through many roles to gain a broad base of experience.

The nonprofit perspective

How nice is it to say, “for profit talent development should use nonprofits as a model.”  Here’s something we can be really proud of.

Constant downward pressure on nonprofit salaries guarantees that competency (using the article’s definition) and years of experience have always been hard to come by. In exchange, nonprofits are more likely to bring on employees who are enthusiastic, engaged and wholly unprepared for the roles that they will eventually inherit.

Not only are stretch assignments a common occurrence, young nonprofit managers frequently zig-zag through multiple organizations, as many smaller nonprofits have too few employees to really allow for upward mobility. Not only does this allow nonprofit employees to experience different roles, but also different organizational cultures.

To be sure, there is room for improvement in nonprofit hiring practices. boards are frequently under-trained when it comes to hiring executive directors. (Who’s going to tell them they need training?) Lots and lots of smaller nonprofits don’t have any professional HR staff, so hiring managers are left on their own.

Finally, lower nonprofit salaries really do limit overall nonprofit performance, but that’s definitely a topic for another article entirely.

Read it yourselfFernández-Aráoz, C. (2014). 21st Century Talent Spotting. Harvard Business Review, (June). 

(1)One example of this was job postings in the late 90’s looking for programmers with 10+ years of experience with Java.  The postings should have also asked for “access to a time machine” because Java 1.0 was only released in 1995. (return)

Image: “Mexico – Bellas Artes – Fresque Riviera « Man at the Crossroads »” by Painting: Diego Rivera; photo: ÉclusetteOwn work. Licensed under CC BY 3.0 via Wikimedia Commons.