Jonathan Davis of American Workforce talks about the new model for recruiting, the cost of mishiring, and the new Entrepreneur Organization Accelerator program.
What does American Workforce do?
We are the next evolution of what recruiting has evolved into. We partner with companies in which the CEO is frustrated by the process of trying to hire the best people and concerned about the sacrifice he and his managers have to spend out of their day talking to unqualified candidates. Companies hire us to build pipelines for the type of people they are going to hire. We become their recruiting department or a supplement to it. The biggest benefit: our clients get a chance to see the best talent in the marketplace, not just the best candidates who happen to be interested in a role at the exact time that companies have that specific need. Instead of billing by the cost of their first hire, we bill more like a law firm: by the increments of each hour - increasing both transparency and allowing a client to dial up or down their recruiting efforts in any given week. We’ll actually do the work in their name instead of trying to cloak the idea—you know what that typical call sounds “I can’t tell you the name of the company or the job but here’s what it may look like.” We think that model is broken. Freakonomics analyzed the realtor model which is we’ll charge you 3% of whatever we sell your house for or the old recruiting model which is we’ll charge you 25% of whatever the first year salary is including bonuses. If a recruiter is only compensated for the placement, their incentive is not to help the client hire the best person; rather, they just want to get someone hired.
How’s it going?
You know if keeps growing. Clients keep coming back. They keep telling other companies about the service. We have some that are now long-standing clients of over 3 years. We really do help companies find “A” players.
How do you define an “A” player?
In the book Topgrading by Brad Smart, he analyzed what is the definition of an “A” player. In a particular job, at that salary, you may be an “A” player, but if we took you out of that job and placed you in another entirely different position (think a Marketing Associate being asked to be a CFO)at a different salary, you likely will no longer be an “A” player. It helps you define that top 10% of the talent available for that role at that salary level. It helps you calculate the cost of mis-hiring which is about 20X of what you would have paid someone. If you hire someone and pay them $10K for two months and then discover it was a mistake, it’ll probably have cost you $200K due to lost time and opportunity cost to correct the situation. Companies that get that are hiring American Workforce to find and hold key candidates until they are needed. We find the “A” players proactively.
That sounds like an interesting book?
It’s definitely interesting but it’s also a textbook. It’s quite thick and dry. He’s got an updated e-book that’s a lot like Cliff Notes and it is a lot easier to read.
You’re now taking over the EO Accelerator Program . What successes have you had so far?
Well it’s cool because we’re on the next level of its evolution. The program continues to grow and could be larger than EO in short order (EO has 6,800+ global members). As you know, EO takes Founders & CEOs whose companies have revenues of $1M or greater. There are only so many companies in the city that meet those criteria. With the EO Accelerator program we reach so many companies. If someone had given me this program five years ago, my company would be quite different today and for the better.
How does the EO Accelerator Program work?
It’s a facilitated learning session held once a quarter. We fly in a facilitator that was involved in creating the content of the program. It’s got four particular areas of study: strategy, money, people, and sales/marketing.
We have sixteen companies in the program now. In the upcoming session we’ll focus on strategy and answer questions such as how do you find and utilize mentors, how do you build a company vision and values, what are some creative strategies for outsourcing and how do you establish a culture inside your company? Our target participant probably only has 3 or 4 employees. That’s a general rule of thumb that when you start adding those employees it’s time to start thinking about culture. The program also involves our existing EO members which is exciting. Austin is unique in that we trend towards some more established businesses that are taking part in the Accelerator Program. These include Chris Justice of SparkSite which is an event planning/logistics company and Dean Dzurilla of Xolved which resells and implements Netsuite packages.
What have they changed from a year ago?
The program focuses more on case study and bringing more mentor input into each of the lessons as we get a wide range of people in the program so one size doesn’t fit all. They kept the core areas the same but stayed true to the EO mantra which is: everyone gets offered advice all day. What Entrepreneurs really need is not advice, rather they need to hear tips and experiences from others who have already been there so that they can avoid the same pitfalls and mistakes.