S3Ep17: Stop Guessing, Start Hiring Smarter: The 3-Lever Talent Framework Every Leader Needs

Introduction

0:00Welcome to Organizational Shnear Locks, the podcast where business needs psychology and your organizational puzzles meet their match. Join us for captivating stories and practical solutions to unravel your toughest challenges. I'm Dr. Elizabeth Fleming. I'm Morgan Ashworth, your guides to a prescription for business success. Let's dive in. So listeners, today we're unpacking one of the most consequential decisions a leader makes and one of the least examined,

0:36unfortunately. When a capability gap opens in your organization, you have three options. Build the capability from within, buy it through a new hire, or borrow it through a contractor or fractional resource. Most organizations default to one answer without ever asking the question, though. Yes, and we will get to all of those questions that we should be asking, but we're going to go through all three of these options. We're going to talk a little bit about when each one works, when it fails, and what IO psychology and operations strategy together

1:09tell us about making the right call. We're also here to give you a practical decision framework that you can use the next time you're staring at a gap in your org chart. Our hope is that by the end of this episode, you'll have a different way of thinking about workforce planning, not just as an HR function, but also as a core business discipline. So listeners, as always, we like to give you a scenario to think on regarding this. So let's say a company's director of operations resigns. Within 48 hours,

1:40there's a job posting live on LinkedIn. Six months later, they've interviewed 40 candidates, made two offers that both fell through, watched three team members quietly absorb the extra load until they burned out, and lost institutional knowledge that walked out the door. Yet they still don't have anyone in the seat. So that's a great scenario. I've seen this happen far too often in the world. And I

Talent Lead Time

2:10actually think that the idea or the concept of talent lead time is a really important concept for us to talk about, particularly when it comes to workforce capacity and being, again, one of those kind of core business components. As a part of my MBA program that I'm doing, because who doesn't love school, right, Morgan? Just keep going on going. We're talking. I mean, it's fun. I like learning and I'm learning a lot. So it's really great. But, you know, this part of my international operations management course. So I'm learning a ton about a lot of different things. And maybe we'll hear about

2:42it on the podcast. But all in all, really, where this is coming from is that it takes time. Talent lead time does take time, right? I see this in organizations who kind of wait until they have an urgent need. I'm not really trying to forecast what internal capacity they'll need based on what their kind of hard data tells them their forecast should look like. And so that's really why I wanted to bring this up here because we spend so much time as organizations really thinking about, you know,

3:16forecasting, supply and demand, you know, supply chain issues, whatever it might be. But I think because people and the idea of people is a little bit more abstract, a little bit harder to measure. It's something we just kind of don't think about. And we really should.

Hiring Challenges

3:32No, I agree. The time of two weeks to maybe four weeks for a leader notices and being able to hire someone within that, it's gone. Absolutely gone. It takes longer to hire because it takes longer to find qualified candidates. In fact, they say that you should take into account, you should have about 37% of your applicants before you really start looking at anyone. Typically, that's the like runoff is that about 37% of candidates, the first 37 is not a fit or, you know, there's only gonna be one from those first 37%. But anyhow, not to get too off topic there, the time of two week notice and hiring

Forecasting

4:08within that, it's gone. And so forecasting, especially when it comes to people, capacity and capabilities is so critical. This is actually why I do tend to say that there should be a level of redundancy in organizations. Because if something like this were to happen, do like an emergent situation, do you have the capability to manage it right then? And maybe if it's not an internal redundancy, maybe it's an external one you can quickly go to for help. But I think that that might relate to what we're talking about today. It sure does. Yeah, absolutely. You know, it's kind of this this idea of

4:44knowing what we need and knowing what we actually need now, but also in the short term and in the long term, right? If you're someone who does forecasting, that probably sounds relatively familiar. And there's lots of different models and everything to to utilize with forecasting for product or service, let's say. But you can use that same kind of technique when you think about people. And so what we're going to offer to our listeners today is this idea of building,

Build Option

5:10buying or borrowing. Okay, just as a simple concept, the three B's building, buying and borrowing. Building is really recognizing that there is some internal capability that you already have existing within your organization. This is really in line with what Morgan and I talk about on this podcast pretty regularly around do we have the capability that we can develop into that role. That's the idea of building. So building equally in development. Okay, we also have buying. Okay, now I know that

5:43sounds kind of weird and icky, but we're just trying to keep it with the three B's. So buying is really about the fact that capability does not exist internally, you need something else. And so you look externally, this is where that LinkedIn job posting maybe comes in, you're looking for an external resource. Yeah, exactly. So that's buying. And then borrowing is a little bit more on kind of the, the fractional or contract economy, if you will, you know, so bringing in someone as a contractor,

6:15or as a fractional, maybe fractional executive or something like that, until you can figure out kind of what is it that you need? And what kind of, you know, person do you want to bring on in full? So that is what we're going to do today is really dig into the build by borrow model. So Morgan,

Building Internal Capability

6:32I'd love to just kind of start a little bit, if you're okay with it, starting with the build. So again, that internal ability, what do you think about that? So I feel like build is a great one to start with, because I would argue that it tends to be the default for organizations, because the goal is always to develop your internal people, it's always easier to promote someone internally, since they already have a really great knowledge of the organization. So you're not just trying to train for, so you're only trying to train for the position and not train them to know the organization, unlike the buy model. Yes, I do

7:07feel like the buy model for more senior levels is more common. But for management and other types of internal promotions, I feel the build level is so, so common. So let's talk about when it's the right answer, right? Let's say internal capability exists in a nascent form. So the role requires deep organizational context. So again, what I just said, that organizational knowledge, and the timeline allows for real development. So to me, this also can tell, you can determine that the build model will

7:38be right pretty soon, pretty early on. You know, I could highlight a team member after one year of employment and say, that person, that person right there might be my manager in five years. As long as everything goes straight to plan. And so this is the forecasting side of build, is you're not just trying to build right then and there when the, you know, senior operations manager resigns, right? You're not just trying to build at that moment. You've actually been trying to build this person for a level of time. That is the forecasting side of things. Right, Elizabeth?

8:10Absolutely. Yeah, no, I know. As you're talking, I was thinking, well, this sounds a whole heck of a lot like forecasting on the business side. Because there is a lot of overlap there. One thing that I notice in my work a lot, and I hear about this all the time is the idea of high potential employees, right? And wanting to invest some organizations, I guess, invest in high potential development, right? Where this goes wrong, and I just want to say this, because this is, it's very true. And I think a lot of business leaders might, might find value in this is, your high performers

8:41do not always equate to being your high potential employees, right? And so when you think about it, just because someone has been there a long time or consistently gets their work done and does it well, it doesn't mean that that potential is exactly the same. You might be overlooking some of those individuals that haven't been there as long, but have a whole heck of a lot of potential, right? So really what we're thinking about, and part of where an IO psychologist or like the work that Morgan and I do, where this comes in handy is really assessing for readiness of an internal

9:14resource as well as potential. And so that speaks to what you just said about, you know, like a senior manager, right? Maybe isn't ready now. So again, that readiness isn't there, but they might be in five years because you see that potential. And knowing that is a very strategic decision for a business. Yeah. Yeah. And I would also even like to talk about the times when, you know, you didn't necessarily foresee someone leaving. And so you weren't developing as quickly as maybe you should have been, you know, it's hard for an organization to, to really read into when someone's going to

9:47leave. Usually more senior positions give longer term, like, you know, notices. But still you have, there's times where there's a very short notice period and there were very few, you know, factors that pointed that this person might be looking to leave too. And when that happens, you might want to look at something like learning agility. So how quickly someone develops new competencies, because that's a strong predictor of their development success. You know, I can think of a scenario where this organization I was working with, they had, you know, they had a strong team

10:20under a leader and suddenly the leader just up and left. There was truly nothing behind it. The individual ended up moving closer, like working closer to home. And so there was a quick, there was a need to quickly change over. And company knew that buying was not going to be the right route because of the skillset required. It has a really strong organizational context and specific context to what the job was due to like software usage and whatnot that the company has, uses in a particular manner. So their option was to build. That was the only option. And so they

10:56quickly highlighted someone, this person was not, was actually already in development, just not as far along as they should have been. And so there was a more structured approach of, okay, so this person's in a transitional role to get that next role instead, because they weren't ready for it right then, but they could be ready for it with more coaching. If this coaching and the development timeline is sped up significantly. So instead the leader over what, so the manager over the management position

11:28was meeting with this individual who was promoted to team lead very quickly on a weekly, bi-weekly basis and working with them and helping them really develop that leadership style for themselves and develop those boundaries, thus leading to success of this person entering into that role within six months instead of another two years of development. Yeah, absolutely. Well, and what I'm hearing you say when you gave that example is that there was an intentional act of providing resources to this

11:59person and support to this person. And I think that's really in the build kind of category where things can go wrong, right? We look at building not just as a cost savings because you're not recruiting and onboarding and all that kind of stuff, but all in all, it really is an investment. So building is that investment, right? You have to be ready to invest. It's not a shortcut, even though it might appear that way to some people, it's not a shortcut. I think really when, if we boil it down, if you're

12:30not willing to resource or provide resources for development, you're really not choosing to build in the way that we are describing it, it's really more just of a delaying the buy, right? Because you're not going to get somebody up to speed in the time that you need it to have a great impact on your organization if you're not willing to provide the resources they need or the support that they need. Yes. So I think that's really an important, an important part of the build cycle is understanding,

13:02again, what learning agility is, being able to identify whether someone's ready, what their potential is, and I'll even throw in a little piece of, are they even interested in another position? That kind of matters quite a lot. And then to your point around the structured development planning, I think really having a structure to that and being able to create a unique plan based on the person rather than just a kind of, you know, one size fits all solution is really the way to go, especially if you want to get people up to speed quicker.

13:32Yes. No, I would completely agree with that. And I also think of it as, you know, when you're, when you're developing a leader, when you're trying to build a leader and you're investing into that time, even if it's, you know, you're, you're trying to invest more quickly and more time into it within a few months and kind of taking on work with the upper level managers, taking on the work in the meantime, it's okay to invest this extra time and extra, I guess, money in a way to these leaders, because to an extent this, each leader will have their own style and it becomes extremely important to customize it to this leader. When you have a

14:07general team, maybe you have like 10 people on one singular team, 20 people on one singular team, could be five people. Every team's a little different, but let's say you have a size team like that. Well, their, their development might look roughly the same and not really customized because to, to customize 20 different people's a lot. But when you're customizing to a leader, that extra level of customization, that extra level of investment will help lead to more success down the road. Yeah. And I will say it's not impossible to do that. I will say that though,

14:37because while yes, it is more of an investment to customize, I think that these same concepts can be applied to people at all levels of an organization. And I, and I only say that because sometimes you don't have someone in a manager role, but they have, they're maybe in an individual contributor role, but you see that they have the potential to move up. So you may start that investment while there's still an individual contributor to get them to a manager, to get them to a director, whatever it might be. So I think a little bit of this is pers, you know, organizational

15:11preference, if you will, depending on the organization, it is possible. And there are consultants that do work with folks on, on developing these programs. So know that you don't have to do it alone, but again, it is, it is possible, even though we tend to focus more on the leadership side of things more regularly. Yes. 100%. You're so correct. All right. Well, we've talked a little bit about the build area. So we're going to call that one 1B and now we'll go to 2B. And Morgan, I'm wondering

Buy Option

15:41if you will walk us through what that means, feel free to use Shakespearean language, if you would like to be or not. To be or not to be. I don't know. We were talking earlier. Yeah, let's bring us through the by. Oh, well, yes. I'd love to bring us through to be because I think it is better than not to be, right? So anyway, uh, lever two is by, so we went through build. Now we're going, talking about by, talking about some external hiring. Um, and so this we utilize and organizations utilize when

16:17capability doesn't exist internally. Um, the role is more long-term requires deep integration. A fresh perspective is usually, um, genuinely needed as well. But I want to talk about one thing as we get into by, there are many organizations out there who will post a position and have both internal and external candidates. My question there is, are these organizations forecasting where they know that there's internal possibilities and maybe they haven't been developed to that

16:50extent? So they, they put it out there for both options to, to try to both play on both build and buy both of those fees. Or could it maybe be a level of, they weren't even aware that they had people they could have built? I know a lot of organizations I work with, you know, every organization's a little different. Some immediately go to external hiring. They know they don't have someone that they want to build others. They're kind of stuck in the middle. So they go the hiring route, the post route to get both internal and external and others simply know that they can build someone and they actually

17:23don't post a position at all. So again, the different organizations, you know, default to in a way. And so I feel like buy has a couple ways that you go about it, but all in all, the purpose of buy is for when you need that external perspective, when you need an external person, maybe because you need that external information experience and need that new perspective. Other times that the capability simply doesn't exist at the organization. Yeah. You know, it's interesting because I definitely have

17:56seen that as well, where people will post it internally and externally. So again, kind of the, using both levers, the build and the buy. And I think that, you know, there's, there's reasons for that. And I really like that you said, maybe they just don't even know that they have somebody who's interested or, or is craving that development to get to that point that already exists within the organization. And I find it really interesting because I think, and honestly, I think we could have another episode just on this topic alone, because it definitely, it comes with certain risks. In my opinion, if I've been in an organization where they've done that, where they have posted

18:29internally and externally and then chosen someone externally. And sometimes that impacts the employee experience of that internal person. And so there's definitely a risk there, right. In how you manage through a situation like that. So I think maybe that's just a whole other conversation we could have because it definitely brings up some, some thoughts in my mind. Well, that plays into where it might, where the lever to buy might go wrong even is, you know, if you have internal people that would have been interested in the role and, and didn't realize that you would only look for external

19:01candidates, you know, that communication within forecasting is important too. It's, it's forecasting for people to understand why you're making decisions. And it's not because you should default to your employees, like opinions and whatnot, right. It's not for that reason, but it's for the fact that they're more likely to buy into this new manager, this new senior level leader of some sort, if they feel they have like a part in a way, or they, they understand the reasoning behind, but where else could buy go wrong? You know, for example, there's a lot of ways it could go wrong. Unfortunately, you know,

19:37the scenario I brought up that you offered two positions and both fell through already. You know, there was, there was something wrong with the hiring timeline or with the types of people where you were looking at, there was a lack of alignment between the organization and the candidate even. So one way I could go wrong is if you're hiring for the role today, rather than the role needed in 18 months. So every leadership role tends to transition in some way, shape or form, their focuses change. And so if you focus on only the needs of like, say the projects that leaders in charge of

20:10right then and not the projects that they might be involved in in 18 months, then that could be an issue. Also using outdated job descriptions. I think it's so critical to look at job description anytime you're posting it. Also the different types of information you share, you know, pay transparency, for example, it's a lot, a lot of, a lot of states right now. So you're required to post the pay range on the pay. And it's interesting that some still do not get their hiring out of those states. So that's actually a compliance issue right there. But the way you post your position

20:43could target people in different ways. You could be missing new types of skill sets like AI, for example, how it might go wrong, the hidden costs of it. So disrupting internal candidates. We talked about that. Having a longer ramp up time because they don't understand the organization itself. There might be cultural friction, whether it's because of internal candidates or the director reports of this person. And these are things that rarely show up in the hiring budget. So it was a

21:15lot riskier to go with the buy model because if something goes wrong, the timeline increases, the costs increase, and then it can have detrimental effects to cultural and cause turnover elsewhere too, or satisfaction issues, or just like the overall, you know, performance of individuals. If you hire the wrong person, right, which I mean, brings up something really important, right? And I'm again,

21:46glad that you brought all of those different pieces in and brought that into kind of the context of the hiring budget, because we often think of the hiring budget as being something that is just about, you know, how much it costs to post you on LinkedIn or post a job on LinkedIn or Indeed or something like that. And how much does it cost in their salary? And like, all of those things are really important considerations. But all those other things also are important, right? Again, like the disrupted internal candidates, the longer ramp up time, the friction, the onboarding, all of those things all

22:19cost money. And it can be really expensive, right? And this is really a core part. And I just want to bring it up like this is a core part of what I, I and you in our work at Appaday do, right? We try to reduce these costs, so that organizations can be more effective. And the idea of getting the right person in the right seat. And I always add to the clients I work with, like, at the right time, right? Because, because we're talking about forecasting, we're talking about where do we want

22:53to be in 18 months? Where do we want to be in five years? And, and what kind of people do we need? Yeah. Yeah. So, you know, there's a lot that could go wrong within the buy model. There 100% is, but that does not mean it's not the route to go ever. Okay, so I do want to premise that because I don't want to worry too many people out there listening that, oh my gosh, maybe I should just never use the buy model. No, you definitely need the buy model for certain levels of positions, because not everyone in your company can manage that. And oftentimes you can't, you know, just

23:27dish it out to multiple people in the company either, because that could cause burnout down the road. It's simply important that when you're using the buy model, you really have structured scientific backing in your hiring process and not just using your gut feeling. That's when you come to people like us who help with that. But let's talk a little bit more about the science behind it. What do you think, Elizabeth? Yeah, I mean, okay. So, and obviously this is an area I'm really passionate about. So it's something I need to, I just want to preface it. Like I could go on and

24:01on and on, but I won't because I know that our listeners probably have days to get back to, but our traditional hiring models really using as to the way you put it, like your intuition or your gut, while that is valuable, and I do not want to discount that it is incredibly valuable and it shouldn't be replaced. However, there are those scientific methods that allow us to really get into the key theoretical components of what actually predicts solid job performance for people. And those unstructured interviews, the, again, the instinct, again, while valuable,

24:35are actually some of the weakest predictors of job performance, right? When you really look at the science behind it, if you want to do more, structured interviews are better than unstructured interviews. Using things like work samples, getting an idea of how they work and what that might look like, think a strategic plan, or what would you look, what would you look for in the next 30, 60, 90 days? Those kinds of things are also stronger, right? But what we really know too, is that using more of the

25:06kind of the cognitive, the personality, the motivational assessments, really get an idea of who someone is, what their skill sets are, and where we can really tailor our budget to invest in their development, those are the strongest predictors. And most organizations do not use them. And I think that's an important kind of piece, because again, it's a core component of what Morgan and I do at Appaday, and what other firms do as well. But all in all, I think it's, it's hard, because I mean,

25:39there are estimates that anywhere from 30 to 70% of someone's salary is thrown into all of this onboarding and development, initially. And what if you could cut that down and actually make choices about their development and get them involved in things that actually help them build their skill sets? Like, to me, that's just completely valuable. Yeah, I completely agree. I think that having a specific structure behind hiring the buying side of things is so critical. And you know,

26:11there's one point I really, really like to hone in on is there's person job fit, and there's person organization fit. Sometimes there's different ways to go about finding those fits, you know, little tests, little like figuring out how they work, sometimes taking them on tours, senior leaders, especially like taking on a tour, will help them bring up questions, help you bring up more questions. And you really can see their like, I guess their affect against like against organization against the environment as well. But within those the fit, the job fit and the organization fit is

26:43also the value system, the mission, the vision behind the companies. And years ago, actually, Elizabeth and I had a podcast solely on vision statements, actually, and I think we had talked, we talked with one CEO, but we also talked just about Starbucks, actually, funny enough. Yeah. And I will say, when it comes to values, there are specific structured questions you can have behind these values. And you can utilize scorecards within your interview to say how much they meet that value

27:14based off of your questions with them. Obviously, there's a lot of caution sometimes when it comes to values, because one, you don't want to necessarily outright ask about the value. But two, you don't want to ask super personal questions either, right? But you want to have structured, almost work related questions that might bring about other types of information that helps see the greater fit. For example, if there's an organization focused on environment, well, does this person recycle? Like see if that can come about. Honestly, it seems super basic, but it does matter. If this person is not someone that

27:49recycles, do they really care about the environment? Let's just ask that. But then separately, just talking about the environment in general, like know what, what do, what have they done previously with organizations to add these environmental factors behind what they do? And does that match the values of the organization? But what I said earlier is having that scorecard. So not just taking information and writing down the information on these structured interviews, but also maybe having a scorecard to back it so that you have, maybe you have a kind of a gut feeling of, you know, they land on a three

28:21out of five or four out of five for this question in a way. But when you connect that to other people in your organization, usually there's a multi-step interview process. And then later, maybe some behavioral testing as well. You know, that's the Elizabeth's wheelhouse right there. Then you'll get a more 360 degree view of the person. Yeah. Yeah. I mean, I think that, you know, it's not, it's not about like, even though we look at job performance and we look at the strongest predictors of them, it's not to say that it has to replace that an assessment of some kind has to replace

28:55those interviews. I think it's, it's about creating more structured interviews. And I think that you can even, and I know because I've done this, I've worked with clients and helped them develop interview structures, but you know, coming up with a value-based interview structure, right? It's, it's structured. And, and I do want to just say, because I think that this is kind of a misnomer at times, like using open-ended questions does not mean that it is an unstructured interview. You can absolutely use open-ended questions. If you use your environment, you know, example, right? I might,

29:27I might just openly ask, you know, what is your perception of the current environmental standards, right? That'll give you a really good idea if they follow, if they have a similar value or mindset as, as the culture of the organization, right? So just because it's open-ended does not mean that it is unstructured. It can be structured. When we talk about structured, it's really more about applying the same interview technique to all candidates for the same position. And I, I would also say that open-ended questions are actually critical, even, even like it is a

30:00structured interview, even with these open-ended questions, because you can create different types of follow-up questions too. But these open-ended questions really allow their, the candidate to take it, take it the way that they have a perceived question too. So you get to actually get a little bit more insight into, okay, when you ask an open-ended question, like, where does this person's mind even go? You know, for example, like let's, like quality, of course, is such a critical value to a lot of different organizations. But sometimes there's like a specific true value put into quality, while other

30:36times like quality is an expectation of the organization. I've worked with organizations where quality is legitimately a value of the organization because there's all, there's a lot of innovation behind what they do. And so not only are they innovating, but they're trying to make it the best it can be. And so every product they do wants, they want it to be the best it can be, right? Or it can be applied to service by customer service. But you may ask a question along the lines of when you have, you know, time constraints, how do you prioritize quality versus timeliness? You know,

31:10that's also another open-ended question. It's a little bit more honed in than just like, what's your perception here? But it still hones in on topics. And then you can ask follow-up questions of, well, do you have a time? I love getting examples from previous workplaces too. Do you have a time that you had to do this? Or, hey, tell me about a time that you moved away from quality and focused on timeliness. Why, why did you make that decision? And were there any repercussions because of the decision or was it okay? And have you had a similar circumstance where

31:40there were repercussions or a similar circumstance that you took a different route, right? Again, that's a lot of follow-up questions. I probably just asked 10 questions right there. Yeah. You're also going to keep in mind the time you have to interview, but that's neither here nor there. I mean, I think that, you know, before we jump into the third lever of borrow, the last thing I want to say about that is by having a structure in your interviews, you're also creating consistency in operations, right? And so you are essentially rating or considering candidates on the same criteria,

32:12which is really important when it comes to kind of equity and all of those different pieces. So just keep that in mind that, you know, when we have unstructured interviews, you know, we tend to invite more bias into that interview process. Structured interviews help eliminate some of that. Not that it's completely eliminated because as humans, we're just, you know, we all have bias, but it does, it does reduce the impact that bias, that bias has. And then you add on the layer of more of the quantitative data components, and that helps you confirm or deny what you believe to be true about

32:48the person you just used a structured interview with. So that is my two cents on that. And right before we get into borrow, just one last point. Let's just remember that lever to buy

Borrow Option

32:58does not end once you hire the candidate, actually. You usually have an introductory period. Most organizations is 90 days. And so you're going to have a number of scorecards, check-ins, you know, evaluations of how this person is doing and see if they're really meeting the skill sets and whatnot that you need. Are they a fast learner? Are they not a fast learner? You know, is that important? And so many other types of criteria. Usually by the end of 90 days, an organization will determine, is this person staying on the team or not? Right. Absolutely. Yeah. I think that's a really

33:30important, an important piece. I mean, I think, and I think of, you know, when you send that offer letter to someone, it's almost like the journey is starting over again. Not, you know, from a hiring perspective, but you get to know the person and you get to integrate them into your culture and into your world. And I think that's a really cool thing. And it shouldn't be discounted because it can be really powerful. So, so with that, I'd love to jump into the, the borrow, which is our B, if you will. I don't have any Shakespearean things for that one, but that's okay. I'll make them up with one thing

34:01there. What? I said the three B is a little high for Appaday consulting. There you go. Okay. That works for me. I like that. Now we're getting into some collective identity stuff, which is awesome. But when we talk about borrow or the three B, the third lever, really what we're talking about is kind of the fractional and contract economy. We are seeing this exploding today in our world. I know so many people who work fractionally or, you know, are looking at contract employment. And I just think

34:37it's, I think it's an important thing for business owners to realize in HR departments is that this is an option as well. It actually is a very strategic option. I do see that a lot of organizations use it more reactively. Like, oh my gosh, we just got this huge project and we need to have somebody so we're just going to hire someone and it's going to be a contract, right? Only for this project. I think there's a lot of power in being very deliberate in how you, um, deliberate and strategic in how you use the borrow lever. In particular, I think it's important to think about kind of the

35:14transactional nature, um, of the contract or fractional employment, right? It's just a feature of it. Um, it's just kind of how it works. It's more transactional. There's actually laws in various states that dictate how you can work with a contractor. Um, and those are really interesting. Yeah. Yeah. I mean, I find them, I find it interesting to look at it. Like the laws of Minnesota here are different than they are in New Jersey or Massachusetts. Right. And so knowing what those laws are, I think it does give you, um, it gives you an opportunity to learn as an HR person

35:50or a leader or a business owner. It gives you an opportunity to learn about what, what is this lever really all about? And I feel like that's a lot, a big way of how I kind of come in with you, Elizabeth is I tend to take that HR perspective on what I do. You know, I may be an IO psychology professional myself, but I did go into the HR realm, no matter how much people argue IO and HR aren't connected. And I honestly am so glad I did because I'm on the strategic side of HR. And when you think about contracting it, you can forecast with organizations of, or you can even have a plan

36:23of, Oh my gosh, if we need to switch to contracting, maybe we have something in place already. We're prepared to do that. Right. Obviously right before you implement it, you want to double check it, but contracting the fractional side is becoming more consistent. People want to naturally work for themselves. They want to have control over their schedules. They want to have control over like the flexibility they need in their life. And because of that, sometimes the borrow level is a great way to go about it. Plus borrow might be, sometimes it could be that midway between build and buy

36:55too. So maybe you have a level of capacity internally that could do this job, but you also know there's a lot of development needed and, or there's parts of the work that need to get done now by an expert without any ramp up period. And so you might connect this contracted firm, this contracted individual consultant of some sort to come in and take over the things that need that expert right then. But this person might work with an internal team member who is building

37:26to take over something like, um, other times it could be a matter of, it's not a full-time role and it doesn't make sense to bring someone in full-time for this or to build someone full-time into this role. And even if someone has capacity and like has the capability internally, they may not have the capacity to add to their workload too. I think that's common with senior leaders. So that might be another reason you bring in the level three borrow. Yeah, I think all of those are really great points. And, you know, there's also the financial component with that and I won't get too

37:59deep into that, but you might be looking at your finances and saying, we know that we need this specialization or we need this expertise and we are not financially at the place where we can commit to a massive salary. Right. And so this can be a really good kind of, to your point, bridge option between, you know, kind of the building and the buying in another, in, in other ways too. And I, this has been the case, um, specifically about an organization I worked with and where they were trying to decide if they wanted to have an operations manager, not just the COO, but also an

38:34operations manager. Right. And they just weren't quite ready to make that commitment to a position like that because they weren't sure how it was going to play out because they never had it before. And so it was a great opportunity for them to bring in a contractor who specialized in operations management and was able to kind of bring some ideas forward and kind of help navigate a few different scenarios so that they could kind of test whether it was something they wanted to make permanent. And I will say that I think that experience was, was really a cool one. It brought in some really

39:06fresh ideas, some cool projects, um, things I got to participate with as well. Um, and ultimately they did decide an operations manager was best for the organization. Um, and they were able to then utilize that contractor, um, who I guess maybe was more fractional if you will, but, um, utilize that contractor to kind of get someone up to speed. And so, um, applying their skillset in more of a developmental way, um, than specifically to the organization. And you know what, I think that's really darn cool.

39:38So we can be creative. I think there's not, again, it's not everything has to be the, you know, one, one way. And I think that's cool. Yeah. And, you know, I default to thinking of, of the borrow lever as, you know, you're needing that expert, that consultant, that really high level individual a lot of times, but I want to break it down. Who has used temp agencies in the past? Manufacturing units, especially like units that do a lot of filing type paperwork, usually less confidential for temps,

40:08but people that have a lot of like hands-on, they can bring in multiple levels of workers at once for busy periods. Temps are considered borrowing as well. So I actually work with a lot of manufacturing units who do the borrow method within temps and temps alone. And sometimes these temps based off of workload may be brought on as full hire. And a lot of these temp agencies have the higher, like have the temp to hire framework as part of them. And so it's, it's actually a helpful way to

40:39even recruit and buy down the road, borrowing in the meantime, exactly what Elizabeth was talking about. Well, and there's a direct tie there to forecasting as well, which is kind of how we started this conversation. There's a direct tie there because you think about manufacturing as a whole, which is an, you know, an industry I work a lot in. I have a lot of clients in manufacturing. And what, what we see with their forecasting models is that there's often seasonal changes that occur as a result of the product they create. Right. I, you know, I have one client who makes snowboards,

41:15for instance, right. They make snowboards for the winter months. Right. And then they do water skis for the summer months. Right. And so it changes, but the, the fluctuations based on the products they sell and the, the market that they are targeting require them to ramp up the number of people they have in production at certain points of the year, because they need to prepare for those times. Right. That is an amazing place to utilize the borrow method. Right. If you know, you can't keep someone on, you know, all 12 months of the year, but you really need help in these specific months

41:50based on the forecasts that you've, that you've developed, that's a great time that you can use that borrow with the possibility, of course, to your point of potentially transitioning into a full hire. And that's, if it's necessary, you know, it might not always be necessary. It was actually a, an interesting scenario. I don't remember the company exactly, but there's something I heard where a company, its workers went on strike, but guests who kept coming to work because they didn't technically work for this organization, the temps and guests who got brought on full-time, all of the

42:23temps. And so this company had a major, major, obviously very, you know, external specialty type of situation, emergency, and the borrow method that they were utilizing ended up maintaining the organization for a long period of time, or else the company could have gone through a major crisis and they didn't. And while, yes, you know, to hear that some staff went on strike and something happened, maybe something not so positive happened, but that's not, that's not our place to judge. Our place is to help organizations forecast situations. All in all, I do want to like quickly

42:57note, like what could go wrong with the borrow method. You're okay with that, Elizabeth? Absolutely. Yeah. I mean, one thing that could go wrong is that you're treating the contractor more like a staff member. So this was that transactional theory that Elizabeth brought up. And so usually it's going to become, you know, a little bit confrontational that contractor might not want to continue to work with you. And then that borrow method could fail. Further, if there's contractor dependency where you're so reliant on this individual, then borrowing could

43:28become a norm, thus avoiding harder decisions and not actually forecasting properly. And then if this contractor again walks out due to circumstances, then the company could find itself back where it started before it brought the contractor on, as well as the misclassification risk. So Elizabeth hinted to this earlier, the whole, you know, how the states classify contractors, what can be a contractor, what can't be a contractor, you know, for example, like a, you can't necessarily require a contractor to come to like staff meetings necessarily, right? You can't do that. If you do

44:04that and the contractor has to, then they could actually be considered an employee of the organization. So it's very important that there's like expectations put out that scheduling is a collaborative effort between the company and the contractor. Absolutely. Yeah. There's, again, there's a lot there for sure. I mean, I, like, I'm thinking of one state in particular that like, you can't tell a contractor to do anything really. But it, I do, there's definitely, you know, between like a full W-2 employee

44:34and then a 1099 contractor, there's, there's just different considerations and different ways that you operate. But all in all, I think it's, if it's something you're used to and you're willing to learn about, it's, it's absolutely doable. Yeah. So thank you for that. Yeah. All in all, I feel like there are these three levers, the three B's that you could go, go to. And it can be hard at times to decide which one is the best route. Obviously, had you had some forecasting previous, you may have

45:04already known which one would have been the best option. But sometimes you find yourself in an emergent situation. And at that point in time, you have to ask yourself a few questions. Elizabeth

Choosing the Right Option

45:14actually hinted to these earlier, but what are those questions? You know, how do you choose which one, if not, which ones on occasion, usually you're using one, not multiple to use. Elizabeth, you want to take us through those questions? Yeah, for sure. I mean, I think based on, you know, job analysis and all of those pieces, we want to ask ourselves, you know, what does the role actually require? You know, what, what do we need? And what do we need now? And what is it, what do we need in the future? So that's the first one. Not just role, but organization, I'd argue. Yeah, absolutely. Yeah.

45:47So what does this role actually, what is the role in the organization actually require? It's also, you know, the second one is what does our talent inventory look like? Do you have the people that you need already and the resources to develop it? So taking a forward look at, you know, if you do have folks internally, do you have the resources? If not, maybe considering one of those other levers. And the last part is really about what is the time horizon requirement, right? And what I mean,

46:17when I say that is, you know, are you, are you looking ahead? When do you need this help? I can't tell you how many times people will call and say, we need to backfill this position. You know, then let's say it's a CEO. I don't know. I'm just making something up for like a CEO position, right? Should that happen four months before the CEO retires? I would argue absolutely not. It should be anywhere from eight, I think 18 plus months to be realistic because you need to pass down that historical knowledge to someone else. So that's where succession plan really comes in. And when we try

46:53to combine kind of, or we try to look at the overlap between the human elements and the forecasting that a lot of businesses are used to, the term time horizon, in my mind is really synonymous with succession planning.

47:09Oh, 100%. I feel like no matter where you're at, whether you're in a situation now where you have to choose one of these or not, I think you need to ask yourself these three questions now regarding each and every position at your organization. This is how you start forecasting is by saying, what happens if this person leaves? What happens if this other individual leaves? Do we have the capability to manage that? What is our plan? What would we have defaulted to usually? Start asking yourself some of these questions for those non-redundant critical roles. Because maybe just

47:43maybe you'll start forecasting a little bit more. You might start highlighting that next fit who's at your organization, if there is one. Or you might start doing some research on what else is out there. Who else is out there? Is there anyone to contract even? If something will be that senior leader doesn't leave, but simply their time needs to be entirely focused elsewhere. And a big part of what they used to do is they can't handle anymore. So that's another question. It doesn't have to just be when someone leaves. It can also be when a major transition of responsibility happens too.

48:16Absolutely. Yeah. I think all of those things are very true. And realistically, what it boils down to in my mind is that, you know, it's creating a sense of maturity in operations as it applies to people. Right? We already do a lot of work thinking about operational maturity in business, in finance, in marketing, in all of those areas or functional areas of a business. But what does that look like when we apply it to people? Right? And I just want to say this for all of our folks who are not in HR. This is not just an

48:50HR responsibility, right? Like this is a leadership responsibility. And I think leadership teams should be considering both the financial impact as well as the people impact. And that's, again, I could go on and on because I'm very passionate about it. But all in all, this conversation today just kind of leaves me a little bit with, you know, when you're thinking about capability gaps, you know, ask yourself which one of these levers is best in this scenario. Right now, you know, take it take the time to evaluate whether building someone buying a new candidate, that sounds awful, but you know what I

49:25mean, or borrowing, contracting would be the best choice for this particular gap that you're trying to fill. So all in all, I think this was a great conversation. Seems like we have a few other conversations that we're going to have to make some podcasts about. As always happens, that tends to. So I guess we'll conclude for today and we will see all of our listeners shortly in the next week. So with that, this concludes another intriguing episode of Organizational Sherlock's. I'm

49:58Elizabeth Fleming. And I'm Morgan Ashworth reminding you that the journey to success is an ongoing investigation. Stay curious, stay strategic, and keep utilizing insights to decode your business mysteries. Join us every Friday for your next whodunit. Let us know if there's something in this episode you want us to talk further on. And otherwise, this is Organizational Sherlock's closing today's case. We will see you all next time.