When it’s smart to climb aboard a sinking ship

Steve Boese Candidate Pool, HR, HR (& Life!) Advice, Job Seeker Advice, Recruiting, Steve Boese

From the Department of the Incredibly Obvious it seems like organizations in financial distress are often unable to attract the talent they need to try and turn things around. Or said differently, when the ship appears to be sinking, it can be pretty hard to get new talent to climb on board. But while we all seem to know this to be true, until recently no one had attempted to measure or quantify the impact on talent attraction of a company’s financial problems.

But fear not FOT nation, finally we have data that supports what you’ve found if you’ve ever had to recruit for a company in a death spiral. Check out this excerpt from a summary of recent research on the effects of a company’s financial duress on its recruiting effectiveness conducted at Northwestern University’s Kellogg School of Management:

Using data from a major online job site, the authors were able to make detailed comparisons between identical job openings at distressed firms and healthy firms. They found that distressed firms received significantly fewer applications compared to the healthy companies: about 20% fewer applications for every 1,000-basis point increase in a firm’s CDS price (an indicator of a firm’s credit worthiness and risk). “We were surprised that the effect was so large,” (study co-author Jennifer) Brown says. “These applicants weren’t interested enough to create even the possibility of getting a job offer at a distressed firm. They just didn’t apply.”

Simple data point – according to this research if you are hiring into a distressed firm you’ll see at least a 20% reduction in applicant flow, and possibly more if you find yourself cruise directing on a modern-day equivalent of the SS Minnow, (millennials – Google ‘Gilligan’s Island’ to get the reference). Again kind of obvious and not terribly instructive if you are a talent pro at one of these firms. You don’t really need some academics from the Big 10 (or is it Big 12 or 16? Ah, who cares.), to prove to you how hard it is to get great or even good talent to sign on to a sinking ship.

But I think there are a few reasons why the research is interesting and worth thinking about, especially for Talent pros at one of these struggling companies, (and face it, you probably have some extra time on your hands). One, the inability to attract talent is usually not talked about much when evaluating whether or not a firm can turn things around. We usually hear details around financial measures, debt payments, declining revenues and the like. But talent troubles are usually not given the same attention, unless we’re talking about the comings and goings of rock-star CEOs. Two, it underscores the importance of understanding what positions, and the likely talent deficits that will accrue at these positions, are going to accelerate the decline faster than others. It may indeed be too late to save the ship, but knowing the ‘right’ type of people to try convince to give it a shot is likely the only chance you have to survive.

And last, and this was not really a focus of the research but seems like the intuitive flip side to the conclusions, is that a struggling firm just might be exactly the kind of place a hungry job seeker should focus some attention towards. You won’t have as many competing candidates to go up against, and the Talent pro is more likely to give you a shot as we know they are probably getting desperate for a quality candidate, (and may be willing to think more expansively). And if somehow, if you can help save the ship, you might just get a reputation as a ‘Turnaround guy/gal’ – and one thing we know about business, is that there will always be plenty more sinking ships to climb aboard in your career.