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In the not-so-distant past, when a CEO or fellow member of the C-suite at any major corporation announced retirement or resignation to pursue a new opportunity, it was a foregone conclusion that the company would be promoting from within to fill those shoes. Looking outside the confines of the organization was something a company did as a last resort. It was assumed that the right insider could hit the ground running with a keen understanding of the company’s operations, its objectives and its values. In perhaps no other industry was that way of thinking more pervasive than in direct selling, where culture is everything. Understanding what can be a complex business model is a challenge for any newcomer to direct sales, but even more critical is something you just can’t quantify.
You may have heard the buzz term “culture fit,” and that criterion ranks very high during any talent search in our channel. The perceived value of that direct selling experience, along with the sheer quantity of direct selling companies we have today, has contributed to what some consider a problem: leaders who often move from one direct selling company to another. Is that good for our companies? There’s no definitive answer to that question. While sometimes an “insider” is able to move to another direct selling company, apply objectivity and a set of fresh eyes, others may come in with preconceived notions, which can make it problematic to assume that what worked at company No. 1 will work at company No. 2.
That’s not to imply that outsiders are the only way to go. There’s a learning curve in this channel to be sure. It’s vital that candidates come into direct selling with transferrable skills, an open mind and a willingness to immerse themselves in a distinct culture the likes of which they’ve probably never before experienced.
At the same time, however, within this global economy where we now find ourselves, if you hire only from within, you’re significantly reducing your pool of potential candidates. “Overall, it’s really a question of whether you want to build a sustainable business for the long haul,” says Pat O’Hara, Chief Human Resources Officer for Nature’s Sunshine. “If you’re looking for top talent, you’ll have to look both inside and outside the channel.”
In July 2015, Direct Selling News examined the topic of talent acquisition, including the imminent need for succession planning. In the 12 months that have followed, we’ve noted the incredible hyper-growth occurring at a number of direct selling companies, many of whom are relatively new on the scene. Those fast-growing companies need skilled leaders who can hit the ground running. Within this climate, we’re often seeing executives move from one direct selling company to another. “Insider experience” appears to be a hot commodity. Combine this executive shuffling with baby boomer retirement, and it’s clear that direct selling offers significant opportunity. But do we have enough internal talent to fill these available positions? Some direct selling recruiters and human resources executives believe we’re facing a talent gap, while others don’t. Regardless of which side of the argument you choose, our current climate raises some interesting questions about just how critical industry experience is for these high-level positions, how we can set outsiders up for success through in-depth onboarding, and whether we’re doing enough to groom high-potential employees within our own companies.
In 2015, ManpowerGroup released its first Talent Shortage Survey in 10 years. More than 41,000 hiring managers in 42 countries were surveyed for the study, which found that the most dramatic change occurring during the decade prior was “the emergence of the Human Age, where talent is the new differentiator,” says ManpowerGroup CEO Jonas Prising. The number of global employers reporting talent shortages in the 2015 study reached a seven-year high of 38 percent. What was most revealing, however, was how these talent shortages were expected to impact affected organizations. Among the employers who believed that talent shortages were impacting their ability to meet client needs, the most common ramifications were expected to be a reduction in ability to serve clients (42 percent) and reduced competitiveness/productivity (42 percent). Thirty percent expected an increase in employee turnover, and 26 percent anticipated lower employee engagement and morale. Twenty-five percent expected reduced innovation and creativity in their respective organizations, and 25 percent stated that talent shortages could lead to higher compensation costs.
Are we facing a talent gap in our industry? That depends upon who you ask. Three things are clear: 1) Ours is a niche industry; 2) We’re in a global market in which competition for talent is enormous; 3) The majority of HR executives in our industry will tell you that recruiting from both inside and outside direct selling is a good strategy for a well-rounded organization. While some functions do favor prior industry experience, in most cases, talent, not experience, leads the day. “Exceptional talent is, in my opinion, the single most important element to a successful direct selling organization,” says Stuart MacMillan, President of MONAT Global, a direct selling haircare products company that launched in 2014. “I place talent above product, above geography, above pricing, above any other single success element. If we believe this to be true, is it now time for us to begin to cultivate and groom new talent to infuse our companies with fresh new ideas?”
Michael Neimand, Division President of Network Marketing at Beachbody, also believes talent should be the first priority. Neimand says, “I think the best approach is to hire the right person, who brings the necessary skill, experience and vision to be effective, whether they come from inside or outside the industry.”
What does the term “talent gap” mean, anyway? In a January 2015 article, “The Truth About the Talent Shortage,” Forbes contributor Liz Ryan defined the concept: “There’s a talent shortage whenever employers complain that they can’t find people with just the skills and the background they want, at exactly the price they’d like to pay.” Ryan isn’t speaking about the direct selling industry specifically, but she raises an interesting point. Could it be that this so-called gap isn’t really a gap at all, but rather a signal that we’re not looking at the actual talent pool we have in front of us, instead creating a mythical candidate who doesn’t exist? Could it mean that we can do a better job of developing leaders within our own companies, or perhaps that we should cast our net wider and consider more outside candidates? These are all good questions for discussion.
Whether companies fill that real or perceived “gap” from within or step beyond industry borders for a bit of outside perspective depends upon a variety of company-specific dynamics. And—whether or not they hire from the inside—all of this industry movement calls attention to the need for companies to ensure they’re identifying, motivating and rewarding high-potential employees. Routinely filling your talent pipeline simply makes good business sense; it’s an insurance policy for employee retention and company success.
Our national economy is by no means out of the woods, and many organizations that flattened in response to the recession are continuing to operate under that structure. Middle management continues to do much more with much less. Heavy workloads and reduced training budgets have resulted in fewer opportunities for leadership development, skill acquisition and, ultimately, advancement for managers. When it comes time to fill executive vacancies, if a company hasn’t been actively grooming its next-generation leaders, a talent gap could very well be the result.
“De-layering has pushed the focus of talent searches to the C-suite only,” says Judy Stubbs, Vice President of Pearson Partners, a direct selling recruitment firm based in Dallas. Stubbs calls Gen Xers “the sweet spot of talent,” but within flattened organizations, their leadership development is often due to their individual efforts versus any formal programs. “We’re living in such different times today. People aren’t hired out of school and put into management training programs anymore,” she says. “We’re not invested in grooming young talent.”
Whether a company offers leadership development opportunities to groom high-potential employees largely depends upon its bottom line. “When you’re growing, you’re creating opportunities for people, and when you’re not, it’s considerably more complicated,” O’Hara says. “It’s a challenge to develop people in a non-growth business.” And yet, “a company’s survival depends on people who can step up and the ability to hold on to good people when times get tough.”
At Utah-based Stampin’ Up!, Human Resources Vice President Julie Gandy has been focused on finding leadership candidates from within the company in recent months, for a few reasons: 1) They understand the business model and find it easier to acclimate to the company’s culture; 2) It has saved the company money; and 3) Stampin’ Up! offers internal development opportunities to its employees through core project teams. Through these cross-functional teams, high-potential employees are able to stretch far beyond their typical roles, interact with company leadership and assume responsibility for high-level projects that support the company’s goals. These kinds of internal development opportunities, along with mentorships, are highly effective methods of building future leaders.
Gandy mentions the distinction between larger and smaller direct selling companies. As a mid-sized company, Stampin’ Up maintains a staff accustomed to filling many roles. “The more hats you expect people to wear, the more likely you are to stay inside your own company or within the channel,” she adds. “If you’re looking for a specific skill set, you’re more likely to go outside.”
Debbie Squier, Founder of IMPACT This Day, a direct selling executive search firm based in Clearwater, Florida, believes the channel already has a great deal of talent. However, “When the same people fill the available executive roles, you can suffer from a lack of new ideas. You could be in danger of restricting creativity and innovation.”
This is exactly the approach taken by Jere Thompson and Chris Chambless, Co-Founders at Ambit Energy. Since its founding in 2006, the company has not hired anyone from either the direct selling channel or the energy industry. Chambless says, “We wanted people that didn’t have a preconceived idea of how things were supposed to be done; we wanted people that would look at the opportunity in front of us with new eyes.”
How far a company should cast its net really depends on its stage of growth at the time. When looking beyond direct selling, though, “companies have to be very careful in their screening process. Aptitude is one thing, but does the candidate embrace the channel?” A recruiter can determine a candidate’s openness relatively quickly during the screening process. She recalls a candidate who, during the interview process, proposed a retail business model for the direct sales company for which he was being considered. “You should have great ideas about how to improve our channel, not about altering its foundation,” Squier adds.
The need for high-level candidates to have prior direct selling experience has grown as the industry continues to evolve and become more complex, says Zachary Wilt, Director of Recruiting and Retention at Take Shape For Life, a meal-replacement and health coaching company based in Owings Mills, Maryland. Wilt says, “If you limit yourself to executives with only directly selling experience, the talent pool can be somewhat constrained. Fortunately, at Take Shape For Life, we’ve been able to attract a team of executives that includes folks with both deep industry knowledge and diverse corporate experience.”
The fact that Meridian, Idaho-based Scentsy has hired so many industry newcomers in recent months wasn’t premeditated, says Talent Manager Angie Wolthuis. Instead, she says, the scented wax company simply cast its net wide to find the largest possible pool of available talent, adding that she doesn’t consider the direct selling channel to have a talent shortage per se. “We’re just at a point where we want to take our company to the next level, and we’re looking for depth and breadth of experience.”
For insiders, merely having direct selling experience isn’t enough. Our channel is continuing to evolve—quickly. Those insiders who want to stand out from the rest must challenge themselves to keep learning, continually raising the bar on their business acumen across the organization. “I do meet candidates who think, ‘I’ve been in direct selling forever—of course you should hire me.’ I ask them, ‘How have you continued to develop yourself?’ I think sometimes there’s a tendency to get too comfortable,” Wolthuis says.
Should You Stay Inside… or Go Outside?
For any position, the decision about whether or not to hire from within really depends upon the function, the degree of specialty required and the company’s culture. HR executives and recruiters offer a few suggestions of their own below:
Scentsy’s Chief Human Resources Officer Richard Steel leads a team that hired several executives within the past 18 months. All but one of them—the company’s Chief Sales Officer—came from outside the direct selling channel. Direct sales is indeed a different animal that requires a specific mindset. Within sales, “you have to understand the mind of an entrepreneur,” Squier says. “You’re dealing with independent businesspeople. You’re not just managing; you’re also influencing.”
Field Development/Field Communication
“Field development requires leaders to drive strategy, and build strong relationships with their networks. Even leaders who have guided internal sales organizations at non-direct selling companies find there are some different elements and unique skill sets needed to be successful in this environment,” Wilt says.
Gandy adds, “For those employees who work directly with the field, inside knowledge is important.” Every direct selling company has an independent salesforce with its own unique dynamics. At Stampin’ Up, for example, the company’s salesforce of 45,000 independent Demonstrators, as they’re called, “aren’t as focused on compensation. We have more hobbyists; they’re interested in crafting, social bonding, connection with others. There are nuances with our salesforce.”
Direct selling experience is helpful in order to understand the compensation plan and appreciate the value of individual distributors, Squier says. “That individual is so much more than one person; they’re bringing their customers and other distributors into the system.”
In finance, Squier adds, “you also have to have an appreciation for independent business owners—they’re the backbone of our business—and an understanding of human behavior.”
For some companies, the infrastructure hasn’t kept up with the continually evolving needs of the business, and yet that very infrastructure is key to maintaining competitive advantage. An objective outsider may be able to offer some valuable experience and suggest an alternative approach.
We’re all looking for ways to help independent distributors find new customers, then turn them into lifetime customers with such perks as VIP programs, autoship and other rewards designed to promote loyalty. This is an area where outsiders could potentially bring in fresh ideas, says Squier.
Social is a huge component of any direct selling company’s marketing strategy today. Given that social media and technology in general continue to evolve at breakneck speed, direct selling companies might be well-served by an outsider who could bring some innovative strategies to the table, says Stubbs. Additionally, an outsider could suggest new ways of engaging with your independent salesforce that you’ve never before considered.
For international expansion, Stubbs recommends using fewer expatriates and choosing more in-country talent for two reasons: It’s cheaper, and candidates who already are on the ground understand the local and regional nuances, so the onboarding process isn’t as extensive.
Onboarding Is Everything
Speaking of onboarding, it’s critical, particularly for channel newcomers. Acclimating to a new channel is a challenge for any executive, but direct selling presents a unique learning curve. We’ve been working tirelessly to clear up myths about the direct selling channel for decades, so it’s important for any newcomer to understand where these misconceptions come from, and learn to separate the facts from the falsehoods.
“When onboarding isn’t sufficient, people are likely to apply their own preconceived notions, and that’s a dangerous thing in the direct selling world,” O’Hara says. Outsiders require an in-depth view of the company, the culture and the larger picture of direct selling. They need broad exposure to all elements of the business, including the opportunity to meet and spend time with company founders in order to understand the organization’s heritage, and time in the field to understand representatives’ pain points and motivations.
Neimand believes that “the best on-boarding practices are to clearly articulate the objectives of the company and the specific role, the culture of the company, and parameters for how the candidate will be successful.”
Ideally, the onboarding process should include attendance at a company event. What better way to become fully immersed? If the timing is right, a channel-wide event, too, is invaluable for introducing outsiders to the key players and issues surrounding direct selling.
Here’s a point worth mentioning: In a 2013 article, titled “How to Hire Your First Outsider and Make Them an Insider,” Forbes contributor Harris Goodman said, “It is important to look for talent that does not overlap with your existing skill sets. Overlap can have serious consequences with workflow and personal territory. However, if strategically managed, adding complementary skills and experiences will allow your team to take on new challenges and achieve greater velocity.”
Regardless of their insider-to-outsider ratios, direct selling companies that want a competitive advantage in our increasingly crowded marketplace would be wise to make sure they not only have a succession plan in place, but that they revisit it every two to three years.
In a webinar, titled “Your Succession Planning Sucks (And What You Can Do About It),” Phil Haussler and Joan Carter from Quantum Workplace, the HR technology company that conducts the research process for DSN’s Best Places to Work in Direct Selling program, presented the consequences associated with lack of planning: alienating backups, overlooking internal candidates and overpaying for talent. Waiting until the last two years of a CEO’s term, they say, is too late.
Generally, potential leaders shouldn’t be told they’re being considered for succession planning, Haussler and Carter say, because a “horse race doesn’t always lead to the best behavior.” However, there are occasions during which prior knowledge is beneficial. Take Steve Jobs, who introduced his successor, Tim Cook, at Apple long before his untimely passing. The move was deliberate and intended to provide employees time to adjust, and for Cook to transition effectively.
Haussler and Carter recommend that succession teams—or, in the case of a CEO, the board—create a CEO success profile, identifying the knowledge, skills, behaviors and values critical for the role. The board should answer such questions as “Who has failed in this role, and why?” “What will the future demand?” and “What kind of aspirations are needed for success in this role?”
Companies also should create an emergency succession scenario, an exercise that helps identify gaps before they become crises. The plan should be reviewed annually and should include key contact information, employee and field communication messaging, and communication strategy.
Direct selling is a channel with a rich heritage and longstanding reputation for giving people the right tools to reach their potential. We’re also a channel with enviable tenure; our employees possess an invaluable wealth of knowledge, including how to engage, motivate and inspire thousands with the products and the business opportunities we offer. We have much to teach others, and, as we continue to evolve and modernize, they, too, have much to teach us. At the same time, one of the greatest investments we can make is to challenge, motivate and inspire our own employees. Whether they’re newcomers or veterans, executives today or tomorrow, they’re on the front lines of direct selling’s future.