The Honest Broker

But those employees are also people. Is it possible to find an honest broker and earn the trust of the humans in the “human capital” equation?

An effective broker will attract and hire high-quality employees aligned with the company’s mission and culture, onboard them effectively, upgrade employees’ skill levels to successfully take on the roles they were hired for, and finally, ensure the retention of excellent hires. It is a business based on understanding people, building and protecting relationships, and having a solid sense of workplace culture. Intuition and experience factor into the success of any individual broker.

But what if the human capital firm you use is a public company? By definition, those financially invested in the company are motivated by quarterly and yearly earnings targets. This fact will necessarily affect the ability of the firm to be 100% straight-up. As long as firms bosses are focused on short-term profits, the brokers will have to focus on short-term results or risk being short-term hires themselves. Bottom line: relationships take second place to profits every time in this scenario.

In his article in Forbes,“Businesses Need To Start Taking Human Capital More Seriously,” Ryan Wong confirms that for years, “public companies have reported their ‘health’ through the lens of just one thing: financial metrics” while ignoring the fact that what will “make or break a company aren’t just found in the financial data but also in people data.”

Finding the Honest Broker

What’s the secret to finding a human capital provider who can be trusted to honor the relationship with both company management and employees? How do you know your broker won’t throw your department under the bus if the margins are down this quarter?

1. Look for a firm that is owned and managed locally. The resource firm should have a hands-on owner or managing partner who is accessible.
2. Longevity—it matters. Brokers who have been in the business for a while know what they are doing. Being in the market for a respectable length of time showcases durability and reliability. No one can operate in this business for a long time without supporting clients.
3. Their earnings are based on their reputation and not at the employee’s expense. They don’t have to charge recruitment fees because they understand the value of the long-term.

Finally, you also want someone who understands business cycles. Chances are this will be a broker who has enough years of experience to have weathered numerous cycles. Someone worried about meeting the quarterly expectations of investors won’t be interested in weathering much of anything beyond the end of the quarter. 

How to Align Incentives?

An honest service provider, which is what all service providers will portray to be for every employee, wants to be considered a trusted advisor. It’s challenging (and inadvisable) to accept advice from someone you aren’t sure has your best interests at heart.

What happens when there are misaligned incentives? If your staffing firm prioritizes the short-term stock market returns for its investors while your broker’s stated goal is to be your trusted advisor, information may not flow with adequate transparency. Your broker may be forced to defer to the financial motives of investors rather than honoring the commitment to you. After all, they have mouths to feed too. In the end, it all comes down to character—and aligned incentives. You want your recruiting team to be on the same page, not working at cross-purposes.

The internal politics within an human capital firm can also be very damaging to a long-term reputation of honesty. With an independent human capital firm, there is one business goal: to serve the client. In a huge corporation, two business goals—quarterly stock earnings and human capital management—can work in opposition to each other. The latter must consider the world beyond the end of the quarter to conduct business humanely and sustainably. 

A relatively recent ruling by the SEC (Securities and Exchange Commission) sets a higher bar for public entities to track and report human capital metrics that convey meaningful information affecting the health of a business. Some of the SEC requirements include employee retention, health and safety, and promotion opportunities. In his human capital article in Forbes, Ryan Wong states that the SEC ruling “is a tentative step to getting public companies to reflect a shift in public opinion that gauges a company’s success by its environmental, social, and governance impacts rather than by financials alone.”

We can only hope that the culture will indeed shift within all companies. Until then, remember the important relationship between human capital firms and their clients boils down to is reliability, experience, character, independence, and reputation. They are the most important assets a successful advisor can have.