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This Hiring Formula Most Deserves Your Attention

by
Shanil Kaderali
Apr 2, 2013, 6:21 am ET

bigstock-Male-hand-drawing-a-chart-isol-27025991I hear from talent acquisition leaders that they want a seat at the table. I ask: “What does that mean to you?”

For an individual recruiter, it’s building trust with your hiring managers. For a recruiting manager, it’s building trust and showing progress on hiring needs with multiple hiring managers.  For the leader, it’s driving quality of hire, building relationships with leaders, enhancing the brand, globalizing hiring if required, managing a large budget,  driving productivity outcomes with the teams they manage, and delivering on hiring goals set out by the company at all levels especially the executive level. Any talent acquition strategy has to be aligned to these company goals and directly to the HR vision.

HR has to build bridges with their finance leaders and with those who influence strategy. For this to happen, talent acquisition has to be the bridge with its HR leaders to be the subject matter expert in hiring practices; specifically, hiring practices that help reduce short-term attrition.

I was once given a unique assignment level for a multi-unit retail organization where the front-line employees interacted with customers, and their interaction strongly impacts client retention. There was 48% turnover in these roles from the division that generated over 80% of company’s revenue and hasn’t been profitable since 2008. This is a billion-dollar private company.

I didn’t fail at my assignment. But I didn’t succeed either. It was a great learning experience. I was involved in hiring senior executives in strategy and finance and got a proverbial seat at the table when it came to collaborating on how to solve the high turnover rates for front-line employees.

This wasn’t my first time. I successfully did the same at a public Fortune 100 firm. I put together a strategic plan and business case and introduced better hiring practices after getting buy-in from senior executives which resulted in reduced turnover over two years from 45% to 22% and drove up quality of hire. The chief human resources officer and CEO were happy. This made me confidant for this new company/assignment.  I built a sophisticated business case that included strategy, three-year cost projections, a focus on outcomes like turnover reduction, quality of hire, etc., with different hiring models showing the technology roadmap, resources needed over time, and investment required for the budgeting process. It was very slick, well received by my peers, my chief human resources officer loved it, and two influential Finance leaders supported the approach/model. It was approved to be presented to the Board after 11 months of effort.

Two weeks later, there were multiple C-suite changes, including the chief human resources officer. My work got stalled for a few more months and eventually I moved on. While disappointing initially, I learned what it meant be at the table, first with a big successful Fortune 100 player with a conservative business approach, but open-minded to data/metrics. The second time when high leadership turnover and poor company performance were involved

Talent acquisition needs to partner with HR to prove the common-sense formula that:

Attrition Reduction Improves/Retains Revenue!

We all know it’s true. We know it in our guts.  We need to convince leaders to truly believe it too; have senior leaders buy-in to this formula; and have smart number-crunchers validate it with a high percentage of confidence.

Data by itself won’t provide you access to new information, because it comes from the past. HR leaders must search beyond the data to find what’s missing. We do this by observing closely and asking new questions.

The business cases I’ve developed showed improved quality-of-hire outcomes, and reduction of time to fill resulting in managers having more time because they’re not deluged by the non-essential parts of the hiring process (scheduling their own interviews, onboarding). But the one metric that caught the eyes of my partners, and caused lots of internal discussion and debate is Revenue Impact from Turnover Reduction.

Working with Finance and Operations validated our metrics. A focus from my part was on customer retention.  We did a thorough correlation analysis. We used a scientific approach to answer the question: “What drives success in customer retention?” This confirmed turnover rate as a factor.

Our major finding with one client was that 4% of customers indicated that they didn’t renew with company due to specifically high turnover on the front line. The study determined a 1% reduction in short-term attrition (more than 90 days) would impact revenue up to $1.8 Million. So a 10% reduction in turnover could mean $18 million in revenue. We believed it would be more, but the finance and operation teams felt comfortable with the more conservative estimate. Factors like negative brand impact, lost productivity for the front-line, and lower morale all impact the business. But those were soft costs we couldn’t really assess.

I’d ask this question for your business:

For every 1% of short-term turnover reduction, what is the expected impact on net revenue?

There are different ways to get at this data. It’ll depend on your organization/industry and philosophy within Finance. I prefer doing a correlation analysis, but there are other methods too. The challenge will be the validation process as there’ll be a lot of views.

To take it one step further, there are many formulas to be a business partner with a seat at the table. The formula above is one that helps show how HR and specifically, talent acquisition’s, hiring practices gos beyond just being a cost-center.

Other formulas and steps to take to raise your department’s profile:

  • Identify the metrics that define quality of hire for your organization
  • Set a strategic plan for hiring practices that will improve outcomes (like turnover, cost, scalability)
    • Assessment technology could be explored. For a major retailer, data from the Shaker Consulting Group showed 58% improvement in 120-day turnover and 36% increased productivity after implementation of The biggest deal was customer service satisfaction increased over 20% and sales increased 22%.
    • Decide what’s going to be “RPO’d” vs. done in house.
    • Technology roadmap — Plan how technology will affect your department
  • Develop an employment branding strategy — social media/mobile and your candidate engagement strategy
  • Document an executive succession/pipeline strategy and be close to the executive hiring process
  • Build the relationship with your HR & Finance partners
  • Understand the political climate of your workplace
  • Understand the motivations and goals of the board of directors
  • Know the strengths of your recruitment team. Keep them challenged, motivated, and engaged. Let go of the members who don’t buy in to the quality vision.
  • Win a lottery and buy a lot of shares and/or make sure someone you trust gets a board seat.

Figure out how hiring efforts support the revenue of the business. Determine how both talent acquisition and HR can be transformational. Calculate why they deserve investment versus being cut. You may get your 15 minutes of fame or infamy. Good luck.

 

photo from bigstock, for ERE.net only

This article is provided for informational purposes only and is not intended to offer specific legal advice. You should consult your legal counsel regarding any threatened or pending litigation.

  1. Bill Meidell

    Shanil,

    This was a great read. As a vendor in the HR space our challenge is to build products and services that help HR accomplish some of the very business objectives you discuss. Otherwise we are just peddling some “nice-to-have” gadget that will be gone in a year or two.

    Bill

  2. Maureen Sharib

    Good luck with this one.

    It’s a fascinating and radical concept and because it’s BOTH those things it won’t get any mileage in the Recruitersphere.

    When I said this 4 yrs ago here on ERE most disagreed.
    http://www.ere.net/2009/09/10/recruiting-belongs-under-finance/

  3. Shanil Kaderali

    @ Bill – thanks for your comments. One challenge is that many HR leaders don’t understand strategy. Focus in on the soft side of metrics, etc.

    @ Maureen – I’ve enjoyed your articles and an advocate for smart sourcing which includes cold-calling. Notwithstanding, I read your article. Finance kills any innovation so recruiting should not report to it. It should though partner with finance. Using stats, correlation analysis and ensuring high confidence coefficents (geek stuff) with turnover reduction and revenue will at minimum, get them to ‘acknowledge’ the science which in turn can influence change at C-suite.
    Uphill battle? yup.
    Radical & Fascinating – maybe.

  4. This Hiring Formula Most Deserves Your Attention | ERE.net — BROKERHUNTER Employer Solutions

  5. Keith Halperin

    Thanks Shanil: I interpret “seat at the table” as “desire for power”.
    I like what you said- mixing logistical tools with strategic ones.
    I think you need to:
    1) Figure out how much power you actually have.
    2) Who your allies/opponents are and how much power do they have- maybe HR and Finance are your allies and maybe they’re your opponents. Maybe some other department could be a better or more useful ally than these.
    3) Unless you’re trying to expand the number of things that you control (a standard power-move), I’d suggest stay away from “employer branding”- it’s to Recruiting what Marketing is to Sales.
    (Maybe you could partner with Marketing on EB to make THEM your ally.)
    4) You mention “buy-in” on quality and retention from your recruiting team. How’re you going to incentivize/penalize us for this, as they are both against our best interests? It’s in our interest to have churn-it’s job security. If you want good long term hires, how about requiring that quality, affordable, quick hires are deliverables of the hiring managers like their products or services? WE shouldn’t be held responsible for who THEY hire. It’s like holding Purchasing responsible for a poorly-made instrument personally selected and inspected by the Head of Engineering.
    5) Finally I mention the old legal saying that says:
    “If you’ve got a winning case- cite the law. If you don’t- cite the facts.” If you have the power, you don’t need to buttress your case with data. If you need to buttress it with data, you don’t have the power.

    Cheers,

    Keith

  6. Shanil Kaderali

    Keith – thanks for your insight.
    I didn’t look at it from the ‘desire for power’ but from desire for influence view. Sun Tzu, Klausewitz(sp?) and others can advise far more wisely/sagely than I on these matters. Politics is and will always be part of the dynamic.
    I disagree on EB. Building a partnership with Marketing is a very smart move. The money (for shared events) and data (candidate/attendees/customer profiles) which can be leveraged are too big to ignore. This is a strategic partnership that takes time to build as does finance/etc.
    As to #4, I think I noted focusing on short-term attrition – if not clear, we (TA) do influence that as part of assessment process. After that, agree – it’s not on us. If your recruiter doesn’t believe that quality hiring, low short-term attrition is a goal, then they should be working at an agency, not internally.
    #5..I’ll defer to lawyers on the wisdom of those cliches and cases can be unique though some truths are universal.

  7. Keith Halperin

    You’re very welcome, Shanil. “Insight” is too fine a word for it, but kindly accepted.
    IMHO, “influence” is a euphemism for “power”. As an example: while an ambitious manager/director/VP might be thinking: “I’m out to grab all the power over those pathetic rat-bastards I can” s/he might put it it out as: “We wish to grow our influence in order to create a passionate and innovative win-win environment among all our stakeholders.”

    As far as EB: ISTM that Recruiting’s core mission is to quickly and affordably put quality butts in chairs: PERIOD. To the extent that certain things accomplish those, they’re relevant to recruiting.
    However as mentioned before, if making a partnership with other groups furthers those goals (more money, power, etc.), all the better…

    As far as attrition: it is our job to provide complete and honest information to the decision-makers, aka full “due diligence”. However, we do not decide who gets hired. If you wish to reduce short-term attrition, then you need to make the decision-makers themselves accountable for the results. Furthermore: if you wish us to work toward retention and reconcile our interests with that of the company’s management, you need to provide us explicit guarantees that we will not work ourselves out of jobs as hiring decreases, and that there will be continuing work for us to do (perhaps working on “EB” and “Talent Communities” which we’d not otherwise have time for) when things slow down. The more you can get a correspondence between what the company wants/needs and what we recruiters really want/need, the better. I can’t speak for all recruiters here, but this is what I want as a recruiter:
    1) More autonomy and respect- being treated like a highly-trained professional with a great deal of knowledge and advice to offer (like a CPA or attorney), and not just a glorified order-taking clerk. You ask me how I can improve recruiting processes and procedures to get better results before you go elsewhere, since I know how to do my job, and do it well.

    2) More high-value add/interesting work emphasizing results (see “butts in chairs” above), money, benefits, stability. Basically, an environment that “gets” and follows this:*

    3) Less administrivia (paperwork, meetings, etc.) and emphasis on process. Basically, an environment that “gets” and follows this:*

    Cheers,

    Keith

    *Manifesto for Agile Recruiting

    We are uncovering better ways of hiring people by doing it and helping others do it.

    Through this work we have come to value:

    Individuals and interactions over processes and tools
    Quick, quality hires over comprehensive documentation
    Customer collaboration over contract negotiation
    Responding to change over following a plan

    Principles behind the Agile Recruiting Manifesto

    We follow these principles:

    Our highest priority is to satisfy the customer through early and continuous delivery of quality hires.
    Welcome changing requirements, even late in development. Agile processes harness change for the customer’s competitive advantage.
    Deliver quality hires frequently, from a couple of weeks to a couple of months, with a preference to the shorter timescale.
    Internal customers and recruiters must work together daily throughout the project.
    Build projects around motivated individuals.
    Give them the environment and support they need, and trust them to get the job done.
    The most efficient and effective method of conveying information to and within a recruiting team is face-to-face conversation.
    A quality hire which is on time and within budget is the primary measure of progress.
    Agile processes promote sustainable employee development.
    The sponsors, developers, and users should be able to maintain a constant pace indefinitely.
    Continuous attention to professional excellence and first-class service enhances agility.
    Simplicity — the art of maximizing the amount of work not done — is essential.
    The best requirements, processes, and hires emerge from self-organizing teams.
    At regular intervals, the team reflects on how to become more effective, then tunes and adjusts its behavior accordingly.

  8. Shanil Kaderali

    Keith: Awesome point on managers being evaluated on the basis of their retention results. I missed that in the article. Arghhh!!! In 2 of past companies, it was part of their evaluation for hiring. Great point and I need to ensure I address in any future articles. Thanks I did miss that.
    Your points 1-3 – agree but I do think that the role of the recruiter will evolve. Say, ‘reinvention of recruiter roles’ will occur but their needs need to align to company, its package/offerings and change (industry, company, etc)
    Talent communities are essential – any recruiting department that doesn’t have a strategy for Talent communities is woefully so far behind the curve, it’s bordering on incompetency. Most have some version even if basic. With EB, goal is to take it to more sophisticated levels and working with marketing can help that cause

  9. Keith Halperin

    Thank you, Shanil.
    I also agree that the role of recruiter will continue to evolve I often point out that FT internal or contract recruiters should be hired to do high-touch, high value-add work that you’d pay at least $50/hr to do and that can’t effectively be “trans-sourced (no-sourced, through-sourced, and/or out-sourced) for much less than that.

    Re: “Talent Communities”: I may be discussing that on a panel next month at the Recruiting Innovations Summit in San Francisco (SHAMELESS PLUG!).

    Folks: I would be happy to work to create Talent Communities for your companies (I’ve got the tools and resources to do it)- just don’t expect any significant amount of hires from them, certainly not within the next several months at the earliest. Consequently, those hiring managers who want quality and affordable butts in chairs NOW, will just have to wait….Oh and by the way, just forget that if you DID *want to build a group of people who would want to work for your company sometime in the future, there are much more efficient, pro-active, (and I’d guess) cost-effective ways of doing it than TCs. Want to know what those better ways are? That would be telling…

    Cheers,

    Keith “Can Self-Promote With the Best of “Em” Halperin
    keithsrj@sbcglobal.net

    *and were willing to devote the people, time, and MONEY to do it

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