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This Hiring Formula Most Deserves Your Attention
Posted By Shanil Kaderali On April 2, 2013 @ 6:21 am In Advice and How-Tos | 11 Comments
I 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:
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.
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 Identify the metrics that define quality of hire for your organization: http://www.ere.net/2013/03/05/how-to-measure-whether-youre-hiring-good-people/
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