Employment Churn and How It Will Affect Your Recovery Sourcing Plans

Aug 7, 2009

The baseball trading deadline has just passed, and 100 or so players have new jobs with different clubs; however, total player employment is still exactly the same. Employed people switching seats with other employed people doesn’t count as a positive in the employment statistics, regardless of how much effort it entails. I refer to this seat-switching as employment churn, or employment velocity, and even though overall hiring might not increase for nine to 12 months, employment churn will begin to accelerate in Q4 2009.

From what I can tell, most companies aren’t ready.

Abraham Maslow, in addition to many behavioral economists, provides some underlying rationale for the idea that churn will ramp up quickly before the overall hiring stats increase.

As part of his “Hierarchy of Needs,” Maslow suggested that while people consistently strive for personal improvement, they become conservative in difficult economic times. During these periods, trade-offs are made where people protect their assets, including their jobs, avoid any unnecessary risk, and reduce their expenses. This is why good people, who are fully employed, are reluctant to move during economic slowdowns.

However, as hiring “green shoots” appear, those who are the most fed up with their current jobs (the least satisfied) will begin to pursue other opportunities. As these people leave, companies will fill these empty seats, most likely with others, currently fully employed. Soon these trickles of churn will turn into significant streams of turnover that will be measured in the national labor statistics. This spike in turnover is an early indicator of an economic recovery. To get a handle on this, here’s a super-short satisfaction survey you can send to your employees, everyone in your LinkedIn network, and everyone in your talent pool. We’ll track these results over the next few months to provide you with a sense of churn by industry and job level. Due to the severity of this recession, it’s quite likely that employee churn will really spike up over the next three to six months.

Once these early indicators start flashing yellow, it’s time to implement the hiring plans you’ve been developing aggressively over the past six months.

Here are additional ideas to consider as you get these plans ready for prime time:

Remember that one size doesn’t fit all. While the hub-and-spoke models brought to you by Jobs2Web, TalentSeekr, and First Advantage’s HireEngine are great for entry-level job seekers, college grads, and staff-level professionals, they might not be the ideal sourcing tool for executives, managers, and the top 10% in any field. The same is true for using social media — the new darling of corporate America recruiting — as a primary means to source talent. Developing a sourcing-channel strategy by position, demographic, and quality level is an essential aspect of any recovery plan. As Yogi Berra once said, “Don’t put all of your sourcing eggs in one basket, unless they’re hard-boiled.”

Don’t spend 80% of your resources on 20% of the market. If 15%-20% of the labor market is looking at any one time (active candidates), and even if it surges to 30% once the recovery begins, this means that 70%-80% of the market is passive. Further, one could easily prove that top performers tend to be more passive and more discriminating. Under this assumption, it seems appropriate to categorize your recruiting expenditures by active and passive and by quality to see how well you’re doing on an ROI basis. This might suggest that cost per hire is the dumbest metric on the planet.

Passive candidate sourcing comes with a significant cost, but a great ROI
. If you define an A-level candidate as three to five times more productive than a C-level candidate, and B-level somewhere in between, paying a 30% search fee makes sense on an ROI basis. This is true at least for a top 10% person. On this same measure, a 15%-20% fee could be justified for a B-level person. On this basis it makes no sense to me why corporations are adverse to paying these fees, since they need to pay their own recruiters an equivalent amount in effort to hire anyone who’s not looking.

Creating talent pools is the sourcing sweet-spot. The most important tool to emerge over the past few years is the idea of building talent pools of prospects by job class. These are large databases of former candidates, employee referrals, and all of the people you sourced for jobs and came in second or third, among others. Using robust CRM systems, these candidates are sent regular emails describing compelling opportunities, and since they’re prospects, you don’t need to report on them until they apply for a specific job. If you make the apply process something other than just submitting a resume, you can also eliminate the bottom 75% during the first iteration, while attracting the top 10%. (Email me if you’d like to learn how outbound emails can be used this way.)

If you’re insistent on posting individual job requisitions, do it right. I’m predicting a significant decline (50%-75%) in the use of job-board advertising over the next few years. However, if you’re going to resist the move to the hub-and-spoke and talent-pool-sourcing model, make sure your ads are easy to find, and compelling. Emphasize what’s in it for the candidate, stop mentioning skills, and focus instead on the challenges. As part of this, use creative titles, like “Off-road Java Developer” or “So You Think You Can Sell,” to differentiate your jobs and attract a better class of candidates.

Implement a forward-looking workforce-planning process. If you’re not yet forecasting your hiring needs six to 12 months out, you should be. This will give you a big clue to what your line managers are saying about their future needs. Even more important is looking at the changes between these forecasts, especially in the differences two and three quarters out. These are great forward-looking indicators as to when the economy for your company will turn. Better: if you build in churn and turnover assumptions into these forecasts, you’ll be able to prioritize how you allocate your recruiting resources.

The key point here is that you need a specific sourcing strategy by job class (e.g., staff, management, sales, entry-level) and a channel-by-channel plan to implement it. This needs to be planned ahead of time and implemented as soon as you see an increase in involuntary turnover in this job class. This is your first clue that labor churn is beginning.

This will be confirmed by increases in month-to-month increases in your hiring forecast. Collectively this will give you a three- to four-month headstart on your competition. Getting candidates first will be a huge competitive advantage.

To see if your program is working, start asking all of your candidates how long they’ve been looking. If they say they’ve just started, you know you’re in the game. If they say they haven’t started yet, you’ve won.

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