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Why Your Hiring Strategy Must Map to Your Business Strategy
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“Each year China produces as many engineers and scientists as the United States does ó and while its numbers are going up, America’s are going down.”
ó Fortune, February 23, 2004.
This is serious stuff that must be considered now. But how many HR/recruiting departments have a five-year hiring plan that supports the company’s business strategy and addresses issues like this one? What about a one-year plan? How many recruiting departments wait until a requisition is approved before they even start to look for people? I’ve asked before on these pages why hiring top talent is not yet a systematic business process. So far, no satisfactory answer has surfaced. Some of the prevailing thoughts include lack of leadership, too much to do, improperly trained staff, uncooperative managers, technology that doesn’t deliver as promised, the inability to systematize soft skills, and a host of similar excuses. In my mind, these are symptoms of a bigger issue, not fundamental causes. Mistaking cause and effect like this is a big issue, and many managers have made terrible decisions by confusing the two. Here’s a mini-mini hiring example: concluding that a candidate who is quiet or nervous in an interview is not motivated, not a good leader, and has weak people skills. It’s always best to first figure out the real problem before coming up with a solution. From what I’ve observed, two overarching issues are the root cause of why companies have such difficulty systematically hiring top people:
If you have any of the following symptoms, you probably have one of the two problems noted above:
Here are some broad ideas on how HR/recruiting can become more effective at the strategic level. Become Involved Whenever a company modifies its strategy, it affects every current employee and the company’s future hiring needs. I guarantee that someone from engineering is there describing the technology challenges of the strategy shift. Someone from marketing and sales is there describing what needs to be done to ensure market acceptance. Someone from operations is there describing how the product or service will be produced and delivered. Someone from finance and accounting will be there to figure out how to justify and finance the project. Someone should be also there from HR/recruiting, trying to figure out how to staff the program and redeploy the company’s current workforce. But I suspect that the HR/recruiting person is not even invited to the meeting. This is what being at the table means. Crash the party. Don’t wait to be invited. Then contribute. That’s how you get invited the next time. A Five-Year Strategic Hiring Plan and a One-Year Tactical Plan A company’s hiring strategy must compliment its business strategy. If the company is technology driven, you must figure out how to hire the best technologists now and in the future. If your company is customer or marketing driven, where are you going to find the best marketing people to brand your products to justify premium pricing and maximize market share? If your company has a low-cost operational efficiency strategy, you’d better be thinking about where you’re going to locate your factories, distribution centers, and call centers, and who will staff them. Was HR/recruiting involved in the decision to move the customer call center to India? Was it their idea? Who’s making the decision to outsource HR? Most companies have a cost-per-hire or time-to-fill hiring strategy. In my opinion, this is terribly misguided. I believe quality of hire should be the underlying strategic driver. This means that you only hire top-5% candidates for game-breaker positions, top-15% candidates for all critical positions, and top-third candidates for all important positions. To my mind, this is the hiring strategy that best maps to any business strategy. The mapping takes place by making sure that the positions defined as “game breaker,” “critical,” and “important” align with the company strategy. This then affects how the recruiting team is built and organized; how processes, systems, and tools are selected; how the sourcing strategy and channels are developed; how external resources are best used; and even how managers and recruiters are trained. A cost-per-hire strategy should be a strategy of last resort. The only reason you should even consider a cost-per-hire objective is if you’re only hiring average people. No reasonable executive would complain if the cost per hire increased if quality also increased. A single top performer can justify just about any cost. A top-third person can justify a reasonable cost increase. The single-minded focus on cost reduction at the expense of quality per hire does not make good business sense on an ROI basis. Instead, separate your hiring positions into the broad classifications noted above (game breaker, critical, important, and standard) and justify different cost targets for each. You don’t want to ignore costs, but these should be dependent on quality first, and cost to obtain that quality second. Time to fill isn’t a bad target, but this also should be a sub-strategy, not a dominant driver. In general, reducing time to fill can be justified by the lost revenue or production associated with the vacancy. Redesigning your systems to reduce time makes sense when there is a comparable business benefit like this. However, quality must still be the primary focus. It’s hard to justify a reduction in time to fill if it sacrifices quality, unless just having someone decent on board is better than waiting. Justifying the Cost of the Plan on an ROI Basis Justifying the budget is an important part of this exercise. Whatever the budget is, it should be directly determined by future hiring needs, not by looking at last year’s budget in combination with some squeeze factor. This is tactical planning at its worst. From the starting gate, it puts the recruiting department into a no-win situation. It’s a result of poor planning and weak management. To justify the appropriate budget, a comprehensive workforce plan must be prepared that describes the external hiring needs by class of position. From this, a sourcing strategy needs to be developed, based on projections of how many people will be sourced from various channels. How the recruiting team is organized, staffed, and trained is part of developing the annual plan. All of this needs to be budgeted and then justified. There is ample research showing the impact top performers make over average performers, easily enough to calculate an ROI. Then you must track performance to plan by comparing the quality and number of positions filled in combination with the usual metrics of cost and time. Justifying the plan, budget and headcount this way would be a logical next step ó if HR/recruiting were present at the strategic planning sessions. This is the way every other major functional department does it, so why doesn’t HR/recruiting have the same opportunity? Why is it considered an overhead department rather than a critical line function? Maybe that’s the real problem. If so, being there is the first step in the solution. Start answering the question of how your company is going to fill its critical hiring needs this year, next year, and all of the years after that. If we’re worried now about outsourcing call center jobs to India, how worried will we be about outsourcing your product design positions to China? These are important critical strategic decisions which every company must make. HR/recruiting must help them make them. It starts by being there and contributing, not complaining about a lack of resources.