Industry Standards: The Shade We Cast To Conceal Issues!

“Problem! What problem? Based on industry standards, we are 15% better than 18% of those companies with 25% of the issues we face 68% of the time, during 30% of the year when 85% of a baseline of 60% of our employee population representing the middle 33% of the over-all mix, indicating that 27% of the ah, time that, ahhh, er. I’m sorry, what was the question again?” As much as I love statistical analysis and computation (give me a roaring fire, a mutually exclusive random variable, and a bottle of wine any day!), it is all too often the root of all evil in business. We become fascinated with the numbers and less with what they represent (or do not represent) by the time we are done manipulating the data. A peer of mine found himself in real trouble one day. He had closed 16 technical requisitions in one month, the resulting paperwork had put him behind on updating the open/closed requisition report. So, naturally, he was dealt with accordingly. He got the message: do less work if necessary, but get the reports done on time! The world ceases, birds fall from the sky, and oceans boil if the bosses don’t get their “stats”. A few months ago I wrote a piece on the fascination we all have with the ultimate Holy Grail of human resources, the “Cost per Hire” (CPH). At that time, and more recently, I have received inquiries about what is the acceptable standard to judge the performance of your staffing efforts–if not CPH, then how do you compare yourself to others, to insure your performance measures up? Well, to a great extent, you shouldn’t! But, that probably requires an explanation. It isn’t that tracking information, and using the data it reveals, to upgrade and improve performance is not a noble goal. Nor is it wrong to want to track performance to make the needed corrections (termination, for example, when the “numbers” dictate). But before you pick a standard, first find out where it has been and with whom it has been playing. (Put down that “Industry Standard” and wash your hands.) For example: You run a large chain of Infiniti dealerships and want to open a telemarketing group. Your goal is to build a polished and professional team that can “pre-sell” a sophisticated and discerning end user. Your HR department looks into the “industry standards” for telemarketing recruiting and informs you that the standard cost per hire is 2.3K, with a 10-1 resume to interview ratio, a 4-1 interview to offer ratio, a 4-3 offer to offer acceptance ratio, and a 1-5 fallout ratio within the first 30 days. So, you now know that the project cost will be about $13.8K, will require 6 hires to insure 5 telemarketers still working 30 days after they start, which means you need 8 offers out for 6 accepts, which means you need to see at least 32 candidates to make your 8 offers, which means you will need at least 320 resumes to generate interest in 32 candidates. Golly Gee! With that kind of performance data based on industry standards, it must be all over, except for the offer letters. Looks like a good week to duck out early and play 18 holes! Well, maybe not:

  • What industry or industries made up your baseline? (If you are selling luxury products to a high-end professional clientele, do you want to use the hiring data which includes a screen door repair company’s efforts to hire telemarketers? (“S-hay, got any holes in your screen doors? Need a $58K car? Thinking of aluminum siding?)
  • You are located in a region with very little unemployment, and some of the data was gathered in another region with staggering unemployment.
  • The cities largest employer just announced a 50% reduction in it’s workforce.
  • Or, it announces a plan to double in size in three months. But your “standard” data is six months old.
  • Or, it does not matter either way as this employer does not hire telemarketers and so has no impact on the employment process in that field.
  • Or, it does not use telemarketers, but, it hires the same skill profile for much higher paying work, or significantly less paying work, but since they have different titles, it was not picked up in the data.
  • You are seen as a “Buggy Whip” company in a dot-com world. Or, are looking for rare leading-edge, or even semi-nonexistent bleeding-edge, skills.
  • Was this data collected in an area that is 90% urban, or 90 rural, or 15% underwater or has already been assimilated by the Borg? (closet “Trekkie”)
  • Your company’s “street name” is clean, or did you just have a visit from 60 Minutes? (Doesn’t Mike Wallace look younger in person?)
  • Your current market appeal is high, or it is low? Does the industry standard take popularity into account?
  • Your company is pre-IPO, post-IPO, IPO-challenged.

Exactly how many variables can there be in a standard, and still leave you with a net result that has any real value? I understand that we have grown accustomed to evaluating and upgrading based on “averages,” but who wants to be average? (“Come join the team at XYZ Inc, where we stand proudly 3 points above average! Join the adventure! Next stop, ‘So-So,’ just shy of ‘Moderately Adequate.'”). <*SPONSORMESSAGE*> So what is a critical measuring tool in staffing that really means something, and how do you arrive at it, once you think you know what “it” might be? Well, how about your own process performance, not theirs, yours! The best place to look is the “Cross-Over” points in your resume and hiring process. These are the points in “the mill” where the value of the resume increases as the “sort in, sort out” process refines and reduces the number. But before you start:

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  • Establish your, YOUR, corporate staffing goals. What is most critical to you: number of hires, timeliness of hires, cost of hires? These are all interactive variables. If you adjust one, it impacts the others. Speed usually means less quality. Increasing cost can speed up a process, or increase the quality, but rarely both. Often the increase in cost does not proportionally impact your hiring process. If you double your cost per hire, do you also cut the time per hire in half, or double the quality per hire? If you have a comfortable gap between headcount and “souls on board”, then perhaps speed is less an issue than quality. Then again, that new product offering is coming up in six weeks and you need 25 new installers, fast! To judge yourself, know yourself and the situation you are in. If speed and quality are the main recruiting issue, cost per hire cannot be a controlling factor. In this example, a low cost per hire is more indicative of a failure to understand priorities, not a sign of successful cost management. Then again, a low or high cost per hire compared to who? Establish your own corporate staffing goals in respect to your companies unique needs and profile.
  • Establish simple, low labor intensive tools to measure your recruiting efforts at the critical points in the process, the ratios reflected in the Cross-Over points of the hiring process: 1. Resumes Received To Resumes Distributed: Is your recruiting message going to the right people at the right level, with an effective “quality” message? That is to say, your message is attracting quality. A high ratio here, let’s say 30-1, may indicate the wrong people are seeing your recruiting message. Then again, a low ratio, 5-1 might also indicate a skimpy screening process. It depends on your own company and it’s unique style and process. 2. Resumes Routed Vs. Resumes Screened/Interviewed: This measures your understanding of the managers’ needs (or their lack of understanding of their needs) and the timeliness of your process. If the candidates of interest are always gone, your process is too slow. Even if you get back within 72 hours with an industry standard of 96 hours, you are too slow–above average, but slow. Managers’ reactions usually speed up based on how good, and how few, resumes are crossing their desk. But, then again, some managers love to see a larger percentage of the total resumes to get a better “feel” of the candidate flow. This cross-over point is highly individualized based on your environment. At one company, a ratio of 3-5 may be a good sign, at another 20-1 may be a goal. Understand the people in your own unique process. 3. Interview To Offer: This ratio measures your pre-screening capabilities. It is also a good tool to determine how effectively you have mastered the subjective as well as the objective aspects of the position or positions you for which you recruit. Regardless of the acceptance ratio, this at least indicates the right resumes are getting into the system up to and including the last step under your control. 4. Offer To Hire: To measure how well you are selecting the best “possible candidates.” Remember, the “Best Candidate” is not always the “best possible candidate for the job.” If you are all too often seeing the former and by-passing the latter, you will have a bad Offer to Hire Ratio, and I suspect a very unattractive turnover issue. The “Best Candidate” may be over-qualified, the “best possible candidate” is not as impressive, but considers your opportunity a “dream job” and is capable of performing it well. (You see, you may not be the “best company,” but rather the “best possible company” as well.) From this number you learn if you are effectively selling your company, are you competitive, and do you know who should be working for you. 5. Base Hiring Profile: Make sure you measure your “critical needs” separate from your “support needs”. If you are a trucking company, it is far more important that your hiring program’s peek performance be measured against how well you hire truck drivers. If you are an engineering firm, your difficulty in attracting accountants must be dealt with, but not to the extent it diminishes your effectiveness recruiting engineers. Recruiters are always shifting gears in an interview day. Entry-level, interns, co-ops and then at 3:00, an Executive Vice President of Operations interview. But you have a core recruiting profile, that is the goal of your hiring program. That is the critical standard.
  • Establish YOUR OWN industry standard of performance, by measuring your own performance at these cross-over points. Look at the last six months, or a year’s worth, of data on the staffing process and the five critical steps outlined above. Develop an average, and also plot each individual month. If no hard data exists, track your work flow for a month. Establish the average as your base line and work on improving yourself from that point. Learn about trends in your own organization, month by month, that effect and impact your recruiting strategy and make the needed adjustments. For example, located in the Northwest, the skiing season may slow down recruiting more than the summer months do in the Northeast. Hawaii may notice no discernable dip in either season. Your cost per hire may be effected by the staggering number of resumes you require to generate interviews: is that because you are fussy or just not getting the right resumes? You have a high Cost Per Hire, but you hire at a higher level due to the elitist culture of your company. That is a profile (or illusion) that your corporate culture dictates; it is not a “fixable” flaw in your staffing process. Gold costs more than zinc. If you decide to build your company out of gold, it will cost more. Learn your own standards.

The unique attributes that are your company, good or bad, will drive your hiring process far more than external measurements of unrelated companies in different markets looking for different people. The efficiency of your unique process within your unique environment will drive that number far more than specious envy of another company’s lower number, or amusement at another’s higher number. For once it is “all about you.” Good recruiters know if a staffing group, internal or agency, is running right without excessive reports.

  • How many recruiters do I have?
  • How many requisitions did we close?
  • How many of our clients are unhappy?
  • Are they interviewing my replacement? If your environment requires more data than that, fine. But do not let your efforts to establish standards of performance and measurement tools cloud the real mission of a staffing team, hiring people. Spreadsheets are for “bean counters.” Look, even when the Titanic was sinking, it was still, by Industry Standards, the largest ship afloat, a fact altered in 90 minutes, and of little comfort to the passengers and crew. Establish your own base line, improve your performance relative to that base line, and become the standard on which you base your own self-improvement. Then when your boss says, “How do we compare to the Industry Standard?” you can reply, “We are our own Industry Standard, and we look pretty darn good!” Have a great day recruiting! (Author’s Note: Two weeks ago I did a piece on industry ethics. I received numerous e-mails from readers and am pleased to report that over 95% of you feel that you conduct business in an ethical manner. Most of you felt like a minority of one, well, it appears you are actually in the majority. Good thing to, after-all, if you believe in a dog-eat-dog world, then you must also accept that even the winner is still a badly bitten dog.)

Ken Gaffey (kengaffey@comcast.net) is currently an employee of CPS Personal Services (www.cps.ca.gov) and has been involved in the Department of Homeland Security, Transportation Security Administration project since its inception. Prior to this National Security project Ken was an independent human resources and staffing consultant with an extensive career of diversified human resources and staffing experience in the high-tech, financial services, manufacturing, and pharmaceutical industries. His past clients include Hewlett Packard, First Data Corporation, Fidelity Investments, Fleet Bank, Rational Software, Ericsson, Astra Pharmaceutical, G&D Engineering, and other national and international industry leaders. In addition to contributing articles and book reviews to publications like ERE, Monster.com, AIRS, HR Today, and the International Recruiters Newsletter, Ken is a speaker at national and international conferences, training seminars, and other staffing industry events. Ken is a Boston native and has lived in the greater Boston area most of his life. Ken attended the University of South Carolina and was an officer in the United States Marine Corps.

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