Santa’s Workshop: Workforce Management in the 2001 Economy

It was with much trepidation that I met with Santa for our third annual review of his recruitment and retention programs. I had heard through the grapevine that Santa had met with some dramatic challenges in 2001, and that the stress had resulted in significant weight loss. Never believe what you hear. While 2001 was the most challenging year Santa faced since the late 1980s, he was as jolly as ever and his health appeared to be excellent. Santa’s first comment was that nothing could have prepared him for the challenges he faced in 2001. First, several of the B2B Internet companies that Santa put some venture capital into during 1998 and 1999 went bust. But losing the investment capital was minor compared to the impact it had on his supply chain. Just as he was placing significant orders for parts through these Internet companies, they ran out of money and folded. As a minority investor, Santa had not been kept informed of the everyday finances and operations of these companies and their shutdowns came as a complete surprise. Fortunately, Santa was able to place orders with his brick and mortar suppliers and did not fall too far behind schedule. Second, with the downturn of the markets and the shaky economic outlook, it was very difficult for Santa to manage his workforce plan. He anticipated that orders would be down for the 2001 holiday season, but he was not sure how low. His employee turnover rate was back to pre-1999 levels of five percent (Santa’s Workshop turnover is historically lower than most organizations). With the exception of his R&D group, which he always keeps well staffed regardless of the economy, hiring in 2001 was anticipated to be extremely low. As a matter of fact, for the first year in history Santa feared that he might have to have layoffs, something he wanted to avoid at all costs. Santa’s challenge was to balance his hiring needs for today’s economy with the outlook for the future. While he did not want an idle workforce, he did want to make sure that he didn’t get caught short when the economy turned around. To make his decisions, he not only analyzed his internal skill sets but also took a look at the predictors for future talent. He needed to develop a way of reducing costs today without hurting his ability to grow in the future. Fortunately, as a privately held entity, Santa’s Workshop did not have to answer to Wall Street. This allowed him the luxury of time to do the appropriate analysis of economic and demographic indicators, inventory controls, internal skills analysis, and employee development plans. He could make the best decisions for the entire organization without succumbing to analyst’s pressures. Analyzing demographic trends was easy for Santa. As a deliverer of toys to all the world’s children he was always up on demographics. Not only could he project the future of the available labor market years ahead of time, he also had insight into the interests of the world’s children. The world’s top economists like Milton Friedman, Abby Joseph Cohen, Robert Reich, and Gary Becker have consulted with Santa to prepare their analyses and trend reports. (Sadly, some direct marketing firms have tried to coax Santa to sell his demographic data. No need for concern, he has that info well protected.) Santa has made it quite clear that he is worried that companies are not preparing for the future. He’s known for quite some time that over the next 15 years the baby boomers that kept his elves busy making toys in the 60s and his workforce well staffed in the 80s and 90s will be retiring. He also knows that the absolute number of children that will be of age to enter the workforce over the next 15 years is diminishing. Even worse, the number of children that have interest in the sciences, mathematics, engineering, and accounting is going down. Requests for toys and books that are of traditional interest to children who pursue these educational directions have dropped significantly. As a result, maintaining a steady, highly skilled workforce is extremely important to Santa. Typically, when hiring slows, one of the first groups to be affected is the recruiting team. Fortunately, Santa has always viewed this team as talent managers, not just people that facilitate the hiring process. Instead of laying them off, he saw this as an opportunity to challenge them with reducing costs while improving efficiencies. He had them working on in-depth workforce analysis, streamlining processes, evaluating new technologies, and improving employee development programs. The first thing Santa’s recruiting director did was to get everyone up to speed on all the features of the workshop’s applicant tracking system. During 2000, Santa’s Workshop invested in a comprehensive ASP system that included most of the front- and back-end features they needed to streamline processes. The system included everything from automated requisition approvals to candidate prescreening questions to advanced reporting capabilities. When the system was implemented the recruiters were so busy recruiting that some of them simply did not take the time to maximize their benefit from all the features. While the technical support was always available, the ongoing support for day-to-day user optimization fell short, with the exception of the initial product training. Through the help of a consultant, the talent management team was able to uncover areas where their usage of the product could be enhanced. The changes made a significant difference in their ability uncover the better candidates faster, reduce their cycle time and redirect their advertising costs to the most effective resources. The changes included:

  1. More thorough use of the current candidate database. They standardized the process so that, prior to posting any position, the recruiter was required to run their search criteria through the current database to determine if there were any potential candidates from previous database entries. While this seems very obvious, several recruiters were not taking this first step, missing great candidate opportunities.
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  3. Improving the use of the qualifying questions. The biggest variability among the recruiting team was in the writing of the prescreening questions. Either they were not writing questions that were specific enough to effectively filter out candidates who didn’t fit the profile, or they were not maximizing their ability to utilize the weighting and ranking features. By tweaking the use of this part of the system, the recruiters were able to significantly reduce their cycle time. They worked more closely with the hiring managers to define success criteria for each position, and then spent the extra time necessary to write questions that truly captured candidates’ abilities. Up until now, most of the questions were very generic and related primarily to whether or not a candidate had particular skills, as opposed to focusing on depth of experience with the skills. After reviewing the first group of candidates filtered in by the system, the recruiters learned how to go back and re-filter the submissions by loosening or tightening weightings on the questions asked the candidates.
  4. Improved use of metrics. What the consultant learned was that the recruiters were not taking full advantage of the power of the reporting function. In addition to the standard reports they had always created, the consultant helped them to take their reporting metrics to new levels. From this, they were able to uncover opportunities for efficiencies and cost savings. Their standard reports included average time to hire, average number of interviews per resume submitted, and percent of candidates hired from each resource. The new metrics also included:
    • Time to hire, broken down by each process step: Time from initiation of requisition to approval, time from approval to posting, time from posting to telephone/email contact with candidates, and time from presentation to hiring manager to hiring manager response. This type of report was broken down by recruiter, department, and hiring manager to determine if there were any glaring opportunities for particular individuals or departments to improve their cycle time.
    • Better evaluation of metrics relative to each other: In evaluating the metrics they learned that the ratio of telephone interviews to in-person interviews was very high, but that the ratio of in-person interviews to hires was very low (about 1 in 12). By improving their telephone prescreening process (which happened somewhat naturally when the recruiters began spending more time with the hiring manager to understand success criteria rather than skills requirements), the recruiters were able to save a significant amount of time and money. They spent more time on the telephone prescreen, allowing them to filter better at that stage of the process – hence fewer, but more qualified, candidates were invited for in-person interviews.
    • Quality of resumes vs. quantity per source: Instead of simply reporting on the number of hires per source, they began reporting on the quality of candidate from each resource. They even went as far as reporting on the numbers of qualified candidates they uncovered in the resume databases to which they subscribed. They looked at metrics like the percent of candidates telephone screened from each resource and the number of in-person interviews that resulted. They then calculated the cost per qualified candidate from each resource. This helped them to better plan where they spent their advertising dollars in the future and where they focused their efforts on uncovering new places to post positions or research databases. The cost per qualified candidate was analyzed in conjunction with the number of hires per resource, and the time to hire per resource to create the best spending strategy. (Note: Because cycle time is a critical factor, they realized that the least cost-spending strategy is not always the best.)

Internal Skills Profiling The recruiters decided to make better of use of the system to identify potential internal candidates. Up until now, the only internal candidates in the database were those that had applied through the intranet for specific positions. By broadening the database to include the current and desired skills of all employees they could better grow their workforce internally. Every employee was encouraged to submit a skills and accomplishments profile, and a wish list of skills desired. This helped the talent management team develop metrics on the pool of available internal talent and internal skills gaps. Santa’s 2001 Workforce Solution Through the great analysis done by the talent management team, Santa was able to come up with a solution to the current economic crisis. By simply using the tools they had at their fingertips more effectively, the team was able significantly improve their efficiencies and directly impact the bottom line, reducing the imperative to reduce headcount. Santa was extremely impressed with the power of his applicant tracking technology to help improve workforce planning and recruiting efficiencies. While these improvements did not solve all of Santa’s 2001 issues, they certainly helped him make better, more informed decisions. The plan presented and approved by Santa would affect employee paychecks in the short term but would not send anyone to the unemployment lines. All employees would go onto a four-day workweek during the leanest four months, April through July. There was enough work to keep them all busy three days a week. On the fourth day they would all receive training on a new skill that could be used in the organization. Santa would save costs by reducing the payroll 20%, but providing more training at the same time. While employees were not too enthused about reducing their pay 20% for four months, they were excited about gaining new skills. This was a tradeoff that most were willing to take. Some employees chose to leave, but this was expected given the proposed short-term pay reduction. The Fruitcake Exception This new plan worked great with one exception. No matter how closely an organization plans, analyzes, and forecasts, an unanticipated situation inevitably occurs. This year it was in the fruitcake production department. Normally Santa can keep production of fruitcakes fairly low because the inventory of recycled fruitcakes is always high. The lifecycle of a fruitcake is typically about ten years. Historically, about 70% of the fruitcakes delivered are returned back into inventory and can be reused as gifts for the next year. About 60% of the returns occur by mid February, and about 40% are returned just after Halloween when families begin pull out their holiday decorations and realize that they had forgotten to return their fruitcake. This year however, only 50% of the total fruitcakes delivered were returned, and most of that occurred by mid-February. The production planners anticipated higher returns in the fall, which never occurred. Apparently, as a result of the economic downturn, families were actually eating their fruitcakes. This hadn’t happened since the Great Depression in the early 1930s. Additionally, orders for fruitcakes skyrocketed in mid November. Companies that normally gave their customers and employees more substantial holiday gifts were ordering the more economical fruitcakes this year. Production had to resume to full capacity and many of the fruitcake employees were working double shifts. Because fruitcake production is a specialized skill, other workshop employees could not readily be moved to that department. Fortunately, because the employees filled out their skills profiles for the company database, the talent management team was able to uncover a few fruitcake experts that had moved on to other positions within the company. Additionally, while few employees had opted to learn this new skill during the spring and summer training days, there were several that did complete the training. Santa’s workshop was able to temporarily shift resources to accommodate for most of this unusual demand without having to take the costly step of outsourcing production. Summary Like most organizations, Santa was challenged by the varied economic conditions of 2001. By better utilizing the tools available, Santa was able to creatively solve his current problems while remaining prepared for the future. The talent managers proved themselves to be true business partners in the organization. If you haven’t yet done the same, it is never too late too start. Santa’s closing comment was to wish for good health for all, peace in these troubled times, a stable economy, and an abundance of laughter to keep us all sane. Happy holidays to all!

Karen Osofsky ( is a co-founder of, an e-recruiting consulting firm that provides outsourced recruiting solutions to rapidly growing companies and new ventures. The firm provides a broad range of recruiting consulting, sourcing, screening, and strategy development services to help companies manage the front-end recruiting process. Tiburon Group is a Certified AIRS Solutions Partner.