The Best Practices of the Most Aggressive Recruiting Department, Part 2

A few weeks ago, in Part 1 of this article series, I took a closer look at the recruiting function at a bank called FirstMerit, based in Akron, Ohio. The FirstMerit recruiting strategy is one of the most aggressive and effective I have seen in a long, long time. Here, in Part 2 of the FirstMerit case study, are some of the company’s best practices, metrics used, future plans, and results: Structural Elements in the Recruiting Function

Internal executive search. The team developed an internal executive search capability to identify, recruit, interview, and assist in the selection of executives, senior management, and other key management positions. The resulting effort saved hundreds of thousands of dollars and produced hires faster ó and who perform better ó than the previous external executive recruiting process.

Forecasting and workforce planning. The team developed talent acquisition forecasting and workforce planning models to identify hiring needs as much as six months in advance. The system includes an alert when an existing employee is put on a progressive discipline program. The premise here is that this is an indicator of a potential upcoming vacancy. The team also projects hiring growth (from projected new branch opening and expansion) during the October budget cycle. Tying the recruiting plan to the financial budget gives them a minimum of two months “heads up” for next year’s demand. The workforce planning process also includes using data mining and analysis of past openings to estimate how many and where positions are likely to open up.
Service level agreements. The team designed and implemented written service level agreements between the recruiting function and hiring managers (a service level agreement is a written document where both sides agree to act appropriately and to perform at a certain level). The goals of the SLAs are to clarify needs and improve service to internal and external clients and candidates. The SLA is also designed to improve time to fill, to reduce cost per hire, and to improve the recruiting effectiveness and efficiency ratios. It includes promises of fast and responsive service from both parties: for example, recruiters agreed to return every call within 24 hours, make an offer to a candidate within two hours of a manager’s decision notification, and to update managers on every search at least twice a week. Requisitions for bank tellers have a contracted time to fill of 21 days. Managers commit to making decisions on candidates within 48 hours.
Prioritized mission-critical positions. So that recruiting could focus its time and resources on the most critical positions, the talent team worked with management to identify each of the “mission critical” positions in the organization. The team found and then prioritized these positions (18 customer-facing and revenue-generating positions), which it turned out, comprised a small fraction of all hiring but impacted nearly 75% of the revenue.
Competency model for recruiters. The team developed an extensive competency model for recruiters and then restructured the recruiting team to include primary individuals with sales and external search experience. Specific recruiter competencies that they identified include persuasiveness, decision making, spoken communications skills, active listening (parroting), energy, passion, and basic sales competency.
Developing recruiters. The director practices silent monitoring of recruiters (with their knowledge) when they make cold calls. After the call, he coaches them and helps to develop their technique. He also offers half-day clinics, one-on-one role playing exercises with recruiters on such topics as “getting around gatekeepers without ruses or lies” and “overcoming common top candidates’ objections, like ‘I’m happy here.'” The recruiting director also developed, taught, and coached passive candidate sourcing strategies to all recruiters, including advanced topics like center-of-influence development, candidate and talent relationship management, and other cutting-edge recruiting techniques.
Implementing a behavioral interviewing for managers. Although behavioral interviewing is common in many organizations, it was not a widespread practice among managers at FirstMerit. In order to improve assessment accuracy and to reduce interview bias, the team built and implemented a behavioral interview and selection process that was designed specifically to improve the recruiting success in the critical customer-facing and revenue-generating positions.
Aligned recruiting with the business processes. The team established a company-wide process to align recruiting processes (identification, acquisition, interview and selection process) with critical corporate business processes. Recruiting processes were aligned with the corporate culture, management needs, business forecasting models, and regional and corporate-wide business initiatives. An example of their approach occurred when the corporate banking division was assigned some large loan goals for 2005. “The need was to add additional commercial and small business bankers to the team to put more relationship managers and business developers on the street,” said Michael Homula, FirstMerit’s talent acquisition director. Starting in spring of 2004, the talent acquisition team began an aggressive campaign to lure commercial and small business banking talent away from competitors. The result of that effort is that the bank is well ahead of its commercial plan goals for 2005.
Sales research. The team developed strategies and approaches to systematically gather what is essentially market research or sales research information about each candidate. They focus on gathering information that is critical to making a sale, including what criteria the candidate will use to make a decision, what would motivate them to make a change, and who will influence their decision to accept another job. (Note: I have found that systematically finding out a candidates decision criteria is actually quite rare in the corporate world).
Pre-need hiring. The team developed and implemented a “Teller Pre-Posting” program to meet management’s request for more efficient and expeditious redeployments and internal transfers. The program approaches current tellers and pre-identifies which branches in the corporation they are interested in working at. Recruiting houses the information centrally, and whenever an opening occurs in a branch, they deliver, in less than 24 hours, a list of pre-qualified candidates for the manager to select from. The program is based on the “evergreen job” strategy, where you continually search for candidates in critical jobs, independent of whether there is a current opening. The net result is a short vacancy time because or the prior work done by recruiting to develop a pre-qualified applicant “pool” that has already expressed their desire to work at this facility.
Email a friend. Like many corporate recruiting websites, the FirstMerit site allows people that are looking for a job to forward any job to a friend that the user thinks they might be interested in. The system stores the recipient’s name and contact information, giving recruiters the capability to follow up if the “friend” doesn’t respond to the referral.
Recruiter rewards. Rewarding recruiters for excellent results is an essential element for great recruiting. At FirstMerit, the director designed an internal recruiter incentive plan to provide recruiters with incentives and recognition for improving time to fill, efficiency, conversion rates, service levels, and sourcing. The final elements of the plan will be in place by January 2006.

Metrics and Assessment

Presenting to the shareholders. The recruiting team was so effective in convincing the CEO of the business value of great recruiting that he invited the director of talent acquisition to present the firm’s recruiting strategy in front of the shareholders at the annual shareholders meeting. By any standard, this was a landmark event in recruiting.
Quality of hire metrics. The team designed and implemented quality-of-hire metrics to measure (and improve) the on-the-job performance of new hires. (On-the-job performance is determined at the end of the first year and is based on new-hire performance appraisal scores).
Recruiter scorecard. The team designed talent acquisition assessment metrics that included a recruiter scorecard to assess the performance of and to serve as an improvement tool for their recruiters. Included in the scorecard are KPIs like actual vs. contracted time to fill, recruiter efficiency, the number of direct sourcing and hiring goals met, service quality, and prospect/candidate/new hire conversion rates.
Assessing candidates for recruiter positions. As part of the assessment process before recruiters are hired, FirstMerit gives candidates for recruiting positions an actual assignment to identify the names of six good tellers and to select the two best from that list. The results of this real-life simulation are used both to fill actual teller positions as well as to assess how good the recruiter really is. Recruiter applicants are also provided with an extensive reading list on world-class recruiting practices and are asked to provide a written checklist of what they consider to be world-class recruiting practices after having read the articles. That checklist is used both to generate interview questions for them and to assess their grasp of the requirements and understanding of world-class recruiting.
Business case in dollars. The director worked with the CFO’s office and studied how accountants at FirstMerit measured success to determine what measures would get the attention of senior managers and C-level executives. The team then developed and rolled out a model for demonstrating the business impacts (in dollars) that great recruiting had on a manager’s business results. In one example, the team showed the manager of commercial lending that the average revenue loss of not having a commercial lending officer in place (i.e. having a position vacancy) was $5,000 per day (the revenue generated each day by an “average” commercial lending officer). Two years ago, each one of those positions was vacant for an average of 76 days. The manager was then asked how he would feel if, with their help, recruiting could shrink that time down to only 40 days ó because that would mean an increase in their division’s revenue this year (from just this one position) of $180,000. The results from this approach were vastly superior to the old approach, where the team only presented “raw recruiting metrics” to managers. By translating a standard recruiting metric (i.e. time to fill) into dollars, the team learned an important lesson: It’s the money that gets a manager’s attention. The team routinely found that, after presenting examples like this, it was not unusual for managers to be salivating about how to improve recruiting. At least at FirstMerit, they found out that if you put money in front of bankers, they listen. Incidentally, their business case has been so powerful that they have received funding that allows them to keep their recruiter workload remarkably low.
Focus on top performers for the dollars. Each of FirstMerit’s recruiting approaches and tools are focused on currently employed top performers, who are without question, the most difficult people to recruit. They focus on those individuals because they have conducted a similar “business case” analysis on the economic value of hiring a top performer. They demonstrate the value of top performers through what they call the “performance standard deviation,” which is simply the difference in performance between an average person and a top performer in the same position. They have found that, for example, the average personal banker generates 13% more revenue than a bottom performing personal banker. A high performing personal banker generates 49% more revenue than the average. Since few top performers in banking receive anywhere near 49% more in pay than the average, focusing on top performers makes excellent business sense.

Improving the Candidate Relationship

Candidate bill of rights. As part of their continual effort to improve the candidate experience, the team developed a candidate bill of rights. The goal was to establish a higher set of “standards of treatment” that applicants and a candidates could expect from the talent acquisition team.
“$25 with your rejection.” Another attention-getting program that they have is their “regrets” program. Under this program, candidates that they have rejected are given a $25 gift certificate if they open an account. Again, this is a brilliant strategy because it softens the blow to the rejected candidate ó but it has the added benefit of turning “regrets” into possible customers. FirstMerit realizes that all candidates are either current or potential customers, and if you treat these candidates poorly, there can be a significant economic downside, while if you treat them right, there might even be a positive economic result.
Reward for interviewing. In yet another attempt to improve the candidate experience, FirstMerit is now giving free movie tickets to all candidate who interview in order to thank them for their time.

Results That Their Approach Has Produced Having unique practices isn’t enough in recruiting; those practices must give you a competitive advantage, produce significant business results, and a generate a positive ROI. Some of the results that have not been covered under the best practice section above:

The newly developed Talent acquisition model was projected to be profitable in 24 months, but that goal was actually reached in 13.
They reduced their exempt time to fill by 18 days.
They reduced their cost per hire by 51%.
They improved their recruiter efficiency ratio from 15.5% to 9.6%.
They reduced their search firm fees by 78.3%.
They improved their quality of hire (average performance rating increased by 1.2 points).
They reached a 56% employee referral hiring rate with no bonus payouts.
They improved client hiring manager satisfaction.
They were labeled as the number one benchmark firm in recruiting and talent management.
Their “takeaway” (poaching) to “giveaway” (losing to the same competitor) ratio results are staggering. In 2004: 107 takeaways to only 51 giveaways. In 2005 YTD: 58 takeaway and only 29 giveaways.

Weaknesses That Still Need To Be Addressed at FirstMerit Although they do many excellent things at FirstMerit, there is always room for improvement. After completing my research and looking at my model for world-class recruiting, I identified some areas where the FirstMerit could use some significant improvement. They include:

They still have a mediocre website that sends a message that is inconsistent with the actual excitement of working there. The website needs to add some “answer guy” features to attract banking professionals who are NOT currently looking for jobs but are interested in doing their current job better.
They have a mediocre employment brand development strategy effort outside of Ohio. They need to broaden the brand’s reach so that they can attract the best from around the U.S. and the world.
Their managers need to be measured and rewarded for great hiring, development, and retention. Those results need to be distributed to increase competition to be the best in hiring and retention.
There needs to be some additional quantification of the dollar impact of great recruiting, development, and retention to further convince managers to invest time and effort into recruiting and talent management.
As their notoriety grows, they will become a prime poaching target for firms both within and outside of banking. As a result, they need to develop a first class retention effort that targets their best and most attractive employees.
Some online assessment capabilities need to be added both to improve candidate assessment and to reduce the amount of recruiter and management time that is currently spent on assessment.
An online candidate feedback and interview scheduling website needs to be developed to improve the candidate experience, to speed up hiring, and to save administrative costs.
They need to develop a system to proactively identify internal talent that is misaligned and to move it to areas where it will have a higher return.
Their talent acquisition strategy needs to be broadened into a broader talent management strategy.
The director needs to continually innovate and add to his team’s toolkit of approaches from the long repertoire that he has used successfully before joining FirstMerit. For example, an innovative approach he once used should be tried, where he set up a “free hotdog stand” with a large banner offering free hot dogs immediately outside and in easy view of a target firm’s office building. The goal was to draw out employees and to eventually recruit them. As others catch up, FirstMerit must continue to innovate.

Outrageous Quotes From FirstMerit Here are some additional outrageous quotes from my interviews and research at FirstMerit:

“In general, most of the corporate recruiting world is quite awful.”
“If you talk enough about what you do in a passionate way, it will weigh on people and convince them to follow.”
“We steal other bank’s customers all the time, why can’t we take their best talent also.”
“I once cut off my recruiter’s Internet connections and budget for newspaper advertising just to shock them into realizing the value of personal contact and relationship recruiting.”

Conclusion In a field full of mediocrity and “can’t do” attitudes, somehow FirstMerit’s talent acquisition team has found a way to take risks, innovate, and to provide their firm with a competitive advantage. As the war for talent intensifies in the next six months, the rewards for their innovation will be even greater. My final key learning from this case study is that this degree of boldness would never be tolerated at 99% of firms. So I can only credit the CEO, the senior leadership team, and their VP of HR for leading and supporting this award winning and amazing effort. My hat is off to each of you! Note: This case study research was conducted between February and July of 2005 by Dr. John Sullivan and his staff members at DJS Associates. There is no business relationship between any of the parties.