Recruiting Recovery Finding Hidden Budget Dollars in Optimized Recruiting Practices

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1 Recruiting Recovery Finding Hidden Budget Dollars in Optimized Recruiting Practices HRsmart October 3, 2012

2 2 Introduction Carl Kutsmode Partner Talent Acquisition Management Consultant with over 18 years experience Talent Acquisition & Talent Management Systems, Process & Strategy optimization expertise Managing Partner and practice lead of the firms Recruitment Optimization Management Consulting Practice. Works with companies to assess, optimize and re-align their recruiting capabilities to best support the future talent needs of the business. talentrise Services Assess current recruiting practices and talent or compliance risks in order to Align future talent and business needs Optimize recruiting systems, processes and strategies to reduce costs and improve efficiencies Recruit the BEST talent to drive business performance Retained Executive Search Contract On Demand Recruiting

3 3 Today s Discussion Review the impact of the recent economic downturn and recovery on your corporate recruiting department practices and budget decisions Review things that you can do today to ensure optimized recruiting practices enable you to cost effectively and efficiently support your future recruiting needs Provide a financial business case that will help the executive team support your recommendations for resources, support or technology investment Share lessons learned tips for avoiding costly mistakes as you embark on critical business decisions in the future

4 4 Hiring & Layoff Trends The recession is over! Hiring is increasing slowly in small spikes Layoffs and voluntary separations have stabilized Employment / Hiring trends are steadily increasing upward Now what? Source: US Bureau of Labor Statistics Labor Trends Summary through July 2012

5 5 Economic Trends & Reactions Economic Downturn Corporate Response Recruiting slowed or Stalled Cost cutting across all departments do more with fewer people Hold on new recruiting or HR technology investments Assess and improve efficiency of core business processes Layoffs of HR, Admin, dedicated recruiting and sourcing staff Expand workload of remaining HR and Recruiting staff and shift some recruiting to hiring managers Vendor contract renegotiations Increased use of consultants and contract labor

6 6 Economic Trends & Reactions Economic Rebound Corporate Response Recruiting trending upward unplanned hiring spikes Cost cutting focus is replaced with investment in new tools and technology to gain efficiency in process Establish New Normal make informed decisions based upon data and relevant performance metrics Limited rehiring of HR, recruiting and admin staff Technology investments resume Consider RPO or other outsourced recruiting models to add future delivery model scalability Focus on data analytics to drive recruiting performance and make informed decisions.

7 7 Starting Point: Assess the Following to Identify Efficiency and Cost Savings in Your Current Recruiting Practices 1. Are you investing appropriately in recruiting and retaining your Critical and Strategic Talent recruitment? 2. Are your talent systems, processes, tools and data optimally used and integrated? 3. Are your recruiters overloaded with too many open requisitions or recruiting the WRONG mix of positions? 4. Are your recruiters spending too much valuable sourcing time on low value, administrative activities

8 Q1: Do you know which ROLES are CRITICAL and STRATEGICALLY linked to driving bottom line business performance in your company? 8

9 9 Talent Matters! The TOP PERFORMING Software Developers are MORE productive than AVERAGE software developers. Not by a factor of 10X, 100X, or even 1000X but 10,000X more productive! Nathan Myhrvold, former Chief Scientist at Microsoft Examples of Various Roles and their Impact On Revenues Performance Matters! How good are you at recruiting talent that is critical or strategic to your business? - Skill training needed? - More recruiters needed? - Investment in sourcing tools?

10 10 Determining Strategic & Critical Roles Role Types Strategic Roles Core (Critical) Roles Role Descriptor Key Actions Directly Impacts Business Strategy creating value for the firm Usually < 15% of all positions NOT determined by Hierarchy Make the most significant investment in these roles from a recruiting, training, compensation perspective. Focus on new hire quality and fit Align TOP talent in these roles with the business strategy and succession plan Critical to delivering results to meet business objectives Roles serve as the company s Engine Develop technical skills; Be good at internal and external recruitment Provide equitable rewards and incentives Provide self directed opportunities to grow, learn and advance career in the firm Support Roles A role the business cannot do without Typically ongoing, needs It can be staffed by alternative staffing means (Contingent, outsourced vendor etc) Improve and automate recruiting process to gain efficiencies Focus on quality and lower turnover Provide opportunities to grow into core roles Look for opportunities to leverage contingent strategies Surplus Roles Does not directly create value for the firm Does not impact the business strategy Make little to no investment in recruiting for these roles Look for opportunities to leverage contingent workforce staffing strategies or outsourcing opportunities. Source: A Differentiated Workforce, by Dick Beatty PhD, Mark Huselid PhD, Brian Becker PhD.

11 11 Why Invest Money in Being Good at Recruiting and Retaining Critical and Strategic, Top Performing Talent? High performing companies do better at managing and retaining talent Valuation of companies is in now measured by the quality of its talent Business environments are more complex and dynamic Advisory Boards and financial markets are expecting greater business performance Their contribution to the bottom line is most significant, measurable and noticeable! Cost of turnover can be 5-100X greater than the cost to replace other employees Source: DDI Nine Best Practices for Effective Talent Management (White Paper 2009)

12 12 Business Case For Investing MORE in Recruiting AND Retaining your Strategic & Critical Roles Identify your Strategic and Critical Roles in your company Ask your CFO if they can share the average NET annual revenue OR download a copy of the most recent annual report consolidated 10-K summary from your website Use the formula below to create your business case for investment in new tools, resources or proactive sourcing support needed to help you fill Strategic & Critical Roles faster! A 10% reduction in hiring cycle time to hire can be a significant savings!

13 13 Q2: How optimized are your talent systems & processes? Are your recruiting processes streamlined and automated? Are your systems and processes aligned with your current business strategy? Are your users trained and using ALL of the capabilities of your existing systems? Are the systems seamlessly unified OR integrated? Are the systems SAAS (Cloud) or server based?

14 14 Conduct a Current State Qualitative Assessment of Your Practices From Different Role Perspectives Talent Identification, Selection & Planning O CR SR Core Leadership Competencies / Traits Talent Assessment & Selection Succession Planning / Pipeline +Bench Strength Core set of validated core competencies exists for each operational role and manager training and tools with behavioral anchors exists and is used. Strategic talent competencies are assumed and little or no assessment against the competencies is done in the selection process. Talent assessment and selection in operational and critical roles is standardized and tools are used to assess candidates against core competencies and skills needed. Readiness assessment criteria includes mobility and situational experience criteria. All high potentials are tracked manually in spreadsheets by HR. HR does a monthly rollup of high potential candidate data into a shared spreadsheet for overall tracking/ reporting and review by executive team. Retention of Critical and Strategic Talent O CR SR Critical & Strategic Retention Planning Analytics of Turnover Focused on development plan, leadership skills and competency gap assessment and development Turnover data by role to identify trends in critical and strategic role turnover is not done. Turnover data is only reported in HR but not analyzed against any industry or internal benchmarks to identify trends and risks. O= Overall CR = Critical Roles SR = Strategic Roles

15 15 Common HR Data Management Business Challenges Redundant, inconsistent manual data entry of recruiting and new hire data into separate recruiting, HRIS and performance management systems. Impacts staff time and creates more opportunities for error in your data Lack of user sophistication, adoption or skills training in utilizing the full capabilities of the existing systems. Impacts recruiter efficiency, data integrity, performance reporting accuracy Hours of recruiter time spent manually tracking data in manual excel spreadsheets or exporting and formatting data from multiple HR systems that are not integrated and then manually merging it into a single roll up spreadsheet for management reporting Impacts recruiter time that should be spent on higher value recruiting and sourcing activities and creates opportunity for recruiters to manually manipulate data in their favor

16 16 Data Management Comparison Legacy Collaboration Model Recruiters Enter Recruiting Data into an ATS System Unified Collaboration Model Recruiters enter recruiting data into a single unified talent management system (i.e Hrsmart) HR Admin re-enters data into HRIS System for each hire Hiring Managers enter performance data in same system HR Admin updates new hire and onboarding data in same system Hiring Managers input Performance Data into a different Performance system HR Admin pulls data from 3 different systems to create management reports on recruiting, performance and new hire data Everyone can access their appropriate talent Dashboard and Report section of the Unified system to view Real-Time metrics - anytime

17 Unified vs. Integrated Technology Unified (HRsmart ) All talent management modules are built from the ground up by a single vendor Data entered into any module is linked by a common source record to all other talent modules that require input on that data point System upgrades to any module are seamlessly updated to all modules A single HR Talent dashboard for decision support is comprehensive and customizable: Recruiting & Onboarding Performance management Succession Planning Retention Diversity Integrated (Multiple Vendors) Each talent management module is purchased from a separate vendor (Recruiting/ATS, Performance Mgmt, Succession Planning, etc) OR The core technology vendor (ATS, ERP or HRIS) has acquired other vendors and integrated them into their solution Data entered into each vendor module may not always be linked by a common data source record which requires a customized API link be created and regularly updated as vendor updates are rolled out ($) Multiple HR Talent Dashboards typically must be accessed unless a customized central dashboard is requested ($)

18 18 The Business Case for a Unified Platform The Power of ONE! One system One vendor One contract One price with volume discounts One support team / contact One source record that links data to all modules One HR Metrics Dashboard One update impact on all modules when updates are made And The Simplicity of.. Financial and contracts management with a single vendor No $ needed for custom API integration of each module No $ needed to maintain the custom API s when vendors make system updates Time savings on reporting and data analysis in one system vs. logging into many to pull separate reports and manipulate them

19 19 Q3: How can data be used to help you optimize your ability to Recruit Top Quality Talent to your organization? Talent Quality and Ability to Attract the BEST Talent Recruiting Performance / Speed to Hire Hiring Manager Satisfaction HIRED!

20 20 Best In Class Talent Acquisition Survey Says - Top Impacts on Recruiting Success are: Source: Staffing.org 2011 Staffing Benchmark Report Staffing Efficiency, Effectiveness, Scalability and Candidate Quality will be the Staffing Imperatives of the Next Decade

21 21 Starting Point Resource Properly! - Requisition Load Directly Impacts Recruiter Performance and Quality Source: Recruiting Roundtable 2009 Benchmark Report. Workload is defined as the average number of open requisitions per recruiter Experienced employees are defined as those with five or more years of experience External Benchmark: Recruiting Roundtable research recommends for optimal performance a requisition load of for recruiters hiring experienced positions. For entry level positions the recommended recruiter requisition load is 20-30

22 22 Time Allocation Impact on Recruiter Performance - Are Your Recruiters Spending More Time on High OR Low Value Activities? Lower Value Activities: 45% 30% - Managing admin activities with 17% being dedicated to just candidate interview coordination and scheduling 13% - Reviewing applicant resumes to posted jobs ( internal and external ) High Value Activates: 55% 37% of recruiter time is spent sourcing and phone pre-screening / interviewing candidates for match to current openings 5% of recruiter time is spent managing candidate and hiring manager relationships and driving the recruiting process forward 7% - Special projects & internal meetings 4% of recruiter time is spent proactively sourcing and networking for top talent 2% - Initial recruiting strategy meetings with hiring managers clarifying new open job specifications

23 23 Key Questions to Answer and a Business Case For Properly Resourcing Your Talent Function Do you have HR Generalists doing recruiting part time or dedicated recruiters focused 100% on recruiting? Do you have admin support staff supporting your recruiting or HR team to own lower value activities? Are your recruiters carrying requisition loads greater than per recruiter for various corporate positions at all levels and for high volume lower level recruitment of the same position ongoing? What is the requisition mix of your recruiters? Is it strategically aligned to your business needs?

24 24 Strategic Business Alignment Metrics that Matter Recruiting Cost Ratio (RCR) and Recruiting Efficiency Ratio s (RER) are better measures of Recruiting Effectiveness and Recruiter Productivity Source: 2010 Corporate Recruiting Benchmark Report Staffing.org

25 25 Measuring Recruiting Costs Using the RCR vs. CPH Recruiting Cost Per Hire Ratio (CPH) - Does not account for variations in position difficulty to recruit or geographic impact on the search costs or timeline. Cost per hire = total recruiting cost / number of people recruited Accurate only when uniformity in staffing specifications and operations exist Inaccurately accounts for variations in job functions, skill levels, labor market conditions and industry variables Example Someone recruiting an executive level position in a rural market will take longer and incur greater costs than someone recruiting a mid level management role in an easily sourced skill set in a major metro market Recruiting Cost Ratio (RCR) More fairly measure and compare recruiting costs across position levels, geographies and recruiters Recruiting Cost Ratio = total recruiting costs / total compensation recruited Example: Recruiter X hired 15 engineers, who were paid $50,000 each (first year comp.), and spent $66,000 doing so ( all in cost including office overhead, candidate travel, the recruiter s proportional salary, etc.) Recruiter Y hired 7 senior managers, who were paid a total of $980,000 (first year comp.), and spent $84,000 doing so Recruiter X: Cost per hire = $66,000 / 15 = $4,400 Recruiter Y: Cost per hire = $84,000 / 7 = $12,000 Recruiter X: Recruiting Cost Ratio = $66,000 / $750,000 = 8.8% Recruiter Y: Recruiting Cost Ratio = $84,000 / $980,000 = 8.6% *** Source: 2010 Corporate Recruiting Benchmark Report Staffing.org

26 26 Recruiting Cost Ratio (RCR) Benchmarks Example: Consulting Average = 16.0 Source: 2010 Staffing.org Recruiting Benchmark Study

27 27 Cycle Time Vs. Recruiting Efficiency Ratio Benchmarks Source: Staffing.org 2010 Benchmark Report Using RER metric to measure efficiency accounts for the impact of unique industry experience, costs, cycle time, geography, company size, total hires (internal vs external) and outsourcing into an average Recruiting Efficiency rating.

28 28 Mutual Accountability - Measure Recruiter AND Hiring Manager Satisfaction? Use Post Hire web surveys to measure new hire experience, candidate quality, and hiring manager and recruiter satisfaction with each other during the search process SLA Agreements are used to manage expectations and create clear accountabilities between sourcers, recruiters and hiring managers Source: Staffing.org 2010 Benchmark Report

29 29 What Best in Class Organizations are Doing Differently 1. Proactive, ongoing pipeline sourcing in advance of need to fill critical & strategic roles faster 2. Focus on ability to identify, predict and assess talent quality 3. Strategic workforce planning and business alignment to support changing needs

30 30 Sourcing: - Talent MAPPING tools and data can help you make INFORMED Sourcing & Recruiting Decisions

31 Predictive Assessments Reduce Turnover Costs and Improve Your Ability to Predict Talent Quality 31

32 32 Business Case For Investing In Tools To Assess and Predict Talent Performance / Quality Are you tracking and analyzing turnover and performance ratings trends in Critical / Strategic roles? Do you have tools in place to improve your ability to assess employee performance and predict new hire performance? Are your managers trained in the use of your performance management and talent selection assessment tools?

33 33 Recap / Action Items Assess your current talent related systems and processes to identify opportunities for seamless data integration, management, collaboration & reporting. Identify and focus talent planning on your critical and strategic roles that drive bottom line business performance. Regularly analyze your workforce data to identify trends and potential talent risks related to turnover, performance, aging workforce, leadership and critical role succession, and diversity. Assess your recruiting practices regularly to optimize resources and tools. Re-align recruiting and talent management performance metrics to drive the right behaviors. Strategically use talent supply & demand tools to make informed decisions on recruiting, compensation and new office locations.

34 34 talentrise Talent Risk Analysis Report Offer To conduct a talent RISK analysis for your organization, we will need an HRIS data export of the following current workforce data for the employee group you wish to have analyzed. Minimum of 250 employee records required. Cost is $3 per record. Minimum fee is $1500. A report will be generated within 2-4 weeks of receiving the data from your HR team: Position Title Department Hire Date Birth date Date Entry into Current Role Termination Date Termination Reason EEO Gender EEO Race Last Performance Rating Score Annual Pay $ Compensation Grade / Code Employee Employment Full time / Part Time Employee Exempt Status Exempt / Non Exempt Additional questions needed to complete the financial risk analysis section of the report: Percentage that headcount is expected to increase or decrease next year in this role or overall? Industry classification? Total annual gross revenues Total annual gross expenses Average revenue per employee Overtime policy

35 35 Questions / Contact Info Carl Kutsmode, Managing Partner Ph

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