Monday, April 18, 2011

5 Reasons Why You Need A Really Awesome Recruiting Process

Measuring the quality of your job candidates (and your employees for that matter) is vital for organizational success and competitive advantage. We are no longer in a manufacturing economy, but rather a service/knowledge worker based economy. This means that human capital makes all the difference toward organizational performance and the ability to compete. Successful hiring keeps the working culture healthy and productive, team performance and creativity high, and workplace turnover low. This translates to employee engagement, and there is enough research that shows organizations with high levels of employee engagement perform well in a poor economy. Getting the wrong people, even if they have the right direction, will never result in building a great company. To paraphrase Jim Collins in Good to Great, you have to get the right people on your bus, and the wrong people off your bus. Then you need to ensure that you have the right people in the right seats. Then and only then can you start your bus moving the right direction.

Here are five reasons why a really awesome recruiting process is necessary:
1. Employee salaries represents a significant part of the operating budget for most organizations, usually on the order of 40% to 50%. Given those numbers, its easy to see that there is a lot at stake in hiring only the best talent. It should be a safe assumption that a reasonable return on the salary investment is expected. It should also be a safe assumption that the recruiting process must take proactive measures to minimize the risk of hiring someone unsuitable for the positions that are open.

2. The labor market is flooded with great talent, and also with poor talent. Separating the producers from the pretenders has never been more difficult. Considering the way organizations have leaned out and reduced headcount, there is even less room for error in the hiring process. Those fewer people on the payroll are now dealing with higher management expectations and need to be more productive than ever. That also means that keeping the culture in a good place is that much more difficult. Hiring for culture fit as well as talent is crucial these days.

3. Turnover creates an insidious cost and impact for organizations, and the issue often is not taken as seriously as it should be by employers. Setting aside the recruiting fees, the costs in lost man-hours can be enormous. The lost productivity associated with interviewing and evaluating a replacement for the position, having temporary help to fill in for the position, and disruptions to the operations surrounding the position, is often overlooked. Then there is the training of the new hire, and then waiting for the new hire to come up to speed and become productive. If the role was a customer facing role, it also impacts the customer service operation, including customer service levels and the customer experience. Conceivably, there could also be additional impact from lost customer relationships if it was a key role in customer service. Impact to customer operations is not only visible, but can quickly translate to lost revenue. All in, published research puts the cost of turnover at 35% to 45% of the annual salary for the given position.

4. The consensus is that there is a leadership crisis in corporate America. Senior executives are now acknowledging the weaknesses in their leadership pipelines in research surveys. This is a significant problem as more and more baby-boomers are retired. Identifying leadership potential should begin at the recruiting stage. High potential individuals, upon hiring, should be identified and put into the leadership pipeline. They also need to be designated as people leaders, customer leaders, change leaders, etc. All of this assumes, of course, that the organization indeed has a leadership pipeline that is formally identified, managed and developed.

5. Great hiring practices (as well as delicate firing practices) builds the brand equity. Poor brand equity can drive up the cost of salaries because candidates will prefer to work in an organization with a good reputation for treating its employees well. Also important to note is that reputation influences the customer market as well. The labor market now pays close attention to the reputation and culture of an organization. Social networking and websites like and makes this information very accessible to candidates. They now have the ability to learn what the culture and environment are like within an organization before applying for a position. A company like Google Inc., with its powerful brand equity, will be able to attract a higher quality of talent. That talent will be less focused on salary, and possibly settle for less money just to have the opportunity to work at a company like Google.

So all that being said, how can we do better at recruiting? Many organizations have found the answer to an extent. They are using personality profiles as part of their assessment process to make a more objective data-driven hiring decision, rather than a hiring decision based on anecdotal evidence and intuition. Research shows that hiring decisions based on gut-feel carry a high failure rate, resulting in productivity issues, culture challenges, employee disengagement, and eventually turnover. These personality profiles present quantified values and criteria and make for much better predictors for performance and success. As a result, personality profiles reduce the number of unknowns associated with the hiring decision and add a good deal of quality control to the recruiting process.

The bad news is that there are a confusing number of these profiles, and all too often they are used ineffectively, or altogether incorrectly. Later this week, in our next post, we will discuss how to best approach these personality profiles and how to utilize them most effectively to successfully hire top performing talent.


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