Recent Trends in Human Resource Management

Monday, October 6, 2008

Retention Problems Begin During the Hiring Process

In most organizations the recruiting function is entirely separate from the retention effort, yet the design of the hiring process has a dramatic and direct impact on future turnover. More than one-third of the factors that drive future turnover have their roots in the recruiting, hiring, and on-boarding process.

Recruiting Factors That Impact Future Retention

If you're interested in reducing turnover, here are some of the hiring-related factors that impact future retention:

1. The source where you found the candidate. Employees who make referrals have a personal interest in the individuals they refer succeeding on the job. As a result, the employee making the referral has a tendency to mentor or guide that individual and will intervene to help the candidate if he or she gets frustrated. Sources of recruits who don't have that mentoring connection, like large job boards, almost always produce hires who quit at a much higher rate. Look at each of your early turnover cases and see which of your sources have above-normal turnover rates.

2. Their average tenure in other jobs. Calculate how long, on average, any "serial quitters" stayed in their last several jobs as an indicator of how long they are likely to stay in this job. I am not saying you shouldn't hire people who change jobs frequently. They might be top performers who are simply in high demand or who work on projects with relatively short lifecycles. However, you should estimate their likely tenure, then mark it on your calendar, and then later, actively "re-recruit" them around the time they are "overdue" for change and are likely to begin looking for a new job.

3. Hiring candidates who are focused on money. Every candidate has his or her own set of motivators for taking and remaining in a job, and a significant percentage of people are motivated primarily by money. Money is the offer component that is the easiest to compare between firms, but it is also a factor that can change fast. Individuals whose primary motivator is money tend to be at the top of the turnover pyramid because they frequently "jump" to a new job as soon as a higher monetary offer comes in. No matter how good your initial starting salary, if your organization is slow to give raises, bonuses, stock rewards, or to counter outside offers, you will inevitably lose these individuals when more money comes along. Leading firms like Ernst & Young and Southwest Airlines understand this relationship and as a result, they specifically target hiring individuals who don't have the "give me the money" mentality. Incidentally, individuals hired from executive search firms can fall into this "money first" category. If they left the last job because an executive search professional presented a "better money" offer, don't be surprised when they leave again when the next executive search professional calls with slightly more money to offer. Solutions include targeting individuals from not-for-profits, government, education, and medicine. Also, share information on the maximum and minimum salary, stock options, and bonus amounts (based on actual new-hire experience over the last two years). By providing only trend information from actual experience and carefully avoiding any direct promises to individual candidates, you can minimize legal issues and any misperceptions about the actual amounts that they "will" actually make. To determine a candidate's top motivators, give them a simple, one-page survey that requires them to force-rank the top and bottom factors that motivate them to change jobs. By forcing them to rank the top and bottom three "job change" motivators, you can get a good (though not perfect) idea of whether exceptional money is a critical factor. Options could include high base pay, bonus percentage, exceptional benefits, challenging work, learning and growth, working in a team, working independently, the opportunity to innovate, job security, a directive manager, a hands-off manager, a product they believe in, the desire to help others, recognition, and two-way communications.

4. On-boarding and orientation. The first few days on the job have a dramatic impact on future retention (one firm found that weak orientation could increase future turnover by as much as 20%). Research shows that individuals make a "mental decision" during their first month as to how long they expect to stay with the organization (Note: this phenomenon is highlighted in the popular book, Blink). New hires subconsciously judge whether the organization meets, exceeds, or fails to meet the expectations they have based on how they were treated during the first week and month. If they are under the belief that your organization promised exciting work but are told during their first week on the job to sit in their cubical and "read the manual," they are likely to conclude (and also to tell their colleagues) that while the organization may talk a good game, it is not reflected in the actual job. To avoid mixed messages, make sure that your "local" on-boarding is stimulating and gets them up to the expected level of productivity quickly. Such a program might focus on coordinating meetings with the top people right away, providing new hires with a mentor, and periodically asking them what can be done to bring them up to productivity faster. During orientation, ask candidates specifically "what is the best way to manage you?" By identifying what management approaches they personally have found to be effective with them in the past, you can avoid the need for a lot of trial and error on the part of their manager. Some of the "factors" you want to identify relating to "how to best manage them" include what motivates them, what frustrates them, what is the best way to communicate with them, how often they like to see their manager, what challenges them, and what would they like to learn during orientation. With this information, you can provide their new manager with insights into the management approaches that make them the most productive (note: managers can also provide new hires with a profile outlining how they manage their employees). Ask new hires during on-boarding why they accepted the job and what led them to quit their last two jobs. Passing those reasons on to their current manager can help ensure that they know which factors might cause the new hire to leave again.

5. Recruiter involvement after the hire. If you want to reduce future turnover, maintain a relationship with new hires during their first six months in order to ensure that they don't become frustrated (this approach was championed by Michael Homula at FirstMerit Bank with great success). Recruiters can add value because good recruiters routinely know what motivates and frustrates their candidates. It only makes sense that they maintain a relationship with new hires for a few months after they come on board to gauge whether the candidates' expectations are being met. I call this process "closing the sale." In this case, recruiters don't take over a manager's role in retention; instead, they only supplement it. Recruiters can be a source of advice and information, help reduce new hire frustration, and provide insight on how to navigate inside the company. Recruiters can also help new hires understand the "what" and "why's" within the firm. As many as 60% of new hires fail, not because they're bad hires, but instead because of a bad initial job placement. Recruiters who keep in touch can help to speed up internal redeployment of initially "mis-placed" individuals.

6. The lack of diversity orientation and retention. Many organizations have a diversity recruiting function that endeavors to hire diverse individuals. Unfortunately, once they are hired, diverse individuals frequently receive no further special attention. This is unfortunate, because by definition, diverse individuals have different expectations and needs than the average hire. If you treat all new hires exactly the same, you should not be surprised when you find that diversity turnover rates are higher than your average turnover rates. The solution is simple: offer variations in on-boarding to ensure that the unique needs of diverse people are met. Next, add a diversity retention function or process to ensure that your organization gets direct feedback from diverse new hires about factors that might cause them to be frustrated or to begin looking for another job.

7. Manager rewards for great retention. Less than one in three organizations reward managers for having low turnover rates among new hires. If you want managers to pay attention to retention both during and after a new hire's induction period, show them the impact that turnover has on their business results. Then, tie every manager's bonus to "performance turnover." Performance turnover differs from traditional turnover in that the loss of a top performer, a diverse individual, or an individual in a mission-critical job is weighted significantly higher than the turnover of an average performer. There is no punishment for losing a bottom performer.

8. Being aware of the most common causes of turnover. If your organization conducts delayed or "post-exit" interviews, you probably already know that most top performers leave because they had a bad manager, were not challenged, were not growing, or were mistreated. Don't place a top candidate with a mediocre or bad manager. If your organization doesn't have a bad manager identification program, look at the processes pioneered by FedEx and Dell.

Shifting to other turnover causes, if you want to ensure that new hires are challenged, learning, and growing, ensure that all new hires have an individualized plan for learning, growth, and challenge (Qualcomm, for example, requires every employee to have a learning plan). Next, focus on the lack of differentiation.

In my experience, it's hard to get compensation professionals to realize the important role they play in great recruiting and retention, but every effort must be made to convince them that you can satisfy most top performers' need for differentiation by ensuring that a significant portion of pay and bonuses are based on performance.

Few things frustrate top performers more than being paid, recognized, and treated exactly the same as poor performers like Homer Simpson.

Final Thoughts

HR has justifiably been accused of creating numerous functional "silos" that hinder cooperation between the different HR departments. New hires must be "maintained" just like any other new asset. There needs to be a planned maintenance schedule that is personalized to the needs of each new hire. That maintenance process must be coordinated and systematic and must "force" integration of the actions of the various silos. Almost without exception, one of the thickest walls between HR functions is the one that separates the recruiting function from the retention effort.
In my experience, the interaction between these two functions is, all too often, minimal to nonexistent even though bad recruiting directly "causes" future turnover and conversely, poor retention efforts unnecessarily increase the future workload of all recruiters.

To avoid this common problem, identify the direct connections between how you recruit and orient and future turnover. Then take the necessary steps to stop this wasteful, preventable turnover.

Ref: Dr. John Sullivan

The Future of Contingent Search

What does the future hold for the age-old industry currently in transition?

The traditional contingent search business model is a risky one in that it is incredibly susceptible to macroeconomics, technological innovation, and population demographics. While many industries can balance their product and service portfolios to survive the most brutal application of the laws of supply and demand, many smaller contingent search providers ride a one-trick pony.

In 1999, contingent search providers were riding waves of success that made those on the North Shore of Maui look tame. Search commissions were rising steadily, exceeding 45% in some markets, newbies to the profession were pulling down six-figure incomes, and the influx of job orders seemed unending. Then 2001 hit, and one contingent firm after another cut back, laying off thousands. Now that double-digit employee growth is once again a challenge for most companies, you would think that the glory days of contingent search are back. But, as many firms will attest, they aren't.

Revenue Is There, But Not From the Same Sources

While industry revenue is forecasted to grow from 10.4% in 2005 to 11.6% in 2006, the industry is deriving the greatest percentage of newly booked revenue from value-added services, namely temporary or contract staffing and professional services. More companies are relying on contingent workforces than ever before. It is estimated that in 2006, as many as two-fifths of newly created jobs are first offered on a temporary basis. That's a fourfold increase in the growth of contract labor in just 10 years.

While the job orders being placed with traditional contingent agencies aren't drying up, the increased use of contingent labor and a confluence of technology driving candidate visibility is forcing such firms to change or die. With the opportunity to maintain minimum placement volume needed to sustain a business in jeopardy, many contingent search providers are increasing the scope of value-added services they offer, and are finding clients more receptive than ever.

The contingent search industry has long been one that defined success too early, in that it never sought out opportunities to extend the value of its services beyond the initial placement transaction. This lack of prior industry development has made the industry ripe for a series of progressive, qualitative transition cycles. Early leaders embracing this transition are already blurring the lines between temporary staffing, contingent staffing, retained staffing, professional services, and training. With this transition firms like Adecco and Kelly, which had few urban competitors, today have thousands, ranging from local companies of one to foreign companies of thousands.

The Confluence of Technology Driving Candidate Visibility

Traditional contingent search firms take advantage of their ability to find candidates who have not been found by companies or who have been overlooked. It is, for the most part, a low-volume, high-margin business. However, the confluence of numerous technologies that service the recruiting function and the proliferation of the Internet have made a majority of the world's workforce more visible to corporations and, in the process, eroded the value proposition contingent search providers once banked on.

In this new era, contingent search professionals are finding it a lot harder to find a candidate who:· Doesn't appear on a lock-out list (a list of the agencies' other clients or strategic partners of the client organization);· Hasn't already been introduced to the company via the employee referral program; or· Doesn't already appear in one of a multitude of databases that employers have purchased access to; or· Hasn't already applied directly to the company sometime in the past four years; or· Presents a background so stellar that companies don't balk at paying search fees.

In short, the inventory of talent that contingent search providers can trade upon for permanent placement is in extremely short supply.

New Services on the Horizon

As stated earlier, those agencies embracing change are finding more ways to extend the value inside the organization. The most common extension is, of course, the move into supporting temporary labor. While many large service providers like Randstad and Kelly have the market economics to secure the largest companies in a metropolitan area, a number of small- and medium-sized firms desperately need help leveraging contingent staff.

In addition to temporary staffing, a number of other potential services are on the horizon, some that many large organizations should consider taking advantage of.

Outsourced Referral Program Management

Employee referral programs are quickly becoming the predominate source of hire inside most organizations. Those firms that lead their industries in hires attributed to employee referral can attest that providing world-class customer service to both referees and referrals is essential to maintaining program momentum.

Unfortunately, most HR organizations are not adept at even spelling world-class customer service, let alone delivering it. For years, HR organizations have focused on containing costs and enabling self-service, two objectives that don't always drive customer satisfaction. Contingent search firms, on the other hand, have built their businesses around customer service, servicing not only the client but the candidate as well.

By outsourcing the management of the employee referral program to a trusted search provider, the client organization could gain several key benefits, including:

· The search provider could more easily ramp up and down the human resources attached to the client employee referral program to maintain pre-established customer service standards.
· Under a split-type agreement, the search provider could provide referrals with additional placement services should the client organization opt not to hire, thereby creating a revenue source to self-fund the employee referral program.
· The search provider could provide more advanced analytics regarding the success or failure of the employee referral program because traditionally agencies have been more adept than HR functions have been at applying metrics internally.
· The search provider could leverage economies of scale and build internal staffing proficiencies in marketing and sales skills to support the employee referral program that would not make sense for small- and medium-sized firms to invest in.

External Brand Assessment

While most lock-out list scenarios prevent companies from using an agency to raid another employer, they don't prevent organizations from hiring services to help identify and understand their position in the market as employers. Because contingent search providers have a proven ability to blueprint a competing talent organization, target specific talent, and establish contact with said talent, it makes sense to leverage that ability to identify and gauge an employer's reputation in specific talent markets.

Professional recruiters may be more adept at getting an honest perception than market researchers because they have a proven ability to keep talent talking. Under such a scenario, search providers would:

· Build contact lists of target talent in competing organizations.
· Establish relationships with said talent over time.
· Use the established relationship to gather research on how the client is perceived in key areas by the target talent.
· Aggregate the research and report back to the client perceptions that limit the client's ability to attract said talent.

Competitive Landscape Mapping

Nearly every contingent staffing professional can tell stories about when it introduced a candidate to a client who came from a competitor whom the client was unaware of. While companies like to think that their marketing teams are adept at identifying potential competitors, staffing professionals often do a much better job at mapping who-competes-against-whom for customers, and especially for employees.

They are more adept at recognizing industries that hire compatible talent, and much more adept at identifying new entrants to the talent market. Client organizations can use contingent staffing firms to build competitive talent landscape maps as a precursor to organizational benchmarking initiatives. Maps can help insure that organizations have a realistic picture of who is after what talent in a specific geography, and what each player's strengths and weaknesses are.

Recruiter Training

While the visibility of candidates may have improved, the ability of the typical corporate recruiter to acquire said candidates has not. Most corporate recruiters are phone averse, and seem to think that proactively contacting any potential candidate before they have applied to you is an ethics violation!

As such, a number of contingent search firms have started offering training seminars and certification programs that help prepare recruiters to be successful in the role of corporate recruiter. Some aspects of these training programs focus on sourcing techniques, while others focus on how to engage candidates and deal with the all too common objections. A number of Fortune 200 companies now rely heavily on recruiters who have undergone said training.

Under this service, contingent search providers:

· Recruit entry-level recruiters onto their payroll.

· Train the recruiters in full life-cycle recruiting or a life-cycle specialty, depending on client needs.

· Provide the newly trained recruiters with on-the-job experience for a minimum period of time.

· Contract out or place the new recruiters with client organizations and guarantee their on-the-job performances for a set period of time.

Vendor Management

Another service that is growing in popularity among traditional contingent agencies is vendor management. Many corporations are horrible at managing the multitude of services that support the staffing function and could not optimize the deployment of searches or resources if the future of their staffing function depended on it.

Despite years of challenges and a host of software products that have sprung up to do the job, most companies still need help. Because agencies are generally better at using metrics internally and have a profit incentive to use resources wisely, outsourcing vendor management to a contingent staffing vendor again makes sense. They can leverage the same metrics that they use internally for assigning recruiters to job orders to assign subcontractors to accounts. Because their profits are tied to helping you maximize both the efficiency and effectiveness of your staffing efforts, you build in accountability to a corporate function that traditionally hasn't been held accountable.


Contingent search firms have existed for years and will continue to exist for years to come. But like all industries, the contingent staffing industry is not subject to life as we have known it forever. It too must evolve — now more than ever. The position of search firms is one that lends organizations a great deal of power to identify what does and does not make sense to do internally. In short, it gives organizations the strength needed to force trusted search providers to become mini-recruitment process outsourcers. Are you progressive enough to leverage your partners?

Ref: Dr. John Sullivan & Master Burnett

Talent Intelligence During the Onboarding Process

It is widely accepted that, in small pockets around the world, the second iteration of the war for talent is well underway. Emerging companies in China, for example, are invading small rural villages in an effort to convert agrarian citizens into knowledge workers, and professional service firms are eagerly grasping at once undesired college new grads.

It would be logical to assume that growth-oriented firms would be devising new methods to uncover hidden sources of talent and fend off poachers from other organizations, but in reality few are. At a time when most organizations should be abandoning the conservative approach of continuous improvement and embracing innovation, too many are still focused on miniscule efficiency gains.

At no time since the final years of the Roman Empire has the world population mimicked its current state. With a huge population of aged workers and a significantly smaller influx of youthful workers, it is well known that something will have to change. Innovation will take place.

The world is full of people who look back and say, "If only I had thought of that," or, "If only I had leveraged that missed opportunity, where would I be today?" It is also full of people who routinely try to reinvent the wheel.

Unfortunately, the recruiting profession seems to be a magnet for these types of people. For years now, thought leaders have been advising organizations to embed formal competitive-intelligence-gathering activities into their onboarding processes, yet few actually have. When a recruiter learns of actions in a competitor, rarely do the managers who could leverage such information hear of it. What is even more disappointing is the lack of talent intelligence gathering that takes place during the onboarding process, and the shear volume of missed opportunities that go unnoticed.

The Problem With Most Onboarding Approaches

Like many programs in human resources, onboarding programs suffer from narrow perspective design. Quite frankly, they are designed by people who truly have no idea what value talent provides or how to maximize the value of that talent.

The most common evidence of this design flaw is the scope and direction of information flow during the onboarding process. In most organizations, information flows only one way, with the exception of benefits enrollment data. Few organizations look at the onboarding process as an opportunity for both parties to exchange in a dialogue where both parties learn something of value.

In short, we add another element to the list of missed opportunities in HR.

The New Perspective

The first week on the job can play a crucial role in motivating and retaining new employees, helping them contribute not only to their own success, but their new employer's as well. Organizations often spend lots of time and money recruiting and wooing new employees, but as soon as they start they turn around and treat them like barely welcome strangers.

In the new perspective, recruiting is viewed as only half of the task of hiring. Orientation is the other, often ignored element.

The new hire's first week on the job is too important to delegate to human resources or to devote to "reading the manual." Managers need to take control of the process of bringing a new employee on board and engage in what we call "talent intelligence gathering." Just like a parent adopting a new child, the role a manager plays during the first week is of critical importance if the value of the new hire is to be maximized.

Talent Intelligence Onboarding Areas

The following is a short list of areas for which managers interested in performance should take responsibility and for which they should make use of intelligence that is gained:

· Accelerating time to productivity. Coming into a new environment can be stressful for even the most adept change seekers. Any delay in providing new hires with the guidance, equipment, and training they need to get started on what they will be held accountable for can slow the time it takes for a new employee to reach a minimum expected level of productivity. Each day of delay can frustrate the employee and may also mean the loss of thousands of dollars in revenue if product development or sales are impacted. During the intelligence-gathering process, managers should engage with the new hire to uncover his or her desired management style, perceptions of company processes (good and bad), and insight about how other organizations may have approached the new hire's role differently.

· Continuous recruiting. Having recently changed teams, the new hire has an innate interest in helping their new team succeed — and that gives both managers and recruiters a perfect opportunity to discover leads for other potential hires. By asking new hires on their first day who else is good at their former firm, managers can easily increase their supply of talent. New hires can also be asked (when appropriate) to directly help in recruiting their former colleagues.

· Competitive intelligence. By asking new hires about the best practices of their last firm, their new managers can gather some new benchmark.

· Setting a manager's expectations. On the first day, it is important for the manager to make sure that the new employee knows the manager's expectations, the departmental goals, and what important contributions the employee can make to the product and the firm.

· Understanding the employee's expectations. It is equally important for the manager to find out what expectations the new employee has in the areas of training, promotion, and preferred management and communication styles.


Innovation is an activity without boundaries, so there truly are no limits as to what opportunities can be created and leveraged during the onboarding process. But organizations must abandon the useless activities that most onboarding programs consist of, and instead embrace programs that immediate create value for both parties.

Gone are the days when an organization could afford to wait six months or longer for a new hire to become productive, or when they could pay recruiters to spend months researching potential hires when the information could have been mined in a matter of hours from existing employees. Take advantage of the opportunities before you to map the competitive landscape, using the expatriates you have just recruited. A war is underway, and you need to adopt warrior-like approaches.

Ref: Dr. John Sullivan and Master Burnett.