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1999 Financial Impact Optimas Award Profile Humana Inc.

Most organizations equate the financial impact of recruiting with productivity—hire the best people and you get the best work. And this certainly is an important return on investment. But Louisville, Kentucky-based Humana Inc., the number five health care company in the United States according to Hoovers Online, has proven that the recruiting process itself can have definite implications to a company’s bottom line.

If you have any doubts, check out these numbers.

In 1997, Humana spent approximately $23 million to fill 3,100 positions with external candidates. In 1998, after restructuring its recruiting process, the company spent $10.8 million (an astonishing savings of more than $12 million) and filled 5,500 positions, as well. What’s even more impressive is that the $10.8 million price tag included the cost of new technology—a one-time charge.

How did the company do it? By dedicating people to the recruitment function, aligning them with business partners and giving them the support (both human and technological) to be proactive and strategic.

A focused recruiting function enables proactivity.
Humana is a growing organization. It currently boasts 6.2 million members in 16 states and Puerto Rico, and posts total assets of $4.7 billion. The company, which offers health maintenance organizations, preferred provider organizations and Medicare supplement insurance, also employs approximately 19,000 people—hiring approximately 4,200 a year on average.

In 1996, Humana’s president and CEO (then COO), Greg Wolf, articulated a new vision for the company: “To improve the health of our members, and to provide value to our customers, partners and shareholders.” To realize this vision, Wolf assembled a senior management team that’s actively recruiting new talent at all levels of the organization. Heading up that effort is Reginald Barefield, executive director talent resources and technology (and currently interim HR director).

Wolf recruited Barefield from Lucent Technologies in 1997 to evaluate Humana’s recruitment process. At that time, 110 HR generalists were involved in recruiting. As Barefield puts it, “We had 110 different versions of how to recruit, and 110 different ways in which people were not tracking costs.”

Since costs weren’t being tracked, the first thing Barefield had to do was determine what the company had been spending on recruiting. After all, you can’t cut costs unless you know what your costs are. So Barefield went through every invoice he could find that related to recruiting to reconstruct the company’s spending habits and determine an estimated cost-per-hire. His best conservative guess: $5,200.

With this knowledge, Barefield set out to find a better way. The answer, he believed, was to centralize the recruiting function, and to have dedicated recruiters instead of generalists focused on this process. He did skill and competency assessments for all the people who had been involved in recruiting, and ultimately reduced the number from 110 to 35. Those who didn’t match the recruiter profile either left the company or were transferred to other parts of the organization. (Of course, some of those 110 previously had only spent 10 percent or so on recruitment, so they simply gave up those responsibilities and picked up others.)

“An in-house recruiting team can be much more proactive,” says Barefield. And that’s critical with today’s unemployment as it is.

Barefield created three levels of recruiters. First-level recruiters handle the lower-level, nonexempt positions, senior recruiters source higher-level management positions or director-level positions, and talent resource managers manage the recruiters.

Essentially, Barefield built an internal staffing agency. “An in-house recruiting team solely involved with recruiting can be much more proactive,” says Barefield. And that’s critical with today’s unemployment as it is. A recent survey conducted by Bala Cynwyd, Pennsylvania-based Manchester Partners International indicates this is the way many organizations are beginning to go. According to the survey of 1,890 human resource openings, the rise in job openings for recruitment professionals hit 13 percent in 1997. The workforce consulting firm concludes that the value of internal recruiters is increasing in a market of high employment and low retention.

But just focusing personnel on recruitment wasn’t enough. Barefield also aligned recruiters and talent resource managers with specific divisions and functions, having them partner with the hiring managers (staffing managers). For example, a recruiter is responsible for just nurses or just physicians or some other functional area within a specific business unit. This same structure is mirrored at each business unit.

At the start of each year, recruiters and hiring managers together develop a forecasting plan. The group looks at the number of jobs filled the previous year, breaking the totals down by quarters and by types of positions (i.e. newly created positions versus replacements). It then looks at key business drivers, new contracts in the works, new products being developed, anticipated increased revenue streams and other such factors to determine the number and types of jobs needed for the coming year. After evaluating the competencies required for those jobs, the recruiter can then put a strategy in place to begin filling the pipeline. The forecasting projections are updated quarterly to address changing business needs. This process enables the recruiters to better understand the needs of their customers, says Barefield.

Diane Tunick Morello, research director for Stamford, Connecticut-based Gartner Group Research and Advisory Services, identifies another benefit of this structure: “Teaming up recruiters with hiring managers allows recruiters to explain to managers what’s crucial—it helps them set priorities instead of developing wish lists.”

Recruiters are freed from administrivia to sell.
Recruiters at Humana are supported by recruitment coordinators. The coordinators schedule interviews, conduct background checks, write offer letters and so on. In other words, they handle the transactional elements of the recruiting process. “If recruiters get involved in transactional activities, it takes them away from recruiting,” says Barefield. “They need to be 100 percent on recruiting.”

That means they need to be finding leads. One avenue that today’s recruiters travel to find leads is the Internet, searching through such sites as The Monster Board and JobOptions. Although this can be an effective method, it’s also a tedious, labor-intensive process—and can devour a lot of time without gleaning maximum results if the recruiter doesn’t have a clue where to search.

To perfect the process, Barefield put in place smart-agent or artificial intelligence software. Essentially what the software does is search the Internet for his recruiters. Say, for example, the company is looking for a software developer located in Texas who has CAD experience. The software already has the criteria (skills, geographical locations and so on) programmed in. The recruiter merely needs to point and click and enter his or her specifications. The software will then query multiple search engines, free recruitment sites, news groups and personal home pages, and bring back relevant resumes. (The recruiters don’t even need to be online to do this.) The software will then format and index the data from the resumes, and slot it all into a database.

At that point Barefield’s second “secret weapon” takes over: Softshoe, a resume management tracking system developed by New York City-based Hot Jobs Inc. using criteria outlined by Barefield. Softshoe, which is a private company version of Hot Jobs’ commercial job board received the Best Network/Internet Software award and was selected one of three Best of Show products at Comdex in Chicago last April. Softshoe manages all the activity flow from requisition to interview schedule to offer acceptance. The two pieces of software create a dynamic system—Humana is even able to update records frequently by storing e-mail addresses from the resumes in the back-end database so recruiters can check on candidates’ availability via broadcast e-mails. Says Barefield: “At Humana, we maximize our resume database—it’s our core tool to track our leads.”

Although the Internet can be an effective method, it’s also a tedious process that can eat a lot of time if you don’t know where to look.

Indeed, Humana also uses the resume management tracking system to help the company evaluate its recruiting strategy. Each strategy (i.e. job fair, classified ad, online search, and so on) has a source code. Recruiters can go back in and track how many hires come from each source. Barefield also is in the process of integrating the resume tracking system with the company’s HRIS to extract data regarding productivity, link it back to where the person was hired and determine where the most successful hires come from.

The technology definitely is a coup for Humana, but not the panacea. “People put technology in and think it will be the automatic solution,” says Barefield. “But the art of recruiting is networking. And in order for you to have people who are experts at networking, you have to align the infrastructure so you have the right people who understand that concept.”

Treating recruiting like a marketing function.
Once recruiters are set up as valuable players, you have to pay them. Barefield says he believes recruiters should be paid just like sales and marketing people because they’re, basically, selling the company. Karen O. Dowd, who heads the Recruitment and Staffing Strategies Practice Area at New York City-based Brecker & Merryman Inc., concurs. “Recruiting is really about marketing—about selling the benefits of a career at your organization to those candidates who are a good fit with your firm’s people and culture.” And that makes their value high.

“They’re helping the company meet goals by hiring quality talent to help the company sustain growth,” says Barefield. Therefore, recruiters at Humana currently receive base salary plus monetary awards based on special achievement. However, Barefield is moving toward an incentive-based compensation program based on how much recruiters drive down the cost-per-hire ratio. “Now that we’ve got the infrastructure and the technology in place, we’ve already driven down costs considerably,” says Barefield. In fact, Humana’s current cost-per-hire is $3,066, down from $5,200 last year. The current figure also is below the industry mean of $4,800.

What’s significant is that this has been accomplished while also improving the process. The industry average for time-to-fill is 53 days. At Humana, it’s 30. And with the technology functionality that will enable the company to evaluate quality of hiring strategies, it seems that Humana has figured out how to be better for less. Now that’s a financial impact.

Workforce, March 1999, Vol. 78, No. 3, pp. 36-40.