It’s a situation so classic they could name a horror movie after it: "The Revenge of the Warm Body Hire." You know the plot: An unfilled job. A desperate manager. A quick hire. And, usually, a very unhappy ending. Workers hired so haphazardly often leave quickly when--no surprise--it turns out that they don’t have the right temperament, skills or dedication. Such ill-conceived hires explain why some companies with large ranks of hourly workers see annual turnover of 100 percent or more.
That’s where workforce optimization vendors come in. It’s their job to help clients make better hiring decisions by automating the job application process and using assessments to match the best candidates to the jobs.
It’s a relatively young and crowded field. A veteran and leader has been Unicru, a Beaverton, Oregon, company that has made rigorous scientific assessments the cornerstone of its "smart hiring" offering. Since entering the business six years ago, Unicru has piled up accolades, partnered with some top names in the workforce metrics field, and processed more than 33 million job applications for A-list clients such as Nordstrom, Kroger, Costco, Albertsons and Blockbuster.
Unicru has been called the 800-pound gorilla of smart hiring by at least one industry analyst because of its head start and expertise in solutions for hourly workers. But with competitors pouring into the field and more corporations interested in smart-hiring solutions for both salaried and hourly workers, it remains to be seen if Unicru can maintain the status quo.
Workforce optimization picks up where applicant tracking leaves off. The latter allows companies to compile job applications electronically to more quickly amass candidates, set up interviews and get new hires on board. Workforce optimizers go further, building assessments into the application process, so if a restaurant manager needs waitresses, for example, she can prescreen for personality traits such as stamina and attentiveness that would make someone well-suited to the job.
The concept is still novel. Most corporations still treat employees as costs rather than assets and don’t realize the strategic edge smarter hiring could give them, say HR industry analysts and workforce metrics experts. Gradually that’s changing, and one reason is the high cost of restaffing.
Chain restaurants, for example, spend a median of $2,399 to hire an hourly employee, including recruiting and training expenses and lost income while a new worker gets up to speed, according to Teresa Siriani, president of People Report, a Dallas-based food-service industry HR researcher. Multiply that by 120 percent average annual turnover in quick-serve restaurants and the expense quickly adds up, Siriani says.
Turnover also hurts customer service, which in turn hurts revenue. "It’s impossible to get good customer service from people who haven’t been in your organization for some time," says Jeffrey Pfeffer, a professor of organizational behavior at Stanford’s Graduate School of Business and a Unicru director.
Competition heats up
Spending by U.S. companies on workforce optimization and other hiring-process automation services is expected to reach $720 million by 2008, up from $260 million in 2004, according to technology researcher IDC.
As corporate interest increases, so has the number of vendors. There’s so much to choose from that some corporate clients hire consultants to help navigate what’s available from companies such as Unicru, Taleo, Recruitmax, Kenexa and Workstream. For vendors, "the real challenge is to get above the noise level," says Lisa Rowan, IDC’s HR management and staf-fing services program manager.
Initially, vendors either specialized in software for hiring hourly workers or solutions for salaried employees. Corporate recruiting managers now want both, and vendors are scrambling to accommodate them, says Rick Fletcher, president of HRchitect, a Cambridge, Massachusetts, consulting firm that matches corporations with applicant tracking solutions.
Fletcher says that Unicru earned its heavy-hitter reputation in the hourly recruiting market because of its relative longevity, extensive client list and science smarts. Among Unicru’s 230 employees is a brain trust of 10 behavioral psychologists, artificial intelligence specialists and other scientists. They use neural networks and modeling to craft assessments "that ask the right questions and score the answers to those questions in the right way" to match prospective employees to jobs, says Steven Hunt, an organizational psychologist who joined Unicru as a chief scientist in late 2004.
Those science roots were a big draw for HR metrics pioneer Jac Fitz-enz, who in fall 2004 chose Unicru along with SAP for a three-way joint venture with his company, Human Capital Source, to consult with companies revamping their workforces because of changing corporate strategies. In a December 2004 report, technology researcher Gartner Group rated Unicru the best of 23 e-recruiting vendors with offerings for hourly workers, based in part on the company’s analytics-based assessments.
It’s a far cry from 1987, when Unicru got its start selling retail security systems. In 1999, a major customer (whom Unicru declined to identify) had an employee theft problem asked for help identifying better-quality job candidates. Armed with that multimillion-dollar contract, Unicru built a job application system with questions to pinpoint personality traits and characteristics desirable for frontline retail jobs such as sales clerks and cashiers. Unicru put the system on computer kiosks inside retail locations and eventually built it into clients’ Web sites. In both instances, the systems are delivered through the application service provider model.
"Analytics are where measurement was 15 years ago. It has nowhere to
Unicru’s current smart-hiring system also automatically dumps unqualified candidates, streamlines background checks, generates follow-up questions for hiring managers to ask in interviews and tracks on-the-job performance to continually refine assessments. Clients pay from $10 to several hundred dollars per employee per month, depending on the size of the installation, plus $50,000 to $100,000 in setup fees, according to Chris Reed, Unicru’s chief marketing officer.
Today, Unicru works with a who’s who of top retail and grocery chains. Since June 2003, Albertsons has used Unicru to process 2 million applications for hourly jobs, resulting in 100,000 new hires. Costco recently contracted with Unicru, but instead of putting kiosks in its warehouse locations the warehouse chain opted to integrate the smart-hiring system into the "Employment Opportunities" page of its corporate Web site, where job seekers can scan it from home or public Internet terminals, says Judy Vadney, Costco’s director of human resources.
G.I. Joe’s was an early customer. Back in 2000, annual turnover for the sporting goods chain’s hourly workers was 168 percent. Managers of the company’s 21 Pacific Northwest locations hired their own staff, and everyone did it differently. "We were looking for a way to simplify, to streamline the process and to elevate the level of employee so we had better quality and lower turnover," says Ed Ariniello, vice president of operations for the privately held $200 million retailer, based in Wilsonville, Oregon.
G.I. Joe’s first tested Unicru’s computer kiosk in six locations. Store managers liked it immediately because it was easy to use, both for themselves and job seekers. "Managers couldn’t wait to get a kiosk in their stores," Ariniello says.
After five years, better hiring has had dramatic results. Turnover among hourly employees is down by more than half, to 80 percent. The company also shaved almost two weeks off the time it takes to replace departing employees, from 30 days to 17. Workers are more productive--the average sale per transaction has risen 3.5 percent a year for the past three years. Customer satisfaction has jumped to 90 percent from the mid-80 percent range, Ariniello says. "Our managers hire better because of the tools they have," he says.
Kay Straky is another smart-hiring believer. When Straky became senior vice president of human resources at Universal Studios Hollywood five years ago, she inherited a mess. Theft was rampant among the 1,800 employees the theme park hired to supplement its 3,500 year-round workers during peak summer months. On more than one occasion, employees who were caught stealing told law enforcement officers that they’d heard it was an easy place to steal from, Straky says.
The involuntary terminations helped push turnover for summer hires to between 30 percent and 40 percent. To improve the quality of new hires, Straky hired Unicru to build a job application with, among other things, a dependability assessment to rule out individuals inclined to steal or skip work.
Unicru put the job application on Universal’s Web site to make it easier for people to apply outside of normal business hours. Unlike the old paper application, which took 30 minutes to fill out, the online job application, which also included background checks, took two to three hours to complete. That immediately weeded out people who weren’t serious about working at the park, Straky says.
As a result of the changes, turnover among summer workers is now 10 percent. In summer 2004, Universal Studios actually processed fewer applications than in years past to come up with the same number of new hires. "Word spreads; the wrong element isn’t applying anymore," Straky says.
A side benefit: While the theme park had to cut its HR staff from 11 to five when business dropped after the 9/11 attacks, it hasn’t missed a beat because Unicru picked up so much screening and other back-end work. Straky says it’s worth what she pays: an annual flat fee based on projected applicants that works out to be $29 per new hire, or about the cost of a drug test. According to Unicru officials, Universal’s fee structure is lower than the norm because all of its applicants come into one site, versus multiple locations for retailers and other clients.
Customers such as G.I. Joe’s and Universal Studios helped pushed Unicru’s contract backlog to a record $100 million in 2004, according to company officials. The privately held company was profitable for the first time in the fourth quarter of last year on revenue of $30 million to $50 million. (Company officials wouldn’t be more specific.)
Unicru can’t rest on its laurels. Competition is pushing the company to branch out. In 2004, Unicru introduced industry-specific assessments for trucking lines, call centers and hotels, and it expects to add something for hospitals and other health care facilities this year.
If Unicru has a weak spot, analysts say it was not offering a solution for hiring salaried employees as quickly as some of its competitors. To that end, in 2003 Unicru acquired such a product, using part of $16 million in venture funds it has raised. So far, though, only five of Unicru’s 60-plus customers are using the company’s software for both hourly and salaried employees.
With pressure on corporations to measure up to new ethical standards brought on by the Sarbanes-Oxley Act, the time is ripe for companies to add assessments for salaried employees to measure their ethical behavior, IDC’s Rowan says. As HR business process outsourcing becomes more prevalent, the success of workforce optimization vendors such as Unicru could make them attractive takeover candidates for big BPO outfits, Rowan says.
No matter what happens to individual companies, though, HR industry analysts agree that smart hiring is catching on. "Analytics are where measurement was 15 years ago," Fitz-enz says. "It has nowhere to go but up because of all the demographic (changes) to the labor pool over the next 20 years. There won’t be enough people to fill all the jobs, so if the pool is smaller, you better pick the right one."
Workforce Management, May 2005, pp. 76-78 -- Subscribe Now!