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Recruiting Outlook

Despite a puzzling economic forecast, HR professionals are addressing recruitment and staffing issues in innovative ways. The task increasingly requires flexibility and skill.

November 28, 2002
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Related Topics: Candidate Sourcing, Staffing Management
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Like most of his colleagues, Russell "Rusty" Rueff isn’t in a furioushiring mode—far from it. But while other HR professionals lapse intoemployment pessimism, he happily pursues talent, not in the usual places, but inthe privacy of living rooms and bedrooms.

Rueff is senior vice president of HR at Electronic Arts, the world’slargest publisher of video games. "Our best candidates hang out online andread gaming magazines," he says. "I think about our next generation ofemployees when they’re 16 years old. I can get to them because our games arein their living rooms and their bedrooms. All I need is their e-mail address."Those addresses flow into an applicant-tracking system from Hire.com, acornerstone of Electronic Arts’ talent-management strategy.

The 3,500-employee company, located in Redwood City, California, willcontinue to integrate recruiting efforts into the organization’s marketingefforts in 2003. Referring to potential hires, Rueff says, "I never want themto be more than 10 pages or 10 clicks away from getting a great impression ofElectronic Arts." In keeping with this commitment, the company now includesmore information about its EA Academy internship program, including a URL to itsWeb site, on the back of video game manuals.

The economic forecast remains puzzling, but, like Rueff, many HRprofessionals address recruitment and staffing issues aggressively andcreatively. They take calculated action. They continue to recruit during ahiring freeze. They fulfill highly specific recruiting needs during soft labormarkets and times of corporate cost reduction. They also take advantage ofhiring lulls by re-evaluating strategy and tactics. Even if the economy driftsdownward and corporations remain in a belt-tightening mode, savvy HR managersenable their companies to quickly add quality staff as soon as the workforcegrowth light turns green. In 2003, that means defining exactly what "talentmanagement" means to the organization and where it fits into overall corporatestrategy. Is it more than a fancy term for recruiting?

On the staffing side, HR professionals expect to more closely manage theirorganizations’ collective psyche and find new ways to motivate and developemployees, who, with the exception of the highly talented, are less likely tojump ship than they were 12 to 18 months ago.


"Depending on the direction the economy takes in the next 12months, recruiting pipelines could become much less robust very quickly."

"From a recruiting and staffing standpoint, I would be concerned aboutwhether the economy is going to make a strong comeback or not," says ChrisMichalak, a principal at consulting firm Towers Perrin in Chicago. "Given thegeneral preponderance of potential candidates, many companies can be moreselective in their recruiting. But that does not hold true for all positions orall industries. Depending on the direction the economy takes in the next 12months, recruiting pipelines could become much less robust very quickly."

The candidate pools for nurses, pharmacists, and many types of engineerscontinue to shrink, even as unemployment in the United States approaches aseven-year high. In the professional services industry, top firms like Accenturelaid off thousands of highly paid consultants in 2001 as large client companiesscaled back their enterprise-software investments. Yet those same consultingfirms are scrambling to hire consultants who can help deliver hefty governmentcontracts tied to homeland-security initiatives. "Many companies will continueto hire and fire," says Jane Paradiso, recruiting solutions practice leader atconsulting firm Watson Wyatt in Washington, D.C.

A Towers Perrin study of 22 companies, selected for their strong financialperformance, high employee-retention rates, and appearance on publiclyrecognized best practice lists, echoes Paradiso’s point. The survey found that73 percent of firms that cut staff in the previous six months continued to hiretalented employees while downsizing.

Deciphering recruiting and staffing trends is complicated by an uncertaineconomic recovery, which could further restrict recruiting budgets. On the otherhand, any signs of a sustained revival likely would tighten the soft labormarket. Unemployment is rising, but remains within a moderate range (5.7percent) from a historical perspective. Mass layoffs, which the U.S. Departmentof Labor defines as instances of 50 or more initial unemployment claims beingfiled against one company in a five-week period, appear to be on the decline(1,060 in September) after peaking in January at 2,146. The practice of hiringwhile firing bolsters cost-reduction efforts and allows companies to continuepursuing highly talented employees, who remain as difficult to find, hire, andhold on to as they were in the dot-com glory days.

As firms discover that they can attract new hires for less than they paid ayear or two ago, pay levels for similar positions within the same company maygrow more inequitable. Those gaps can further demoralize workers already jadedby a spate of accounting chicanery, workforce reductions, directives to shouldermore health-care costs, revelations about luxurious executive-compensationpackages, and the pummeling of 401(k) plans and company stock holdings.

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    Some organizations will continue to respond to the iffy economic recoverywith short-term cost cuts. One company is transforming its recruiters intoreduction-in-force counselors because firing has far surpassed hiring. "That’snot necessarily a good idea," notes Paradiso, "but it illustrates how costconsiderations can drive decisions right now."

There are more effective recruiting methods to use during times of lighthiring. At New York Life, the hiring pace is slower than usual, as it is at mostother companies. However, the recruiting staff for the 11,900-employee companycontinues to participate in job fairs and visit college campuses. And recruitershave used their time to focus on New York Life’s diversity-hiring efforts,strengthening existing relationships with the National Urban League, the NAACP,the National Black MBA Association, and Women for Hire. The company also istaking advantage of the softer labor market to reduce turnover in its accountingdepartment, which is higher than in other departments. To aid in this effort,recruiters have stepped up their pursuit of CPAs.

At The Container Store in Dallas, a 28-store retailer with 2,000 employees,the hiring rate is down slightly from previous years. However, ElizabethBarrett, vice president of operations, attributes the decline to a lowerturnover rate. Regardless of whether there are 15 job openings or no jobopenings, The Container Store requires store managers to invest two to threehours per week in interviewing job candidates. "One of our goals is to neverhave to place a job-opening ad in the paper or, frankly, anywhere," Barrettsays. When the retailer—which was ranked second in Fortune’s "BestCompanies to Work For" in 2002—hires seasonal employees to meet the demandsof holiday buying, managers do not need help from the home office’s two-personrecruiting staff because they already have a roster of qualified candidates tocall on.

Defining talent management
    Like The Container Store, Electronic Arts is actively recruiting during thecurrent period of minimal growth. That practice is an essential component of "talentmanagement," a phrase that sits atop most recruiting and staffing prioritylists for 2003. Yet too many HR professionals simply use it as a synonym forrecruiting or as a description of their new applicant-tracking technology.

Not Rueff, whose well-defined approach to talent management reflects his10-plus years in PepsiCo’s human resources managerial ranks—which includedlocking horns with union organizers, running staffing divisions, and recruitingthe president of Pepsi’s China business—as well as his more cutting-edgeapproach to courting future video-game wizards. He e-mails updates on thecompany and its hiring needs to the 200,000 potential job candidates inElectronic Arts’ recruiting database. "The bridge between great people andgreat companies is timing," Rueff says. "I can’t hire hundreds ofrecruiters to maintain relationships with candidates, but I can use technologyto do that."

Although Electronic Arts’ applicant-tracking technology enables the companyto maintain relationships with a greater number of potential future employeesthan ever before, its hiring process remains steeped in personal contact. Mostjob candidates participate in 15 different interviews before the company decideswhether or not to extend an offer. "It’s a slow and laborious process,"Rueff says. "Two years ago, people inside and outside the company complainedabout this gauntlet. Today, I have candidates asking me if they can see morepeople. Before they make their next move in this economy, they want to make surethey have the real story."

New York Life uses its applicant-tracking system to free up recruiters tospend more time making connections on college campuses. Angela Coleman, vicepresident of human resources at New York Life in New York, reports that thetechnology also helped reduce the average cost per employee hire from $7,000 to$6,000. "We’re also noticing that fewer applicants are turning down offers,"Coleman says. She acknowledges that market conditions drive that improvement,but says that quicker responses from recruiters to candidates via theapplicant-tracking application also play a role. "Our recruiters spend lesstime doing administrative work and more time selling the company and all of itsbenefits."

Concerns about employee engagement
    At top HR departments, talent-management practices will include staffingtactics that focus on bolstering the levels of employee engagement in 2003. Theterrorist attacks of 2001, the recent accounting scandals, and the still woozyeconomy have generally depressed employee morale.

Michalak encourages HR executives to address several questions on this front:Are employees less trustful of the company? Do they have less confidence insenior leadership? Do they value a work/life balance that tilts more toward "life"than it did 15 months ago? "I think heads of HR need to become more focused onwhat will and will not engage employees in 2003, particularly in the early partof the year," says Michalak. "You quickly need to get an idea of what willallow the company to get the most from its employees."

The rising number of job-hunters enables many companies to become moreselective in their hiring. In addition, better candidates can be hired at lowerrates than companies were forced to offer 12 to 18 months ago, during a tighterlabor market. That’s particularly true of IT positions. "My clients aresaying, ‘There are a lot of techies on the market today. They’re stillvaluable to me, but not as valuable as they were a year or two ago, becausethere is a huge surplus to pull from,’" says Brent Longnecker, president ofResources Consulting Group in Houston. He expects companies to addresssituations in which they have an IT employee earning, for example, $70,000 peryear but can hire a better candidate to do the same job for, say, $50,000 peryear. "There’s no perfect answer to that problem," Longnecker says. Onesolution he mentions is using that information as the basis for freezing the$70,000-a-year IT employee’s pay.

"It’s as if the music stopped and if you’re sitting in a chair, you’reholding on to it," says Rueff. "At the same time, employees hear footsteps,especially in the technology world. They have a strong need to stay ahead of thenew talent that’s knocking on the door." That presents HR executives with anopportunity to improve employee engagement through training and developmentofferings. Electronic Arts trains its employees on many of the new softwarepackages that crop up in the video-game publishing industry.

In an uncertain economy, those and other offerings can provide more bang forthe retention buck. At The Container Store, Barrett pays close attention to theneeds and frustration levels of store managers. In October during a weeklystaffing update with her CEO, she proposed providing a laptop to every storemanager to help ease the burden of conducting 60 to 100 employee reviews eachyear. In January 2003, each manager will receive a laptop.

Cultural balance
    Top HR professionals include recruiting and staffing techniques as well ashigh-tech and high-touch approaches in their talent-management definitions. Theyalso mention a third dimension—the growing difficulty of recruiting andretaining top performers.

Rueff recently wrapped a year-plus recruiting effort by hiring a new CFO,Warren Jenson, who formerly served as CFO of Amazon.com. "We were fortunate toget someone who is probably one of the top five CFOs in the country to come workat EA," Rueff says. That hiring occurred after lengthy due diligence on bothsides and a substantial amount of opening up on Rueff’s part. "It was onlyafter he felt confident that we are the real thing with a real growthproposition that we were able to bring him across," Rueff says. "Finding,convincing, and bringing in top talent is hard, if not harder than ever."

Retaining that talent also presents a challenge. The Towers Perrintalent-management study found that 42 percent of respondents have createdstaffing programs specifically targeted to retain top performers. Colleen O’Neill,talent management leader for Mercer HR Consulting in Atlanta, works with aclient company that has, in effect, created two different organizationalcultures: one for its highest performers and one for the rest of the employees.The professional services organization built its initial success, O’Neillsays, "by letting its mavericks run the business the way they wanted to."But as the company supplements its executive-search offerings with moremanagement consulting services, the maverick model no longer suffices, at leastnot exclusively.

"You don’t necessarily have to have a one-size-fits-all staffing model,"O’Neill says, noting that sales forces in many companies are managed withdifferent rewards and incentive models than those that apply to the rest of theorganization. "You can have one part of your business that is oriented to toptalent and another part of your business that provides a different career path."For those two cultures to thrive in tandem, HR executives must communicate veryclearly with both sides of the divide. "Top performers must understand thattheir position in the organization depends on their sustained performance," O’Neillsays. "And the other employees must understand their value to the organizationso that they’re not made to feel like second-class citizens."

In the coming months, balance will be a critical skill for HR professionals.They will have to respond to sudden economic shifts and changes in labor marketswhile continuing to find and hire top performers. As they embark on a newrecruiting and staffing year in January, those who will fare best will be theones who are flexible and can quickly respond to an unpredictable, ever-changingclimate.

Workforce, December 2002, pp. 40-45 -- Subscribe Now!

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