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New Internal Hiring Systems Reduce Cost and Boost Morale

February 27, 2004

Until last year, if one of Whirlpool Corp.’s 68,000 employees wanted to look up internal job openings at the multibillion-dollar home appliance manufacturer, it was next to impossible. The only option was to search for listings in a sluggish, archaic, 1980s-era computer system. The system was regionally based, so an engineer in Tulsa, Oklahoma, for example, couldn’t access or even apply for a position at the company’s headquarters in Benton Harbor, Michigan.

    Like a growing number of companies that are giving their internal-mobility programs a much-needed boost in an effort to retain and groom top talent, Whirlpool has made it simpler for employees to access job openings. Now, with a keystroke, employees can retrieve a list of jobs that match their background and apply for jobs online. Managers who need to fill an opening can enter the job criteria and instantly receive names of internal and external candidates who fit the description, all by using a Web-based application from the San Francisco-based company Recruitsoft. More than half of the 320 people that Whirlpool hired last year were internal candidates. The company estimates that by hiring internally, it saved at least $1 million in recruiting costs alone.

    As the economy starts to improve and managers worry that a stronger job market could prompt their employees to jump ship, companies are investing more in their internal-mobility programs to provide a way for their employees to remain with the organization in new roles. The alternative? Top performers will take their experience elsewhere. "If employees aren’t given the opportunity to move within their own company, then they’ll get out in the marketplace to get new experiences," says Tim Reynolds, corporate director of talent and organization development at Whirlpool. "As long as they’re developing where they are, there’s no need to go someplace else."

    There’s no question that it helps an organization’s bottom line to move employees internally. For one thing, it can reduce employee turnover. Companies with a formal internal-mobility policy have an average turnover rate of 11 percent, whereas companies without such a plan have a turnover rate of 15 percent, according to a 2003 study of 70 large and global corporations by iLogos Research, a division of Recruitsoft. Now is the time to worry about turnover. As the job market offers more prospects, employees who have survived layoffs, increased workloads and minimal raises are likely to look outside the company, says Marc Pramuk, program manager of human resources management and staffing services at IDC, a Boston-area financial analysis firm. "A lot of people will be thinking, I took one for the team, now I’m out of here."

    What’s more, employers will be facing a shortage of talent and will want to develop their people in-house to prepare for future openings. As baby boomers retire and the population growth slows, labor-force growth is expected to be .6 percent by 2014, about half of what it was during the 1990s, according to the Hudson Institute, a think tank in Indianapolis. Holding on to your employees can make a big difference in productivity, too. External hires take up to twice as long to reach full productivity as those hired from within the organization, according to a 2003 study by Mellon Financial Corp. in Pittsburgh.

A shift in thinking
    While most companies have always posted internal jobs, now organizations are being more proactive about getting employees to apply, Pramuk says. In the past, many companies would first consider external applicants unless they happened to know that someone was interested internally. Or they would list openings in the company newsletter, but by the time it was distributed to employees, managers would already be interviewing external candidates. "It was that backward in terms of how they were thinking of it," Pramuk says. "There’s a big mind shift now."

    Some organizations, including Whirlpool, BMW Manufacturing Co., Kellogg, Hyatt and Hewlett-Packard, have replaced their paper-driven approach to managing internal and external candidates with Web-based applications sold by companies like Recruitsoft, Hire.com in Austin, Texas, and others. Using Recruitsoft’s tool, employees at Whirlpool create profiles that detail their skills and interests for their next ideal position. Employee turnover is low at Whirlpool--less than 5 percent--but the key to retaining employees is helping them plan and advance their careers, and this tool allows them to do that, Reynolds says. Before launching the new system, Whirlpool rewrote every job description to better describe the role on a daily basis and what future opportunities the job might lead to. "Job candidates today are looking for tools like this," Reynolds says. "They’re not just looking for a job. They’re looking at managing their career."

    For BMW Manufacturing in Spartanburg, South Carolina, which hired more than 1,500 workers in the last three years, making its internal job-posting system more efficient was imperative. During that time, more than half of hires were internal candidates, and by using Recruitsoft’s Web tool, managers could find applicants within minutes, rather than taking weeks under their old system of digging through file cabinets, says Bunny Richardson, company spokeswoman. The facility, which employs 4,700 people, has always put a premium on first looking inside to fill jobs. Not only does it build morale and reward loyal employees, but it also results in less need for training. Tapping its internal skilled labor pool is critical for BMW, which maintains a workforce of up to 3,000 factory workers in a state with no other car manufacturers. "You don’t want a revolving door," Richardson says. "You don’t want to always be retraining." BMW has anything but a revolving door. Turnover among production workers is just 2 percent.


"Job candidates today are looking
for tools like this. They’re not just looking for a job. They’re looking
at managing their career."


    Other companies have created their own Web-based tools to encourage employees to make internal moves. Fidelity Investments in Boston, has an internal site called MyCareer@Fidelity that enables employees to map out their career path at the company. Employees type in their current job and can see the next logical job and alternatives. Or they can type in the position they’d like to hold in five years and see what path they should take to get there.

    Some companies are moving away from the high-tech approach to encouraging internal moves toward a strategy known as managed movement. Managers share performance reviews of their potential leaders and create a slate of internal candidates for future openings. It’s proactive because it helps employees plan their careers, rather than making them fend for themselves when internal postings come up, says Jim Kochanski, a senior vice president at the human resources firm Sibson Consulting in Raleigh, North Carolina. "It helps managers think ahead about who they want in the job," he says. "Open postings don’t do that."

    In anticipation of the looming talent shortage, global manufacturer Ingersoll-Rand Co., based in Hamilton, Bermuda, started last year to make sure "the right people are ready for the right job at the right time," says David Bomzer, director of talent management at the company’s U.S. executive offices in Woodcliff Lake, New Jersey. "We needed to ensure that we’re growing talent internally, so we’re not dependent on talent from the outside." The 40,000-employee company, which makes everything from Bobcat construction vehicles to Kryptonite bike locks, assesses potential leaders according to a set of criteria called "two by two by two experience"--expertise in managing two sectors of the industry, working in two geographic locations and working in two different functions of the business. Internal moves are planned on the basis of where candidates in the pipeline have gaps in their experience, Bomzer says.

   Whether companies are taking a high-tech or high-touch approach, their culture must support internal mobility to make a difference in retaining employees, says Jane Paradiso, national practice leader in workforce planning at Watson Wyatt Worldwide in Washington, D.C. If employees fear that their managers will resent them if they move to another department, then employees will go outside for new opportunities, she says. The best organizations encourage internal moves, but set down rules, such as requirements on how long employees must stay in one position and performance guidelines for moving internally.

    At PricewaterhouseCoopers, the opportunity to move internally is ingrained in the culture, says Mark Friedman, U.S. leader of experienced recruiting in the firm’s New York headquarters. Job openings are posted on the company’s intranet, and the firm’s 123,000 employees are reminded to check the listings by quarterly e-mails and voicemails. The firm’s recruiters use the internal-mobility program as a selling point with job candidates, and new hires hear about it at orientation. "We’re trying to tell our recruits that this company is very much about a career and not just a job," Friedman says. "For eight years I was an auditor, and now I’m doing recruiting. That’s an example of someone who can move their career into something they really wanted to do."

Workforce Management, March 2004, pp. 76-79 -- Subscribe Now!