Recruitment by the Numbers

December 1, 1993
Smith & Nephew DonJoy Inc. is a small but fast-growing manufacturer of medical devices. Nestled in the semirural north end of San Diego county, it has ready access to the pool of experienced production laborers, engineers and technical professionals who have lost their jobs in the recurrent downsizings of Southern California's aerospace and defense industries. Recruiting should be a snap.

It isn't. Each opening now draws five times more applications than just a few years ago. One engineering position, for example, is likely to pull in as many as 300 applicants. Just weeding through the voluminous amount of resumes makes the selection process harder than it was a few years back, says Karen Sanchez, human resources manager for DonJoy. In addition, selective cutting during downsizings and a need for people to seek new career paths create a glut of less-than-qualified applicants from which to choose.

DonJoy's situation is typical. Although some corporate recruiters say that the currently swollen labor pool offers advantages—a larger selection from which to choose and plenty of highly skilled applicants willing to take big cuts in compensation, for example—others are finding that it has drawbacks, such as those Sanchez has found. In addition, as selection becomes more difficult for HR staffs, many of which have downsized themselves, recruitment costs increase.

The problems aren't going to disappear quickly either. According to New York City-based American Management Association's 1993 Survey on Downsizing and Assistance to Displaced Workers, each year since 1988 between 35% and 55% of surveyed companies downsized. Between July 1992 and June 1993 alone, the percentage of respondent firms that downsized reached 46.6%, leaving recruiters to wade through a flooded labor pool.

The cuts made as a result of downsizings during the five-year period from July 1988 to June 1993 averaged between 9.3% and 10.9% of the downsizing companies' work forces. According to Eric Rolfe Greenberg, editor of research reports for the AMA, the number of people let go by these firms during this period totals 388,046. Of this number, 179,603 were non-exempt or hourly workers, 62,341 were at mid-management levels, 56,874 were supervisory employees, 36,368 were professional/ technical workers, and 52,860 weren't identified.

These numbers represent only a portion of the people added to the labor pool as a result of downsizings. According to Chicago-based Challenger, Gray & Christmas Inc., U.S. companies announced cuts totaling nearly 450,000 people just within the first nine months of 1993.

An increased labor pool provides recruiters with more for less.
Having all of these people out of work, it should be easy for recruiting companies to find quality workers. Greenberg suggests that companies are able to "make better selections among available talent and hire the people at lesser costs." He says that downsizing companies that lay off managers who make $80,000 a year can refill those positions later on when needed by offering annual salaries of between $40,000 and $60,000. And, growing companies that aren't replacing workers but adding them can offer out-of-work, experienced people salaries lower than what they used to make because the competition for jobs is so fierce.

Terri Vernon, a principal of Career Networks, an Orange, California-based recruitment and consulting firm, has seen this happen. "Companies are getting higher-qualified people for the same amount of money as a less-qualified person because these applicants are underpricing themselves just to get the jobs," says Vernon. "For example, one company that I know of that was looking to fill an office-manager position offered a salary way below what an office manager should make." The company filled the position with a highly qualified person who had been out of work for a long period of time.

This is happening in all types of industries. At Santa Monica, California-based Saint John's Hospital and Health Center, an open financial analyst position, which only required a person who had a bachelor's degree in accounting, attracted applicants who had PhDs. "I had people who had been CFOs at other hospitals applying," says Penny Bresky, manager of retention and recruitment for the hospital. "The quality of the people applying for a much lesser position was just absolutely amazing."

For Stanley C. Dahlin, staffing and employee-relations manager for Spokane, Washington-based Olivetti North America, the willingness of people to take less money has made recruitment easier. "We see lots of highly qualified people that bring more to the table than what's required for the position," says Dahlin. "We get people here who might have been high-powered people out East or in California. They take jobs for dollars-per-hour less than what they got elsewhere."

Not all laid-off professionals are willing to take less than what they feel they're worth, however. June Paley, director of personnel at Osanam Hall, a Bayside, New York-based nursing home, says that many overqualified people who apply for jobs have high expectations of what they should earn. "A lot of people who have been out of work for a year or so are starting to look at other fields," says Paley. "But they still expect to be at the $50,000 or $60,000 pay level. We get a lot of shocked people."

Bresky sees this at her hospital as well. Many registered nurses, she says, still believe that they can make demands and receive what they want as they did just two years ago. They don't realize that the number of positions available are limited, and that hospitals now can pick and choose among an abundance of applicants.

In certain industries, however, some applicants still can be selective. These are people who have specialized skills and knowledge, and who haven't been affected by downsizing. Vernon cites workers within the mortgage banking industry as an example.

With the dropping of interest rates came increased business for these companies, and an increased need for experienced workers—people to process loans, underwrite loans, fund loans, and put together loan packages. "While industries such as aerospace are laying off people, the mortgage banking industry is thriving so much that it can't find enough qualified people," says Vernon. "People who are out on the streets that have been out of work for so long are willing to learn the jobs, but the mortgage people won't hire them because they don't even have time to train them. It's a shame. Even to people who have financial backgrounds I have to say, 'Sorry, you don't have experience for the exact position for which these people are looking.'"

Both Paley and Bresky say that finding people for technical-allied health positions, such as physical therapists and occupational therapists, is similarly difficult. There are only a limited number of people qualified for these fields of work. These people can make up to three times the salary that hospitals can offer them by setting up their own practices and consultancies.

Bresky uses sign-on bonuses to attract these workers to her hospital. The bonuses last between one to two years. The hospital pays them out in increments, usually three times a year. For example, if Bresky offers a physical therapist a $6,000 sign-on bonus, he or she might receive $3,000 a year for two years, paid out in $1,000 increments every four months.

Not long ago, Bresky had to offer this type of sign-on bonus for just about all jobs at the hospital except for clerical and administrative positions. Now, technical-allied health positions and some specialized nursing positions are the only ones for which she needs to use this method.

Overall, Bresky spends a lot less money for recruitment than she did a few years back. At one time, she had 208 openings within the hospital for which she had to offer perks and sign-on bonuses to fill. She also had to spend money for programs, such as a new-graduate program, to recruit enough workers. For example, two years ago she rented a yacht and took 85 new graduates from a nursing program for a cruise on the Pacific Ocean to recruit them. "I wouldn't think of doing that today," says Bresky. "There's no need."

Other businesses also have changed their recruitment strategies in the past few years to account for the downsizing-induced swollen labor pool. Olivetti, which is a branch of an automation company serving the banking industry, employs primarily software engineers, networking engineers, internal-information-systems support people and other such technical specialists. Dahlin says that since he transferred to the Spokane division a year ago, he hasn't had to use a search firm at all to recruit new employees. He has been able to fill all open positions through employee referrals and the want ads.

Marc Goldberg, vice president of HR for Mobile Telecommunications Technologies Corp., based in Jackson, Mississippi, currently is in the process of changing his recruitment strategy. To save money, Goldberg will be sending fewer jobs out to search firms and limiting the number of search firms that he uses.

Some recruiters get quantity, not quality.
Other companies, however, are finding that although they get plenty of applicants through ads and blind solicitation, only a small number of those applicants are suitable. As mentioned earlier, Sanchez has found that although she receives more applications for each job than she ever did before, recruitment has become more difficult.

As a growing company, DonJoy hopes to attract and employ those workers who would receive a seven or above on a quality rating of ten possible points. However, Sanchez says that companies going through downsizings hang on to these people. "If I were an organization looking to downsize, I would want to hold on to my cream-of-the-crop employees and do what I can to keep them, as opposed to losing them and maintaining a lower-skilled work force," she says. "How to attract those people to our organization is something with which we're currently struggling."

Although Sanchez also relies primarily on ads and word of mouth to fill positions, she uses professional search firms as well to help her recruit the workers who haven't been cut from their companies during downsizing.

Rick Jansing, vice president of human resources for Northern Illinois Financial, located in Wauconda, Illinois, struggles through the same situation as Sanchez. His company also gets a lot more responses to recruitment ads than in the past, but he finds fewer quality people among the applicants. "Even with the layoffs and the downsizings, the quality people aren't being let go, although the companies are saying that they aren't discriminating based on quality," says Jansing.

The AMA study confirms what Sanchez and Jansing have found. According to the study, the share of companies that target specific functions, units or localities rather than across-the-board cuts increased from 53% during the last survey period to 57% in the latest period, which ended in June 1993. "As companies become more experienced at downsizing, they're targeting staff cuts more carefully," says Greenberg.

That creates two problems. First, how to separate the wheat from the overabundant chaff that's now on the market. And second, how to acquire the wheat once it's been found.

Finding Mr. or Ms. Right.
How does one sort through the multitude of applications to find the one best candidate? Sanchez admits that for her, the process is only somewhat scientific. "If someone sends me a book for a resume, I push it aside. I don't have time to read it," she says. She then weeds out the people who don't meet the position's minimum requirements. Next, she searches for people who might be overqualified. Some of these she weeds out, but not all of them. "Sometimes what appears to be an overqualified individual is really what we should be looking for because of our growth," says Sanchez. These individuals often bring along skills that the company will need to take advantage of in the near future.

Among the resumes that are left, Sanchez compares the applicants' backgrounds and experiences to the company's needs. The eight to ten people who fit best with the company, she brings in for interviews.

Sanchez doesn't use any personality or honesty tests during the recruitment process. However, she does use data-entry and word-processing tests to aid in the selection of clerical personnel. Engineering recruits must answer technical questions posed by a company engineer. These tests help the human resources staff verify qualifications to assist in the selection process.

At Northern Illinois Financial, Jansing doesn't respond to unsolicited resumes, only those sent in response to ads. He contends that it's easy to go through the resumes after eliminating all of the ones that don't meet minimum requirements, which he says are most of them.

After selecting a candidate pool, the HR executive relies completely on interviewing for hiring selection. He's currently in the process of retraining his hiring managers and HR managers on interviewing techniques needed in this new labor market. The training began in September and will continue through next year.

One of the goals of the training is to teach interviewers how to ask questions that will elicit honest responses. "There's an awful lot of exaggerated truth in resumes," says Jansing. "So many people have gotten caught up in the downsizing who are trying to differentiate themselves from others. It's a challenge for the interviewer to read between the lines and to ask the penetrating questions to find out exactly what the personality of the individual is and also what the person's real credentials are. But we need [the interviewers] to do this. The cost of people is going up, and therefore the cost of making a hiring decision is going up."

Getting the best people.
What happens if the right person doesn't come to you as one of the masses? With companies making selective cuts during downsizing, your No. 1 candidate still may be employed elsewhere. And if the person is a survivor at a company that has downsized, he or she may be afraid to make a move. "Getting people out of other organizations is a lot more difficult today," says Jansing. "People just aren't willing to expose themselves to the potential of a layoff. They feel comfortable where they are, they've got tenure there, they figure that's better than taking a pay raise somewhere else but running the risk of being out of a job in a year or two."

Vernon works with client companies to create packages that will attract the people they want—be it flexible work hours, higher salaries or particular benefits. "You have to do a lot of creative thinking nowadays to get people to make a move," says Vernon. "We've even asked some companies if they'd be willing to guarantee their position for a year and have that in writing for them. People have been that scared when they make a move."

Goldberg says that generally what these people are looking for is career opportunities and challenges. A company must be competitive with its pay and benefits packages to attract these people, he says, but what really closes the deal is the attractiveness of the company and the opportunities it presents.

Neil Schermitzler, director of human resources for Lowell, Massachusetts-based Wang Laboratories, agrees with Goldberg. Within the past few years, Wang has gone through several downsizings, cutting the work force from between 32,000 and 33,000 employees worldwide to just 6,200. The company also filed chapter 11 bankruptcy in August 1992, and didn't emerge from it until September 1993.

Through this whole process, Wang continued to recruit. "If you're able to clearly define your business direction and your business strategy, and articulate the mission, it's far easier to recruit people," says Schermitzler. "We were able to attract, at multiple levels of the organization, some key people who had good backgrounds and who had left decent jobs. Some of them left what would be described as very secure positions, well-paying secure positions, to come to Wang because they saw the opportunity in the transformation stage as Wang changed its business."

Olivetti went through some downsizing as well in the years 1989 through 1991. Unlike Wang, however, Olivetti had difficulties recruiting people during this time. "Within a small metropolitan area such as Spokane, bad news and rumors became widely known, deterring motivated people from coming here," says Dahlin.

Good press during the past year and a half about major accounts that the company has signed has boosted the confidence of local people into again looking to Olivetti for employment. In addition to this, the company receives a lot of applications from people from out of the state looking to relocate, despite the fact that Olivetti doesn't offer extra pay to get people to come to Spokane. Instead, Dahlin and his staff sell the applicants on quality of life. "Fortunately for us, the fact that this is one of the few states that doesn't have personal income tax is very attractive, especially to people coming from California," says Dahlin. "It's a real motivator."

Downsizings affect hiring costs.
With companies interviewing from among the masses that come to them, as well as seeking out prominent workers from other companies for their exempt positions, the cost of hiring for exempt positions has substantially risen. According to Gary Cluff of Herndon, Virginia-based Cluff & Associates, author of The Employment Management Association's 1992 National Cost Per Hire Survey Report, the cost-per-exempt hire rose 22% between 1991 and 1992, although hiring levels hit a 10-year low. "Managers want to see more candidates to find the most perfect one," says Cluff. Even though they find many qualified people, he says, they want to find somebody who's a little bit better. "They tend to interview more candidates and incur more expense in applicant travel or management time and other related expenses."

In 1991, the average number of candidates interviewed for an exempt-level job was approximately 4.5, according to Cluff. In 1992, it was 6.1.

Moreover, because many HR departments themselves have downsized, they more often use agencies and other fee-paid services in place of in-house recruiters. Even when recruiting is done by HR staffs, Cluff estimates that a lot of companies now use their generalists as recruiters. "Part-time recruiters aren't always going to put first priority on recruiting and staffing, so it tends to lengthen the process and lead to more cost," he says.

Cluff believes, however, that this will soon change. As companies look at their 1993 total costs of employment, they will back away from cutting their human resources so extremely and dedicate more resources to the staffing function.

It's a good thing. According to the AMA survey, based on history, the percentage of participating companies that will downsize in 1994 will be between 44% and 66%. That means hundreds of thousands of additional people in the labor pool, piles of resumes to sort through, and companies of all types with which to compete for held-on-to talent. HR will need all of the resources it can get.

Personnel Journal, December 1993, Vol. 72, No. 12, pp. 68-74.