Recruiting Outlook: Creative HR for 2003

    Rueff is senior vice president of HR at Electronic Arts, the world’s largest publisher of video games. "Our best candidates hang out online and read gaming magazines," he says. "I think about our next generation of employees when they’re 16 years old. I can get to them because our games are in 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, a cornerstone of Electronic Arts’ talent-management strategy.

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

    The economic forecast remains puzzling, but, like Rueff, many HR professionals address recruitment and staffing issues aggressively and creatively. They take calculated action. They continue to recruit during a hiring freeze. They fulfill highly specific recruiting needs during soft labor markets and times of corporate cost reduction. They also take advantage of hiring lulls by re-evaluating strategy and tactics. Even if the economy drifts downward and corporations remain in a belt-tightening mode, savvy HR managers enable their companies to quickly add quality staff as soon as the workforce growth light turns green. In 2003, that means defining exactly what "talent management" means to the organization and where it fits into overall corporate strategy. Is it more than a fancy term for recruiting?

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

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

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

    A Towers Perrin study of 22 companies, selected for their strong financial performance, high employee-retention rates, and appearance on publicly recognized best practice lists, echoes Paradiso’s point. The survey found that 73 percent of firms that cut staff in the previous six months continued to hire talented employees while downsizing.

    Deciphering recruiting and staffing trends is complicated by an uncertain economic recovery, which could further restrict recruiting budgets. On the other hand, any signs of a sustained revival likely would tighten the soft labor market. Unemployment is rising, but remains within a moderate range (5.7 percent) from a historical perspective. Mass layoffs, which the U.S. Department of Labor defines as instances of 50 or more initial unemployment claims being filed 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 hiring while firing bolsters cost-reduction efforts and allows companies to continue pursuing highly talented employees, who remain as difficult to find, hire, and hold 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 a year or two ago, pay levels for similar positions within the same company may grow more inequitable. Those gaps can further demoralize workers already jaded by a spate of accounting chicanery, workforce reductions, directives to shoulder more health-care costs, revelations about luxurious executive-compensation packages, and the pummeling of 401(k) plans and company stock holdings.

    There are more effective recruiting methods to use during times of light hiring. At New York Life, the hiring pace is slower than usual, as it is at most other companies. However, the recruiting staff for the 11,900-employee company continues to participate in job fairs and visit college campuses. And recruiters have 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 is taking advantage of the softer labor market to reduce turnover in its accounting department, 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, Elizabeth Barrett, vice president of operations, attributes the decline to a lower turnover rate. Regardless of whether there are 15 job openings or no job openings, The Container Store requires store managers to invest two to three hours per week in interviewing job candidates. "One of our goals is to never have to place a job-opening ad in the paper or, frankly, anywhere," Barrett says. When the retailer—which was ranked second in Fortune’s "Best Companies to Work For" in 2002—hires seasonal employees to meet the demands of holiday buying, managers do not need help from the home office’s two-person recruiting staff because they already have a roster of qualified candidates to call on.

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

    Not Rueff, whose well-defined approach to talent management reflects his 10-plus years in PepsiCo’s human resources managerial ranks—which included locking horns with union organizers, running staffing divisions, and recruiting the president of Pepsi’s China business—as well as his more cutting-edge approach to courting future video-game wizards. He e-mails updates on the company and its hiring needs to the 200,000 potential job candidates in Electronic Arts’ recruiting database. "The bridge between great people and great companies is timing," Rueff says. "I can’t hire hundreds of recruiters to maintain relationships with candidates, but I can use technology to do that."

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

    New York Life uses its applicant-tracking system to free up recruiters to spend more time making connections on college campuses. Angela Coleman, vice president of human resources at New York Life in New York, reports that the technology 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 the applicant-tracking application also play a role. "Our recruiters spend less time doing administrative work and more time selling the company and all of its benefits."

Concerns about employee engagement
    At top HR departments, talent-management practices will include staffing tactics that focus on bolstering the levels of employee engagement in 2003. The terrorist attacks of 2001, the recent accounting scandals, and the still woozy economy 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 in senior 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 on what will and will not engage employees in 2003, particularly in the early part of the year," says Michalak. "You quickly need to get an idea of what will allow the company to get the most from its employees."

    The rising number of job-hunters enables many companies to become more selective in their hiring. In addition, better candidates can be hired at lower rates than companies were forced to offer 12 to 18 months ago, during a tighter labor market. That’s particularly true of IT positions. "My clients are saying, ‘There are a lot of techies on the market today. They’re still valuable to me, but not as valuable as they were a year or two ago, because there is a huge surplus to pull from,’" says Brent Longnecker, president of Resources Consulting Group in Houston. He expects companies to address situations in which they have an IT employee earning, for example, $70,000 per year but can hire a better candidate to do the same job for, say, $50,000 per year. "There’s no perfect answer to that problem," Longnecker says. One solution 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’re holding 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 the new talent that’s knocking on the door." That presents HR executives with an opportunity to improve employee engagement through training and development offerings. Electronic Arts trains its employees on many of the new software packages that crop up in the video-game publishing industry.

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

Cultural balance
    Top HR professionals include recruiting and staffing techniques as well as high-tech and high-touch approaches in their talent-management definitions. They also mention a third dimension—the growing difficulty of recruiting and retaining 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 to get someone who is probably one of the top five CFOs in the country to come work at EA," Rueff says. That hiring occurred after lengthy due diligence on both sides and a substantial amount of opening up on Rueff’s part. "It was only after he felt confident that we are the real thing with a real growth proposition 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 Perrin talent-management study found that 42 percent of respondents have created staffing programs specifically targeted to retain top performers. Colleen O’Neill, talent management leader for Mercer HR Consulting in Atlanta, works with a client company that has, in effect, created two different organizational cultures: one for its highest performers and one for the rest of the employees. The professional services organization built its initial success, O’Neill says, "by letting its mavericks run the business the way they wanted to." But as the company supplements its executive-search offerings with more management consulting services, the maverick model no longer suffices, at least not 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 with different rewards and incentive models than those that apply to the rest of the organization. "You can have one part of your business that is oriented to top talent and another part of your business that provides a different career path." For those two cultures to thrive in tandem, HR executives must communicate very clearly with both sides of the divide. "Top performers must understand that their position in the organization depends on their sustained performance," O’Neill says. "And the other employees must understand their value to the organization so 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 markets while continuing to find and hire top performers. As they embark on a new recruiting and staffing year in January, those who will fare best will be the ones who are flexible and can quickly respond to an unpredictable, ever-changing climate.

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