uman resources executives most commonly cite their department’s performance
in recruiting and retaining employees as the primary factor in how top
management evaluates HR’s contribution to the organization. But despite the importance assigned to recruiting, budgets are stagnant and the
systems deployed are often inadequate.
Recruiters are showing the strain. Early-stage recruiting tasks such as sourcing
and screening chew up too much time and pull recruiters away from key
later-stage tasks such as interviewing and onboarding.
This suboptimal state is reflected in the results of two new studies from BNA
and ADP that offer benchmarks for recruiting performance and essential feedback
from HR executives and recruiting directors.
Closing the gap between what recruiters have and what recruiters need means
building a business case for additional resources. The new data from BNA, a
business research and publishing firm based in Arlington, Virginia,
and ADP, a business outsourcing firm in Roseland, New Jersey, helps establish a
baseline for current recruiting practices and point to the changes necessary to
boost recruiting effectiveness.
Staffing and budgets
In the BNA survey, which covers a broad range of HR metrics, 48 percent of HR
executives cite recruiting and retention as the top criterion in C-suite
assessments of HR’s overall performance. Partnering to implement key
organizational goals, often noted as a high priority for HR, falls in second
place, with 39 percent of the HR executives citing this factor as the leading
factor for management’s evaluation of HR’s contribution.
The BNA study, conducted annually for more than 20 years, is based on responses
from 607 HR executives. Despite the softer economy and lower overall employment
growth, 34 percent of HR executives identified recruitment and retention as
their top priority for 2008, followed by only 13 percent citing strategic
planning and management and 12 percent noting training and development. The
importance assigned to recruitment and retention varies little by organizational
size or industry sector.
Although the priority placed on recruitment and retention is clear, the BNA
study reveals a disjuncture between this priority status and actual practices.
For example, HR executives are more likely to plan and measure the results of
their compensation and benefits programs than their staffing programs.
Fifty-nine percent reported that they regularly track compensation and benefits,
compared with 52 percent who regularly use measurement and planning tools for
staffing. In fact, 14 percent reported that they do not use any measurement or
planning tools for staffing.
Median HR expenditures increased to $1,082 per employee in 2007, up marginally
from $1,056 per worker in 2006, according to the BNA study. Although 54 percent
of the surveyed organizations reported that they increased HR expenditures in
compensation and 52 percent increased spending for benefits, only 44 percent
boosted spending for employment and recruiting in 2007.
The same percentage reported they will increase spending for recruitment in
2008.
Forty-seven percent reported that their budget allocation for recruiting in 2008
will not change, and 9 percent reported that it will decline, the largest
percentage reporting a drop in spending for any HR task.
In addition, despite widespread coverage of increased outsourcing, recruiting
and related tasks remain largely in-house, including tasks that are not part of
core recruiting work. HR departments are most likely to outsource background
investigations, but only 27 percent report that they use vendors for this work.
Only 23 percent outsource drug testing and only 15 percent outsource
pre-employment testing.
Recruiting responsibilities for lower-level positions also remain largely
in-house. Responsibilities for non-college recruiting rests solely with HR at 53
percent of employers; 39 percent share the responsibility with other
departments; and only 5 percent outsource the task. At companies with 2,500 or
more employees, 45 percent give HR sole responsibility for non-college
recruiting.
HR handles all college recruiting at 41 percent of employers and shares the
responsibility with other departments at an additional 25 percent. Interviewing
remains a joint effort, with 87 percent of the organizations reporting that HR
and other departments share this responsibility.
HR handles all temporary labor administration at 33 percent of companies, shares
it or leaves it to other departments at 48 percent, and outsources the work at
only 9 percent of organizations. For large organizations with 2,500 employees or
more, 27 percent of HR departments still carry sole responsibility for temporary
labor administration.
Demand and pain
The stagnant recruiting budgets and staffing reported in the BNA study do not
reflect a decline in recruiting activity. The ADP survey results indicate that
recruiting is an ongoing process at the vast majority of organizations.
According to the survey, average annual turnover stands at 16 percent for
salaried employees and 34 percent for hourly employees at companies with 5,000
or more employees. Companies with 1,000 to 4,999 employees report turnover of 13
percent for salaried employees and 26 percent for hourly employees.
The ADP study is based on a survey of 537 senior HR executives in charge of
recruiting at 175 companies with 100 to 999 employees and 362 companies with
1,000 employees or more. ADP found that recruiters are under the greatest strain
at large companies with 5,000 or more employees. These companies employ an
average of 10 recruiters to bring in 1,970 new hires a year with an average of
23 applicants per position.
Recruiters report that the early-stage tasks are the most time-consuming. At
companies with 1,000 or more employees, finding and matching candidates to
requisitions accounts for 15 percent of recruiting staff time. Initial
screening, scheduling and interviewing consume another 15 percent, followed by
processing, which accounts for 14 percent of recruiters’ time.
A significant percentage of recruiting directors surveyed by ADP are
dissatisfied with the tools and the methods used for managing the early stages
of the recruiting process, which includes sourcing, screening and tracking.
Inefficiencies at this stage are particularly troublesome for organizations with
1,000 or more employees, which screen an average of 23 applicants per position,
almost double the average number for companies with fewer than 1,000 employees.
Recruiting directors consistently report that they would prefer to use in-house
recruiting staff more effectively by adopting better technology or outsourcing
specific recruiting tasks. A sizable majority would prefer to automate or
outsource sourcing, applicant tracking, background checks, skills assessment and
compliance and reporting.
Building the business case
Although recruiting directors are pushing for more efficient systems, ADP found
that only one in 10 midsize companies use an end-to-end system to manage the
recruiting process.
"Every employer wants the best candidates," says Dean Rehfeld, divisional vice
president, market and business development for ADP’s pre-employment services.
"But for HR executives and recruiting directors, the key questions are: Do they
have the tools? Do the tools integrate seamlessly? And can they build the
business case to get what they need?"
Building the business case for additional recruiting resources requires a full
set of metrics for all the standard measures of recruiting efficiency, including
time to hire, the quality of hires, the cost per hire and the cost of a bad
hire, where, for example, the screening process was insufficient or a poorly
conducted background check failed to reveal a serious potential liability.
"HR executives and recruiting directors should focus on the ROI for
recruiting-process improvements," Rehfeld says. "A key step is to get out in the
field and interview stakeholders in the recruiting process, beginning with the
hiring managers. Get input around the demand for recruiting and the level of
pain involved in the various tasks. Any CFO is sensitive to this feedback."
HR executives and recruiting directors can also design and conduct an internal
survey that will capture the time consumed by various recruiting tasks and the
effort involved in navigating the current system. The information gleaned from
the internal survey and from hiring managers in the field allows recruiting
directors to develop a baseline against which improvements can be measured at
regular intervals after additional resources are deployed.
HR executives and recruiting directors must also document the cost of the
improvements by soliciting bids from vendors.
"Look at the issues holistically," Rehfeld advises. "Evaluate the tools that
address each task and the degree to which they can integrate all the parts into
one coherent system. In the marketplace, plenty of companies take advantage of
specific solutions but don’t take advantage of integrated solutions that address
all the recruiting tasks and achieve incremental value by doing so."
A comprehensive system should offer continuity across geographies and a full set
of compliance tools—features that CFOs will find particularly appealing.
"To help build the business case, calculate the cost of noncompliance and the
risks entailed," Rehfeld says. "To ensure continuity, look across multiple
locations and hiring across all those locations. HR executives can end the
nightmare of wondering whether recruiting-related policies and practices are
actually implemented in a uniform manner. Continuity drives compliance."
HR executives and recruiting directors can also establish costs and ROI metrics
through third-party research.
"In addition, tap vendors with extra teeth for showing the ROI on a
recruitment-process investment," Rehfeld says.
During the past decade, recruiting has gained greater attention in the C-suite
as top executives increasingly realize that corporate growth hinges on hiring
the best talent for key positions in the organization. Meeting the mandate for
effective recruiting, however, means that HR executives and recruiting directors
in many organizations will have to make a successful case for additional
resources.
Workforce Management Online, August 2008 -- Register Now!
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