Recruitment_trends_in_the_indian_hro_sec.pdf

International Journal of Management (IJM),OF ISSN 0976 – 6502(Print), ISSN 0976 – INTERNATIONAL JOURNAL MANAGEMENT (IJM) 6510(Online), Volume 3, Issue 2, May-August (2012) ISSN 0976 – 6367(Print) ISSN 0976 – 6375(Online) Volume 3, Issue 2, May- August (2012), pp. 98-107 © IAEME: www.iaeme.com/ijm.html Journal Impact Factor (2011): 1.5030 (Calculated by GISI) www.jifactor.com

IJM ©IAEME

RECRUITMENT TRENDS IN THE INDIAN HRO SECTOR Vijaya Mani Professor SSN School of Management and Computer Applications SSN College of Engineering, Kalavakkam, Old Mahabalipuram Road Tamil Nadu, INDIA 603110 ABSTRACT The paper aims at analyzing the recruitment trends in HRO Industry in India. The research study was undertaken in a niche HRO services provider focused on mid-market companies in Tamil Nadu, India, where there was a well pronounced difference in the Performance and Productivity of employees who are hired from different Recruitment Sources and the time to fill the vacancies has also gone up.. As the sample organization intends to increase its employee base, it was important to benchmark the best possible recruitment trends in the HR BPO Industry and to infuse those practices with the Recruitment process of the Organization. Both Primary and Secondary data have been utilized in the research. A well structured questionnaire was used for collecting the primary data. The sample consisted of forty Pure Play HR Outsourcing Solutions Providers in India. The data was analyzed using HR Metrics, Percentage analysis, and a part of the data was analyzed using regression analysis. Based on the analysis, the recruitment trends in the Indian HR BPO Industry were determined. Using comparative analysis, the HR Metrics calculations of selected HR BPO organization were compared to the Recruitment Trends in the Industry. The analysis revealed that the employment rate at the selected Organization is lesser than that of the Industry rate and the company is relying heavily on Job portals to fill its vacancies. It is suggested that the company can use Employee Referral as a major source of recruitment and it should frame policies to increase the employment rate to align itself with the industry. Key Words: HRO, BPO, HR Metrices, Employee Referral, Recruitment Trends

98

International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 – 6510(Online), Volume 3, Issue 2, May-August (2012) 1. INTRODUCTION AND BACKGROUND The increasing focus on HR's contribution to the performance of the wider business has led to more emphasis on cost reduction. HRO has grown out of this debate - from reengineering and cost reduction on the one hand to a potential transformational capacity on the other. HRO is an evolving industry and can be defined as ‘the purchasing by an organization of ongoing HR services from a third-party provider that it would otherwise normally provide for itself.HRO is a strategic tool aimed primarily at chief executives. Though organizations may have different strategies and performance models, all will relate in some way to HRO. These can involve the Capability, Scale and Technology While HRO providers may seem to offer little that is different between them, differences do occur in their size, culture, HRO methodology and track record. However, they offer their services in three distinct ways namely Single-service or transactional solutions for a particular HR activity, Multiple HR services as part of a large-scale deal, Transformational deals which radically change the purpose and role of HR. Three different types of providers are active in the HRO market - pure HRO specialists, business/HR transformation firms and HR process technology suppliers. As Marsden and Campbell (1990) very correctly state, businesses will choose the recruitment source that offers them with the highest expected benefit compared to the expected costs that the recruitment channel produces. A number of variables, such as the time and cost of the recruitment process, tend to have considerable influence on the expected benefits and costs of each recruitment channel. More importantly, companies will vary in the level of significance that they attach to each of these variables depending on the position and the needs of the organization, which is the main reason as to why different recruitment channels are being chosen by different firms. New recruitment channels have developed in recent years, especially as a result of technological advances during the past decades, which have provided companies with a completely new set of options and possibilities to recruit. Especially the internet has provided a number of new recruitment alternatives to employers, such as the development of so called Headhunting, recruitment search engines such as www.monster.com and the ability to apply for a position at a company’s homepage, to name a few. Hence, now-a-days a large variety of recruitment channels exist, which are available to organizations who seek to hire new members of staff. Recruitment sources are commonly distinguished into external and internal recruitment channels. An alternative way of distinguishing recruitment sources is to divide them into formal and informal recruitment channels. Formal recruitment channel are those that lead to an actual add being published either on a webpage, a newspaper or similar, whereas informal channels include, for instance, informing personal and business contacts or employees of a vacancy. The division between internal and external recruitment channels is quite similar to that between informal and formal channels in that informal channels often tend to be internal channels. The same tends to be generally true for formal and external channels, although a few exceptions do exist, the most striking one being business contacts. Business contacts are a form of an informal recruitment

99

International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 – 6510(Online), Volume 3, Issue 2, May-August (2012) channel, yet they are an external channel. . Henning Weiner (2008), examines an area of the recruitment process in today’s labour market from the point of view of the employer. More specifically, an analysis is conducted with respect to the recruitment channels that Swedish firms utilise in the present days. Furthermore, the degree of importance that firms place on finding the best available candidate for a vacant position will be investigated. The study reveals among others that contacts and recruitment agencies are the two most highly utilised recruitment channels, especially for the hiring of individuals who possess high levels of skill. Similarly, the analysis indicates that locating high quality candidates is the most influential factor for employers who are seeking new candidates. Other results reveal, among others, that recruitment costs are of comparably higher importance to smaller organizations than to larger ones, that large firms use formal recruitment channels to a larger extent than small ones do. Lars Behrenz (2001), gives a picture of the recruitment behavior of Swedish employers. The analysis is based on about 800 telephone interviews with employers regarding the last person they had hired. Employers mainly recruit personnel in order to expand a certain activity of their firm. On an average the total recruitment process takes about a month. In first round employers mainly look for job seekers with good education and experience. During the job interview the employer search for persons with professional knowledge, personal engagement and social competence. Stephen Taylor ( 2001), investigated the effectiveness of different recruitment sources used by six American companies for new employees. New workers who came through referrals by current employees had longer tenure with the organizations than did those recruited in other ways. Two competing explanations for this were tested; tentative support was provided for realistic job previews as one way to reduce turnover. Recruitment sources differed only in terms of tenure with the organization. Individual job performance and attitudes toward the employer were largely unaffected by the source through which the employee was recruited. Alexandra Rufini ( 2008),analyzed the recruitment strategies of firms aiming to fill high job positions. They have considered four recruitment channels actually used to hire high skilled workers: employee referrals, private agencies, promotion and topnotch Universities. The model emphasizes two optimal recruitment policies according to the firm characteristics. When several firms are considered in a stationary equilibrium setting, the combination of channels generates multiple rational expectation equilibrium. If firms are homogeneous, the optimal choices of firms may involve coordination failures. If they are heterogeneous by their size and technologies, conflicts of interest may emerge among firms and between firms and top-notch Universities. Cees Gorter, PeterNijkamp,Piet Rietveld(1996),has examined the functioning of labor markets from a demand-side perspective. In particular, the determinants of vacancy duration are studied in the context of a model of employers’ search behavior. A model for the choice of the recruitment strategy at the start of the search process and the corresponding recruitment duration is developed in which allowance is made for different patterns of duration dependence for each recruitment strategy. This model is applied to data on employers’ search behavior in the Dutch labor market. It is also found that when advertisements are used as the first recruitment strategy employers need some time to acquire a pool of applicants and to select candidates from this pool. Bryan Hickson (2008), has built a comprehensive survey of management consultancy candidates, to we which they have receive over 1500 responses in UK. Of the two parts, the first part focus on the responses 100

International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 – 6510(Online), Volume 3, Issue 2, May-August (2012) to the recruiter’s survey and on recruitment and retention data trends within management consultancies in UK. Part two looks at the appeal and the effectiveness of different recruitment channels from the candidate’s perspective and includes the rankings of recruitment agencies, job boards, etc. The research aims at analyzing the recruitment trends in HRO Industry in India. The research study was undertaken in a niche HRO services provider focused on mid-market companies in Tamil Nadu, India, where there was a well pronounced difference in the Performance and Productivity of employees who are hired from different Recruitment Sources and the time to fill the vacancies has also gone up.. As the sample organization intends to increase its employee base, it was important to benchmark the best possible recruitment trends in the HR BPO Industry and to infuse those practices with the Recruitment process of the Organization. As the organization emphasis a lot on the aptitude, attitude and the integrity of applicants, the selection ratio, and cost per hire has increased. The time to fill the vacancies has also gone up. So it is vital to benchmark the best possible trend in the HR BPO Industry amid the Tier II companies in regard to recruitment and to infuse those practices with the Recruitment process of the Organization. 2. RESEARCH METHODOLOGY This study is confined to Pure Play HR Outsourcing Solutions Providers in India. Only MP HRO Companies (Multiple Processes Solutions Providers) were considered for the study (End to End HR Solutions Providers). In the MP HRO Sector, only Tier II Companies having employee strength of > 100 and < 500 were considered. This also includes Recruiters working in the organizations. The study has included the following metrics: Employment rate, Cost Per Hire, Sourcing Mix, Referral Rate, Time to Fill, Hire Diversity, Quality of Hire, and Offer to acceptance ratio. The study aims to determine the Recruitment Trends in HR BPO Industry in India. It also made an attempt to assist the organization in framing a better idea for an effective use of Recruitment Sources by giving a comparative analysis of the Industry trends based on HR Metrics with the HR metrics calculations of the organization and to check whether the Vacancy Duration is influenced by independent variables. The research design is descriptive as the

purpose of this study is to investigate the Recruiting trends in the HR BPO Industry in India. It is more specific than the exploratory study, as it has focus on particular aspect or dimension of the problem studied. It is designed to gather descriptive information as provides information more sophisticated studies. Descriptive studies are those studies which are concerned with describing the characteristics of a particular individual or group to help in predictions. The population of the study encompasses all Pure Play HR Outsourcing Solutions Providers operating in India irrespective of the nation in which they are head quartered. Since the total number of Pure Play HRO Providers in India is around 55, questionnaire was administered to all the 55 companies. The response rate was 72% (i.e. 40 companies responded to the questionnaire). Sampling technique used was convenience sampling. The sample size for the project is 40 Pure Play HR Outsourcing Solutions Providers in India. Primary data was collected through a questionnaire administered through email to the recruiters in selected companies. The data was analyzed using statistical tools like Regression Analysis. It was used to analyze a part of the collected data. Multiple regression was performed using the vacancy 101

International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 – 6510(Online), Volume 3, Issue 2, May-August (2012) duration as the criterion variable (Dependent variable), the recruitment channel used to hire the last person and the size of the company as predictor variables (independent variable). Bar Charts and Pie Charts are used for representing the collected data. Secondary data was analysed using HR Metrics. A set of HR Metrics were calculated for the companies considered and then analysis was done to determine the HRO Industry Trends. 3. DATA ANALYSIS AND INTERPRETATION HR METRICS CALCULATIONS Employment Rate in HR BPO Industry in India This metric is based on actual hiring (internal and external) into a country and area against budgeted positions for a given period and expressed as a percentage. Employment Rate = Actual hiring this fiscal year/ Budgeted hiring for this fiscal year. Using the above given formula, the Employment Rate for the 40 companies are calculated and their mean is calculated to determine the Industry Trends. Employment Rate in Indian HR BPO Industry is 11%. Quantity per Recruitment Source in Indian HR BPO Industry a)

External versus internal fill rate

External vs. Internal Fill rate = Total number of offers from Internal or External Recruitment Source/Total number of offers. HR BPO Companies in India rely on External Recruitment Sources to fill 86.13% of the vacancies and on Internal Recruitment Sources to fill 13.3 % of the total vacancies. b) Quantity per source within External Sources This metric is to determine the percentage usage of each recruitment source within the External Sources. The sources that are considered for this study are Job Portals, WalkIns, Campus Visits, Internship Programs and Advertisements. Quantity per Source = Total number of hires from a particular source/Total number of External Hires. HR BPO Companies in India: •

Rely on Job Portals to fill 59.26% of their vacancies,

•

Rely on Advertisements to fill 3.08% of their vacancies.

•

Rely on Direct Walk-ins to fill 13.07% of their vacancies.

•

Rely on Campus Visits to fill 5.41 % of their vacancies 102

International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 – 6510(Online), Volume 3, Issue 2, May-August (2012) •

Rely on Contract Hiring to fill 3.25 % of their vacancies.

Referral Rate in HR BPO Industry in India This metric is measured as a ratio between the total numbers of hires recruited through employee referral to the total number of hires in the particular fiscal year. Referral Rate = Total number of positions filled through Employee Referral / Total number of offers. Using the above given formula, the Employment Rate for the 40 companies are calculated and their mean is calculated to determine the Industry Trends. Referral rate in Indian HR BPO Industry is 17 %. Cost per Hire in HR BPO Industry The metric is based upon two key components, the Staffing People Cost and Staffing Variable Costs. Staffing Variable Costs consist of staffing marketing, agency, employee referrals and miscellaneous costs. Staffing People Costs consists of vendor, contingent and FTE staffing costs (salaries, benefits, infrastructure, etc). Recruiter (FTE/CSG/Vendor), 3rd party agency/search fees, PR/Marketing spend, Miscellaneous Spend and Employee Referral bonuses. Cost per Hire = Total Recruiting Costs/ Total no. of Hires. Using the above given formula, Cost per Hire for the 40 companies are calculated and their mean is calculated to determine the Industry Trends. Cost per Hire in Indian HR BPO Industry is Rs. 8453.50. Average Time to Fill in HR BPO Industry Time to fill metric is used to ensure they are meeting the businesses requirements on delivering high quality hires in a timely manner and is measured on the time from requisition to offer accepted This metric is expressed as a numerical value based on the average number of calendar days from the point the requisition was opened until the offer has been accepted, by area and country. a) Average time to fill a vacancy that needs highly skilled candidate (i.e. a position that requires special skills and/or is a management/leadership position) is 31.5 days. b) Average time to fill a vacancy that doesn’t need a highly skilled candidate (i.e. a position that does not require special skills and is a not a management position) is 14 days.

103

International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 – 6510(Online), Volume 3, Issue 2, May-August (2012) QUALITY OF HIRE IN INDIAN HR BPO INDUSTRY Post-hire - 6 Months: New employee’s manager completes survey which is linked to role competencies. The analysis from survey reveals that : a). 58% of the organizations are highly satisfied with the performance of hires in the immediate 6 months of the hire. b). 35% of the organizations are satisfied with the performance of hires in the immediate 6 months of the hire. c). 8 % of the organizations have stated that their hires are just showing average performance after 6 months of the hire. Post-hire - 1 year: Performance management data is used from the previous year to determine quality of hire. a) Only 33% of the organizations are highly satisfied with the performance of the hire after 1 year of the hire. b) 60% of the organizations are satisfied with the performance of the hire after 1 year of the hire. c) Only 8% of the organizations are saying that the hires just performed average after 1 year of the hire. HIRE DIVERSITY IN INDIAN HR BPO INDUSTRY The diversity metric is used to monitor progress against area and country level diversity plan and commitments. Ultimately, ensuring they continue to improve the employee diversity across the business. This metric is expressed as a percentage value of female YTD hires versus total number of hires within the fiscal year-to-date. Hire Diversity = Total number of female hires / Total number of hires. Using the above given formula, Hire Diversity for the 40 companies are calculated and their mean is calculated to determine the Industry Trends. Hire Diversity in Indian HR BPO Industry is 48.82% Offer to acceptance ratio in Indian HR BPO Industry An Offer Acceptance Rate shows the percentage of job offers that have been accepted from the hiring process. It is calculated by knowing the Job Offers Accepted by the Job Offers Extended. Offer to acceptance ratio = Total number of Offers accepted / Total number of Letter of Intent issued. 104

International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 – 6510(Online), Volume 3, Issue 2, May-August (2012) Using the above given formula, Offer to Acceptance Ratio of the 40 companies are calculated and their mean is calculated to determine the Industry Trends. Offer to acceptance ratio in HR BPO Industry is 86%. COMPARISON OF THE HR METRICS CALCULATIONS OF NEEYAMO WITH INDUSTRY RECRUITMENT TRENDS Comparison of the Employment Rates The employment rate in the organization is 4% lesser than that of the Industry rate. Comparison of Recruitment Sources a)

Internal Recruitment Sources vs. External Recruitment Sources

The organization is relying on internal recruitment sources for filling 23.36% vacancies when compared to the 13.70% in the industry. it is relying on external recruitment

sources for filling 76.13% of the vacancies when compared to the 86.30% in the industry Comparison within External Recruitment Sources a) It is evident that the Enterprise relying heavily (72%) on Job Portals for sourcing their candidates when compared to the 59 % in the Industry. It is using advertisements for sourcing. This is negligible given the 3% use of advertisements in the Industry. This case is also same in regard to the usage of Contract Hiring. Direct walk-ins account for only 5% of sourcing when compared to the 13 % in the Industry. Comparison of the Referral Rates It is relying on Employee Referrals to fill 7% of the total vacancies, when compared to the staggering 17 % in the HR BPO Industry.

Comparison of Cost per hire The cost per hire in the enterprise is Rs.6068 when compared to the average cost per hire Rs.8453 of the industry. There is a difference of Rs.2385 which is resulting because of the recruiting cost cutting measures in the organization. Comparison of Time to fill The average time to fill vacancies which requires some sort of High Level Skill is 25 days when compared to the 32 days in the Industry. The average time to fill vacancies that are of low level skill is 7 days when compared to the 14 days in the Industry. Both these inferences show a robust recruitment policy in the organization.

105

International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 – 6510(Online), Volume 3, Issue 2, May-August (2012)

Comparison of Hire Diversity The Hire Diversity in the organization is 41% when compared to the 48% in the Industry. This indicates lesser number of female hires compared to the total hires in this fiscal year. Comparison of Offer to Acceptance Ratio The offer to acceptance ratio in the organization is at 69% when compared to the 86% in the Industry. This associated with the high rate of early attrition shows some sort of problem in the opportunity provided in the organization. MULTIPLE REGRESSIONS Multiple Regressions on the last person hired Multiple regressions was performed using the vacancy duration as the criterion variable (Dependent variable), the recruitment channel used to hire the last person and the size of the company as predictor variables (independent variable).A t-test was performed to discover whether the coefficients were of significance at the 5% level. Table 1 Model Summary for Regression Analysis Model

R

R Square

1

0.816

0.678

Adjusted R Square 0.623

Std. Error Estimate 3.477

of

the

The variables considered accounted for around 62% of the variance in the criterion variable vacancy duration. Table 2 Multiple Regressions on last person hired Coefficients Standard Error Intercept 4,8254 3,3133 Advertisements 3,4355 0,9167 Employee Referral 2,8181 1,0451 Campus Visits 0,3349 0,9033 Internship Program -1,1449 0,8920 Internally -1,6758 1,2652 Job Portals 1,4235 0,9290 Headhunting 3,7281 1,7654 Small 0,0989 3,3479 Medium -0,2204 3,3107 Large -0,7059 3,3118 106

t Stat 1,4564 3,7479 2,6965 0,3708 -1,2836 -1,3245 1,5324 2,1118 0,0295 -0,0666 -0,2132

P-value 0,1482 0,0003 0,0082 0,7116 0,2021 0,1882 0,1284 0,0371 0,9765 0,9470 0,8316

International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 – 6510(Online), Volume 3, Issue 2, May-August (2012) The results implicate that coefficients with a t-test score of t ≥ 1.984 or t ≤ -1.984 are significant at the 5% level. Advertisements, Employee Referral and Headhunting, due to the long length of the vacancy associated with the recruitment channel. CONCLUSION The project was undertaken to determine the recruitment trends in the HR BPO Industry in India. From the study, those trends are determined and they are compared with the metrics of selected Enterprise. Analysis, revealed that the employment rate at the enterprise is lesser than that of the Industry rate and the company is relying heavily on Job portals to fill its vacancies. Based on the findings, it is suggested that the company should go for employee referral at a greater rate and it should frame policies to increase the employment rate to align itself with the industry. REFERENCES 1. Stephen Taylor (2001),The Relationship between sources of New Employees and Attitude Towards Job, The Journal of Social Psychology 2. Alexandra Rufini (2008),Choosing recruitment channels to fill high job positions, International Journal for Talent Management 3. Bryan Hick son (2008), ‘Management Consultancy Recruitment Trends Report’, Top consultants, UK 4. Cees Gorter, Peter Nijkamp, Piet Rietveld (1996), ‘Employers’ recruitment behavior and vacancy duration: an empirical analysis for the Dutch labor market’ 5. Gary Dessler, Biju Varkkey (2009), Human Resource Management, Pearson Educations. 6. Henning Weiner (2008), A study of Recruitment Process Trends in Sweden Which factors shape businesses recruitment behavior?, Wiley’s Online Library 7. Lars Behrenz (2001), ‘Who gets the job and why? An explorative study of employers’ recruitment behavior’, Journal of Applied Economics.

107