Softscape Whitepaper: Hire Right The First Time: Improving Retention With Better Hiring Practices

WHITE PAPER

Hire Right the First Time: Improving Retention with Better Hiring Practices Next Generation Talent Acquisition Technology to Improve Candidate Selection & Retention A Softscape White Paper June 2008

Say Goodbye to Applicant Tracking Systems Traditional applicant tracking systems helped manage processes for requisition creation and resume searching. These systems provided the basics companies needed to locate and track candidates as they moved through the hiring process. However, they neglected one critical element of effective hiring: “Will the candidate actually succeed at the job?” Best practices for effectively hiring top performers goes beyond the initial task of tracking and managing applicants to match the best candidate to a detailed job profile and bases hiring decisions on more than just gut intuition. Hiring is inherently a subjective process. However, companies can greatly improve their ability to make accurate hiring decisions and ultimately impact employee retention with a more focused approach to defining job requirements. It is this detailed requirements profile that is often neglected in most hiring processes. The critical element of hiring right starts with clearly defining “what it takes to be successful on the job” and matching the best candidates to that criteria. Many organizations look at the hiring process as simply a search problem. However, forward-thinking organizations are recognizing that hiring is both a search and an assessment issue, and are looking to advanced Human Capital Management (HCM) technologies to link strategic talent management functions with demand planning and hiring management to clearly define position requirements. The next generation of talent acquisition technology has emerged which takes a holistic approach to people management and improves candidate selection, ultimately impacting retention and driving employee engagement by hiring right the first time.

“The costs of time and lost productivity are no less important or real than the costs associated with paying cash to fill empty positions.”

The Real Cost of Poor Hiring Practices Although some amount of attrition in an organization is normal, and in most cases a healthy requirement enabling an organization to grow, the actual costs associated with excessive turnover are much more than most executives realize. There are many well published formulas for calculating the cost of turnover. The average cost of replacing an employee can reach 150% of that employee’s annual compensation. The cost will be significantly higher (200% to 250% of annual compensation) for managerial and sales positions. To put this into perspective, let’s assume the average salary for an employee is $50,000 per year. Taking the cost of turnover at 150% of salary, the cost of turnover would be $75,000 per employee who leaves the organization. For an organization of 1,000 employees that has a 10% annual rate of turnover, the annual cost of turnover would be $7.5 million. For a 10,000 employee organization, the cost would be $75 million. What is not calculated in this well documented formula is the cost of starting over. The costs of time and lost productivity are directly proportionate to each person leaving, and no less important or real than the costs associated with paying cash to refill that position. These are all very real costs. Consider these variables for calculating the total cost of replacing one employee:

“First clearly define the requirements for what it takes to be successful in a specific position, and then evaluate candidates against that criteria.”

2

•

Training costs and time already invested in the employee who is leaving

•

Cost of manager’s time who now has to determine how to cover the remaining work until a replacement is found

•

Additional resource time conducting exit interviews

•

Cost of temporarily filling vacant role

•

Cost of departmental productivity lost

•

Cost of severance and benefits continuation

•

Cost of lost knowledge, skills, and contacts

•

Cost impact of unemployment insurance premiums

•

Cost of losing customers that the employee will potentially take

•

Costs based on how long the position is vacant

•

Cost of job advertisements to fill position

•

Cost of the internal recruiter's time

•

Cost and productivity impact of all interviewers interviewing multiple candidates

•

Administrative cost of handling, processing, and responding to hundreds or thousands of resumes

•

Number of hours spent by internal recruiter interviewing additional candidates

•

Cost of new background checks and other reference checks

•

Cost of departmental training and new hire orientation

•

Cost of person or persons who conduct the training

•

Cost of various training materials

•

Cost of manager’s time spent in orientation and reassigning backlog of work

•

Cost of overall lost productivity until new hire is up to speed (typically 3-6 months)

•

Cost impact on sales and revenues

As previously mentioned, moderate turnover is normal and expected. However, excessive or unplanned turnover can greatly impact an organization’s ability to compete and grow at a desired pace. Take into consideration the profound impact of losing specific staff members and how it can effect your organization: •

Negatively impacts getting a product to market and beating the competition

•

Loss of sales productivity that prevents the organization from achieving revenue goals

•

Effect on morale that creates additional turnover and unwanted erosion on productivity

•

Lost intellectual property and competitive advantages when the person leaving goes to a competitor

Your organization can greatly reduce these risks and costly expenditures by employing an improved approach to hiring practices.

Hiring Best Practices Hiring is often regarded as a painful means to an end; search through hundreds or thousands of resumes, then screen and interview, and in the end, make that gut decision on whether your top candidate is the right choice. Interviewers pass each other in the hall and ask “did you like them?” and “I don’t know, did you?” Hiring best practices start with the fundamentals: clearly define the requirements first for what it takes to be successful in a specific position, and then evaluate candidates quantitatively and qualitatively against that criteria to achieve the best match. Below are the steps involved to improve overall hiring practices.

Step 1: Clearly Define the Job Profile It sounds simple enough to clearly define a job. However, best practices across leading organizations reveal that true “job profiles” go beyond the traditional job description. This step is usually the most neglected because hiring managers tend to focus on what a person will do, and exclude specific details about what characteristics a candidate must have to be successful (see “Anatomy of a Job Profile” below).

Step 2: Source Internally, Then Externally Before expending resource time and associated costs on external sources, always begin by sourcing from within. This includes posting jobs internally, promoting referral bonus programs, and searching an internal skills inventory from your HCM system.

Step 3: Automate Applicant Screening Automate the applicant screening process by leveraging online surveys to screen applicants. Screening questions should focus on the most critical requirements (i.e., specific technical or domain experience, must-have requirements). Online screening questions should provide multiple choice or yes/no answers to quickly filter individuals that do not meet the basic requirements.

3

Step 4: Prepare Interviewers A key step in the hiring process is to coordinate the interviewing team. Select team members because of their particular expertise, and then, more importantly, assign question focus for each. Additionally, make sure scheduling between recruiters and interviewers is seamless. Leveraging common tools such as Microsoft Outlook to manage appointments is key. Too often interviewers are grabbed at the last minute and sent to interview a candidate without knowing the position, or the specific requirements of the position, for which the candidate is being considered. Top candidates will judge your company based in part on how they are treated in the interview process. If four interviewers all ask the same mundane questions, your candidate is unlikely to be impressed or even accept your offer.

Step 5: Use Behavioral-event Interviewing Questions Behavioral-event interviewing focuses less on the skills or knowledge base of candidates and more on how they have used those skills and knowledge in the past. The premise behind behavioral-event interviewing is that past behavior predicts future performance. Behavioral-event interviewing involves asking the candidate for specific examples with questions that begin with; “Give me an example of when you…” or “Describe a situation where you…” or “Tell me about a time when you had to…”

Step 6: Assess Candidates Based on Criteria When evaluating candidates against your job profile criteria, first ask yourself what evidence did the candidate provide for this requirement. You cannot assess someone properly if you never got an answer to the question. A scale of 0,1, and 2 will suffice (0 no evidence, 1 some evidence, 2 complete evidence). Then, based on those with evidence, rate each criteria on a scale of 1 to 5 (1 low, 5 high). This will provide the quantitative assessment you need to make more informed hiring decisions. In addition, add qualitative notes on the candidate’s strengths and weakness. Finally, make an overall assessment score (1-5) on the individual’s general fit. Averaging these ratings together will provide an accurate overall “fit” rating for each candidate.

Step 7: Make Qualitative & Quantitative Decisions Finally, make your decisions on more than just gut instinct. Rather, weigh both the qualitative and quantitative information gathered from your assessments. You can take ratings from all interviewers and average for a total rating. Comparing all candidate ratings will provide the high level answer to who best matches the job requirements. Then you can drill down into each interviewer’s assessment to find details on why candidates were rated the way they were.

Anatomy of a Job Profile Clearly defining a job profile and what it takes to be successful at a job is the critical first step and can often reveal hidden requirements that never get captured in a job description. A detailed job profile will include the necessary experience, skills, competencies, behaviors, and organizational fit criteria to assess candidates. There are three questions that must be answered in the hiring process:

Can They Do the Job The specific experiences, skills, and education required to succeed will reveal the answer to whether the candidate can do the job.

4

Three questions to answer: Can they do the job? Will they do the job? How will they do the job?

Will They Do the Job Determining whether someone will do a job is a reflection of their motivation (e.g., career growth, financial stability, work environment) and how well they will fit within the organizational culture.

How Will They Do the Job Competencies and behaviors are often overlooked in the hiring process and are one of the more important factors for determining whether a candidate matches the job. Behaviors are the best indicator of future performance. A complete Job Profile will define the following: •

Role:

job function and title

•

Responsibilities:

job description

•

Experience:

historical accomplishments

•

Skills:

professional abilities

•

Education:

schooling requirements

•

Certifications:

certifications required

•

Language:

languages spoken and/or written

•

Competencies:

behavioral characteristics

•

Compensation:

base salary, bonus, options, etc.

•

KPI Metrics:

primary goals and measurable metrics

Job profiles should also change over time. They must evolve to accommodate lessons learned and future organizational changes. This includes reevaluating requirements after an individual leaves a position and determining the critical factors of success for new candidates.

A Holistic Approach Hiring best practices look beyond just tracking resumes and seek to better match candidates to jobs. Taking a holistic approach to how workforces are managed enables companies to speed their hiring processes while greatly improving the accuracy of each hire. Human Capital Management (HCM) technologies must manage the entire employee life cycle and integrate critical HR functions into a single system. Softscape’s HCM platform provides a unique, talent-based employee system of record that connects the job profile with both a unique matching talent profile as well as core employee records: This end-to-end approach enables a comprehensive view of resources across the organization and answers important questions: who are your top performers, what are their job profiles, what development is being leveraged, what positions may be at risk of vacancy, and so on. Competency Library

Talent Profiles Employee Records Job Profiles Employee Record: Personnel Record Address Eligibility Salary Payroll Benefits Equipment Time-off Absence

(What it take to be successful at a job)

Talent Profile: Role Responsibilities Experience Skills Competencies Certifications Compensation Goals KPI Metrics

Job Profile: Role Responsibilities Experience Skills Competencies Certifications Compensation Goals KPI Metrics

5 9

With an integrated approach to HCM, companies are able to achieve the following: •

Workforce Planning defines the roles that need to be filled and adds up compensation totals. Different scenarios can be evaluated prior to initiating a hiring plan.

•

Talent Acquisition manages the complete hiring process, enabling you to streamline the process of searching for candidates, posting jobs (internally and to external job boards), automating applicant screening, tracking, and searching resumes, coordinating interviews and interviewers, printing interview kits with behavioral-event questions, assessing candidates, and managing the offer process.

•

HR Management automates the on-boarding process of new employees and provides them with self-service functions to update their employee records.

•

Workforce Performance enables you to quickly define performance goals and measurable metrics, as well as applicable development plans.

•

Learning & Development automates new hire orientation registrations as well as any other required and ongoing training.

•

Succession Planning also automates the development process to fill skill gaps across the organization, identifies positions at risk, and prevents positions from remaining vacant by promoting from within.

“Hiring is both a search and an assessment issue.” These are just a few examples of how you can leverage HCM technologies to integrate different HR functions to improve your hiring processes, better manage your entire workforce, and ultimately, drive business performance.

Conclusion Every hiring decision will have some level of subjectivity. It is inevitably a painful process. However, companies can greatly improve retention by revisiting their hiring practices. By leveraging the latest HCM technologies, you will not only improve your hiring practice and retention, you will also benefit from a holistic approach that enables you to better manage your people, their development, and how each can effectively contribute to and grow your organization.

6

Authored By Christopher Faust, Executive Vice President Global Strategy, Softscape For more information, contact [email protected]

About Softscape Softscape is the global leader in integrated people management software that enables organizations to more effectively drive their business performance. Recognized by industry analysts as the most comprehensive strategic human capital management (HCM) solution, Softscape provides complete employee lifecycle management, including a core system of record, in a single, integrated platform for improved business intelligence. The company offers customers of all sizes and in all industries the most flexibility and choice with multiple purchase, configuration, and deployment options. For more than a decade, Softscape has helped millions of workers across 156 countries be more successful at their jobs while contributing to bottom-line results. Softscape’s customers represent Fortune 500/Global 2000, mid-market, and government organizations, including Procter & Gamble, Barclays, AstraZeneca, Seagate, GKN, Edcon, LandAmerica, and the U.S. Department of Homeland Security. Softscape is based in Massachusetts with offices in London, Sydney, New York City, Chicago, San Francisco, Hartford, Washington, D.C., Bangkok, Hong Kong, and Johannesburg. www.softscape.com Copyright © 2008. All Rights Reserved. Reproduction without written permission is strictly prohibited. The Softscape logos and referenced products are either trademarks or registered trademarks of Softscape, Inc. All other brand and product names may be trademarks or registered trademarks of their respective holders. 08_0625ls

Worldwide Headquarters Softscape, Inc. One Softscape Center 526 Boston Post Road Wayland, MA 01778 USA 800-881-2546 (US & Canada) +1 (508) 358-1072

EMEA Headquarters Softscape Europe Greenland Court 6 Greenland Place London NW1 0AP United Kingdom (+44) 207 424 4000

APAC Headquarters Softscape Asia Pacific Pty Ltd Level 1 52-54 Stanley Street East Sydney, NSW 2010 Sydney, Australia +61 (0) 2 9358 3966 7