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6/11/2008

Benchmark Report: Executive Summary

Focusing Attention on Talent

Finding, attracting and retaining talent has become increasingly critical to every enterprise. By talent we do not mean those recruits who adequately fill a seat for a while, then move on, but rather those top quartile recruits whose performance and tenure will exceed expectations; those recruits we are glad we hired and regret losing.

This 8th edition of the Benchmark Report updates cost, time, qualifications and performance measurements for 20 industry groups, with data from more than 1,000 companies gathered in April 2008. This year we delayed data collection by 60 days to more accurately reflect current economic conditions.

Measurement represents focused attention. We measure what counts and what is important to us. If we have a business objective, we measure to determine our progress toward it. To be competitive in today’s globalized economy a competent staffing function is essential. To excel, it is critical.

But measurements are not metrics. Metrics only occur when a measurement becomes a common reference point for something, for example, efficiency or quality in a business setting. Without such standards, staffing professionals and top management cannot have an appropriate dialogue about Staffing’s contribution to meeting key corporate objectives. Our study confirms that more often than not, the most basic performance measurements used by Staffing have two important shortcomings: 1) They are either incomplete or misleading; and 2) They do not relate well to the concerns of top management. These shortcomings result in a condition we call “death by metrics”: diligent reports that gather dust and have little impact on high-level decision-making.

We find the external trends affecting staffing to be net negative, meaning that in the future they will make locating and attracting the best recruits more difficult. These external trends include demographics, globalization, competition, education, job seeker attitudes and behavior, outsourcing and technology. On the other hand, we find the internal trends to be net positive, although not dramatically so. These trends include metrics, business alignment, access to management, and technology.
 
Good Measurements, Good Metrics

Good metrics begin with good measurements. This year’s benchmarks are the most extensive and sophisticated we have gathered.

  • Again we stress the limitations of traditional cost-per-hire and urge wider adoption of Recruiting Cost Ratio (RCR) and Recruiting Efficiency Ratio (RER) as an alternative or supplement. The data shows very little relationship between Cost-Per-Hire and Recruiting-Cost-Ratio.
  • We find that by dividing survey respondents by employee size, and by measuring employers and suppliers separately, the overall Recruiting Cost Ratio for employers has fallen to 9.5%, with a range of 7.8% to 11.2% and relatively little variation. The average for suppliers remains at 14.2%, close to last year’s overall measurement.
  • There is wide variation in Cost-Per-Hire from industry to industry, with Retailing and Hospitality at the low end (approximately $2,000) and Pharma Biotech on the high end at more than $16,000.
  • Time-To-Start averages 7-8 weeks across all industries, with a one-week discrepancy between promise and performance. Larger companies report longer average hiring times, but with a smaller discrepancy. Again, there are substantial differences between industry groups (from Retailing at about four weeks to Government at about 12).
  • We measured candidate quality in two ways: qualifications and performance. Fewer than half of all employers reconcile candidate qualifications with what they originally sought. This measure changes little with company size and is a troubling statistic when assessing the global competitiveness of large U.S. companies.
  • The lack of widespread qualification measurements undoubtedly affects new hire job performance measurements, but the correlation needs further study. The data in this report shows a bell curve, with 11% of all employers reporting poor performance and 20% reporting superior performance. Small companies report better performance results than large companies.
  • Cross-tabulations reveal that 30% of all employers and 29% of all suppliers measure neither qualifications nor new hire performance. This is a disturbing statistic.
  • Roughly half of all employers conduct the first job performance assessment after about three months, with about one-fifth measuring at four or more months.

 

Multiple Areas of Survey Inquiry

Many factors influence the success or failure of a recruiting initiative and today’s recruiting environment is unusually complex. Survey data shows that competition for talent and candidate quality are the two most important staffing issues, while the least important issues are globalization and environmental/green issues. It also shows that suppliers are consistently more concerned than employers about two-thirds of the 12 issues we surveyed. Size is a factor in assessing external staffing issues. Some industries are much more sensitive to the issue of an aging workforce than others. Overall, Hospitals appear to be the most stressed by external conditions.

Candidate availability is a key metric. Regardless of variations in external factors, candidates are either in short supply or not. Overall, two-thirds of employers and 56% of suppliers reported problems with candidate availability (almost non-existent, hard to find and borderline). This concern does not vary appreciably with company size, but it does by industry group. The least affected group is Hospitality, while the most affected is Architecture/Engineering/Construction.

Technology has had a major impact on staffing, both internally and externally. Our survey of 1,200 job seekers confirms the universality of the Internet as a tool for finding new positions while at the same time revealing the extent to which this popular tool is sparingly or judiciously used by the majority. For example, 86% of all job seekers look for jobs irregularly, rarely or passively. Only 14% use this resource consistently or actively. Almost 40% have never used a job board, and more than half seldom visit a company website or have never been to one. The data emphasizes the need for a robust, multi-channel recruiting effort, particularly where time is a factor.

Internet staffing interactions require a high degree of trust and very skilled presentation. Some 76% of our respondents said that a poor company website deters them from applying for a job.

Internally, the adoption of technology varies enormously. ATS systems enjoy adoption rates among employers in excess of 80%. At the other extreme, Talent Management Suites – notwithstanding their various definitions and capabilities – and Learning Content Management Systems have very low adoption rates. Adoption rates for all technology systems surveyed (ATS, LCMS, LMS, TM, TMS) vary significantly by industry. 

Increased Emphasis on Alignment

The final two sections of this year’s Benchmark Report emphasize aspects of staffing performance that have been gradually increasing in importance since this report was originally published: creating metrics that will engage top management, and aligning staffing performance with overall enterprise mission, objectives and strategy. Traditional staffing metrics are not seen in this light frequently enough. Too often they are viewed only as department efficiency metrics (which they are) but not as part of the corporate dashboard regularly reviewed by senior management.

As a baseline for our future focus on executive leadership, we asked survey recipients to report their access to senior management and their perceived alignment with overall corporate objectives and strategy. The data indicates substantial room for improvement. Only about a third reported they were very satisfied with access, and one in five were unsatisfied. These measurements correlate closely with organization size, with negative reports rising and positive reports declining as the size of the organization increases. They are also highly variable by industry group, with Healthcare conspicuous at the low end and Telecommunications reporting the highest score.

Alignment scores are also ambiguous, with 31% of all staffing organizations reporting excellent alignment, and but 21% reporting poor alignment. And even if the majority reported fairly good alignment overall (good or excellent) we wonder at the comparison in results between internal HR managers (77% positive) and managers with additional responsibilities outside of Staffing (45% positive). We also remark on the difference in executive perception of the HR/Staffing department with that of Finance, the most respected department. If Staffing has such good access and alignment, why aren’t department scores higher?

This report will provide food for thought and action within your organization just as it has within ours at Staffing.org. We are ready to share it with you.

 

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