In our just released 2010 Corporate Recruiting Report, we devote three chapters to staffing effectiveness, which is different from staffing efficiency. Efficiency means running your staffing operation to the best cost and time standards possible. Effectiveness means that while you are working on that, you can also prove that you have put the most qualified and most suitable candidates in their seats. It’s about quality. So these two criteria constitute the complementary Yin and Yang of staffing best practice.
Assessing candidates is immensely challenging work in any event, and the more complex and difficult the job being filled, the more challenging it becomes. The problem we are addressing here is that too few companies have a systematic, rigorous program for measuring both candidate and new-hire quality. Even when they do, the contributions of staffing departments are frequently not linked to it.
2010 Corporate Recruiting Report
This is Staffing’s loss. Quality is the most important core staffing metric because it has the greatest effect on the performance of your enterprise. The downstream financial consequences of poor candidate quality, on both job performance and turnover, dwarf the financial impact of any increase or decrease in CPH (cost per hire) or RCR (recruiting cost ratio). Consider that:
- Cost per hire is typically only 8%–12% of first-year compensation.
- The cost of poor retention (high turnover) is typically around 50% of first-year compensation and can easily top 100%.
- Poor performance, however, is a multiple of compensation over the entire employee lifecycle.
Bringing Staffing fully into the loop on quality control is therefore one of the best ways to transition from a tactical, transactional department role to a strategic, business-critical one.
Quality Is Both a Specifications and a Performance Issue:
- Specifications answers the question, “Did we hire the appropriate person?”
- Performance answers the question, “Did that person actually perform well in the job?”
Despite their importance, both these answers have been neglected historically. Our studies still say (see above) that fewer than half of all companies systematically and rigorously compare both new hire qualifications against job specifications and job specifications against performance. And where they do, they often measure them only occasionally or informally, or they measure specifications or performance, but not both.
Improving quality is where the big enterprise returns on good staffing lie. Although they may not have read the studies documenting it, most CEOs intuitively understand this. Thus it is a much more significant issue for them than CPH or time-to-start, especially at large companies. Therefore the staffing department that can impact quality in a measurable way will receive a lot more attention than the one that cannot. Put bluntly, were a staffing department to focus on a single objective above all others, it should be finding and selecting the highest quality, most capable, best-suited people for the jobs at hand.
Why Bother Measuring?
Careful and consistent quality measurements take time and effort. If your hiring process is running smoothly already, why bother to improve it? Because in addition to the big-ticket financial benefits linked to workforce performance, there are four more benefits that are smaller-ticket, but still meaningful:
- Shorter recruiting cycles
- Happier hiring managers
- Greater management credibility
- More business relevance.
Take, for example management credibility. Knowing you are doing terrific work, and being able to prove it numerically, are two different things. A good set of quality metrics represents the proof you need. In senior management circles, it’s essential to be able to say things like,
“Last quarter we delivered candidates with an 85% excellent quality rating after 6 months. The industry benchmark is 60%. By contrast, last year we scored 76% and over the next two quarters we’re aiming to reach 90%. Here’s how we plan to accomplish that.”
Such a statement is powerful, factual, and specific. A staffing department that can make it clearly appears both informed and in command.
Chapter 16 of the report explains the links between candidate quality and corporate performance in more detail and provides checklists and templates for implementing a best practices program. Chapter 17 examines the financial impact of post-hire candidate quality and Chapter 18 examines the impact of retention.
The full report, published just last week, is available for immediate download. Click here to visit our store.
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