The annual fall HRTech conference is always a geek’s delight: all that nifty new software to review in an application area that’s as complex and volatile as the Middle East. Blink and you’re apt to have missed a revolution, which makes attending akin to playing an online multi-player game. Strategy, focus and competition footwear are crucial.

Two takeaways from this year’s event:

1) HR has finally entered the Promised Land
2) Technical fluency is HR’s number one competency challenge

Two presentations crystalized these points: Laurie Bassi’s discussion of her new book Good Company, Business Success in the Worthiness Era; and Lexy Martin’s review of the 2011-12 CedarCrestone HR systems survey.

Bassi writes about the new criteria for durable business success. According to her research, Nobel Lauriate economist Milton Freedman’s argument that the only social responsibility of business is to maximize profits is outdated. To succeed in today’s fluid, globalized, hypercompetitive, increasingly socially conscious business environment companies must adopt a broader set of responsibilities that embraces all stakeholders, including customers, employees and communities, not merely owners.

The argument that virtuous companies that care about the environment, give back to their communities, tell the truth, delight customers and treat employees as valued corporate assets, perform better over time is not new. Listings like the 100 Best Companies to Work For are well publicized and applauded, then mostly ignored by stockbrokers and investors who remain fixated on their limited set of traditional metrics.

Bassi’s big gun is stock price, which her firm tracks in conjunction with a Worthiness Index. Top rankings in worthiness do not correlate perfectly with stock performance. Apple, for example, a widely admired company whose stock has sizzled lately, earns only a B- on the Index. Only two companies out of 100 receive “A’s,” FedEx and Disney.

There is a powerful message here for corporate talent managers. Woven throughout the book, in example after example, is the theme that businesses are people-driven. A grumpy Starbucks barista, a scripted Virgin flight attendant, or a sloppy Disneyworld sweeper is a quantifiable business liability.

This makes recruiting absolutely central to business performance. Get recruiting right and you have a chance to excel; get it wrong and you not only face longer odds but your success will be more tenuous.

Bassi’s research is the gateway to the Promised Land, where good business and good HR intersect and become inseparable, but no one responsible for talent acquisition and management will ever pass through without mastering the data in Lexy Martin’s survey, which reports on HR technology adoption, deployment trends, vendor evolution, expenditures and application impact (example above).

Technology ownership, which begins with literacy, is the Achilles heel of most HR departments. They depend on it and they use it, but they don’t understand how it works, what’s it’s capable of, or how it’s evolving. Nor to they really care to. Technology is the IT department’s job. This is as wrongheaded as thinking you can understand an investment by just studying a spreadsheet.

As the annual HRTech Conference in general, and Ms. Martin’s presentation in particular, makes abundantly clear, the HR technology landscape is devilishly complicated. It would be hard to master if it were standing still, which it’s not. It’s evolving quickly. Ownership requires not only making the best use of what’s already available, but also making accurate guesses about what’s to come. At the very least, realistic tech planning for 2012 needs to factor in what trends suggest will happen 2013 and 2014. Mobil technology, social media and data integration are three key issues.

Some will continue to say that you don’t need to be a mechanic to drive a car; you just need to know how to drive. That might be true if your only task is a daily jaunt to the local grocery store. But business is more like a race. Your car is an important competitive tool and if you don’t know how to optimize its performance other drivers will walk away with the freshest doughnuts.

Owning technology doesn’t require a degree in computer science or programming expertise but it does require a substantial commitment of time and effort. The questions you need to be able to answer are in our upcoming technology report. If you run a small department, you’ll need to allocate time for study. You would also be wise to engage a knowledgeable advisor. If your CFO balks at the cost, give him or her the report. You can start with a simple inventory of what you’re using and what the upgrade options are. If you run a big department and don’t have a tech specialist on staff, it’s time to hire one.

Bassi’s presentation linked people performance to business performance; Martin’s links technology to people performance. You can’t have one without the other.

Request for information
Our upcoming technology report is part of our package of efficiency reports, which includes updated time-to-hire and cost-per-hire industry data.

Please contribute to our current SURVEY today!

It’s time. The tea leaves have spoken. We need an updated look at staffing efficiency. So we have 4 new reports underway, all focused on it. Technology will be the first, followed by Cost and Time, followed by Structure.

Most important, our 15th annual cost and time survey has just been posted. We completely reworked it to make the questions more precise and easy to answer. Even if you don’t have exact data, many questions offer ranges you can choose from. Take survey >

We intend your ROI on this to be meaningful. In exchange for your data, contributors will receive a complimentary executive summary of the findings and a coupon for the Cost and Time Reports. We’ll also be analyzing our findings in a series of UPDATES. Thank you in advance for helping the industry unflatten the staffing performance bell curve. (Unflattening means bringing the performance of industry leaders and laggards closer together.)

Here’s what you’ll be getting in the new reports.

In a word, executive credibility. Lest you suspect that by emphasizing recruiting effectiveness (quality) so frequently over the past year we’ve left efficiency behind, rest assured we haven’t. Effectiveness may keep you at the executive table because it provides the greater financial benefit to your company, but efficiency is what gets you that seat in the first place.

Without efficiency, you don’t have any management credibility to leverage. Especially in these times, proving you know how to make dimes sing like dollars is competency Number One.

Why have we included our annual technology update in the efficiency group of reports? Because without optimizing today’s and tomorrow’s technology you’ll never achieve best practice efficiency metrics. Repeat, never. Technology now runs the entire human capital supply chain, from prospect sourcing, assessments and onboarding, through performance management and workforce planning. Learning to optimize it is as fundamental to high performance as learning to use your mobile phone or laptop.

Even more important, and the source of considerable confusion these days, is learning to make all that new technology the servant of the recruiting process and not its master. Finding, recruiting, developing and keeping good people always has been, and remains, a people-to-people endeavor. The hot topics at this fall’s HRTech Conference — gamification, suites, SaaS, mobile and data optimization — are just tools in that human process. Get that mixed up and all you’ll end up with is the most expensive also-ran staffing performance on your block.

So before you forget, go take the survey.  And thanks.

Read this article in CFO magazine. (The link’s at the end of this UPDATE.) It’s the best explanation I’ve seen of how, if you aspire to CHRO leadership over the next decade, you will be talking to your CFO.

Here’s the gist. Talent metrics pioneers like Jac Fitz-enz and Wayne Cascio have for decades been pressing the case for human capital metrics as way to empirically validate HR’s impact on business performance. Lately a second generation of people like Laurie Bassi and Jeff Higgins has joined the cause.

Dr. Bassi’s most recent book, Good Company, documents the link between business success and good social behavior, which includes internal talent management. She also chairs SHRM’s Investor Metrics Workgroup, which will release recommendations in 2012.

Jeff Higgins at HCMI, who spent years as a CFO, has been working on definitions and standards that speak to CFOs with the same consistency and rigor as the other financial metrics they are used to dealing with. The samples here are from an extensive example that is linked to the CFO article.

Our own organization joined the cause in 1998 when we began publishing the first annual industry benchmarks for corporate talent acquisition and performance. Our 16th such study will be launched next week.

The dialogue between CHROs and CFOs has been slow to develop but is now louder and brisker than it has ever been.  One reason is technology, which has recently reached a state of maturity and integration that can deliver comprehensive, integrated data capture and analysis.

A second is that academics and others have created the necessary hard links between people and profits.

A third is that a critical mass of CFOs, CEOs and investors confronted by the pressures of globalization have accepted that better management of human capital can deliver business benefits.

And fourth, CHROS in bellwether companies have already used technology and data to successfully transition from transactional to strategic business roles.

Call this a perfect storm with happy consequences. We now have a foundation on which to begin building the human capital practice of the 21st century, one that is the equal of any other measurement-guided business process.

Here is the link to the CFO article, Power from the people, Can human capital financial statements allow companies to measure the value of their employees? and the link to the exhibits from Jeff Higgins at HCMI.

We all want our hires to hit the ground running and time-to-productivity is the metric that tracks this. But like time-to-hire or time-to-start, it’s a recruiting metric that means little without context.
It has three drivers:
•    The experience and aptitude of the candidate (recruiting’s responsibility)
•    The onboarding/training program (training’s responsibility)
•    And on-the-job mentoring and support (the hiring manager’s responsibility)

All three have to be synchronized for new hire performance to be optimized. This requires teamwork and shared responsibility that happens to be somewhat rare.

We recommend measuring speed to productivity as part of a suite of recruiting effectiveness metrics that includes candidate quality, time to productivity, job performance, training/job evaluation and retention. Developing these metrics involves creating a linked series of 5 measurements that all derive from pre-hire conversations with your hiring managers to establish — carefully and in detail! — their desired candidate qualifications and competencies, job performance benchmarks and desired time to productivity.

Many companies say they have such pre-hire conversations but few actually conduct them with the necessary thoroughness and care; and even fewer create written checklists that serve as the evaluation criteria for the whole complicated process of turning candidates into productive employees.

Many companies say they have such pre-hire conversations but few actually conduct them with the necessary thoroughness and care; and even fewer create written checklists that serve as the evaluation criteria for the whole complicated process of turning candidates into productive employees.

Once you have these checklists and benchmarks established, you’ll need 5 measurements:

• The 1^st pre-hire to make sure you’re getting candidates in the door that match the needs of the position.
• A 2^nd one with candidates after training is completed and they’ve been on the job for a bit in order to establish that the training was suitable and effective and that the candidate feels adequately prepared.
• The 3^rd one at whatever point you set your pre-hire expectation for 100% productivity and job performance —1 month, 3 months, 5 months, or whatever is reasonable. (This will vary enormously from position to position. Some jobs can be trained up in a week or two. Others take months. Making senior executives fully productive may require as much a year or two.) If you have some historical data points, use those for starters; if not set them as best you can and validate them going forward. Hopefully, all your hires meet your goal, but if not, you sit down with your team and begin analyzing why. Then either change the goal or change your process.
• The 4^th one at the point where it makes sense to measure retention, 3 or 6 months being the most common intervals.
•  And the 5^th, exit interviews with hires who leave prematurely.

Interesting question. There’s not much argument that corporate recruiting is different than it was a decade ago, but is it better? Right now we can support either the ‘yes” or the ‘no” answer. The macro level survey data (see chart) supports “no;” the micro level case study data supports “yes.”

Last week our question was, “where is excellence?” Where should we set the performance bar for outstanding work? Only statisticians find average performance noteworthy; on the job it either puts you on a “needs improvement” list or sets you up for replacement. There isn’t much job security in being average.

Caption: The data for most of the 27 industries we follow shows a trend from lows during the recessionary period of 2000-2001, then steady rises during the recovery period of 2002-2007, then a sharp retreat over the past three years back to the lows of 2000-2001. Last year, our 2010 consolidated benchmark for all 27 industries we cover was within one-tenth of one percent of the low we saw 10 years ago. So from a recruiting cost standpoint, we are back almost exactly where we began.

There are so many performance-enhancing tools out there today that bar placement is more a question of will than anything else, including budget. You don’t have to spend more, but you do have to be willing to ruffle feathers and speak truth to power. We’ve dealt with two examples of that already this week, and it’s only Wednesday.

Case #1 is a health care organization that wants recruiting to “own” 90-day turnover, meaning they are to be 100% accountable for that retention number. If it’s not satisfactory, it’s recruiting’s fault, period. We love the ownership part because it confers power and we want recruiting to have as much of that as possible. However, in this particular case there’s a red flag attached the size of Denmark: hiring mangers will have no responsibility whatsoever. No matter how inept their leadership, turnover will be recruiting’s fault; and this in spite of ample exit survey evidence from this same institution showing that hiring manager behavior is the overwhelming reason for early exits.

Case #2 is an international retailer embarking on a reorganization and renewal campaign. They have money, terrific leadership, the right objectives, and senior executive harmony; what they also have is several layers of pre-reorganization middle managers who slipped into their jobs when standards were looser and patronage flourished. New management has the ship half turned, but it won’t turn further without these folks on board and committed to the renewal program.

Neither of these cases is directly about efficiency and yet they are indirectly all about efficiency, which begins with people alignment. Their stats won’t change our survey numbers at all until the people problems are resolved: problems that could just as easily have occurred 10, 25 or 50 years ago.

So are we making progress? We’re optimists. Of course we are. The possibility of better recruiting performance clearly exists. Individual companies are proving it every day. The Case 2 example above will almost certainly get where it wants to go and perhaps Case 1 will too. We’ll see.

In the meantime, we think the best answer to the question in the title is another question, “do you want to?”

Our upcoming report, Recruiting Effectiveness, will provide both average and, for the first time, best practice efficiency numbers from our Q4 client survey.  Thank you in advance for taking the time to fill out that survey (which we be emailing to you) and help us set new corporate recruiting efficiency standards for your industry.

What defines excellence or deficiency in recruiting efficiency? Where are the performance bars? When clients ask this we ramble on about the bell curve in our data and point to companies in the top or bottom 10% of our survey samples; and when they ask for excellence benchmarks we suggest guidelines that are 25% better or worse than their industry’s (illustration).

A 66% Efficiency Advantage

These general instructions have served us well for more than a decade but now need updating. As the recruiting ecosystem continues to evolve, performance gaps have been growing and are now very wide indeed. Both time and cost provide easy examples.

Companies with exemplary succession plans can replace top managers in a matter of days and have them in full stride almost immediately. Companies starting external searches from scratch need months to find, vet, hire and relocate good hires and months more to make them fully productive.

Companies with exemplary employee referral and candidate management programs can easily pay half of what their peers do for a steady supply of high quality candidates.

25% no longer accurately describes the differences in performance between talent acquisition leaders and laggards.

The definition of efficiency has also evolved. When we began our surveys in 1998, recruiting competence was largely defined by efficiency. Since then efficiency has become table stakes. If you can’t prove efficiency as a manager you don’t even get to sit down with the A players, much less play in their game.

The evolved definition includes all the traditional markers of efficiency plus a bunch more but places more emphasis on effectiveness — quality of hire, job performance, retention, and business alignment — because we have learned that those things have greater impacts on corporate performance.

Pareto’s Principle
In 1906, Italian economist Vilfredo Pareto described the distribution of wealth in Italy using a mathematical formula that has come down to us as Pareto’s Principle, or the 80/20 rule of thumb:

20% of the population controls 80% of the wealth
20% of your stock holdings will provide 80% of your gains
80% of your sales will come from 20% of your clients (or sales staff)
and so forth.

Pareto’s Principle reminds managers of all types to focus on the relatively few things that are crucial to driving top tier performance instead of the much larger number of things that aren’t but that can so easily siphon off scarce time and resources. Beginning with the release of Recruiter Workload earlier this month, identifying those crucial 20% factors and calculating their impact will be our focus in Q4, 2011.

Clearing the Bar
Our past efficiency metrics have compiled survey results into “average” results, which we always remind clients are merely passing grades, not measures of excellence. Hitting the industry benchmark means you’re doing an OK job of supplying the talent material your enterprise needs to prosper. Once that was sufficient because everyone recruited pretty much the same way, using the same tools and techniques. Hitting that benchmark meant you were competitive, right there in the running.

But that’s no longer the case. If you’re hitting the benchmark now, half the world is ahead of you and some of them are so far ahead they’re out of sight. Not a wonderful place to be if you work in a competitive, globalized industry and your stock is public. Average in this scenario means mediocre not competitive.

So we’re changing our approach. Our efficiency survey (which you’ll be receiving shortly) will still yield traditional industry metrics but the focus of the reports will be on where the excellence bar sits now and how companies are clearing it. Our goal will not be helping you be average but helping you to be exceptional.

Please consider filling out the survey when it arrives. And if you happen to have beaten the heck out of some efficiency benchmark, let us know how you did it. We‘ll write you up as a case study. Vendors are likewise invited to provide examples of client home runs. As usual, we’ll share the high level results with all our 30,000 readers in a free executive summary and publish selected case studies in our Weekly Research Updates.

Recruiter Workload,our newest research report, is now in the store. Here’s some of the coverage.

It makes a real difference where a recruiter works because requisition workloads vary tremendously from employer to employer. The per person workloads we found varied from 4 to 450, and variations of 50% or more between departments in similar industries, handling similar types of requisitions, were common.

Recruiter workload is a critical component of recruiter mental health. In an era of increased competition for talent, that factor bears heavily on an employer’s ability to assemble and retain a crack recruiting team. Overwork will quickly degrade the performance of even the best ones.

Unprecedented job market transparency, technological evolution and changing candidate attitudes and behaviors are making routine, “average” quality recruiting easier and best-in-class, top quality recruiting harder. Performance gaps are increasing.

Candidate marketing and channel selection and productivity have become major factors in recruiting efficiency. These are unfamiliar and undeveloped competencies in most corporate recruiting departments.

Cost-per-hire is a poor way to assess recruiter productivity. Many performance assessments proclaim objectivity but in reality are highly subjective.

Nearly everyone’s workload metrics are home grown (as they should be) but because there are no standards to work against, few know whether to rate their performance as poor, average or excellent.

Most employers pay lip service to quality of hire as their key recruiting metric but judge recruiting productivity mainly on quantity. The inherent tension between these two mandates remains mostly unresolved.

We didn’t find anyone who had a formal or consistent way of measuring the impact of 28 variables that can affect individual recruiter productivity. (We offer a methodology and tool for your consideration in the Recruiter Workload report.)

Workforce agility — the ability to rapidly scale a workforce up or down — is one of the hallmarks of recruiting excellence in today’s volatile business environment. The traditional recruiting model, based on full-cycle responsibility, doesn’t scale very efficiently because its primary throughput control is headcount. The newer, 21^st century model has multiple ways of tuning throughput to business conditions.

Efficiency mandates for recruiting departments will not ease any time soon. Lean staffing coupled with optimum productivity will remain the norm. Rational and persuasive defenses of staffing headcount will remain necessary.

As we wrote a few weeks ago, an employer’s calculation of recruiter workload says a good deal about how it views recruiting overall. Recruiters and their managers understand that theirs is not assembly-line widget work but often their higher ups do not. Those line of business and corporate executives have business plans to execute and expect employees to be in place when and where they are needed. The two sides have a common cause but clashing perspectives. What’s needed is a rational set of arguments that both sides can relate to.

Is it possible to take work that has an acceptable quantitative outcome (hires) but that varies considerably from assignment to assignment, from job level to job level, and from geography to geography, and create a logical framework for managing the people who have to do it?

Happily, there is.

We were on a consulting call for a client this week and it came up again: the quality versus quantity issue. Happily this client has it right: 250 new hires over the next year, only the best of the best, probably all deeply passive, already well employed, and highly sought after in two of the country’s most competitive talent markets.

The questions: How to structure the recruiting effort to make those hires? How many recruiters are needed? What channels should they exploit and how? What engagement tactics will produce the greatest interest?

The refreshing aspect of this assignment is that we get to work backwards — outcomes first, strategy second, tactics third and workload last. So often it’s the reverse, with the client treating workload as a cause rather than a result.

This client, perhaps because it’s young, VC backed, and operating on the West Coast in the tech space, is talent centered. Call it the Google effect. Talent counts and top talent really counts, so they’re perfectly willing to rewrite the recruiting rule book to capture it.

Bury Cost Per Hire

When it comes to workload, quality and efficiency are closely linked. If your management has been asking for workload metrics as a way of managing headcount, eventually you will confront the quality issue: the balancing point between optimum efficiency and compromised work — i.e. “How many people do I need to do the work?” versus “How many people do I need to do the work well?”

If you can manage the added data collection and analysis, the quality argument is extremely powerful. Quality counts because of its long term financial consequences. The impact of candidate quality, when measured as vacancy cost, plus replacement cost, plus job performance, simply dwarfs the financial impact of any reduction in cost-per-hire or recruiting cost ratio.

• Cost per hire typically amounts to 8-12% of first year compensation. So using 10% as an average, the cost of hiring a $50,000 employee is $5000.
• A 25% reduction in that cost would save $1250 (although such a large reduction would probably compromise the operation of an already well-run department).
• But what happens if compromised workload ends up increasing employee turnover? Each turnover will cost 4 times your savings.

• And if the full cost of replacement is calculated, the cost to replace would typically be around 50% of first year compensation, or $25,000 for a mid level manager, and 100% or more at upper job levels. That’s 20 times your savings or more.
• And if the cost over time of lower productivity from lower quality employees is also factored in, the business penalty increases even more.

When you think about it, this all seems fairly obvious: short term gain but long term loss, or the business equivalent of cutting off your nose to spite your face, which is why becoming familiar with the math is so important, and not just when it means maintaining headcount. A well documented quality argument can fundamentally change management’s perspective on what recruiting is and how it should work.

The rungs on the management ladder are defined by the amount of corporate dollars involved. We call this the Law of Large Numbers: the higher the rung, the greater the dollars at stake. In HR, the large numbers have always been workforce compensation, pension obligations and health care. When calculated the old way, cost per hire is not in this league; calculated the new way it comes much closer.

Cost per hire by itself has such minor effect on corporate success that some of our clients now use that metric only for department budgeting. Senior management never sees it.

Our newest research report, Recruiting Workload, will be published shortly.

What’s the right requisition load for a recruiter? How do I respond to senior management when they ask me to defend my staffing levels? What’s the most efficient way to handle seasonal staffing variations?

We heard these questions less frequently during the first two quarters of 2011, but their frequency has increased of late as economic growth remains sluggish and we enter the first phase of the 2012 corporate budgeting cycle.

Senior management remains both cost-focused and unsure of their future hiring plans. In a repeat of last year, they are debating whether to keep staffing levels lean for now and hope to ramp up smoothly if growth accelerates, or to anticipate the uptick by putting extra recruiting capacity in place now.

In Trends, our first report of the year, we concluded that the ability to scale recruiting up and down rapidly would be one of the core capabilities of the 21st century staffing model. In our March report, Outsourcing, we then reviewed structural strategies that would allow that scaling to happen with the greatest efficiency and the least pain.

But any decisions regarding flexibility and structure have to be grounded in dependable workload metrics that tell us how much work our current or future staff should be expected to handle and which workloads represent the best combinations of efficiency and effectiveness.

In budget discussions, the best defense is careful preparation. So now is the right time to gather the evidence that will either support your request for additional resources or defend those resources against reflexive cost cutting.

Before the end of the month we’ll have a new report, Recruiter Workload, to support that work. The good news: all three questions have persuasive answers based on CFO-friendly metrics. But the answers aren’t cut and dried. You’ll have to be able to work through diagnostic exercises like:

• What kind of candidates are you looking for?
• What’s the state of your particular labor market?
• How aggressive is the competition?
• How experienced is your recruiter?
• How supportive is your technology?

And so on. There are dozens of relevant questions that affect recruiter performance.

Culture is Vital
How your company calculates recruiter workload says a good deal about how it views recruiting overall. If it subscribes to the assembly line piecework model, then it will believe that a reasonably competent recruiting team, working within a reasonably functional recruiting environment, ought to own valid workload and output metrics (benchmarks) against which both individuals and the team can be evaluated. In the world of standardized piecework, that expectation is universal.

The obvious question is whether requisitions represent standardized piecework or whether they represent another kind of work altogether, perhaps something more like custom tailoring: a set of skills applied to tasks that can vary widely depending on the situation and the customer.

Every experienced recruiter we know rejects the piecework model. Even in situations where they deal with large numbers of similar job requisitions, there are variations that make the job more difficult one day, less difficult the next. These could be internal (hiring managers, timetables, compensation, communication or process) or external (labor supply, economic conditions or competition).

Is it possible to take work that varies considerably from assignment to assignment, from job level to job level, and from geography to geography, and create a logical framework for managing the output of the people doing it? Yes, there is.

Our report will analyze recruiter workload from 3 perspectives: how to accurately measure it, calculating the balance point between efficiency and quality, and critical influences.

Our newest research report, Sourcing and Marketing, is now available in the store. As sometimes happens with research, it didn’t end up where we expected. The more we looked at the data, the more we realized there were some fundamental flaws in traditional end-to-end recruiting practice that no amount of tweaking was going to fix. We needed to define a new set of best practices that were better adapted to today’s vast, noisy job marketplace and that promised to move corporate recruiting efficiency metrics that haven’t budged in years.

We found them outside of HR in models developed by marketing and sales departments to produce results in hotly competitive consumer products markets. Those models already had mirror images in corporate recruiting, but faint ones that required competencies we had only occasionally seen here and there in top tier recruiting departments.

All of which was good news, because it meant that while our recommendations might be unfamiliar and challenging to many, they had already been accepted by some of the most advanced players.