By Jeff Higgins, CEO of Human Capital Management Institute (HCMI)
Employers have been complaining loudly about the inability to find and hire qualified talent for many years, and the challenge and noise increased further during the pandemic and the ensuing 'Great Resignation' that started during the pandemic. The total number of open positions in the US has remained above 10.0 million for more than two years, nearly double the pre-pandemic historical norms of 5.0 to 6.0 million open positions across the US. As of February 2023, according to the US Job Openings and Labor Turnover Summary (JOLTS) Report, open positions dropped slightly to 9.9 million open positions, but according to some economists studying demographic workforce trends, including an aging workforce, the economy is unlikely to return to the prior average level of open jobs in the foreseeable future.
Evidence of the continuing 'Great Resignation' and resulting talent war trend continues in 2023 since the same JOLTS Report (February 2023) shows quit rates or turnover increasing slightly to 4.0 million workers or 3.7% of the workforce in February 2023. The 3.7% quit rate, when multiplied by 12 months or annualized, equates to a 44.4% turnover rate, which is 75.5% higher than the decade before the pandemic (Feb 2013 vs. Feb 2023).
The point is that higher levels of employee turnover and increasing competition for jobs make for a challenging environment to attract and retain workers and this is likely the new normal for companies. Therefore, in order to have any chance of winning the talent war by attracting, hiring, and retaining good talent, companies must be willing to change how they operate, not just in recruiting but decision-making, accountability, career pathing, and more.
All employees eventually leave a company, whether by retirement (good turnover in many respects), layoffs, or voluntary resignation. What makes a difference is whether the company is improving how it sources, hires, trains, rewards, manages, and retains its best workers.
Companies are, of course, focused on keeping good employee turnover to a minimum. The key is to concentrate on retaining the good performers, the critical roles, the highly engaged employees, and the current as well as emerging stars. The amount of human capital value lost when a hard-to-fill vital role or high performer leaves is considerable, causing work to slow while much time is invested in replacing the open position with no guarantee that the replacement will match the level of performance of the prior worker. Since it is much harder today than it was a decade ago to find great talent in a reasonable amount of time, that leaves the company and co-workers to struggle while a replacement is found and brought up to speed. As a result, morale may decrease, and the risk of turnover of other good performers may increase, creating a negative growing turnover cycle.
Here are the 7 recruiting mistakes companies must change to win the war for talent:
1. Hiring Managers Who Are Unaccountable for Their Hiring Decisions
A famous Gallup poll of more than a million employed US workers concluded that the No. 1 reason people quit their jobs is a bad boss or immediate supervisor. In the study, 75% of workers who voluntarily left their jobs did so because of their bosses and not the position itself. "In spite of how good a job may be, people will quit if the reporting relationship is not healthy."
Marcus Buckingham said it best "People leave managers, not companies...in the end, turnover is mostly a manager issue." In fact, the issue is even worse than what Gallup found. Managers, in recruiting, wield tremendous power in the overall hiring process and are typically the final decision maker as to whether or not to hire a person for an open job. If the manager makes a poor hiring decision, even if HR and the rest of the organization do everything right, the new employee often can end up leaving in the first year (or 90 days in some cases), regardless of whether it was a voluntary or involuntary termination. Worse, who do the manager and the organization typically blame for this failed hire, why, HR, and often, specifically recruiting? The blame may start with unfounded accusations by the hiring manager or a more senior leader trying to support their junior manager saying, "HR didn't find us any good candidates," or "We hired the best we could find from a bad batch." Therefore managers conclude HR needs to do a better job of attracting talent. Also, HR can be blamed due to HR pay policies that a position be paid commensurate with internal pay equity and candidate experience level, which translates to "HR doesn't let us pay enough to get and keep good people."
The solution to mistake #1. while simple requires discipline and management support to execute as described below;
Management can simply hold hiring managers accountable for any 'New Hire Terminations' within a given amount of time (either 90 days or one year via a New Hire Retention Rate metric). In essence, this holds managers accountable for newly hired employees and whether that employee stays with the organization for a specified amount of time.
Concurrently, HR should track and score all applicants for open jobs based on an agreed-upon set of criteria for each job. Many applicant tracking systems today enable users to score job applicants on how well they meet selected job requirements, with the best systems turning the scoring into a percentile from 0% to 100%. The advantage of this is to share such data with hiring managers to help them make more objective final round interviewing and hiring decisions.
Lastly, another metric is to track and digitize each hire based on who agreed or voted (i.e., hiring manager, HR, recruiter, Higher manager director) to make an offer to a candidate. Over time, managers who are terrible talent scouts are easily identified. In one financial services company case study, when both recruiter and hiring manager agreed upon a hire, the retention rate of the new hire was 2x the retention rate when only the hiring manager approved the hire against HR's advice.
2. Valuing Jobs and Employees Only After They Leave the Organization
While this seems obvious, it is perhaps one of the great truisms of managers who are frequently beset with a need to replace departing good employees who are relied on as essential contributors. These essential contributors are also easily ignored and overloaded with work. The famous saying "the squeaky wheel gets the grease" applies to employees, with some of the best employees rewarded with more work while other employees consume more time and resources. This issue manifests as a high-performing employee voluntarily departing and the direct manager suddenly realizing the employee had, in fact, been doing the work or two or even three positions.
As a former head of compensation for a publicly traded bank and large privately held real estate firm, I saw this scenario play out many times. Hiring managers would submit a requisition to hire a replacement for a departing employee and, yet, would have two or sometimes three separate requisitions for a single vacancy, effectively doubling or tripling the cost.
If the manager were to realize the organization's risk in advance, they could have pro-actively invested in positive feedback, better salary increases, rewards and recognition, and training for co-workers as well as appointing future successors to enable automatic backfilling of some or all skills. In effect, if managers truly value each employee as if they may leave or be promoted at any time, they would treat the employee better, recognize and reward better, and most importantly, have defined career paths and successors, pushing continual cross-training and career development.
3. Recruiting Based Solely on Experience/Education/Industry
Managers who are overly reliant on experience, education, and industry-relevant knowledge/expertise often ignore three of the strongest predictors of future job success and retention.
The solution is to focus on what potential employees really want, a career, a community, and a cause (see Harvard Business Review Feb 2018, "The Three Things Employees Really Want: Career, Community, Cause" 1);
"Career" includes a defined career path and growth potential, meaning the ability for the employee to grow with the organization over time, assuming good job performance. This also includes cultural and motivational fit meaning a job is intrinsically motivating and that employee gets a level of satisfaction from the job.
"Community" includes feeling respected, cared about, part of a team, and recognized by others, and today increasingly includes job flexibility and autonomy in skilled roles.
"Cause" reflects a sense of purpose that the employee is making a meaningful impact, aligned with an organizational mission, and doing good in addition to doing well. This element is often reflected in employee engagement surveys which ask employees to rate the questions "I am proud to come work for XXX Co." and "I am proud to go to work each day."
4. Increasing the Job Requirements for a Position to Ensure a More Qualified Hire
This is closely related to #3 above. Hiring managers who feel pressured to fill a position and restart work quickly may interpret that if no time is used to train a new hire, then they can get an immediate boost by increasing the requirements of the job. Examples of increasing job requirements include increasing years of experience, increasing the level of required education, adding certificates/certifications, and requiring more industry expertise.
Managers following this path to success unknowingly are likely to doom the new super job to dramatically fewer job candidates, longer time to fill the job, dramatically increased cost, and a plateaued employee with little or no career growth. Such a position becomes a job with less chance of meeting what employees really want (see #3 solution above) and may spend increasing amounts of time as an open position unless hiring managers are actively practicing solutions to #1, #2, and #3 above.
5. Recruiting/Evaluating/Hiring Only for the Current Job
As described, this is short-term thinking at its' worst and, when combined with #4, may make a position not only harder to fill but one without a defined career path since the employee is expected to have plenty of experience. Such positions in less technical job roles are subject to competitor talent cherry-picking via higher pay leaving no successor due.
6. Ignoring the Newly Hired Employee Once Hired
Once an employee is hired, even one who is experienced and qualified still requires considerable time to fully come up to speed in a new organization due to unique aspects of work, decision-making, support systems, tools, and technologies. The largest of the learning curve challenges often is navigating the human capital aspects of work, whom to go to for specific questions, how to work with others in the team, how decisions are made, and what it takes to fit into the organization's culture.
Employees who are hired and ignored can fail regardless of expertise, experience, and competence if rejected by the company culture, co-workers, departments, and leaders. In such situations, it is far easier for the employee, sensing that they have no support from their boss, to simply leave and go on to the next company.
7. Throwing Money at Recruiting Problems
Interestingly, this can be like trying to put out a fire with paper. The problem, like fire, just gets bigger. In the field of compensation, trying to adjust compensation significantly for one individual or position can have the inadvertent effect of creating a large number of unhappy employees and positions all around it since, in most cases, employees end up discovering what other employees make in salary or total compensation, and once a pay disparity is created as an exception for a position it can create internal havoc across larger and larger sections of the workforce.
The solution to #7 is to hire the best talent available that is a reasonable fit with the internal wage structure and the external market, rather than a weak manager simply trying to get an exception to salary and wage policies to make their own individual department more stable and secure. This is another form of sub-optimization that many large companies experience as hiring managers seek to optimize their own situation without regard to the impact on the larger organization.
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