Recruiting Orientation Guide

Roadmaps are a new form of content to help you navigate key areas of people management. Each Roadmap includes an Orientation Guide that gives a high-level overview of the subject as well as articles and other resources that provide more detailed directions on how to find your way to success. This Roadmap focuses on recruiting wisely in today’s tough job market. The Orientation Guide below will get you started, and we invite you to use the rest of the Roadmap by visiting workforce.com/roadmaps.

The days of putting a help-wanted ad in the local paper to fill a job opening are so 20 years ago.

The past two decades have seen a sea change in how enterprises find and recruit employees. Fortune 1000 corporations, startups and all of the companies in between are acting more strategically to identify, court and hire new talent, and at the same time, automate and outsource a bigger piece of the process.

There’s good reason companies invest so much in recruiting. Talent acquisition has a greater impact on revenue growth than any other people management function—more than onboarding, talent management or performance management and employee rewards, according to an August study by Boston Consulting Group and the World Federation of People Management Associations.

Recruiting’s revolution has seen the rise of job boards and career websites for advertising positions, increasingly more sophisticated systems for handling online applications, and more attention being paid to the natural ties between recruiting and workforce planning on the front end and onboarding at the back. As the world of work goes social and mobile, social recruiting on LinkedIn and other popular networks has taken the industry by storm.

With the gap widening between the skills workers have and what companies say they need, many enterprises are thinking differently about how—and who—they hire. As companies need to stay competitive despite the vagaries of an increasingly global economy, they’re thinking more in terms of filling roles than filling jobs, and using more contingent workers to be quicker to respond to changing business demands. And while they may still retain inside recruiters, they’re just as likely to seek help from recruitment process outsourcers, employee referrals or “talent communities” of ex-employees or retirees.

This orientation guide, part of Workforce‘s Roadmaps series on navigating key areas of people management, provides a high-level overview of talent acquisition today. It covers what recruiting is, the different ways companies find candidates and hire employees, and what you should consider if you’re setting up a recruiting program or changing your company’s hiring practices.

Philosophies: When it comes to filling their workforce needs, companies can follow divergent paths.

Companies regrouping after a merger or bankruptcy or other change may seek people who can help transform their corporate culture.

Another hiring philosophy centers on seeking high-potential candidates. This school of thought, captured in business and management expert Jim Collins’ concept of “getting the right people on the bus,” promotes snagging promising individuals and training them or letting them learn on the job.

A third approach is hiring for targeted skills. Companies don’t have time or resources to train new hires, this thinking goes, especially since employees today are less loyal than in the past. But while this mindset is dominant today, companies that have adopted it are running into some problems. Despite continued high unemployment, companies in some industries say they can’t fill all open positions because too few applicants have the right qualifications for the work. The counterperspective to that, set out in the 2012 book Why Good People Can’t Get Jobs from Wharton Center for Human Resources director Peter Capelli, is that companies are their own biggest barrier to hiring, keeping positions open to save money, not offering adequate wages or being too demanding about qualifications.

In any event, the “skills gap” is forcing more companies to hire high-potential individuals and train them, and to rely more heavily on networking to uncover passive candidates with desired skills.

Account for a changing workforce: Changing workforce dynamics means companies are becoming simultaneously more and less concerned with candidates’ qualifications. As more companies operate as flat organizations with a little middle management and a lot of collaboration, they’re involving more team members in vetting candidates, which can stretch out the recruiting process. At the same time, employees aren’t staying in positions as long as they did in years past, putting pressure on recruiters to make hiring more automated and transactional. “While the consequences of a bad hire are still great, they’re not as bad as they were 30 or 40 years ago” when people stayed with a company for life, says Dan Finnigan, chief executive of social recruiting software maker Jobvite Inc.

Fill positions internally: Recruiting isn’t just about bringing new blood into an organization. In many cases, talent acquisition happens in-house, with existing employees groomed for promotion or trained to fill new positions tied to emerging products or businesses. Such an approach is supported by recent academic research. Employees who are promoted or move laterally perform better in the first two years than external hires despite the fact that they typically make less and have less experience and education, according to a study from the University of Pennsylvania published in the Administration Science Quarterly in December 2011 . When companies fill positions internally, it can push recruiting needs into an organization’s lower ranks, as replacements will be needed to pick up work done by employees who’ve been promoted or made lateral moves.

Recruiting Costs

Create a recruiting budget: Ideally, a company’s human resources or recruiting staff works with hiring managers and other departments to assess current or upcoming workforce needs, the types of jobs to be filled and the desired time frame for filling them. Such information determines the methods recruiters use to find candidates, and that drives the amount that will be spent on recruiting and setting the budget.

Calculate cost per hire: A large part of building a recruiting budget is calculating cost per hire, or CPH, the dollar value of the resources needed to staff one open position. Companies have long used CPH not just for budget purposes but to gauge the effectiveness of their staffing efforts. Until recently, there was little consensus on the best way to calculate CPH. That changed when the Society for Human Resource Management and other industry leaders published the Cost-Per-Hire American National Standard earlier this year. The standard establishes algorithms for measuring CPH within an organization compared with competitors or other outside organizations, and relative to a new hire’s first-year salary, commonly called the recruiting cost ratio.

Planning

Historically, companies planned hiring needs and recruiting budgets from one to three years out. The Great Recession and the economic uncertainty that followed made forecasting business needs and long-term hiring more difficult. As a result, identifying who to hire has become a just-in-time process, with staffing industry experts agreeing it’s become more common for companies to limit workforce planning to six months or a year in advance.

Understanding a company’s hiring philosophy, identifying positions to be filled and creating a budget and planning time frame are just the beginning. From there, recruiters must map out how they’ll fill jobs, including choosing the best workers for openings as well as what internal or external means and technology they’ll use.

Labor Force: Today when companies want to expand their workforce, they’ve got several options. To increase flexibility and tap scarce skills, companies are turning increasingly to contingent workers—temps, contractors, freelancers or other workers not classified as employees. Some companies also hire on a temp-to-permanent basis to test-drive how someone will fit into the position or the culture before bringing them on as an employee. But the bulk of the U.S. labor force continues to consist of full-time employees, and most companies’ recruiting efforts continue to focus on bringing full-time employees into an organization.

Internal and External Recruiting Help

It’s a recruiting industry rule of thumb that three criteria determine how to fill open positions: type of job or jobs to be filled, time frame for filling them and budget.

Given those parameters, companies may use some or all of the following:

• Internal recruiters: The ranks of internal recruiters have shrunk as companies have downsized HR departments. But internal recruiters are still used to staff jobs deemed too important to outsource to an outside recruiter, whether those positions are for salespeople, scientists or customer service agents. Companies also rely on internal recruiters when they’re doing too few hires a year to justify paying an outside firm.
• Sourcers: In the pre-Internet days, sourcers compiled lists of prospective candidates from print directories, expensive databases and contacts from years in the business. Software and social networks radically altered that. Today’s sourcers are social media specialists who use the Internet, join online groups, and cull online résumés to generate qualified leads.
• External recruiters: Companies employ headhunters and specialty recruiters when they’re hiring for high-level executives, positions that require hard-to-find skills, or when they’re staffing more jobs than their internal staff can handle in the required time period.
• Recruitment process outsourcing: Some companies outsource some or all of their hiring to an outside agency that generally works under a long-term contract to staff multiple types of positions. The same bad economy that forced many companies to downsize internal HR operations boosted RPO providers, not just in the United States but worldwide. The trend is one reason RPO revenue jumped 25 percent in 2011.

Recruiting Technology

Companies mapping out their recruiting strategy have an overwhelming array of technologies to choose from. If they’re startups or redoing a system from scratch, it’s an opportunity to evaluate whether to integrate it into a larger HR management system or companywide enterprise resource planning software. It’s also an opportunity to evaluate systems sold as a service, also called cloud-based software, because it’s used and information is stored via the Internet, which is where the bulk of new recruiting technology is headed.

Software used for talent acquisition includes:

• Applicant tracking systems: The granddaddy of recruiting software, these programs are used to create, screen and manage online applications, parse résumés for job-related keywords, maintain applicant profiles, schedule interviews, handle communications between recruiters and hiring managers, and they also synch with other HR information systems. Newer ATS software plugs into popular social networks.
• Talent management suites: The multifunction people management software includes or works with Applicant tracking system programs. Talent management suites also include modules for performance reviews, compensation tracking, succession planning, online learning and learning management, goal setting and workforce analytics.

Assessments: Assessment software includes everything from job-applicant ability screenings to personality or behavior tests companies give high-level executives to determine their leadership style.

Social and Mobile Recruiting

Social media has revolutionized how companies source and recruit employees. Instead of flipping through Rolodexes, recruiters generate leads by looking up people’s profiles on social networks such as LinkedIn. Recruiters also use social media to vet applicants. Software developers now offer apps built on top of Facebook and Twitter that recruiters and job seekers use, including programs such as BeKnown, BranchOut and Glassdoor.

The popularity of social recruiting goes hand in hand with widespread use of mobile devices by job seekers, employees and HR staff. “Mobile is the hardware for social recruiting software,” say Gerry Crispin, co-founder of consulting firm CareerXroads. “It’s not a question of if but of how fast you’re going to adopt mobile-enabled practices.”

Macy’s Inc. was an early adopter of mobile recruiting. Executive recruiting director Owen Williams fills 80 store manager positions a year. There’s no way he could do it all without his BlackBerry and a LinkedIn app, which he uses everywhere, including on the walk to and from his car in the company parking lot. “It’s amazing what work I can get done in that walk,” he told Workforce in a 2011 interview.

Once recruiters have the foundation and framework in place, they can put the finishing touches on their hiring program: promoting open positions, using assessments, interviews and other means to screen applicants and candidates, doing background checks, and finally, making an offer and finalizing a hire.

Promoting Open Positions

Recruiting has gone digital. Newspaper help-wanted advertising, once a recruiting mainstay, has decreased dramatically in the past 20 years. In its place, companies market and merchandise job openings like products, using online campaigns and also tapping into internal and external networks.

Here are some of the ways recruiters can spread the word about job openings:

• Career websites or microsites: Twenty years after companies first started posting open positions online, even the smallest have job listings or career microsites on their websites. But there’s room for improvement: less than half do a “good” or “really, really good” job of conveying their employment brand to job candidates, according to a 2012 job seeker survey from Crispin’s consulting firm, CareerXroads.
• Employee referrals: Referrals account for close to a third of new hires and produce employees that research shows perform better and stay longer. That’s causing more companies to incorporate referrals into their recruiting efforts, including using software that lets employees share job openings with their social networks.
• Job boards: Though not as popular as they once were, job boards still account for 20.1 percent of new hires, according to CareerXroads. Job boards aren’t as homogenous as they once were either, with the latest iteration including aggregators such as SimplyHired and Indeed that pull from other job sites, and niche boards such as Dice that cover specific industries or locations. To get listings in front of as many eyeballs as possible, job board services such as Monster and CareerBuilder license their listings to social networks and other websites.
• Social media: As social recruiting becomes widespread, it has become common for recruiters to post openings as status updates on LinkedIn or Twitter, with links back to full descriptions on the company’s career site. Companies can also use services such as Glassdoor and YouTube to post video job descriptions, workplace walkthroughs and employee reviews of what their own hiring interviews were like.
• Recruiters: Companies still use headhunters, but blind calls are on the way out. Headhunters need to be more transparent about opportunities because job seekers—who can go online and find out everything they want to know about a company in a matter of minutes—demand it.
• College recruiting: Companies hit by the bad economy might not do as much on-campus recruiting as they once did, but they still may need to maintain a presence. Today, that can include using apps to stay in touch with potential recruits. Eighty percent of new hires for National Instruments Corp.’s U.S. operations are new college graduates, so for the Austin maker of computerized measurement tools creating a career app is a no brainer. “Students have quite a few companies to choose from, and we want to make sure when they want to apply to us they can do it quickly,” recruiting manager Roxanne Green says in this 2010 Workforce story.
• Internal postings: Internal social networks such as Yammer and Rypple that companies are adopting for employee collaboration also can be used to post job openings, a supplement to advertising open positions in company newsletters and elsewhere.
• Talent communities: Because employee referrals have proven so crucial to finding qualified candidates, companies are taking things a step further and reaching out to ex-employees and others who could become useful. That includes setting up real-world and online communities to connect with retirees, interns, college students, vendors and suppliers.

Screening Candidates

Once a job’s listed, the work of sifting through résumés for candidates and putting them through additional screenings begins. Today, recruiting software can be used to “read” applications and parse high-potential prospects from less qualified applicants. Companies also can choose to use additional screenings. Here’s a breakdown of some options:

• Pre-hiring assessments: Companies can administer a comprehensive assessment or test of a standard list of questions to help determine a candidate’s traits, experience and values. Recruiters may choose to incorporate pre-hiring assessments into online applications if they’re hiring for a large number of openings or anticipate being inundated with applications.
• Personality and behavioral tests: Recruiters can administer Myers Briggs and other common personality or behavior tests to learn more about a candidate’s world view or to assess how they would handle specific work-related situations.
• Executive assessments: If companies are hiring C-level executives or other upper management, they can run candidates through additional extensive evaluations of their leadership skills. Consultants such as Brad Smart, an industrial psychologist and proponent of the “top grading” theory of hiring “A” players to produce “A” companies, recommends that companies use interviews to dig deep into a candidate’s prior work experience plus thorough reference check-ins with former bosses for the best possible picture of their strengths and weaknesses.

Interviews

The face-to-face interview remains a hiring mainstay. But today, companies can choose from many approaches. Some may still limit interviews to recruiters and hiring managers. Others opt to include up to a room’s worth of current employees, especially if the person being hired will work on a project basis with multiple work teams.

Some companies put candidates through a battery of situational questions or workplace simulations to gauge their ability to problem solve in real time. Others ask “trick” questions that have nothing to do with the job to see how candidates think on the fly, emulating Google Inc.’s now famous interview process.

Alternatives to standard hiring methods: Pushed by the economy, competition and changing technology, recruiters also are moving beyond face-to-face interviews and other traditional hiring practices. More conduct video interviews or stage competitions to identify top prospects. Innovative tech companies run coding contests called “hackathons” or monitor open-source-code-sharing sites to evaluate software developers’ skills.

These days, even companies that hire mostly full-time employees may not bring them on-site for interviews or to work. The rise of the virtual workplace means recruiters may look for potential employees with characteristics or skills that would make them successful working from a remote location or telecommuting.

BrightScope Inc. co-founder and CEO Mike Alfred embraces alternative hiring methods, including social recruiting. Alfred hired the San Diego-based 401(k) ratings service company’s sales manager after inviting him on a run up a mountain. “I could tell he was hurting, but at the end he asked, ‘What’s next?’ ” Alfred says. “At the time we hired him we didn’t have a sales organization and he had no formal sales experience. Now he’s one of the best in the industry. There were a couple of things I learned about him through this nontraditional interview process that led me to believe he would be exceptional. If I had relied on a consensus-driven approach, he wouldn’t have made the cut.”

Compliance: HR staff can use reference checks and background checks to vet a promising candidate before extending an offer. But companies need to be careful not to use background checks to discriminate. Depending on the state, companies may also need to run potential employees through the federal E-Verify system for checking their work eligibility. Companies that work as government contractors also must comply with additional federal requirements for affirmative action and other programs. Any external recruiters that government contractors use are held to the same standards, so companies that outsource part or all of their talent acquisition to third parties needs to educate them on what they can and cannot do.

With the rise of social recruiting, companies have run into legal trouble by asking job candidates for passwords to their Facebook or Twitter accounts during background checks or other screenings.

Companies also can run afoul of federal labor laws that govern things such as minimum-wage rules, exemptions and overtime if they rely on independent contractors or other contingent workers but treat them like employees.

Choosing a candidate: Once a company’s recruiting or other staff has completed assessments and interviews, background checks and reference checks, it’s time to identify a candidate and make an offer. Exactly who’s making the hiring decision depends on the organization. At some, a hiring manager or management team makes the decision with guidance from a recruiter or HR staff. Organizations with less middle management and more collaboration across departments or functions may hire by consensus, with multiple individuals having a say, especially if whoever’s being brought onboard will work with a number of teams or departments.

Once everyone agrees on a candidate, they need to hammer out the details of the offer. At some companies, a compensation specialist or other HR staffer assists in this to ensure the package being offered matches the candidate’s qualifications and skills and also that it’s in line with the company’s compensation program. When the time comes, recruiting experts suggest making an oral offer first, hashing out any sticking points, and then following up with contracts or other paperwork.

Recruiting’s responsibilities end once a candidate becomes an employee. For a successful transition and onboarding, companies need to make sure the realities of the new employee’s job match what was presented to them during the recruiting process.

With business moving at the speed of a text message, it’s not good enough to review a recruiting plan once a year—or even once a month. To keep pace with changing business goals, hiring trends and technologies, recruiters need to analyze and revise their hiring process on a regular basis. “In the old days we called it total quality improvement,” Jobvite’s Finnigan says. “It’s never anything you perfect. It’s ongoing improvement.”

Measure key variables: Some key variables recruiters can use to gauge the effectiveness of their work include:

• Number of applications for open positions and ratio of hires to applications
• Time to hire, or how quickly positions are filled
• Percentage of positions filled through various recruiting channels
• Cost per hire
• Quality of hire, by retention rate, performance or other measures
• Retention rates of new hires by recruiting channel

In addition to those milestones, recruiters, HR staff and other business units should review on a less regular basis – once or twice a year – the effects changing business needs have on the number and types of positions to be filled. Recruiters also can use this data analysis to determine what the characteristics of great performers in the organization are and then apply that to how they hire.

Review against the competition: A recruiting review should take into account not just how staffing stacks up against internal benchmarks but how a company compares to competitors or other businesses in its industry. CareerBuilder spells it out in its Ultimate Recruitment Guide e-book: “If you’re only examining your metrics internally and not benchmarking against the industry, how do you know how you compare to your competitors for talent in terms of recruitment success? Where do you really measure up?”

Now that we’ve set down the basics, we’ve organized a Roadmap Review into three parts to help you plan and execute your recruiting program. Here is a summary of the Plan, Do and Review of hiring employees:

Plan:

• Determine the company’s recruiting philosophy, which are the core principles driving hiring efforts.
• Use HR analytics and other workforce planning tools to identify jobs that need to be filled.
• Map out a recruiting budget, planning and review process.

Do:

• Decide if hiring employees or contingent workers meets workforce needs.
• Engage internal staff or retain third parties to assist with recruiting efforts.
• Use internal and external programs to promote open positions.
• Run prospective candidates through approved assessments.
• Make job offers and finalize hiring.

Review:

• Analyze key variables on an ongoing basis.
• Analyze long-term variables at least once a year.
• Use recruiting data for workforce planning.

Beyond HR: The New Science of Human Capital: This 2007 book from University of Southern California management professor John Boudreau and co-author Peter Ramstad on using recruiting and talent management to gain a competitive edge.

CareerBuilder’s Ultimate Recruitment Guide: This e-book guide on hiring basics, from the online job services company.

Contingent Workforce Management: The Next-Generation Guidebook to Managing the Modern Contingent Workforce Umbrella: May 2012 paid report from industry researcher Aberdeen Group on how companies can best build and maintain temporary labor forces.

CareerXroads: Staffing industry consulting firm that sponsors a yearly mystery job seeker survey and Candes.org awards to help companies improve their online recruiting efforts.

Cost Per Hire American National Standard: Algorithm and related benchmarks for calculating cost of staffing open positions in organizations, published by the American National Standards Institute Inc. and Society for Human Resource Management in spring 2012.

Good to Great: Why Some Companies Make the Leap … and Others Don’t: Business and management expert Jim Collins’ seminal work on what makes some companies standout, with details on such concepts as Level 5 Leadership and First Who (get the right people on the bus, then figure out where to drive it).

mRecruitingcamp blog: News on mobile recruiting, and home of mRecruitingcamp conference, which is held every September.

“Paying More to Get Less: The Effects of External Hiring versus Internal Mobility“: Study by University of Pennsylvania professor Matthew Bidwell published in the Administrative Science Quarterly in December 2011 on value of internal promotions vs. external hires.

The Recruiter’s Lounge: Sourcing industry expert Jim Stroud’s blog on all things related to recruiting.

Why Good People Can’t Get Jobs: Wharton Center for Human Resources director Peter Cappelli’s June 2012 book on the gap between job openings, skills companies are looking for, and what it will take for the country to fill the gap.