It's Talent, Stupid!

Cost Per Hire - The Death Knell of Outsourcing

Firstly, thanks. Had an amazing response to my last post on Innovation and it wasn’t the usual heavy handed legal letters (you know who you are).  In fact my heart was warmed by the number of recruiters who clearly are thinking their world needs to change, bring it on! Lot of recruiters ask me how do i deal with RPO’s?  The likes of AMS, Lorien, Ochre House and Hyphen.  Got to say I am at a loss with this one, I would love to be able to say that outsourcing is misunderstood and there are some amazing relationships to be had but you know I can’t.  I personally refused to outsource the Nortel Networks in-house team and resisted the outsource of the Energis team, until told to.  When I did, I can tell you right now our Cost Per Hire (CPH went down), so why the regret? Simple, the quality of hire went South faster than the cost.

That was slightly unfair, the biggest issue is  and was not caused by the RPO but by accountants and the simplicity of the key internal resourcing Key Performance Indicator (KPI), that of Cost Per Hire (CPH). 

I have not found one in-house or outsource team whose key KPI is quality of hire! Cost per hire, yes; time to hire, yes; interviews : offer, yes but never quality of hire.  The first three are absolutely no measures of quality.

We are frequently asked to review recruitment processes within organisations, we are never, ever asked to reduce cost of hire, our remit is always to increase the quality.  In the end, as with most things, people will pay more for quality.

A classic example is an organisation whose outsourced partner had managed to decrease the Cost Per Hire (CPH) to £1,500 for their 250+ sales people they hired every year.  On the face of it an astounding result, actually if you know anything about recruitment, it’s not astounding at all, it’s unbelievable, no really, totally unbelievable.

The simple fact is that hiring the right talent for your business cannot be measured in CPH, it has to be total employee cost.  In this example over 50% of the hires left in the first year, at a cost to the business of £1,000,000 in wasted training costs and ultimately further £millions in lost revenue, oh plus you have to hire them all again at £1,500 per hire. In this example the CPH was driving the wrong behaviour, as it always does, and the business suffered.

So my recommendation? Do away with CPH as a KPI for an in-house or outsourced team, it’s irrelevant. Still don’t believe me?

When I took over the resourcing team at Nortel Networks my budget was $10,000 per hire. Yep a reasonable £5,000 at the time, with 3,500 hires to make, my £20M budget was a sight to behold...however it simply wasn’t true.  The CPH was actually $65,000, let me rephrase that, the total cost impact of hiring for the business was $65,000 per hire, caused by mishires, leading to wasted management time, cost of missed revenue, impact on team morale, leavers etc. So in-house or outsource, that’s one for your conscience but whatever you do, don’t use Cost Per Hire as your KPI, it’ll doom the whole thing to failure.

PS: I did in 9 months get the total cost impact of hiring at Nortel down to $10,000 per hire but that’s another story...

This blog was originally produced as a 'Blog with Bite' for Recruiter magazine.

Recruiters - What will become of us?

I recently read a blog which talked about how social media and networking sites were going to be the death of the recruiter. I disagree, if anything I believe the role of recruiter has become ever more important, but has also changed.

The argument in this blog was that the internet has enabled accessibility to candidates that would never have been possible before the internet revolution. Therefore by posting a few ads and doing some poking around on LinkedIn HR team can now source candidates directly and cut out the middle man.

This argument is sound if you accept that a recruiter is merely a way of sourcing or aggregating candidates. However, here is where I (predictably) disagree. I believe previously organisations used recruiters because they had lots of cards in their rolodex (I'm a bit young to have seen one, but I have been told about them) and could provide them with access to their networks. Now that organisations can directly source candidates fairly successfully the question becomes, as quite rightly asked in the blog I read, what is the recruiter for?

The answer (in my humble opinion) is about selection rather than sourcing. Recruiters need to become experts in selecting candidates, they need to be better than the client at predicting which candidate will succeed in each role in each company. Sounds ridiculous?

It shouldn't, the recruitment processes of most companies (CV based interview) is about 25% accurate (according to research conducted by the CIPD). The job of a recruiter is not to find the candidates but to help the client select the right person for their business. The British Psychological Society has shown that by using the right psychometric tools and behavioural interview techniques hiring accuracy can be raised above 75%.

Therefore if you're a recruiter and you want to stay ahead of the game you need to up skill big time. Recruitment consultants of the future will not be the salesman of old flogging candidates to anyone who'll have them; they will be a mix of occupational psychologists, management consultants and project managers.

If you are an organisation currently using recruitment consultants, you may want to have a chat with them about what tools and expertise they are using to select candidates. If the answer is 'I've been doing this for years, I know a good one when I spot one' then I suggest you go looking for a new one!

Anyway back to my original point, I don't believe the increasingly easy access to candidates the internet offer will be the death of all recruiters, however, as Darwin so aptly figured out years ago, it will kill off those those who don't adapt and quick! As Rupert Murdoch put it "The world is changing. Big will not beat small anymore. It will be the fast beating the slow."

Rowan

Are Recruitment Companies Dead Men Walking?

Short blog, as writing on my iPhone, more of a series of questions actually...

What do recruitment companies need to look like in the future?

% based fees are pants, bear no relation to work done or value of the hire...can we carve these up differently?

Chemistry's value is our
candidate relationships and our ability to predict future performance, is charging for placements the most relevant way of generating revenue? Is there another way?

That's what I'm thinking about, I'll blog some ideas on answers shortly.

Would love to hear from anyone else...

Thanks

R

Playing to our strengths - No. 2 in sales recruitment here we come!

Blimey, this running your own business lark is a tumultuous affair...over the last 5 years we have evolved as a business, continuously striving to meet ever changing customer needs.

Part of this process is looking at yourself closely and deciding what you are really good at? Why do people value you? And where do you truly delight customers (in our case candidates and clients)...well after a bit of self evaluation and questioning of our clients we have made the decision that:

1. We are bloody good at hiring sales people, seriously good...we are the only recruitment company who truly knows what "great" sales people look like, we have 5 years of research on the subject...on this we know our onions.
2. Clients like LexisNexis, C&W, Yell, The CarbonNeutral Company and Novartis value us because we know what "great" sales people look like.
3. We know we truly delight our candidates and clients when we focus on them and their needs and deliver against an expectation, by focusing purely on sales we give ourselves the time to focus on delivering a breakthrough level of service...lovely :-)

There is a market reason too.  The way we see it Michael Page Sales are the biggest player in sales recruitment (draw your own conclusion on them) and then below this is, well nothing...BMS, CD Sales Recruitment and some medium sized regional players possibly.  But no-one who is 75% accurate in predicting the future sales performance of hires.  We see huge opportunity to the be the 2nd largest player by volume to MP Sales and the No.1 by quality (we now what position we value more)...now there's a mission :-)

So that's it,Chemistry Recruitment are the only recruitment company who are over 75% accurate in predicting the future sales performance of new sales hires.  Our hiring methodology is proven to reduce the first year attrition in new sales hires (always the biggest cost in sales force opex) and increase the sales performance (always the biggest lost opportunity for top line growth).

Don't know about you but i am beyond excited!

R

Recruitment is recruitment – it doesn’t change?

So here is the line – we will find the best job for you, or if you are a client, we will find the best candidate for you. It is all the same. It is recruitment.

Or is it the same? Let me tell you a story.

Once upon a time there was a person who knew an industry very well, had experience of that industry and had actually done the jobs he was recruiting. He had a high level of knowledge about roles, companies and good understanding of the needs of people within a recruitment process.

Or so he thought.

Then he saw the difference between a “standard” recruitment process and a good one. The difference was startling. How could his previous processes have been so shoddy and inaccurate, with so little data and information to back them up? This new and shiny process had in-depth understandings of the people, the business, and delivered real quality in terms of service. And ultimately, it really did provide the right person in the right job within the right business. That person stayed within that role and has progressed within the business that is absolutely right for them.

This is the story of a converted Recruitment Consultant – me!

What this shows is the difference between a normal recruitment agency and a good quality one. I have been at Chemistry now for 3 months since joining from a leading search & selection firm. I have seen a difference here like I never thought I could. Honesty, openness, quality – a recruitment company that people really like and recruitment consultants that actually care about people and not just revenue and selling advertising all of the time.

And there is the difference. Caring. Caring about the people we deal with and what the outcome is. I have been astounded by the difference between Chemistry and the rest of the recruitment industry. Other recruitment companies are starting to take notice of how we do things and try to emulate it, and our customers are telling us what a refreshing change we are within the industry. People are realising that they don’t have to accept low standards, or bad service, or inaccuracy. An aggressive sales culture will breed aggressive sales people and they are not the people who should be managing recruitment processes.

An important part to add here. Other recruitment companies are very successful businesses and have a business model that works brilliantly for them from a commercial point of view. However, the model does not take into account the people most important to it – customers. Somewhere along the line, something was missed and people were forgotten. People who are looking to find a new job, and people who are looking to recruit great people.

So to the company. Chemistry has been a revelation to me in terms of working. A truly great environment with superb people and a set of values and attitudes that are brilliant. We care, we want this business to be successful, and that success depends on how well we deliver to our customers – and we intend to deliver very well.

A Footnote

Mark, who wrote this blog, did name the company he worked for but hey they are "big and powerful" and we are just the small kid in their playground .  So they, in a very nice, not in a threatening way at all (much) legal letter asked us to remove their name from the blog...which as you can see we have.  A victory for the big guy ;-)

Who doesn't hate recruitment agencies?

So my first post, got to be a bit controversial or at the least interesting, so here goes.

My industry stinks...no seriously name another industry that impacts on an individuals life more than recruitment?  Midwifery possibly, undertaker maybe, parents/wife/husband/partner well clearly that depends :-). To most people the single biggest factor on how good they feel, how successful they are, how prosperous they are, the car they drive, the house they own (if these things are important), the person they settle down with is impacted/determined by the job(s) they get.  So in that context current recruitment practice is tantamount to a 2 minute test drive in a £100,000 car or a 2 minute visit to a new home you will buy.  The people facilitating the recruitment transaction are frequently ill-trained (if at all), incentivised on placement (not the quality of it) and have absolutely no qualification to do the job bar possibly being naive or vunerable enough to accept it...it's rubbish. Name another industry with that burden of responsibility that has no regulation or even governing body.

How do I know this, well two things I have worked for those agencies and been at the crappy end of their service as a client.  In addition Chemistry Recruitment (http://chemistryrecruitment.com) carried out a proposition project with one of the coolest companies on the block, Dave (http://dave.biz). The findings were staggering we (recruitment consultants) were hated and the service offering ripped apart, really, we are, and i quote, "a necessary evil" - FTSE 100 CEO.  Nice, that's what I wanted to be when i grew up :-)

Of course it's partly the recruitment consultants clients fault because despite the fact that the service to the client is shoddy (unreturned calls, inappropriate CVs, irrelevant and ill-informed candidates presented to interview being the less provocative complaints) and the service to candidates is well just nonsense, seriously laughable nothing has been done by the buying community to stop it, where's the "push back"?  It needs to change but i believe the customer needs to lead the change...the recruiters won't, Christ they are making too much easy money doing it the current way, where's the incentive!

In the meantime if you are a hiring manager to get the best out of your recruitment supplier, know the animal you are dealing with:

1. They play closest to the fee, if you are not paying a competitive rate you will not get to to see the best candidates, fact!  It may save a few pennies up front screwing the supplier down on their fee but you will lose more by having to hire from the least relevant bunch of candidates.
2. They work to the principal of least effort.  If you are easy to deal with, have a quick interview process, provide speedy feedback (note I said speedy not detailed) and don't ask them to fill in reports or interview notes you will get a better level of service.
3. If you don't like the recruitment consultant you are dealing with, get him/her changed.  On the whole recruitment companies are rubbish, however every now and again an individual might be brilliant.  Of course they will leave and the relationship with the agency will die a death but hey that's just what happens, right?

Follow these simple rules and you will get the best of a bad lot.

So where's the good news?

Well there are a couple of good 'uns out there:

Martin Noakes at Christian Timbers (only search practice i know who audit and publish their placement stats) (http://www.ctnet.com/ctnet/)

Curly Moloney at Bright Young Things (http://www.byt.com)

and of course if you really want to do it properly contact Chemistry Recruitment (http://chemistryrecruitment.com), I know a cheap plug :-).

Cheers

R