Which Are More Valuable: Internally or Externally Sourced Candidates?

The science of recruiting is years behind our peers in other disciplines, but when I see research like this journal article, "Paying More to Get Less: The Effects of External Hiring versus Internal Mobility," I know we’re beginning to catch up.

This study was published in the Administrative Science Quarterly in September 2011 and recently described in detail by Peter Cappelli (my favorite Wharton Professor), in his column for HR Executive magazine, Paying More to Get Less.

It is perhaps the best work I’ve seen in years.

In the original research, the author describes how he dug into the data of one financial services firm to identify and track a number of jobs filled by both internally and externally sourced candidates over a protracted period of time.

He then compared subsequent performance ratings of the incumbents (over years) and found statistically significant evidence that:

• Internal candidates performed better than those hired from the outside.
• External candidates took as long as three years to achieve the performance levels of their internally promoted peers.
• External candidates were paid 15% more on average.
• The performance of individuals who were externally sourced was higher if they were not brought in through search.
• Now this is science I enjoy … not because it is necessarily true beyond the one firm in which the study was done, but because it is transparent, describing methodology openly and in a way that we (dear readers) would be able to improve on and replicate within your own firms.

As someone who is getting tired of tons of unsupported opinions stated as fact and megatons of research by vendor content creators with serious conflicts of interest, this is refreshing. Give me more.

New HRM American Standard: Cost Per Hire

The first [ever] HRM American National Standard, Cost-Per-Hire, was approved last month.

It has evoked consternation among some, yawns among others and considerable scorn from those whose ideas about influence are fixed on individual Klout versus collective might (ok, this last should just evoke a smile).

Seriously, this document represents a watershed agreement among hundreds of professionals making their livelihood from every aspect of recruiting and staffing.

Within the next few years any vendor claiming to offer a means to calculate a C-P-H report will have to answer the question…”Is your methodology in compliance with the American Standard?”

“The goal of this project”, as stated by Lee Webster, SHRM’s point person on this and many other standards poised to change the face of HR, “was to create a credible, comparable and consistent approach to calculating the costs of hiring workers. “

There is no judgment that CPH is inherently better or worse than any other measure of recruiting. That has been argued (and will be argued) incessantly for years without resolution. In our opinion, CPH is merely a means to assess the efficiency (not productivity) of a process…in this case recruiting.

Whatever the arguments for its worth, which are certain to continue, the effort to once and for all define it, led by Jeremy Shapiro, currently a Sr. HR Analyst at Morgan Stanley, is a template for developing agreement on many more of HR’s building blocks lacking 'standard' definition, and, it clears the way to adding to the body of knowledge in staffing by tackling emerging tools in a disciplined fashion that mirrors our colleagues in the 'harder' sciences

The CPH document as Lee stated, “was formed under procedures embraced by the American National Standards Institute and crafted by consensus by HR practitioners, academics, consultants, customers and other stakeholders who represent the American professional view of how this metric should be calculated.”

There is no question in my mind that a series of effective HR and staffing standards that correlate to how we as professionals impact our firm’s bottom line (as well as the lives of the people affected by our businesses) will eventually transform HR.

The only question left is whether you are going to participate. This Linkedin HRTechnologyConference Group discussion on CPH included 74 comments along with dozens of professionals who said “count me in for future standards initiatives”. Still, not everyone should join in. Patience and...more patience is a necessary attribute. For those with a long view, an email to lee.webster@shrm.org about your interest to serve will do.

(Disclosure: I was, until 2012, the initial Task Force Leader for the Staffing and Workforce Planning Task Force out of which this standard was developed. I’ve stepped down to get more involved hands on in one of the Task force's group working on a job description standard led by Dr. Michael Kannisto)

SourceCon: Taking the Temperature of the Staffing Space

Sourcers, especially the hard-core practitioners of this specialty niche, are in demand again suggesting that ‘hard to fill’ openings are getting even harder to fill. The bi-annual ERE meeting known as Sourcecon was held in Atlanta at the downtown Aquarium February 8-10. The niche conference offered plenty of action for everyone interested in tracking, hunting and engaging candidates.

With over 200 attendees it was the largest gathering of its kind to date and, because of its specialized focus, it afforded me with a glimpse of how the best technical minds in our profession are employing the newest staffing tools emerging from every direction.

The presentations ranged from how to dig deeper into social media (how could one not have social media and mobile sessions) to unpublished and private hacks shared by the elite after hours in a local bar- Sourcecon After Dark. (Normally I go to a bar after dinner to have a nightcap so this was definitely a different experience watching geeks gather around laptops and challenge each other to find purple squirrels.)

It wasn’t all technical tactics as several presentations including an excellent talk by Aida La Chaux, from Yahoo, a CareerXroads Colloquium member offered insights into developing, leading and supporting sourcing teams while staying aligned to the business…particularly through times of adversity.

Additionally, three practitioner leaders, Anne Dewys, Chris Havrilla and Theresa Hightower on Elaine Orler’s technology panel also offered critical business insights about how the tools and technologies employed by Sourcers, especially ATSs need to change in the future. And Adam Lawrence’s excellent keynote on sourcing’s role in building trust globally touched a Candidate Experience nerve that needs to be expanded in several directions.

Even technology as old as the office phone became the focus for awhile as Conni LaDouceur enthralled the audience by playing tapes of successful calls into firms she had targeted in order to learn everything she could about the firm’s people- titles, responsibilities, reporting relationships and teams (whose online presence by the way was limited or non-existent.) Sourcing skills clearly aren’t limited to one medium.

Glen Cathey was outstanding as the Master of Ceremonies. He shared his journey and lessons learned as a recruiter, sourcer and leader in the field. A former Sourcecon MC and now with Hodes, Jim Stroud, gave one of the most entertaining talks laced with apps and ideas to start the conference off.

Ending the conference was a session by Eric Jaquith that had the audience begging for more as he shared some of his ‘tricks of the trade’ (that will likely cause a few vendors to shudder). It was also a highlight for me because he first put the focus of his presentation into the context of a winning hand of poker. He bridged the gap from technique to goal by linking the tactical ‘features’ of the tactic to the ‘benefits’ leading to a successful placement strategy. I believe this will be a classic and would love to see his detailed description of a ‘high hand’ put into a whitepaper. It deserves some serious attention.

Kudos to Amybeth Hale for putting this program together and to ERE for streaming and archiving this content so it is all available here.

Effective Recruiting Measures: Tackling Pipelines

A current animated conversation on Jeremy Shapiro's Measuring Human Capital group on Linkedin sparked some thoughts about what is worth measuring short and long-term in recruiting.

I've always been a fan of measuring a short-term hiring process on time, cost and quality but then aligning accountability to the business on only two of the three as a practical measure.

For me, that still leaves a critical need to measure the long-term impact of recruiting i.e 6 months and beyond.

One obvious example of this is college recruiting, assuming the firm has interns and converts some of them to F/T. Is an effective and productive college recruiting program that does not sustain its goal of feeding an internal pipe of leaders 5 and 10 years away worth the investment?

Another aspect however is a little trickier

Imagine a manufacturing supply chain in which you invest all your measures of success- time, cost and quality around the 'finished' product but, since the cost of material has been going down dramatically, you haven't paid attention to how the supply is brought to the 'plant' and how the workers treat the material that isn't 'finished'.

Eventually you look more closely and you discover that :

-the 'cost' of finding new sources is escalating exponentially while you've been taking advantage of the lowered cost of mining the existing but dwindling supplies.

-the material not included in finished products (which are wonderful) isn't 're-worked' but instead is simply dumped out back and is fast becoming a toxic problem.

- In addition there are stores of similar product already in the plant that could be re-purposed with a little rework but no one is measuring the advantage of internal versus external sourcing or what the best balance might be (and, anyway, policy requires we NOT consider internal sourcing until the existing configured product has been used for at least two years in its current state..or it just no longer functions...or it disappears with 'no regret'.)

-The emphasis on cost AND speed AND quality especially in the last 3-4 years has created dissonance among the workers who have managed to master any two but not three dimensions and the pile of (unmeasured) broken product out back that never reaches a quality audit has been getting bigger and bigger.

The typical 'large' firm (if there were such a thing) acquires from numerous sources about 125,000 applications per year which yields around 20,000 finalists and 5,000 hires (I'm in the midst of examining these numbers from 100 companies right now and this is very conservative). Almost nothing is done in any firm with 80% of these applications despite protestations to the contrary by advocates of talent communities etc.etc.

Lots of assumptions however:

- One assumption is that 50% or more of the applications are totally inadequate for any position. How did they get into the system in the first place?

- Few Finalists (qualified, considered, screened and interviewed but not selected) for one job are, in fact, almost never hired for any other position (but then I can't find anyone who has ever measured this).

- Fewer than 5% of firms have ever audited their recruiting process...from the beginning.

- Fewer than 1 in 4 recruiters has EVER applied to a job in their own firm (let alone the ones they are handling).

- Only 40% of staffing leaders have EVER (i.e. once in their lifetime) sat in on one of their team members to audit the crucial interview we assume is a disciplined behavioral based event. And no one dares to audit the hiring managers skill in the selection interviews they conduct. They may be trained but no one asks them to prove they use the training. Good thing we don't apply recruiting protocols to airplane pilots.

Our Cost, Time and Quality measures can be good...for now but the unmeasured broken pipeline will be the death of firms in the future.

What might be the effect on a retail firm's sales to a poorly managed pipeline of candidates that produces 1000 high quality hires in record time and under budget?

For the sake of this hypothetical argument, assume 80% of those 10,000 candidates (who each spent 45 minutes applying) are also customers. What if 20% of the unqualified applicants who never hear back and aren't even thanked for their effort (because the firm forgot to configure the automated ATS response letter and wasn't even sending out its normally rude acknowledgment) stop buying the firm's product? What if 50% of the 5000 finalists who didn't get a job (but who couldn't reach either the hiring manager or the recruiter because they refused to take their calls) not only stopped buying product but each told ALL their friends (120 on average) about their experience and their resolution?

So my contention is that in the 21st century we will need standards for measuring a quality hiring process at every stage not just time, cost and quality against an arbitrary start and stopping point.

Anachronism: Out of Place. Out of Time. Out of Our Mind.

According to Wiki an Anachronism is an inconsistency in a chronological arrangement such as ‘time’. It’s the intentional use of older, often obsolete cultural artifacts which a general public might consider an error.

Rotary Dial Telephones would probably qualify as an anachronism. In 2006, best estimates had the number of these outmoded devices at just under1% of US households. And it’s a good bet that quite a few of the 2 million people still leasing phone company supplied telephones 5 years ago were using the rotary dial- an essentially unchanged technology since it was first distributed in 1919.

My sense of disappointment at these numbers isn’t so much directed at the silliness of the people who continue to pay monthly for a piece of hardware that has long since been paid for and hasn’t been manufactured in decades. No, my incredulity is the phone companies who willingly take old people’s money (young people have never seen the device). You would think they would be better than that.

Another anachronism showed up in my local paper, the Home News Tribune this week (Tuesday, January 10). An article, Legal Ad Mandate Retained, written by a real local reporter, Bob Jordan, one of the few remaining, reported that a bill that would “end requirements for governments to advertise budgets, bids for services and other public records in [print in] newspapers” died.

Government legal print ads running in NJ’s local papers cost taxpayers at least $20 million (and by some estimates more like $70 million) annually. Instead of self-publishing the notices on their own government websites (or having a single smaller print ad ‘point’ to the relevant internet pages), legislators bowed to the obvious lobbies like the NJ Press Association and killed the savings.

One legislator noted this was “good news for an [anachronistic] industry that is hurting” and, added we should “urge all New Jersey residents to read newspapers to keep up on what is going on.”

I certainly don’t blame the newspapers for protecting its last source of income no matter how obsolete its’ reasoning (their failure was the years spent protecting print income when their mission was informing others. Now the information they present is old by comparison and in a form unusable to the majority of consumers). I am incredulous however that Governor Christy hasn’t yet leaped on those who killed the bill since it is my tax they are spending and he has been pretty consistent at cutting it all out…up until now.

Then there is Recruiting. Imagine what would happen if customers, in this day and age, were ignored when they came in the store (unless of course they fit the ideal customer profile but, since they are never told what exactly that was they never knew if they fit it). What if they we’re allowed to wander and check out the merchandise- but none it came with a price, any explanations of the garment’s history or a description of the designer. What if the customer was 100 times more likely to discover that the item they wanted was out of stock or that someone else had been given it and couldn't learn how they could move up in the queue or be told they will never be allowed to purchase.

But at least each time the customer asked if they could ‘buy’ they were thanked for their interest in ‘buying.” Customers were also always invited to come back but, why bother- to join a community of non-buying customers just like themselves?

The only thing these customers can do better than their forebears 100 years ago is to tell a whole lot of people about their experience.

I really can’t get upset at the candidates who, like lemmings, continue to exhibit a failed set of behaviors over and over. I’m less impressed with a profession that maintains its’ just a business decision to ignore candidate needs. It is. It’s a short term business decision. You would think we were better than that.

Referrals in College Admissions Emphasize Selection versus Sourcing

The University equivalent of a recruiter is the college admissions officer who, like their corporate counterpart, has always had a secret weapon… referrals.

There are two differences however:

- Corporations generally rely on Employee referrals while Universities get their help from Alumni.

- Employees help ‘find’ the candidate while Alumni are most often pressed into service to help ‘select’ the candidates in the field.

And it’s this second difference that may be changing according to a Wall Street Journal article last week (1/5/12) by Melissa Korn, B-Schools Send Rejections to Unlikely Group: Alumni.

Apparently at B-Schools like Wharton with its 88,000 avid alumni, concerns have been growing that the alumni may either lack some of the skills and motivation to properly assess the candidates or, may have another agenda for helping the candidate get in without having the necessary qualifications.

Claiming better ‘consistency’ as its goal, Wharton, which conducts as many as 3,500 interviews to admit about 1000 “is sending its six admissions officers to 12 ‘hub’ cities, including San Francisco, Sao Paulo and Singapore to interview applicants…” rather than rely on Alumni in those locations.

Reading between the lines it seems the ‘interviews’ conducted by alumni in other lands may not effectively test the candidate’s ‘language’ skills and, while it may be hard to believe, some candidates have paid ‘stand-ins” to complete the applications for elite schools…even taking their interviews on Skype for them. Really.

Bringing the conversation back to the contribution of referrals in a public or private firm, this article made me realize that we almost never see involvement by the referrer in the screening of the candidate.

What if an employee could simply pass on a ‘referral’ as they normally do to the pool of applicants that recruiters and hiring managers dip into to create a slate, and additionally, opt-in to guarantee the candidate a spot on the slate by screening them (after the employee first completes training and practices using a solid script for the appropriate job-family)?

Worst case the employee sends in a real dud, the recruiter does an ‘exploratory’ interview and the employee is not allowed to opt-in to screen candidates for future positions (and their future referrals are less likely to be considered).

Best case the employee saves the recruiter time in sourcing and screening, hits the bulls-eye and a star is born. The employee’s future referrals whether or not the employee opts in to do the screening have higher visibility.

With technology managing the communication, training, scripts, documentation etc, this seems like an intriguing possibility.

One Prediction and One Prediction Only for 2012

Educational Technologies (broadband video, collaboration tools, e-learning development tools, marketing and distribution tools, apps, etc., etc.) passed a tipping point in 2011 and will change ‘training’ and ‘learning’ business models forever.

Next year is the beginning of the end for current approaches to how we attend conferences; collaborate at seminars; develop ourselves and our colleagues; train our subordinates; support local-tax-based school systems; matriculate at college and, much more.

This Forbes article begins by noting an M.I.T. announcement (December 19, 2011) that it will offer free online courses – not its current decade old OpenCourseWare (OCW) initiative with 2300 courses online anyone could audit but “a new online learning initiative, internally called M.I.T.x, which combines research, technical innovation and new online learning opportunities” and where

Students using the program will be able to communicate with their peers through student-to-student discussions, allowing them an opportunity to ask questions or simply brainstorm with others, while also being able to access online laboratories and self-assessments.

Individuals who complete the program will receive a certificate of completion.

The comments at the end of the article are well worth reading and included many naysayers who IOurHO missed the point that tens of millions of people around the world and currently cut off from ever attending college can, in the future, access…knowledge…vetted by some of the best and brightest minds in the world, and develop and collaborate with a learning network.

Whether or not these new 'learners' have ‘experienced’ a campus or formally been granted a degree is just not relevant from a global, long-term perspective.

Demonstrating what they know, what they can do with what they know (and with those they’ve developed a network to do it with) is what matters.

But that isn’t the whole point. Anyone who has looked at a TED presentation (any TED presentation), but especially the the Khan Academy story or, to bring it closer to home, simply sent a friend a link to an archived ERE Expo session after watching it live has to suspect that something new is in the wings.

Students (of every stripe) can access low cost, just-in-time learning objects that offer interaction with the author, networking & collaboration and ability to demonstrate mastery.

Trainers, educators and learning developers might look at this expertly developed Slideshare list of the Top 100 Learning Tools for 2011 compiled by Jane Hart. How many are you familiar with? How many of these would enhance your content; expand your reach 100 fold; create an interactive and collaborative platform to upgrade your content continuously?

Will geo-location learning events disappear? Not a chance but the cost and the expectations of going to a conference, attending a live seminar, traveling to a training, eventually matriculating at a college will escalate both in cost and expectations (where cost is not the issue).

Sitting in a darkened room in a lecture format in 2012 just won’t cut it at a national conference or anything less than an Ivy league campus (for now) where the content is video-streamed live (or recorded sub rosa by any number of attendees). If you can ‘see’ your fellow students, chat with the instructor and participate in the learning from your home or office, you are going to spend much more time doing that and learning what you need to learn when you need to learn it.

If you do attend in the flesh, you will want intense, face-to-face participative involvement emphasizing networking, hands on activities where highly specified outcomes are promised. This will draw you…but not much else. (Just notice how every conference is already shifting their focus from what goes on in their concurrent sessions to what goes on around them.)