Cost of Hire – What’s the real

Calculation?
What do Agencies have to Offer?

Presented by Kevin Wheeler

2004 RCSA Conference
Melbourne, Australia
September 10th 2004
 What are the Talent Market
Gorillas?
„ Technology has allowed the number of
applicants to go UP.
„ Lack of precise criteria and poor
screening has allowed the number of
qualified applicant to go DOWN.

© Global Learning Resources, Inc., 2004 2

 „ Therefore, quality is LESS THAN
EXPECTED.
„ Costs are GREATER THAN PERCEIVED
VALUE.
„ Big concerns over in-sourcing recruiting
vs. outsourcing.

© Global Learning Resources, Inc., 2004 3

 Good People are Good for
Business

© Global Learning Resources, Inc., 2004 4

 Value of Quality
„ A modest improvement in talent can double
the market capitalization of a software
company. -McKinsey

„ All that separates you from your competition

are the skills, knowledge, commitment, and
abilities of the people who work for you.
Companies that manage people right will
outperform companies that don’t by 30 to 40
percent.
© Global Learning Resources, Inc., 2004 5
 Yet. . .
„ Only about 30% measure quality, up
slightly from last year. –Staffing.org
„ The vast majority still put their faith in
the front end--a rigorous selection
process--to ensure that they get a
"quality" employee.

Source: Workforce Magazine & Staffing.org

© Global Learning Resources, Inc., 2004 6

 What is “Quality” of Hire?
„ No standard definition
„ For many, subjective definitions suffice:
„ Perceived “fit” into organization
„ Match between hiring manager and hire
„ Likeableness
„ Social and educational parallels

© Global Learning Resources, Inc., 2004 7

 What is “Quality” of Hire?
„ For others there are more objective
definitions:
„ Time to productive output
„ Amount produced
„ Dollars earned/sold
„ Measurable skills/capabilities
„ Customer satisfaction
„ Return business

© Global Learning Resources, Inc., 2004 8

 What is a “Quality” Hire?
„ Anyone who produces at or above
standards consistently, fits into the
organization, and has career potential.

© Global Learning Resources, Inc., 2004 9

 Agencies should be seen as the
best source of the highest quality
candidates!

© Global Learning Resources, Inc., 2004 10

How Are Search Firms Perceived
by Corporate Clients?

© Global Learning Resources, Inc., 2004 11

 Recent Study in Australia
„ Australian study of ARAs and ESFs
„ Alan Fish and Robert Macklin of Charles
Sturt University
„ Surveyed 109 HR professionals –
members of Australian Human
Resources Institute (AHRI)
„ Asked to rate agencies on 31 factors

© Global Learning Resources, Inc., 2004 12

 Discrepancy Between Importance
and Perceived Quality Received
1. Having wide access to the market

2. Understanding the client organization’s needs

3. Quality of the candidate database

4. Communication skills

5. Understanding the vacancy

SOURCE: Perceptions of executive search and advertised recruitment attributes and service quality, Fish &
Macklin, Personnel Review,Vol 33, No 1, 2004

© Global Learning Resources, Inc., 2004 13

 Agency Searches
„ Slower (> 30 days)
„ Certainly not cheaper (>3-6x more)
„ Quality is not necessarily perceived as
better
„ Retention rates vary and probably are
no better than employees from other
sources

© Global Learning Resources, Inc., 2004 14

Your Value Proposition Has to Be. . .
„ Access to better candidates;
„ Knowledge of the talent marketplace;
„ Delivery of more qualified candidates;
„ Delivery of the highest quality candidates;
„ In an acceptable time frame;
„ Fewer “bad” hires;
„ At an acceptable value/price ratio.

© Global Learning Resources, Inc., 2004 15

 Rising Corporate Concerns
„ Key objectives of many organizations:
„ Reduce use of outside agencies
„ Reduce number of outside agencies
„ Increase proprietary web site usage
„ Increase use of internal employee pools
„ Increase use of referral programs
„ Hire recruiters with agency backgrounds

© Global Learning Resources, Inc., 2004 16

 Agency Hurdles
„ Job analysis dependent on hiring authority
„ No access to internal talent
„ No methodology or incentive to recommend
internal talent
„ Limited understanding of business strategy or
future needs
„ No proof of competitive advantage
„ Higher costs without higher quality

© Global Learning Resources, Inc., 2004 17

Three Challenges for Agencies

© Global Learning Resources, Inc., 2004 18

 Challenges One
„ Client Management
„ Establish long-lasting, on-going
relationships with employers
„ Circumvent HR – get to hiring authority
„ Issues:
„ Competition
„ Limited candidate pool
„ Limited time horizon
„ Lack of in-depth insight into employer needs
„ No control over job interview
„ Difficult access to hiring authorities

© Global Learning Resources, Inc., 2004 19

 Challenge Two
„ Candidate Management
„ Convince candidates to consider an
employer
„ Issues:
„ Always some degree of manipulation from all parties
„ Have to “sell” candidates on jobs/movement and

employer.
„ Candidates are trying to “manage” the recruiter.

© Global Learning Resources, Inc., 2004 20

 Challenge Three
„ Impression Management
„ Creating how candidates regard them
„ Creating how employers regard them
„ Coaching candidates
„ Coaching hiring managers

© Global Learning Resources, Inc., 2004 21

 What’s Going On?
„ Agency process hasn’t really changed in
50 years.
„ Value proposition based on developing
and nurturing personal relationships,
building client loyalty, physical
proximity, generating a large candidate
pool.
„ Value derived from volume and cost.

© Global Learning Resources, Inc., 2004 22

 The Changing Perspective
Static, One-time Dynamic, on-going
Requirements: Requirements:
-Logistics -Flexible workforce scenarios
-Static workforce planning -Interactive communications
-Sourcing capability
Traditional Emerging

Reactive Proactive
Focus on open positions Anticipate needs

-Running ads -Building a talent pool

-Posting to job boards -Developing relationships
-Searching databases -Development focus
-Competitive intelligence
Value: volume / cost Value: quality / speed

© Global Learning Resources, Inc., 2004 23

It is the foremost task—and
responsibility— of our generation to re-
imagine our enterprises, private and
public.
—Tom Peters, Re-imagine!

© Global Learning Resources, Inc., 2004 24

 Some Ways to Improve Your
Value and Candidate Quality
1. Sophisticate the supply chain - Supply
market information
2. Partner with your clients - Learn more
about their talent needs
3. Streamline your processes - Integrate
new technologies
4. Develop metrics you live up to – Provide
a guarantee

© Global Learning Resources, Inc., 2004 25

 1. Sophisticate the Supply Chain
„ Value comes from market knowledge,
reach, total customer service and
communication.
„ Traditional talent supply chain is no
longer linear nor does it add enough
value.
Candidates Agency Company

© Global Learning Resources, Inc., 2004 26

 New Supply Chain
Company’s
Internal
Customers
Candidates Passive
Candidates

Firm Active
Candidates
Others. . .

Agencies

The supply chain is complex, global and intertwined with

development.
© Global Learning Resources, Inc., 2004 27
 Implications
„ Offering market knowledge sharing tools, skill
building programs and social networking
services can add immense value.
„ Find a way to take the internal supply chain
into account – even to get paid to place
internal talent.
„ Educate customers and candidates and
expand supply types.

© Global Learning Resources, Inc., 2004 28

 2. Partner with your Clients
„ Develop formal partnership plans with your
clients.
„ Spend time to learn organizations’ strategic
plans. Know where they have talent pain.
„ Offer to be a part of talent discussions based
on your superior talent market knowledge.
„ Develop private employment exchanges.
„ Leverage technology.

© Global Learning Resources, Inc., 2004 29

 Agency Focus Trend Lines
No of Recruitment Agencies

One off Full Outsourced

Placement Solution

Sophistication of Service
Source: Human Capital management Solutions Pty Ltd
© Global Learning Resources, Inc., 2004 30
 3. Streamline Your Processes
„ Technology drives all change.
„ Streamlined fulfillment systems
(automated tracking, offer and
screening).
„ Online delivery systems (talent pools).
„ Tools to communicate personally and
deeply with candidates and employers
worldwide instantly.
© Global Learning Resources, Inc., 2004 31
 4. Develop Metrics
„ Provide customers with detailed
measures.
„ Partner with clients to get access to
facts, numbers.
„ Help them measure quality, speed,
cost.

© Global Learning Resources, Inc., 2004 32

 Historical Agency Roles

Brand Source Screen Assess Sell

Offer Orient Retain Plan

© Global Learning Resources, Inc., 2004 33

 Future Agency Roles

Brand Source Screen Assess Sell

Offer Orient Retain Plan

© Global Learning Resources, Inc., 2004 34

 Surviving/Thriving Agencies
„ Offer Employers:
„ Low cost solutions
„ Higher quantitative quality
„ Convenience – One-stop shopping
„ Flexibility
„ Broad, global reach

© Global Learning Resources, Inc., 2004 35

 Surviving/Thriving Agencies
„ Offer Candidates:
„ Negotiation
„ Choice
„ Education/Guidance
„ Relationship

© Global Learning Resources, Inc., 2004 36

 There is Great Opportunity
„ E-Recruiting is a US$7.1 billion dollar
business.
„ Candidates and employers are more
technology savvy.
„ Talent supplies will be constrained for
the next 30 years.

© Global Learning Resources, Inc., 2004 37

 What is the Cost of Hire?
„ Your ability to provide differentiated
services.
„ Your capability to offer a talent solution
to a business need.
„ Your foresight in understanding the
emerging talent marketplace.
„ Your reliability in delivering a quality
candidate.

© Global Learning Resources, Inc., 2004 38

 The greatest danger
for most of us
is not that our aim is
too high
and we miss it,
but that it is
too low
and we reach it.

Michelangelo
© Global Learning Resources, Inc., 2004 39
Thank You for Listening!

Kevin Wheeler
www.glresources.com
kwheeler@glresources.com