new realities of recruitment and retention

1. New Realities of Recruitment and Retention Wayne F. Cascio IMTA Brussels October 26, 2004

3. Fortune �100 Best� v. Stock MarketAnnualized Return, 1998-2001

4. Fortune �100 Best� v. Stock MarketAnnualized Return, 1998-2001 (cont.)

5. Recruitment: Best Practices Internet and Intranet Employee referrals Improve candidate pool (Before you need them, develop new sourcing contacts and relationships) Hire those who can perform with little training Recruiting: Companies these days are posting jobs on both their intranet and on the internet to attract potential hires. Internet recruiting is becoming increasingly sophisticated with new power searches such as X-Ray, Peelback, Flipping and Domain Search. Companies are focusing more and more on their own career websites (often the second most visited page) to attract candidates. The five core components of a properly constructed site are: 1) rich, relevant content, 2) good navigation, 3) clear delivery of company�s brand image, 4) sense of community, and 5) prompt feedback. Branding your company to attract job candidates can be as important as branding your products. From printed materials to special career Web sites, companies are creating effective recruiting campaigns touting their virtues as employers. Most companies continue to hire for top talent even as they downsize. Many companies rely on employee referrals (e.g. DoubleClick and Charles Schwab boast a 30% employee referral rate). Top 10 Recruiting Tips: Improve Candidate Pool by building it up before you need it�develop relationships with university placement offices, recruiters, and executive search firms; watch online job board and professional association web sites; attend professional associations and conferences. Hire the Sure Thing by selecting candidates who can hit the ground running; they have demonstrated they can do the job in this or a similar industry, in a similar company, with a similar culture, etc. Look First at In-House candidates to provide promotional or lateral opportunities. Be Known as a Great Employer�examine your practices for retention, motivation, accountability, reward, recognition, flexibility in work-life balance, promotion and involvement. Involve Your Employees in the Hiring Process�they can recommend candidates, they can assist in reviewing resumes and helping interview candidates. Recruiting: Companies these days are posting jobs on both their intranet and on the internet to attract potential hires. Internet recruiting is becoming increasingly sophisticated with new power searches such as X-Ray, Peelback, Flipping and Domain Search. Companies are focusing more and more on their own career websites (often the second most visited page) to attract candidates. The five core components of a properly constructed site are: 1) rich, relevant content, 2) good navigation, 3) clear delivery of company�s brand image, 4) sense of community, and 5) prompt feedback. Branding your company to attract job candidates can be as important as branding your products. From printed materials to special career Web sites, companies are creating effective recruiting campaigns touting their virtues as employers. Most companies continue to hire for top talent even as they downsize. Many companies rely on employee referrals (e.g. DoubleClick and Charles Schwab boast a 30% employee referral rate). Top 10 Recruiting Tips: Improve Candidate Pool by building it up before you need it�develop relationships with university placement offices, recruiters, and executive search firms; watch online job board and professional association web sites; attend professional associations and conferences. Hire the Sure Thing by selecting candidates who can hit the ground running; they have demonstrated they can do the job in this or a similar industry, in a similar company, with a similar culture, etc. Look First at In-House candidates to provide promotional or lateral opportunities. Be Known as a Great Employer�examine your practices for retention, motivation, accountability, reward, recognition, flexibility in work-life balance, promotion and involvement. Involve Your Employees in the Hiring Process�they can recommend candidates, they can assist in reviewing resumes and helping interview candidates.

6. Recruitment: Best Practices Identify internal candidate(s) Involve employees in the hiring process (not just HR) Pay better than competition Use benefits to your advantage Write effective ads Simplify the application process Pay Better Than Your Competition. Use Your Benefits to your Advantage�Keep your benefits above industry standard and add new benefits as you can afford them; educate your employees about the cost and value of your benefits. You should provide a standard package that includes medical, dental and retirement benefits and includes one or more of the following: stock, ownership opportunities, profit sharing, and bonuses. Hire the Smartest Person You Can Find�Hire for strengths; do not count too much on training them later on key things you need now. Use your Website for Recruiting�Include a section that explains your values, vision, etc. and employment opportunities. Check References�Call the references and do necessary background checks to ensure you are hiring the best person and minimize legal repercussions. The most popular recruiting methods to date are: internal job postings, employee referrals, newspaper advertisements, college campuses, contract recruiters, employment agencies, job fairs, the Internet, minority and handicap sources, state employment agencies, rehires, part-time employees, and other sources such as billboards, open houses, radio and television. 5 Steps to Finding Better Employees: Write excellent ads to attract top talent Simplify the application process Develop relationships Use a powerful applicant-tracking system Make sure you�ve built a comprehensive solution and aligned business processes with technologyPay Better Than Your Competition. Use Your Benefits to your Advantage�Keep your benefits above industry standard and add new benefits as you can afford them; educate your employees about the cost and value of your benefits. You should provide a standard package that includes medical, dental and retirement benefits and includes one or more of the following: stock, ownership opportunities, profit sharing, and bonuses. Hire the Smartest Person You Can Find�Hire for strengths; do not count too much on training them later on key things you need now. Use your Website for Recruiting�Include a section that explains your values, vision, etc. and employment opportunities. Check References�Call the references and do necessary background checks to ensure you are hiring the best person and minimize legal repercussions. The most popular recruiting methods to date are: internal job postings, employee referrals, newspaper advertisements, college campuses, contract recruiters, employment agencies, job fairs, the Internet, minority and handicap sources, state employment agencies, rehires, part-time employees, and other sources such as billboards, open houses, radio and television. 5 Steps to Finding Better Employees: Write excellent ads to attract top talent Simplify the application process Develop relationships Use a powerful applicant-tracking system Make sure you�ve built a comprehensive solution and aligned business processes with technology

7. Vintage Recruitment Ad Employee needed for dairy farm. Reliable and experienced - $6.00/hr Reliable and inexperienced - $5.00/hr Unreliable and inexperienced - $3.50/hr

8. How Do Leading-Edge Companies Find & Keep Talent? Let�s examine Cisco, The Home Depot, and Mastercard as Examples

9. Cisco Systems Cisco makes routers for the internet + high-end networking gear It targets �passive job seekers� - people who are happy & successful where they are

10. Cisco Systems Held focus groups to learn how ideal recruitment targets: Spend their time (lots of movies) What Web sites they visit (Dilbert zone) How they feel about job hunting (hate it) Recruiters used unusual routes Infiltrated art fairs, micro-brewery festivals, home and garden shows

11. Cisco Systems Unusual use of newspaper help-wanted advertisements Doesn�t list specific job openings Does list its Internet address, directing all job seekers to its Website There it posts hundreds of job openings + lots of information about each one Since prospects often visit the Website from their jobs, Cisco can tell where they work

12. Cisco Systems More focus groups - Question: How can happily-employed people be enticed to interview for a job? Response: �I�d do it if I had a friend who told me he had a better opportunity at Cisco than I have at my present employer� Result: �Make Friends@Cisco� program

13. Cisco Systems To standardize online CVs, Cisco uses Profiler on its Web page Using pull-down menus applicants provide information on education & experience Most log on between 10AM - 3PM Button: �Oh no! My boss is coming! When pressed it fills the screen with, �7 Habits of a Successful Employee� Employment page also includes virtual tour of Cisco�s campus

14. Cisco Systems Diligent measures of recruiting outcomes: Cost per hire = $6,556 v. $10,800 industry average Recruiting staff is steady at 100, while annual number of new hires grew from 2K to 8K Time to fill an open job: 45 days v. 113 days three years ago Tracks where visitors go after leaving Cisco Places employment banner ads on those sites

15. The Home Depot Sells everything for home-improvement projects Automated hiring and promotion to settle a lawsuit 2003 revenues: $64.8B Operates 1707 stores, 300,000 employees

16. The Home Depot Computer kiosks installed in every store Cost: $10MM Applications go into a company-wide network Ensures broad consideration of candidates Applicants take a computer-administered 40-90 min. basic skills test

17. The Home Depot Introduced into 900 stores in 1998 The test helps identify unqualified candidates Managers say they get better candidates to interview This has cut turnover by 11%, increased female and minority managers by 30%

18. The Home Depot Other retailers have automated application processes, but Home Depot uses its system for promotion as well as initial hiring decisions Employees are required to register for jobs they might want in the future Can update profile regularly using kiosks in employee break rooms

19. The Home Depot New system is not negotiable 5 managers have been dismissed for not using the system System is networked, so CVs go to all stores in commuting area

20. MasterCard Assumption: It�s employee�s responsibility to make the referral It�s responsibility of HR + hiring manager to make the decision to hire It�s their fault if a bad hiring decision is made, so why punish the employee? Immediate payment guarantees good will

21. MasterCard Referral program pays for itself 10-fold Reduced recruitment & retention costs Has convinced skeptical managers of the value of the program

22. The Online Recruitment Revolution There are more than 30,000 online job-search sites with millions of listings Can research employers + network 90% of large U. S. employers recruit via Internet

23. Online Recruiting Every Monday Monster.com gets about 4 million hits, as people search for jobs At same time, 000s of corporate recruiters are scouring Monster�s database of 28MM CVs Despite the allure of commercial sites, 60% of all Internet hires come from company sites

24. The Best Company Websites Make it simple for candidates to apply for jobs Provide a wealth of information about the company Leave candidates with a favorable impression

25. The Allure of Company Websites Only about a third as many corporate job openings as were listed on corporate Web sites were posted on the three biggest job boards, Monster.com, HotJobs.com, and Careerbuilder.com

26. The Bad News About Online Search Only small proportion of jobs get filled that way Only 6 percent of hires for management-level jobs currently occur through any Internet site, compared with 61 percent for networking (DBM 2002 study)

27. Effect of Internet Recruiting on Recruitment Budgets For many companies, it has been minimal (SHRM 2002 study) Costs decreased at 37% of companies Costs stayed the same at 46% Costs increased at just 17% of companies

28. Biggest Complaint About Online Recruiting Recruiters spend too much time finding potential candidates Not enough time developing relationships with them + persuading them to take jobs Unless they do the latter, many good applicants will slip away

29. Retention

30. Why Focus on Retention? 55% of employees think about or plan to quit within a year Across all industries, the average time it takes to fill a job has increased to 51 days Companies spend 1.5 to 2.5 times annual salary to replace + retrain a new employee as a result of turnover Overall industry average in U. S.: 20% turnover rate

31. Why Focus on Retention? Only 9% of organizations rate their retention efforts as highly successful Only 35% of US workers truly believe that their performance significantly impacts their pay increases 50% of job satisfaction is determined by the relationship that an employee has with his or her immediate manager

32. Why Focus on Retention? A 2003 Spherion Emerging-Workforce Study: 52% of employees desire to change jobs 75% of employees seek a change within 1 year SHRM (2003) estimates that �by 2012, we will experience a 33% shortfall of degreed candidates�approximately 6 million graduates fewer than expected to fill new jobs and replace retirees.�

33. Turnover Outlook Push is building Security-weary Decreased commitment Pull is coming Job market lagging recovery to date Equalization coming

34. Job Security by Industry

35. Survey Items That Predict Retention 6 items that comprise overall job satisfaction correlated .65 with retention A good place to work Proud to say I work here The culture is a healthy one Morale is good at present People are treated with respect and dignity Things are well-planned and organized

36. What Drives Retention?

37. Linking Retention Practices to the Drivers

38. �It�s important to work at a place where you are connected to a dream� Bill Gates, Fortune, 1-26-04

39. Retention Strategies: Best Practices Be a company people want to work for Get people off to a great start Coach and reward to sustain commitment Add benefits

40. Retention Strategies Sub-strategy #1: Adopt a �give-and-get-back� philosophy. Starbucks offers full benefits, stock options, and a pound of coffee to any employee who works 20 hrs/wk. TD Industries in Dallas uses indexing health insurance premiums to income�the more you make, the more you pay. Sub-strategy #2: Measure what counts and pay for it. A.G. Edwards pays branch managers on the basis of individual branch profits, pays executives less than the competition, seldom rotates managers so they can establish local, long-term relationships, and shuns the practice of using upfront bonuses to lure brokers from the competition. More than 90% of promotions come within the company. Broker turnover rate is less than half the industry average, with a 92% retention rate (80 to 85% is more typical). Sub-strategy #3: Inspire commitment to a clear vision and definite objectives. GE�s Chairman, Jack Welch (named �Manager of the Century� by Fortune Magazine) swore to make every GE business #1 or #2 in its industry when he became CEO in 1980. He proceeded to get into 118 businesses and sold another 71 to the company out of businesses where it held no competitive advantage. 3M encourages visionary leadership among all employees by allowing those who develop new product ideas to take the lead in the development and marketing of those products. This practice has been instrumental in helping the company to produce more than 60,000 products. Sub-strategy #1: Adopt a �give-and-get-back� philosophy. Starbucks offers full benefits, stock options, and a pound of coffee to any employee who works 20 hrs/wk. TD Industries in Dallas uses indexing health insurance premiums to income�the more you make, the more you pay. Sub-strategy #2: Measure what counts and pay for it. A.G. Edwards pays branch managers on the basis of individual branch profits, pays executives less than the competition, seldom rotates managers so they can establish local, long-term relationships, and shuns the practice of using upfront bonuses to lure brokers from the competition. More than 90% of promotions come within the company. Broker turnover rate is less than half the industry average, with a 92% retention rate (80 to 85% is more typical). Sub-strategy #3: Inspire commitment to a clear vision and definite objectives. GE�s Chairman, Jack Welch (named �Manager of the Century� by Fortune Magazine) swore to make every GE business #1 or #2 in its industry when he became CEO in 1980. He proceeded to get into 118 businesses and sold another 71 to the company out of businesses where it held no competitive advantage. 3M encourages visionary leadership among all employees by allowing those who develop new product ideas to take the lead in the development and marketing of those products. This practice has been instrumental in helping the company to produce more than 60,000 products.

41. Retention Strategies It is important to share with employees why their job is important. All jobs have a degree of meaning. It is important to communicate the significance of the job to each new job holder. Aventis, a pharmaceutical maker, has a video with patients describing the benefits gained by using the company�s allergy medication. Harley Davidson puts up large, full-color posters of celebrity �Harley Hog� owners with their bikes so that plant workers are constantly reminded that they play an important role in customer satisfaction. Sub-strategy: Get commitment to a performance agreement. This strategy falls in line with �what counts gets measured� and �what gets measured gets done.� Performance objectives should be: specific, measurable, achievable, results-oriented, and time bound. International Paper redesigned the company�s peformance review process to allow employees to review themselves. Instead of passing judgment on everything their staff members do, managers now reach a mutually agreed-upon performance agreement by actively soliciting employees� ideas. The company has also instituted the practice of �accountability partners� where each employee identifies others they work with who may be contacted for input by their manager at review time. Electro-Mechanical Corporation switched from annual to quarterly reviews to keep employees from being surprised at appraisal time. The company also has employees guide the review process and keep the performance agreement so that they can look at it from time to time to see where they stand. It is important to share with employees why their job is important. All jobs have a degree of meaning. It is important to communicate the significance of the job to each new job holder. Aventis, a pharmaceutical maker, has a video with patients describing the benefits gained by using the company�s allergy medication. Harley Davidson puts up large, full-color posters of celebrity �Harley Hog� owners with their bikes so that plant workers are constantly reminded that they play an important role in customer satisfaction. Sub-strategy: Get commitment to a performance agreement. This strategy falls in line with �what counts gets measured� and �what gets measured gets done.� Performance objectives should be: specific, measurable, achievable, results-oriented, and time bound. International Paper redesigned the company�s peformance review process to allow employees to review themselves. Instead of passing judgment on everything their staff members do, managers now reach a mutually agreed-upon performance agreement by actively soliciting employees� ideas. The company has also instituted the practice of �accountability partners� where each employee identifies others they work with who may be contacted for input by their manager at review time. Electro-Mechanical Corporation switched from annual to quarterly reviews to keep employees from being surprised at appraisal time. The company also has employees guide the review process and keep the performance agreement so that they can look at it from time to time to see where they stand.

42. Retention Strategies 50% of work life satisfaction is determined by the employee�s relationship with his or her manager, so it is important for employees to see a link between their performance and their rewards, as well as keeping employees aligned with team and organizational goals. The front-line manager can make employees feel valued and appreciated. Sub-Strategy #1: Proactively manage the performance agreement. ARCO researchers asked hundreds of their employees to list the characteristics of managers for whom they had done their best work. The top 10 results described Managers who: 1. Took time to listen, 2. Saw the employee as a person, not just an employee, 3. Cared personally about the employee and helped them out if they had personal problems, 4. Set a good example, 5. Let it be known that the employee was capable of being stretched, 6. Encouraged the employee, 7. Never pulled rank but rolled up their sleeves and pitched in, 8. Kept the employee informed of what was going on, 9. Praised the employee for a job well done, 10. Let the employee know in a straightforward manner when the employee didn�t do a job well done Sub-Strategy #2: Recognize Results. Employee recognition is one way, but not the only way to reward good work. Michael LeBoeuf, author of The Greatest Management Principle in the World, offers other suggestions: 1. Money, 2. Recognition, 3. Time off, 4. A piece of the action, 5. Favorite work, 6. Advancement, 7. Increased freedom, 8. Personal growth, 9. Fun, and 10. Prizes.50% of work life satisfaction is determined by the employee�s relationship with his or her manager, so it is important for employees to see a link between their performance and their rewards, as well as keeping employees aligned with team and organizational goals. The front-line manager can make employees feel valued and appreciated. Sub-Strategy #1: Proactively manage the performance agreement. ARCO researchers asked hundreds of their employees to list the characteristics of managers for whom they had done their best work. The top 10 results described Managers who: 1. Took time to listen, 2. Saw the employee as a person, not just an employee, 3. Cared personally about the employee and helped them out if they had personal problems, 4. Set a good example, 5. Let it be known that the employee was capable of being stretched, 6. Encouraged the employee, 7. Never pulled rank but rolled up their sleeves and pitched in, 8. Kept the employee informed of what was going on, 9. Praised the employee for a job well done, 10. Let the employee know in a straightforward manner when the employee didn�t do a job well done Sub-Strategy #2: Recognize Results. Employee recognition is one way, but not the only way to reward good work. Michael LeBoeuf, author of The Greatest Management Principle in the World, offers other suggestions: 1. Money, 2. Recognition, 3. Time off, 4. A piece of the action, 5. Favorite work, 6. Advancement, 7. Increased freedom, 8. Personal growth, 9. Fun, and 10. Prizes.

43. Retention Strategies 4. Add Benefits - Best Practices: Enhance work/life programs Provide opportunities for employees to discuss personal and work-related issues Add flextime (4 10-hour days, or 3 12-hour days) Offer telework opportunities

44. Effectiveness of Retention Practices Exit interviews Ineffective Survey feedback Effective Job enrichment Effective Realistic job previews Effective

45. Summary and Conclusions New Realities of Recruitment/Retention Up and Down Economic Conditions Require Agile Responses Effective Recruitment Enhances Retention Benefits That Matter Improve Recruitment and Retention Branding Your Company as a Great Employer Enhances Recruitment and Retention Less than 10% of jobs are being off-shored Economic recovery�cost conscious business executives Negative selection�easier to sell than positive selection Overweight and obesity�incentives to lose weight�KPMG subsidy for Weight WatchersLess than 10% of jobs are being off-shored Economic recovery�cost conscious business executives Negative selection�easier to sell than positive selection Overweight and obesity�incentives to lose weight�KPMG subsidy for Weight Watchers