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Making Money V
(January 21, 2003) - We get amazing material from our readers. Today's column is a copy of a note sent by Don Ramer, CEO of RecruitUSA. Don is one of the key survivors of the last couple of years and is more focused on the potential of proactive recruiting than most. Here's what he has to say about Creating Capital Through Cycle Time Reduction:

One of the ways that staffing executives and their recruiters can create capital and achieve alignment with strategic corporate objectives is by reducing average time-to-hire.  "Time-to-hire" is the number of days elapsed from the approval of an employment requisition to the acceptance of an offer of employment by the selected candidate.

  The business case works like this: in a given company where the average return per employee is $200,000 per year, and the average time-to-hire is 180 days, lost productivity costs of $100,000 can be associated with every approved requisition.  If this is established as the organization's baseline performance metric, then every 30-day reduction in average time-to-hire (cycle time) yields a return to the bottom-line of approximately $16,665 per position filled.  So cutting the cycle time in half would bring the return from streamlined employment operations to $50,000 per position filled!

  In an environment where an average of 50 positions are filled each month, a streamlined staffing team could report a revenue contribution of $2,500,000 per month, amounting to $30,000,000 on an annualized basis. In most complex organizations gains like these can be achieved by adjusting the perspective of the stakeholders.  In other words, creating pools of capital through recruiting operations usually requires a change in the ways the players think about the process. 

  While average time-to-hire appears to be a simple measure of operational effectiveness, how it is applied is a key indicator of the quality and depth of thought the staffing executive has devoted to aligning recruiting strategy, tactics and operations with the strategic, tactical, and operational elements of the business. 

  For a window into CEO thinking on the subject read Louis Gerstner's "Who Says Elephants Can't Dance?" in which he chronicles the rollout of the services business at IBM and writes "We had to bet that we could build the recruitment, training, compensation, and HR processes to bring in 1,000 or more people a month‑even though we'd never attempted anything remotely close to that.  In fact in the mid-to late 1990's, when services was consistently growing 20-plus-percent a quarter, we knew we could do even better if we had more people.  But we capped our hiring at about these levels simply because we thought we'd over extend our ability to hire and train qualified people."  He adds, "I've said repeatedly that this is the kind of capability you can't simply acquire.  The bet you're really making is on your own commitment to invest both the years and the capital, then build the experience and discipline it takes to succeed."  In other words, the results don't flow from acquiring a system; they come from tenacious dedication to achieving strategic linkage and tactical alignment in recruiting through continuous improvement in policy, procedure, systems, practices, and programs.

  What we glean from Mr. Gerstner's comments is that from his point of view cycle time in recruitment is not merely an indicator of operational performance.  From at least one CEO's perspective it is a key measurement of the capacity to execute against an aggressive growth strategy.  This linkage is so profound that recruitment performance is an element in defining the upward limits of the potential return from the strategic initiative and all its corresponding investments.  We believe senior executives will universally hold Mr. Gerstner's view of recruiting (as a strategic differentiator) when corporate America begins to hear the ticking of the Attrition Bomb.

  How much capital did the recruiters at IBM create through their performance in executing against the CEO's vision?  How much reengineering would be required for your staffing team to hire an additional 1,000 people per month from a standing start?  Do your hiring processes allow for the scale that may be required to exploit a new market opportunity?

  So how does one go about reducing cycle time in recruiting? 

  • Be procedurally proactive.  This could include something as simple as approving requisitions earlier in order to match the current cycle time.  If it takes an average of 90 days to fill positions given your current practices, start by opening the hiring process 104 days prior to the optimal start date (to allow time for the candidate to give notice).  While you will feel the workload crunch during the first phase, your hiring managers will be delighted with your "just-in-time" performance against hiring requirements.  Since you'll be accelerating cash flow for the company, you might frame an argument for contract recruiting support to get you through the crunch.

  • Tweak the process.  If you currently advertise through newspapers as your first line of attack for recruiting, use Internet media by posting jobs to the web before you resort to the higher-cost, more time-intensive, traditional media.  If you currently use a paper-based resume scanning and applicant tracking system, require that your recruiters give priority attention to email from candidates rather than waiting for resumes from the scanning shop.  These are quick fixes that can buy you some time (and some make money for the company) while you prepare for the hard work.

The real pay-off comes from mobilizing all the resources of the company and creating pools of qualified candidates to meet the anticipated needs of the organization.  This requires alignment of the strategic, tactical and operating objectives of the staffing group with those of the business.  The company's policies, procedures, systems, practices and programs must be made congruent with the strategic, tactical and operating objectives established by the leadership if they are to produce optimal results. 

Focus on the key vectors of organizational impact as the change from reactive to proactive hiring unfolds.  Employ rigorous benchmarking of quality, time, cost, efficiency, value, synergy and corporate culture in staffing operations against best practices (and competitors).  Making these kind of organizational changes will consume significant internal resources (time, money, thought and cooperation).  What makes these changes desirable is the strategic leverage effective electronic recruiting can give modern corporations.

When one reads Mr. Gerstner, there can be no doubt about the straight-line correspondence between effective recruiting and capital creation in the minds of senior executives who create capital through people everyday.  When you stop to think about this business at the most basic level, the reason for-profit enterprises hire people is to make money for the company.  When generalized in this way, the linkage between capital creation and staffing becomes transparent.  Recruiting is about finding the people who make money for our companies.  Therefore money is made when recruiting is done well and money is lost when recruiting is done inefficiently.

Internet media and technology can deliver the capacity Staffing Executives need to reduce cycle time and accelerate cash flow.  Making the most of these tools and building a business case senior management will understand and financially support requires process leaders and product champions.  Innovative vendors can provide technology and thought leadership but realization of the potential of these contributions is entrusted to visionary customers who individually effect change in their organizations and thereby shape the evolving marketplace

- John Sumser

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