Hiring Freeze vs Redundancy vs Paycut/Reduce hours?

How you answer this goes to the heart of your business strategy. Because even in these tough times of downsizing, your business strategy is inextricably linked to your people strategy.

In this post I'll look at the hiring freeze. 

The theory: Stopping hiring doesn't mean that people stop people leaving, so you let natural attrition do the work for you until you reach your desired resourcing level. 

The upside: You don't have to make a decision - its made for you. Also, it is in many ways more humane, as you are not forcing people out of paid work. It's also good for keeping the company out of the press and away from criticism.

The downside: You don't control who stays and who goes.  Darwinian principals tell us that the strongest (best) will be those who can leave and find opportunities elsewhere, while the weakest (not so good) will have little chance of finding other work in a weak employment market.  So you end up with both a smaller and qualitiatively inferior workforce in a tougher economic environment.

Also, you can't control how quickly people will leave so you won't know how long it will take you to reach your ideal reduced state.

What is the strategy behind this course of action?

1. A strategy to do the right thing by your loyal workers and keep all of those who want to stay employed, in a job (no matter the associated business consequences); or

2. A strategy that accepts the organisation will get weaker in the short-term, and maybe taking the quality of your workforce more seriously again in the future when times pick up; or

3. No strategy/avoiding making a decision/hoping for the best.

Imposing a hiring freeze as a short-term measure (ie 1-3 months) is a legitimate course of action that will not have far-reaching impacts for an organisation.

Any longer than that, and an organisation is by default or design embarking on a "people" strategy that will impact on the business strategy. 

This will be reflected in financial performance as well as reputation (both positive, and negative).

HR has such a strategic role to play no matter the market conditions.

Make sure your business imperitives drive your HR decisions, or your HR decisions (or lack of) will drive your business performance for you.

Interrupting my latest theme of how to get around the skills crisis in Engineering and Construction, just wanted to mention that "5 Secrets of Talent" has been accepted as a proposed "manifesto" on the website: Change This.

Change This is awesome - you can spend hours looking through some very well thought out ideas and arguments on any number of topics - really it's just a great way for new ideas and new thinking about current problems to find their way to the light of day quickly - while they are still relevant! The power of the web for sharing new ideas and insights really knows no bounds.

Anyway, I've had over 2500 downloads of "5 Secrets" since I released it a couple of months ago, and would consider it a huge favour if those of you who read it and liked it would vote for it, so it gets published as a full manifesto. Its simple and quick - no registration, just go to the page and click on "5 Secrets of Talent" and your vote is registered.

While you are at it, you're bound to find something amongst their published manifestos that you like, as well known thought-leaders like Seth Godin and David Meerman Scott are amongst the authors there.

Thanks!

What if senior management in a firm suspended decades of tradition for just a month or so, and decided to ignore the dollars and find out what it would take to smash their competitors in the talent market?  I mean just pin the ears back and throw open the door to whatever it would take to REALLY address the issue?

I am betting a few things would happen.

Firstly, if they got some ORIGINAL thinkers with strong professional-level recruitment backgrounds on the job, they would come up with some EXCELLENT solutions that would work (hopefully I'll be starting the ball rolling with some blog posts to come).

Secondly, having had their minds opened, they would abondon the idea that "good enough" is good enough.  They would toss the idea of benchmarking themselves against competitors, and start imagining the possibilities of implementing these ideas that would change the recruitment game in their market.

Thirdly, they just might be tempted by the dilectible prospect of jumping the opposition,and get the proposals fully costed.

Finally, someone, somewhere, (a Managing Partner, CEO, even HRD?) would find the guts to get behind the strategy, sell it to investors and management, and argue for it as a "company-maker" style of investment that will propel them to the forefront of the sector. 

A move that would change the game...wow what a prospect!

PS...this firm would also prove in the medium term that this investment is nothing compared to the returns realised, and that in fact it drastically reduces other costs associated with poor recruitment strategies like undisciplined agency spending, high turnover amongst "new hires", and worst of all - chronically unfilled vacancies.

Well, firstly, recruitment would become the most important department in the company (like R&D at Sony or Google is).

There would probably be lots of public statements by the CEO about how much money goes into the recruitment department each year - except that the more they invested, the more impressed the stock analysts would be!

The recruitment department would get frequent visits from the top execs just to see "how it's all going" and make sure all the recruiters are happy and productive.

The best recruiters in the country would flock to work for this company.

Before long - this company would be getting an unfair share of the available talent in the sector.

OK, now back to reality...why doesn't this happen?

Engineering and construction firms are a collection of skilled people applying their knowledge to solve client problems.

That's it.

The more skills that the firm can hire, and the greater numbers they can hire them in, the more capacity they have to solve client problems.

That means more work, and more revenue.

If a pharma/software/electronics company distinguishes itself through product innovation, then it makes sense to treat the R&D function as its most critical business function.

If an engineering/construction firm distinguishes itself through the number of skilled people that it can apply to a client project, then doesn't it make sense to treat recruitment as its most critical function?

This won't solve the skills crisis for the whole sector, but the first company to change their thinking and start acting this way will win.  Because no-one is doing it yet.

I am there as part of the Colliers International case study on the journey they've taken to build a unique, knowledge-sharing and remarkably consistent culture with a strong pipeline of professionals wanting to join.    My part is to talk about how my company helped them harness all of the great things about the company to sell their story to potential employees and achieve 20% organic headcount growth per annum in a mature business and a mature industry.

Anyway - to my central point... We're tightening up the presentation at the moment and the flow of the various speakers, when the CEO remarked:

"I think I've got to be honest about this: what we've done comes out like a perfect strategic plan when we look back at it, but it really just came about by fixing one thing at a time. It was a collision of a business goal, a workplace strategy and a people strategy that we didn't ignore and hope it would go away. We were lucky to tackle it in the right order and get this fabulous result.  But I can't say that we planned it this way at all."

I think this is the best message that anyone could get out of their remarkable transformation story - just begin, and keep doing it.  It will start to snowball and make each new intitiative that much more effective. 

The other thing they did was let the business need drive each initiative, rather than do something because it was considered HR best practice. And each time they did it, they saw a positive business impact that emboldened them to take the next step.

I saw a quote somewhere from the guy who runs SouthWest Airlines who summed it up this way:

"Yes we have a strategic plan.  Its called doing things."

We all know what needs to be done, but very few of us actually do it.  And that includes companies.

I've got involved and answered questions before (where I thought I had something relevant to share), and it was kind of fun and I had some nice interactions with the "asker" of the question.

But on Friday night, just before leaving for home, I thought I'd ask a question myself and see what happened. 

Well, I stuffed up a little bit because I forgot to put a question mark so really what I wrote was just an assertion!  I was a little embarrassed but it was posted and gone and I couldn't change it so I just wondered if people would think I was wierd and ignore it.

Monday morning came around, and low and behold I had 7 messages in my inbox from kind people taking pity on me and trying to answer my (sort of) question.

Actually, their answers were brilliant, expansive, sincere and represented a wide range of experience and enlightened thinking.

I am certainly richer for having asked the question and have of course connected with a number of those who answered the question, and we have continued our dialogue.

One of the answers that stood out was a lady who clarified my equation:

#1 organisations = #1 recruiters

Her name is Reut Schwartz-Hebron , who runs an organisation called the KindExcellence Institute, and she respectfully (and quite rightly) suggested to me that:

#1 organisations = tons of friends, referrals and piles of top talent looking to join

Wow!  Thanks Reut, you've just helped me more than you know.

I am also going to make sure I ask more questions in the future. Those wonderful folks that took pity on me and answered have already enriched my perspective on why talent matters and how you get your unfair share of it.

And I am just getting more and more blown away with how small the world becomes with web 2.0 tools like LinkedIn.

After months of work I've taken the scary step of publishing an E-Book...

"5 Secrets of Talent - what the world's best don't want you to know about recruitment and talent management".

(It's a very ambitious title isn't it?)

I really have one aim in writing it - to change the mindset of "C"-level executives towards recruitment.

I hope it gives some insight into the CENTRAL importance of doing it well, and opens their eyes to the enormous OPPORTUNITIES for them in being the best recruiting organisation they can be.

It's available for download for FREE on The Talent Fanatic , or by visiting my company's website, rpo group .

If you like it (or hate it!) - let me know because I'd love the feedback. 

And please forward it on to anyone you think would benefit from the message.

Thankyou.

Some good speakers with some great stories from around the Asia-Pac region, and some clever and interesting people to chat with between times from a host of countries and industries. 

The Big Topic of many of our conversations around the break out areas and at the cocktail party was the need to banish "HR Speak".

Well, not banish it, but at least only use it when there is no perfectly good words in plain English that can say the same thing.

I then had a fellow delegate boil it down:

Some people speak plain English because there really is nothing of substance that they know about HR.

Others speak in HR speak because they know quite a bit about HR and not very much about anything else.

And then there are those who have mastery of their technical discipline to the point where they know all of the detail, and know why it matters in the big picture, and so can make themselves perfectly understood to any audience.

I wish I had thought of that...

I think it also stimulates some thought on some of the things a company should consider when it comes to how they attract, select and integrate talent into their organisation.

So here goes:

"To answer this question I have to tell you a little bit about my background. As you might know I have been working in the industry for well over a decade and was one of the founding Directors of a ‘traditional’ recruitment agency – GOW - in 2000.

Although this was – and still is – a very successful company I made a conscious decision in 2005 to do something different.

Let’s face it.

These days everyone has a really tough time finding people quickly and cost effectively and many companies don’t want to, or simply can’t, build the necessary internal infrastructure to tackle the problem.

This means up to now they were forced to rely more and more on traditional recruitment agencies which – although they are an important part of the recruitment puzzle - simply can’t be the answer to solving the growing people problems businesses are facing today.

This made me think. I knew companies were looking for alternatives and I felt that there must be a third way to attraction and retention – and that’s how RPO Group was born.

So the best way to describe what we really do is tell you what we used to do, why we changed it, and how we do it today.

Everyone knows that traditional recruitment agencies are only paid when you hire one of their candidates. They are experts at sourcing and selling.

This transactional approach unfortunately brings a couple of inherent problems with it.

The market dictates the rules and under current conditions agencies simply have no incentive to run a thorough search and screening process on a contingency basis but rather have every incentive to "sell" a candidate to their clients, regardless of their qualifications.

Being brutal about it, a traditional agency that checks references on the candidate could lose a $20,000 placement fee for reporting to you that a reference was less than stellar.

Or it could simply "give up" and stop working on one of your openings if they feel it is too hard to fill and they won't easily earn a placement fee.

These are just commercial decisions that an agency needs to make for its own sake and so are inherent problems which, deep down, the client knows are present.

So I felt a more holistic approach to optimising the talent within a business that still made commercial sense would be a winner.

I settled on a performance-related, but non-transactional commercial model. Being remunerated for the quality of the process and the whole outcome, and not only for getting a candidate offered and signed.  There is no real commercial reason for an agency to change their business model to deliver that, which is why I needed to make the big decision to sell my agency business and start from scratch if I really believed in this concept.

A pure recruitment outsourcing company with no agency legacy has no financial incentive to hire candidates from a particular source and therefore can guarantee full, fair and complete disclosure on all candidates. They are free to bring their considerable sourcing abilities to the advantage of the client by maximising the number of "direct" applicants who make it onto shortlists and ultimately are hired.

By definition, they work on a position until it is filled.  They can be 100% focused on meeting the client’s long term staffing goals. They sit in their client's office and feel their pain.

All of RPO Group's clients has a team of consultants embedded within their business, living and breathing their culture everyday.

And unlike a traditional agency placing a person onsite, eg. master vendor, our involvement does not create conflicts of interest. For example, we don’t own a central, proprietary candidate database that services other clients – every talent pool we build is owned exclusively by the particular client we build it for.

Being independent, we have no incentive to give work to any particular agency.  This means that agencies see us as a fair business partner to work with and know we don't have a hidden agenda.

Finally, we only ever partner with one client per sector. This allows us to proactively source from competitors without fear or favour."

Well there you have it.  That's been my personal journey and a big part of my philosophy on how companies should choose which 3rd parties to partner with to deliver their recruitment outcomes.

What struck me, or actually gradually dawned on me as the trip went on, was the calibre of people performing what I assume to be low-paid, non-career roles in the service industry.  Obviously, you had your teenagers and disinterested, slow-moving mutes that you come to expect in a ticket booth or working a ride or cleaning, for example. 

But to a surprising degree, I had my car doors opened at the hotel curbside by well-presented and articulate men in their 30's and 40's with families (yes - I spoke to them to find out); had my tables bussed by friendly, worldly ladies and gentlemen in their 50's and 60's; and was served in retail by professional-looking men and women who are in the prime years of their working lives. 

I say this not to denigrate those roles although I know that is how it is coming across.  In fact, as a customer, it was nothing but a positive experience for me.

It is just that these people are clearly being used in economic capacities that are not making the most of their abilities, and they must be earning considerably less money for their efforts than if they were otherwise employed.

Which begs the question - is there still a war for talent in the US?  I have just come across a timely piece on this very question in the Recruiters Lounge blog by Karen Mattonen.

Certainly this situation contrasts strongly with my experiences in Australia and Asia, where there is no question of a sustained skills shortage and fierce talent war.

Would like to know if anyone has any further insight on this?

"What if you started acting like the VP of Talent? Understanding that talent is hard to find and not obvious to manage. The VP of Talent would have to reorganize the department and do things differently all day long (small example: talent shouldn't have to fill out reams of forms and argue with the insurance company... talent is too busy for that... talent has people to help with that.)"

This is exactly how high achievers in business think about things.  They know where the value lies and are RUTHLESS about palming off anything else that may fall in their job description and distract them from the high-value/high visibility projects.

Why doesn't HR do this?  Well, partly because they rarely have the confidence and ruthlessness to behave like this, and partly because administration, while individually a low value-add part of the function, is vital to the cultural "hygeine" of a company.

So, how to reconcile this?  Take a look at an enlightened finance function.

The CFO deals with the board and senior execs, flagging risks to the business operations and managing them.  She/he is also responsible for the hygene issues of lodging accounts, regulatory returns, paying bills and collecting payments, but this is not where the business sees her/him earning his bread and butter.

So, finance gets broken into operational and strategic functions.  Operations functions are managed by someone who is focused on deadlines, efficiency, accuracy, and customer service. A Finance Manager or Financial Controller.

Strategic Finance is headed up by a Commercial Manager or a Head of Forecasting and Planning who switches the lights on for business management so they can see whats coming up ahead and can adjust their business strategy accordingly.

HR should absolutely do the same.  A Head of Talent plans, forecasts and creates strategies to fulfill the future talent needs of the business - essentially ensuring the best people with the right skills are making it into the business in significant numbers to achieve the business mission and then managing the internal movement of that talent to where it is best employed.

A Head of HR Operations looks after the administrative, tactical and risk avoidance functions like IR, contracts, the HR business partners, and L&D.

Then the HR Director is free to switch the headlights on for management at board or exec level with future risks, opportunities and strategies.

If you're a CEO, high level exec or HR Director - what do you think?

I don't follow soccer closely, but I was captivated by an article I found on FIFA.com about the Dutch club, Ajax.

Titled "Grooming Talent the Ajax Way", the piece describes their famed ability to consistently produce home-grown superstars fit for the world stage.  While clubs in the English, Spanish and Italian leagues spend huge sums on importing superstars from all over the planet, teams in the smaller Dutch League have to be smarter with how they spend their recruitment dollars.

So Ajax, the most famous of the Dutch clubs, is clear ab out where it's priorities lie - identifying and grooming their own talent.  While they may not be able to afford to buy established superstars, they certainly spare no expense on their own talent identification and development through their "Academy".

In recruitment terms, they follow a philosophy of "build, not buy".

And the investment brings results.  According to the article, the club won the UEFA Champions League in 1995 (for those of us that don't know, that involves all of the top clubs of each of the European Leagues) with 9 of the 11 starters having come through their Academy system.  In the big money world of European soccer, that's almost unbelievable.  Their academy has produced some of the world's all-time greats over the past 30 years.

I love the clarity with which they describe what they do. 

"Our aim is to bring 2 players from the academy through to the first team each year."  Simple. Clear. Precise.  And they do it!

Their guiding principle in recruitment?  "T.I.P.S....technique, insight, personality, speed."  Even I can follow that!

Where do they look? "We don't travel more than 60km outside Amsterdam.  We believe in our own culture."  My God -no worldwide network of scouts?

This is an organisation with recruitment and development in its bones. It has a belief that this is where it derives its success.  It has clear aims, simple philosophies, and then goes out and does it.

In the business world, the dilemmas are the same.  Build or buy? 

Very few organisations want to invest in a "build" strategy, and so ultimately join the merry go round of poaching "established" performers from elsewhere. 

Their recruitment strategy is, by default, a "buy" strategy.  That is very different from a company that proactively pursues a "buy" strategy - that is a perfectly legitimate way to go if you do it with purpose. 

Not having a recruitment strategy that can be articulated consigns an organisation to mediocrity. 

In the soccer story above, you could contrast Ajax's strategy with that of Manchester United or Chelsea or Arsenal.  They clearly have a "buy" strategy, and it works for them.  It works for them BECAUSE they are clear about it, in the same way Ajax is clear about it's strategy.

What is your company's philosophy regarding talent? 

Do they identify and develop their own, and have established and well regarded business processes for making this happen? 

Do they splash out and get the top performers from rivals and pay top dollar for them? 

Or do they do neither?  Don't consistently build their own, have to look outside to recruit, but end up paying too much for average performers? 

That's the curse of not having a strategy - you don't like your results, and it still costs you alot.

#1 Organisations = #1 Recruiters.

You can go about recruitment in any number of ways depending on the strengths and weaknesses of your company.  No strategy is inherently better than another, but some strategies will suit particular businesses better than others.

The most important point is that to achieve your potential as an organisation, you must have a recruitment strategy / philosophy.

Once you have one, the whole organisation can be energised to fulfill it.

Anyway, there's two interesting points in it.

First of all, it acknowledges the importance of performance management and talent for the modern organisation.

Secondly, it says "Executives are most likely to call for CFO's (to)...oversee administrative functions like HR". (emphasis is mine)

The juxtaposition of those two lines of thought are brilliant in their irony.  Acknowledging the importance of talent to the organisation, and labeling HR as an administrative task to be "overseen" by someone competent - like a CFO.

Well there's no point crying over spilt milk. This line of reasoning exists because of one thing: business doesn't see HR as being strategic enough / responsible enough / impactful enough to handle the "talent" imperative.  So they hive off the operational aspects of HR and consign it to the "administrative" dustbin, and muddle along or get in consultants to help them with raising the Talent bar.

So how do the best HR departments claim their rightful seat at the table to take charge of the Talent question?

Well, by doing just that - taking charge of it.

With that in mind, what are some immediate practical steps that can be taken to start this process? 

1. Measure the activities of HR staff, and turn those into practical, reportable metrics.  Simple, I know, and it's all been said before, but I have very rarely seen it actually done in practice.  For example - preparing employment contracts?  OK, well we're going to measure them for accuracy, with 100% being the benchmark. We're going to measure them for timeliness, with 24 hours to dispatch being the benchmark.  Get the picture?

2. Link the activities to their business objective (eg, risk minimisation, avoiding legal costs, increasing sales performance, reducing billing errors) using BUSINESS LANGUAGE not HR jargon.  After all, if they don't have a business objective - why are we doing them? Again, many CEOs I deal with end up speaking to outside advisors because they don't get this type of insight from their HR Directors, which is a crying shame.  They want to have a business conversation about how this function will help them achieve more revenue, minimise cost, or enhance the corporate reputation in the short and long term.  Keep it that simple.

3. Manage HR staff according to the activity metrics, holding them accountable to benchmark levels of performance, then show them the actual business outcomes that are relating to their performance.  For example, if the Head of Recruitment is targeted on minimising "new-hire turnover", show them sales results (lower turnover should increase sales performance), the customer service benchmarks (longer tenure should lead to more competent service and greater customer satisfaction), etc.  They need to know the point of it all as well!

4. Give senior management the results, whether they ask for it or not, and shamelessly self-promote yourself.  If your team ensured 100% compliance during the hiring process for 98% of hires and this led to a $107k reduction in the legal costs associated with contested employee severances, then highlight it and report it.  How else would they make the connection if you don't make it for them?  If you reduced the time-to-hire in the sales function from 67 days to 18 days and sales revenue rose by 29%, then don't assume that the executive board will see the relationship - point it out to them.

Basically, what I'm saying is that real, measurable results is how they judge each other.  So if you don't want to be stuffed in an "administrative" corner, get in the ring with them and show them what your girls and guys are contributing.  And if you don't want your staff to behave like administrators, help them understand the business impacts that their roles have - ie what's the point of their job in the first place?

Considering the number of retirements that are draining the ranks of experienced practitioners each year (they are not immune to the "greying" of the workforce either), what is the real number of new entrants that the industry must attract into its workforce to meet this demand?  Another 1000 or so a year?  I don't know the number, I'd only be guessing, but the trend is obvious.

At the same time, two further factors are conspiring against them.

Firstly, there is only a handful of Australian universities whose business faculties offer a Bachelors Degree with a Financial Planning Major, supplying a couple of hundred qualified new entrants into the industry each year.  No point looking there for an immediate solution.

Secondly, with the ageing worforce, future demand for qualified financial advice for retirement savings is expected to continue to increase sharply from current levels.

Still don't think attracting talent matters? 

Because attracting new talent into the industry was never effectively addressed in the past, it now faces a crisis that will impact on retirees not being able to access qualified financial advice.

From a business perspective, what a HUGE opportunity lost!  Just when the demand for their services will be greatest, they have not geared themselves up to be able to maximise the potential revenues on offer.

Why doesn't banking face a similar crisis?  Or funds management?  Because, as industries, they do a better job of attracting new entrants.  They may have some natural advantages, but at the end of the day they're better recruiters.  Recruitment matters to them, so they get good at it.

With a talent shortfall into the many thousands, there's one thing for sure.  In the Financial Planning industry of the next decade, the number 1 organisation will be the number 1 recruiter!

#1 Organisations = #1 Recruiters

Why bother being good at recruitment?

Why bother trying to retain staff?

HR as a profession has not been good at talking business.  Yet HR departments get bigger and bigger.

Why?

Because almost everyone seems to agree on one point - people matter to business.

What they don't have clarity on, and find it difficult to articulate, is exactly HOW and WHY they matter. And HR, the girls and guys that specialise in people, rarely gives a compelling answer to those questions.

That's why I am blogging. I want this to be a forum to talk about how and why talent matters, and how you get your unfair share of it. 

Because if it doesn't matter to a business organisation, why bother? Who cares who you recruit, how you find them, how they perform, or how long they stay?

So, I'm going to start with one BIG idea.

#1 Organisations = #1 Recruiters

The New York Yankees, the Bolshoi Ballet, an Olympic Gold Medal winning Rowing Eight know that despite having the best coaches, facilities and culture in the world, if they don't find the best talent to begin with they cannot be number 1. And, to them, anything other than number 1 will not do.

In the corporate world we think of the likes of GE, Apple, Sony, etc. Simple.  They do lots of other things well - but recruitment is where it starts for them.This is where they get their head start, which they never surrender back to their competitors.

In plain English - the best organisations in the world got that way because they were also the best recruiters.