How HR/Recruiting Wastes $100 Million Every Year!

How many people will your company hire over the next 12 months? Multiply this number by the average salary (some number between $50,000 and $100,000). Now do the math. If you’re hiring 500 to 1,000 people, this represents a total expenditure of $25 million on the low side to $100 million on the high side. I don’t think HR/Recruiting as a group is doing a very good job of spending this money wisely. Think about this: The following represents the typical processes that most companies use in deciding how to spend their $100 million budget for new salaries.

  1. Don’t put a formal project or business plan together. No business manager worth her salary would be allowed to spend $25 million or $100 million without putting together a complete project plan evaluating alternatives, conducting pilot programs, and testing assumptions. Then, it would need to be approved by the Board of Directors or company operating committee for soundness. Yet, HR/Recruiting doesn’t seem to need to meet the same standards. Most don’t even have a workforce plan, let alone a comprehensive project plan with all of the details and assumptions worked out and evaluated. Would your recruiting business and workforce plan get approved if it needed to be submitted to your Board?
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  3. Use a document to attract top people that doesn’t even reflect the real job. Worse, these documents exclude the best people who could ace these jobs. Skills, experiences, and academics don’t describe a job ó they describe a person. Even if you throw in a few responsibilities, it’s still vague. Now, to make matters worse, some of the best people who have all of the skills find the online job description unappealing, and won’t apply. Few good people want to do the same thing over and over and over again. In fact, the best people probably are those with about 70-80% of the comparable experience who would find your job a great opportunity. Unfortunately, your description says they can’t. They “must have” what’s listed.
  4. Use a competency model that managers don’t understand, won’t use ó and one that doesn’t predict on-the-job performance. The PhDs who developed competency models had better go back to their first basic logic course and reconsider whether competencies are a cause or an effect. Competencies don’t cause success: They’re a result of a host of different variables, including the quality of the company, hiring manager, team, and culture, as well as having the right tools, and doing a job the person finds compelling.
  5. Use online advertising techniques that are designed to find exactly the wrong people for your jobs. Why would anyone post a boring job description that turns off those who are fully qualified and those with the most potential? Job descriptions need to describe what the person will be doing, including examples of exciting projects, and why the work is important to the company’s long term success. Then the ad must be found by top people, or by people who might refer the ad to a top person they know. So put a great title on the ad that grabs the person by the throat and says “READ ME.” Now for the real kicker: Make sure the first two lines are so engaging that they compel readers to apply for the job or forward it to some hot prospect they personally know.
  6. Force candidates to go through an application experience that only unqualified candidates have the time or inclination to endure. People who are selective and are looking for better jobs will not apply to jobs the same way average people will. If your application process was designed by a lawyer, an IT person, a bureaucrat, a Ph.D., or someone in an overhead department, it will not work. Ask your marketing department to design the interface and each step with the requirement that it appeals to a very discriminating customer. Then get your lawyers, etc., to approve it.
  7. Use an interviewing process that allows managers who don’t know what they’re looking for to substitute their own personal needs and biases when assessing competency. Everyone can assess a dud or a shining star with no training. So managers who’ have done this once believe they are great at interviewing. Then, they push the recruiting department to find more stars, and complain when it ‘doesn’t. Unfortunately, some of the true stars might be a bit unpolished and go unnoticed, or are uninterested because your jobs are boring and the interviewing process is flawed.
  8. Give each person on the interviewing team a full “yes/no” vote, even if he or she is unprepared for the interview or unqualified to conduct an interview. If this person conducting the interview knew he was responsible for a $100,000 expenditure, I bet he would first be evaluated to see if he could do it right. And, I bet the person would then be totally prepared before making any recommendation.
  9. Make a “no” the default vote, and give “no” votes more weight than a “yes” vote. Assessing competency takes objectivity and evidence. Without either, a “no” vote is safer than a “yes.” This is dumb, especially if some recruiter spent a great deal of time pursuing the person being interviewed. Why not make members of the interviewing team justify their “no” votes with hard facts as well as their “yes”es?
  10. Give the highest-ranking person more votes than everyone else, even if he or she is less qualified to assess competency. This is akin to Saddam Hussein thinking he was winning the war and directing strategy until some U.S. GI knocked on his door. (FYI : This is exactly what did happen. Remember “Baghdad Bob?” Saddam believed him because his people were afraid to tell him the truth.)
  11. Use a flawed voting process to make important business decisions. When was the last time a group of people got together to spend $100,000 to $1 million and voted before they shared any meaningful information? Eliminate the voting process in its entirety! There’s not enough time in 30 to 45 minutes to determine anything other than if the person is a complete dud and maybe an absolute superstar. It’s getting the in-betweens right where good assessment skills are required. Then, rather than voting, make the business decision to hire or not by sharing everyone’s information in a formal debriefing session. This is the way most professional business decisions are made. (FYI: Here’s a great two-question behavioral interview that will work and everyone will use.)
  12. Make the offer based on compensation ó not on job stretch and growth. Top people are more concerned with the opportunity and challenge, not with the compensation. So why not demonstrate that the job offers more stretch and growth rather than trying to offer more money? In my opinion, if the person is only taking the job only for the money, you’re hiring the wrong person.
  13. Make offers before the candidate has said yes. It’s like asking someone to marry you before you know the answer. This is na?ve at best. Get 100% formal agreement on every single term in your offer before formally extending it. Then, ask the candidate to sign it and send it back to you by the next morning. If the person refuses, don’t make the offer. And please don’t make excuses about why you can’t do this. If you suffer from counteroffers or candidates rejecting your offers and accepting other offers, you need to do this immediately.

If any of these problems sound familiar and occur at your company, shame on you! John, Howard, Kevin, and I (among some of the other ERE authors, but not all) have been preaching for the past five years about how to get hiring right. But, the advice must be falling on deaf ears. These same problems keep on cropping up year after year after year. So, there must be a bigger problem underlying all this. Maybe the recent congressional solution for fixing FEMA might apply to the recruiting departments at most companies ó overhaul everything and start from scratch. Perhaps start by designing the hiring process around the needs of top people, not lawyers, and then make the assessment decision more business-like. Whatever you do, don’t try to solve each problem one at a time. Instead, tackle the whole project. That’s how you’ll stop wasting $100 million every year!

Lou Adler is the CEO and founder of The Adler Group – a training and search firm helping companies implement Performance-based Hiring℠. Adler is the author of the Amazon top-10 best-seller, Hire With Your Head (John Wiley & Sons, 3rd Edition, 2007). His most recent book has just been published, The Essential Guide for Hiring & Getting Hired (Workbench, 2013). He is also the author of the award-winning Nightingale-Conant audio program, Talent Rules! Using Performance-based Hiring to Build Great Teams (2007).

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9 Comments on “How HR/Recruiting Wastes $100 Million Every Year!

  1. Absolutley brilliant. Lou this is the single best piece I’ve read on the costs of doing it wrong I’ve read – ever. Thank you. I will pass this on to the CEOs of my client companies with your permission.

  2. Lou,

    This one touched a nerve. Great article. Absolutely hit the nail on the head.

    Sheila

  3. How exciting ? someone who thinks like we do! Lou, outstanding comments. We especially echo your thoughts around those points (5, 6 and 12) that speak to the experience of the job seeker during application, interview and offer phases.

    The application experience is the first impression that many candidates have of a company. So if it’s laborious, difficult and/or designed for compliance over user experience, there’s more than a good chance that great candidates will self-select out.

    I don’t know a company that doesn’t aspire to offer an awesome overall recruiting experience (with a well-organized web site, professional interview, respectful offer process and an onboarding program that reinforces the candidate’s decision to join the company). However, many companies fail to execute. As a result, great hires go elsewhere.

    We believe there is a strong correlation between recruiting experience and Cost of Vacancy/Time to Fill (the less fulfilling the job seeker experience, the longer it takes to get a good hire).

    Consequently, we are introducing a business intelligence tool for Recruiting and HR that is currently in the beta test stage. This tool helps managers better understand how their company is perceived by job seekers in a wide range of categories during critical points in the selection and hiring process, and how these companies compare with competitors seeking to hire the same talent.

    Armed with this information, managers can make appropriate changes to the process and brand messaging, and create more targeted outreach programs.

    Thanks again Lou, for getting to the heart of the issue as usual?good things to think about!

  4. Lou good article not sure what you are trying to say with number 9, then again never understood the Beatles number 9 either 😉

    9. Give the highest-ranking person more votes than everyone else, even if he or she is less qualified to assess competency.

    Are you saying not to give the most senior person the heaviest weight in the decisson process? I’m not sure that i agree with this.

    But if you’re saying highest-ranking person should should be trained on assessing competency then I agree. In fact that should be fundamental to becoming a high ranking person. And they should have the heaviest weighted vote.

    As for deaf ears some of us are listening so long as you give us something worth listening to.

  5. Mo – the best designer in a company is rarely the head of engineering. There is no correlation with rank and interviewing ability either. In fact I’d suggest there is negative correlation. The higher you are in the organization the more you over trust your intuition. Regardless why should you arbitrarily use rank or anything other than evidence to make the assessment? This is how bad decisions are made at every level. Hiring people is no exception.

    Lou

  6. Mo:

    Fascinating ending to your comment on Lou?s article.

    Maybe you are reading Lou?s stuff wrong but I can assure you he has been providing content worth listening to for a very long time. Perhaps it is time for people to do more than listen; perhaps it is time to take action and change.

    Howard Adamsky

  7. Howard:

    I read Lou’s articles almost every week since I switched into this industry (from CRM). I love Lou and only comment with things I disagree with. I appologize if my last comment did not come out right it was not targeted at Lou at all.

    As for high ranking folks having equal voting rights – if they are not compentent and do not know how to interview they should not have any voting rights!

  8. Changing the ‘bad habits’ of interview committees is akin to quitting smoking…hard to do. Especially as most corporate recruiters display meekness when influencing committee members when higher level searches are at stake. Interview committees made up of VPs or Directors in corporate- land require loads of finesse and TLC in order to be orchestrated to conduct an interview process without short-cutting it. Their list of distractions, individual tendencies, and agendas is endless.

    Recruiters need to step up and consult with their hiring partners and make it known that while they are there to help and offer some flexibility, there are no shortcuts to an interview process done right. Once the ‘right’ process and criteria for decisions are bought into, there can be no compromise. Unfortunately, recruiters often drop the ball when someone with the power to fire them decides to back-slide into old habits.

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