How Should John Respond?

Tom Snyder, the tough-nosed director of operations at Great Company, had a big decision to make.

Like so many other executives faced with poor sales and a slow economy, Tom had to reduce staff or find some other way to reduce costs. The CEO was a traditional guy and assumed that the first cuts should come from administrative areas — particularly human resources. But he left the final decision up to Tom.

Tom has already decided to reduce the number of human resource generalists and to find an outsource provider for payroll, benefits administration, and some other similar functions. But those changes were not enough. He needed to find additional savings and recruiting was the most expensive function that remained.

Tom realized that recruiting was an essential function and even in tough times, they needed to recruit certain key people and replace those who decided to leave. He respected the head of recruiting and wanted to ensure that he stayed with the company. But he was also a good businessman and he wasn’t certain they really needed the number of recruiters they had, given the lower levels of hiring. He was also thinking about outsourcing the function — or parts of it — to reduce costs.

Great Company was located in a coastal area with 4,000 employees globally — most of them in this location. It produced medical devices that were fairly recession-proof, but growth had slowed tremendously. The CEO wanted to trim costs and improve efficiency, but he wanted to emerge from the slow economy ready to grow immediately.

John Tully, the Director of Recruiting, led a team of 15 people. Four sourced candidates and maintained the CRM tools and communication processes, another four were administrative and scheduled interviews and did reporting and other tasks, and the remainder were general recruiters with a broad range of skills. John was an exceptional contributor. Tom had praised him at a recent communication meeting in a rousing speech about how HR could actually deliver if they had more people like John on board.

Tom was somewhat upset that events had led to this.

The staff of 15 handled all the requisitions for the company worldwide. Their cost per hire was steady and reasonable. They recruited internally for every position first and then went to the outside. Normally they filled about 20% of all requisitions with internal transfers or promotions. They had developed a successful referral program. Their success in better dealing with internal candidates and in engaging the employees in recruiting had led to higher employee engagement scores.

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John had changed everything over the 18 months he had been at the company. His very first act had been to develop a reasonably good recruiting site. He had involved the internal marketing folks who were amazed that he had asked them to help on an HR project. Together with some of these marketing experts, John had laid out a campaign to improve candidate awareness of the company. John had also developed a candidate relationship management tool that allowed recruiters to communicate with potential candidates as well as screen them more thoroughly.

In his 18 months, he had taken a very inefficient function and turned it into a team that was respected throughout the company. He had added automation, built a strong sourcing capability, and trained the recruiters to be better at candidate relationship development.

Tom realized that it would be hard to maintain that level of involvement if they outsourced the recruiting function, but he was looking at perhaps keeping one recruiter to look internally and outsource the remainder.

After spending days agonizing over what to do, Tom decided to involve John in his decision. He laid out the problem and candidly shared the issues and solutions he was considering. And then he asked John to come back to him with his recommendations on how he should proceed within a week.

My questions to you: What should John recommend? What are his options and why would one be better than the other?

Kevin Wheeler is a globally known speaker, author, futurist, and consultant in talent management, human capital acquisition and learning & development. He has founded a number of organizations including the Future of Talent Institute, Global Learning Resources, Inc. and the Australasian Talent Conference, Ltd. He hosts Future of Talent Retreats in the U.S., Europe, and Australia. He writes frequently on LinkedIn, is a columnist for ERE.net, keynotes, and speaks at conferences and events globally, and advises firms on talent strategy. He has authored two books and hundreds of articles and white papers. He has a new book on recruiting that will be out in late summer of 2016. Prior to his current work, he had a 20+year corporate career in several San Francisco area tech and financial service firms. He has also been on the faculty of San Francisco State University and the University of San Francisco. He can be reached at kwheeler@futureoftalent.org.

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9 Comments on “How Should John Respond?

  1. John seems insightful – to say the least – since every argument angle seems to have been well covered. Now it’s time to face the reality of “The World of HR”.

    Despite knowing that his business is “recession proof”, it’s apparent that CEO still sees HR as a *cost* rather than a legitimate business expense. Why else would he assume cuts should be “particularly” in HR?

    Want to keep your own job, John? HR was your choice of professions and your ultimate boss, the CEO, has never seen a good business case for your existence. His attitude and understanding of the role of your department is crystal clear and, unfortunately, internationally pervasive. Draw straws and make the cuts. It’s too late to build a life boat (a business case) as the ship sinks.

  2. John should push for a meeting with the CEO and Tom at the same time.

    John should explain to the CEO that his department represents .0375% of the firm’s headcount but is and will be working on transactions that impact the firm in full % point increments when measured between success and failure.

    John should ask the CEO for a candid look at the cost factors confronting the company, such as suppliers, energy use, R&D, SG&A. After that review, it should be obvious that .0375% worth of cuts can and must be found before cutting into a vital organ that has just been returned to full-function.

    Now if its true that .375% simply can’t be found anywhere else in the firm (the jet is parked, the cell plans trimmed, the meals and travel cut back, the sales force sized to the market, the PR firm told to find 20% off, etc.) then it says something about the state of the enterprise and the future prospects and need for a full powered recruiting functions.

    Even in that extreme case, John should push to have less vital RIF take place, and have members of his team take over lower-impact admin roles until things pick up in the interest of keeping the band together.

    If all that is to no avail, John (whose skills and ability to bring value are unqustioned) may need to go find an enterprise who has a need for what he offers.

    When the CEO has this whole frame, his or her decision will be easy.

    ting that can be done in less vital areas- or in the very worst case, some of John’s team could (until things pick up) assume lower skilled roles at other spots in the company at normal pay in the interest of keeping the team toge

  3. John is an important player in terms of adding value through innovation and has made several key contributions which have positively impacted recruitment KPI’s. He might recommend that he stays on, and rather than be a team manager, transition into a vendor management role. The sourcing, administration and candidate management can be outsourced to an RPO provider. The only remaining costs would be John’s salary and the cost per hire for new employees. When Great Company is poised for an upturn, some RPO providers like Aon Consulting with a flexible workforce, can quickly ramp up to meet high volume hiring initiatives with little notice.

  4. It seems to me that the 4 sourcers could be “rented” to the sales/marketing department and their skills could be used to find/qualify new sales prospects. The 4 admin team members should certainly be able to contribute in other areas as well.

    Finally, if the recruiting team is as good as it appears to be, why can’t Great Company offer recruiting services to vendors/customers? Let others outsource some of their recruiting functionality to Great Company. I hear that RN’s are always hard to find. Wouldn’t helping a large hospital chain recruit staff endear them to Great Company’s products?

  5. If I were the Director of Recruiting, I would work with the parties involved and do some reasonable forecasting. Based off anticipated demand of staffing levels (say $9.6-million in salary per year per recruiter). Then, based off your forecasting model, size the team appropriately. There’s no need to keep additional recruiter headcount if the company only needs to hire half of what it did in years prior. You cut the poorest performers and reward/retain the best. It aint personal, that’s business.

  6. The most prevalent views of recruiting include some bits about how recruiting is essential and we must always be recruiting or how some company gets great people through pizzas or employee referral t-shirts. Take a breath…because that’s what companies do as the economy expands and contracts. As a company is growing, recruiters are quite popular and the cost of hiring is seen as a pathway to growth (breathe in). There is always a cost associated with growth (that’s what corporate credit is all about). As growth slows and the need for a steady flow of new hires begins to wane, the recruiter’s become more burdensome (breathe out). There is also always a cost associated with not growing (just ask the auto maker’s trying to get credit to survive).

    Nobody wants to say it, but human capital is pretty much a commodity that has to be dealt with on the balance sheet as well as among discussion boards of the recruiterati. As a corporate recruiter, I realize that I’m an expense; but I’m also a fairly common item as the company will be able to build up a stable of recruiters faster than it could build up a stable of engineers as the economy improves.

    The only option for John is to cost out the internal process and compare it to the RPO’s proposed solution. If he can create a proposal that beats the outsourcing option, he wins. Even if the internal team is awarded the contract, I doubt if the recruiting team would survive intact, but it’s worth a shot.

    Worst case scenario and the most probable…

    If I was John, I would ask to lead the outsourcing initiative. He can ensure that the proper measurement tools are in place so that the RPO vendor will be held to the same high standards of the internal team. I think having some of the internal staff transfer to the RPO vendor would be a plus for the company…even if it was on a contract basis. In the end, John and his team have provided a value add to what was probably a shambles beforehand, but the CEO and his troops have got to answer to the shareholders regarding costs when profits are not in sight.

    Thanks for the lunch time activity Kevin!

  7. What should John do:
    1) Outsource the sourcers for $1,250/mo each.
    2) Outsource the schedulers/coordinators for $800/mo each.
    3) If this isn’t enough, instead of laying off one of the recruiters, have all four go to 3/4 time. If one of them complains about this, they would be a good one to let go as an alternative- not a “team player.”

    Meanwhile, it seems clear that while “respected,” John isn’t “valued” for his accomplishments as a member of the corporate hierarchy. His budget and headcount are being attacked with a meat axe, one way or another. Even Dir. Ops Tom can’t seem to “protect” him. So John should do whatever he needs to do to hold on to his job during the recession, and then as things improve, work to “get the hell out of Dodge,” aka (Not So) Great Company.

    Easy in principle, difficult in practice.

    Cheers,
    Keith keithsr@sbcglobal.net 415.586.8265

  8. The CEO is focusing in entirely the wrong area . . . per the following evidence:

    “It produced medical devices that were fairly recession-proof, but growth had slowed tremendously. The CEO wanted to trim costs and improve efficiency, but he wanted to emerge from the slow economy ready to grow immediately.”

    Recessions are an excuse to further ‘control costs’, and while investigation of cost is necessary, the analysis shouldn’t stop there. Instead of immediately looking to chop heads to reduce costs and ‘improve efficiency’, a focus needs to be on countering the slowing growth. The herd will move to lean out and prefer to shiver in the cold due to short-term Wall Street pressures – for Great Company, this is the perfect opportunity to disrupt the game and hit their competition just before dawn, at their flanks and weak points, thereby leveraging the element of surprise.

    My advice is this: Focus a talent acquisition initiative on hiring the very best Salespeoople from the competition. If Great Company is hurting in recessionary times, it’s likely widespread in their sector . . . so enhance your ability to compete by recruiting the Rainmakers. The Poker analogy is this: Don’t go into a ‘big pot’ with a weak hand – bring your “Big Guns” and be ready to bust the table. Furthermore, Great Company should look into marketing initiatives geared at defending current market share and cutting into the competition’s.

    Some follow-on questions I would pose include:

    a. Where are we growing quickly vs. where is growth slowing?
    b. What products and services are fueling growth?
    c. What products and services are delivering optimal EBITDA?
    d. What products and services are delivering optimal EBITDA per Employee? (i.e. a MUCH better view of ‘efficiency’ than most).
    e. What is our strategic plan for 2009, 2010, and 2011?
    f. Are their new markets we are looking to penetrate (be it through our own efforts or through acquisition?)

    Instead of most Universities teaching HR programs built on cost-cutting and efficiency, more courses need to be offered in the way of strategic planning. I have found myself reading way too many newsletters and articles about ways to further cut costs . . . and the snowball is growing bigger as the recessionary groupthink expands. My point is this: We’re asking the wrong questions and investigating the wrong things.

    Although I have never formally worked in HR, I have always found myself in discussions with Directors and Leaders of Talent Acquisition that are surprised that I ask the above questions. In the word of on VP, Talent Acquisition, last week: “To be honest, 99% of Recruiters just want a job description and want to put bodies in seats . . . and that includes External Recruiters, so I appreciate this deep dive into our company.”

  9. Thank you Joshua, for outlining page one of the business case I referred to in the first comment of this string. Your point, “We’re asking the wrong questions and investigating the wrong things…” can only be supplemented by adding “way too late in the game.”

    It’s either time for John to draw straws or cut and run to the next employer WITH BUSINESS PLAN IN-HAND. Unless and until HR documents its value, it will remain the easy (and accepted) target.

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