Improving the Internal Recruiting Process, Part 2

HR has come a long way over the past decade in terms of utilizing technologies and reaching out to employees with vital career information. But despite advances in technology, most companies rely on a similar approach to internal recruiting that they used twenty years ago: post a job (this time on a website rather than a bulletin board), and then let the employee identify the opportunity that is right for him or her. This process is known as the “self-nomination approach,” and as I discussed in my last article, it has many shortcomings. The result of these shortcomings is that many employees find it easier to look for jobs outside of the company than to look for them within. The good news is that internal recruiting processes can be changed. The HR decision-maker can lead that change, and in the process allow HR to take on a more strategic role with respect to talent management. So how can a company begin to implement a more proactive recruiting process ó one that gives the company the ability to find the right employee for an opportunity, just as it gives employees the ability to reach out for opportunities that suit them? The simple answer is to institute an internal recruiting program where the HR representatives or recruiters are permitted to proactively look for candidates among the employee population to fill vacancies. Proactive internal recruiting is not a new concept. On the surface it does not appear to be overly complicated, but it is very difficult to gain the organizational buy-in to actually implement the idea. This is the most important hurdle for organizations to overcome when attempting to create a talent management mindset. One challenge will be the perception that current succession planning, leadership development, and self-nomination programs are adequate and that there is no problem. In order to drive this type of change, it will be critical to define the program in such a way that it is focused on a tangible business need and backed by data. The first step will be to identify the business issue and then provide a measure that will articulate why something needs to be done about it. Create a Retention Index to Set Goals and Measure Effectiveness The issue of retention has received a lot of attention lately, particularly with the speculation that as the economic recovery continues more people will begin searching for new job opportunities. The cost of turnover is a well-documented metric, and most companies tabulate both voluntary and involuntary turnover rates. The typical approach is to focus on voluntary turnover and try to reduce the number as much as possible. By examining exit interviews, the reasons for leaving are tabulated and programs are developed to mitigate them. While tracking turnover rates and conducting exit interviews may be helpful in identifying potential issues, a new dimension of analysis may provide a better picture of what part of the company is turning over and what part of the company is being retained. I call that measure “the retention index.” The retention index is a measure comparing the average total turnover rate for all employees to the rate of turnover within a specific demographic category. The first step in determining a retention index is to select a demographic. In the example in the first table below, employees are grouped according to performance rating. To calculate the retention index, take the average turnover rate for all employees and subtract the turnover rate of the employees within each performance category. The resulting retention index will be either a positive or negative number. If the rate of turnover within a performance category is greater than the average rate of turnover for all employees, then the retention index will be negative. This indicates a segment of the talent population that is being retained at a lower rate than the average. If the turnover rate within a performance category is less than the average rate of turnover, the index will be positive, indicating that this segment of your talent pool is being retained at a higher rate than average. To observe the total impact on a selected demographic, it is important that both voluntary and involuntary turnover be included in this analysis. Table 1 compares the retention index for employees of different levels of performance. For employees in the “far exceeds expectations” performance group, the retention index is 0%. This means the company is retaining employees in this category at the same rate as the average. For “Exceeds Expectations,” there is a retention index of negative 10%, indicating that the company is retaining employees who exceed expectations at a rate 10% below the average. The “meets expectations” and “needs improvement” categories are both positive, indicating that the company is retaining employees in these categories at 8% and 5% above the average respectively. This can be interpreted as a leak of quality talent, because the company is retaining more employees in the lower performance categories than in the higher.

Performance Rank All Far Exceeds Exceeds Meets Needs to Improve Does not meet
# Employees 6500 300 1300 3500 1000 400
Total Turnover 1625 75 450 600 200 300
Turnover % 25% 25% 35% 17% 20% 75%
Retention Index 0% -10% 8% 5% -50%

Another way to view the retention index is by the employees’ tenure with the company, which is illustrated in Table 2 below. In this example the data shows that the company is having difficulty retaining employees who have tenure of less than five years.

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Tenure All More than 15 11-15 years 5-10 years 1-4 years Less than 1 year
# Employees 6500 300 1300 3500 1000 400
Total Turnover 1625 25 200 700 550 150
Turnover % 25% 8% 15% 20% 55% 38%
Retention Index 17% 10% 5% -30% -13%

A calculation of the retention index across several demographic categories can reveal trends in the types of talent a company is turning over or retaining. Other demographics worth exploring include job family, total years of experience, geographic location, and diversity data. Essentially, a retention index can be developed from any demographic that is of importance to a company’s growth and prosperity. If the analysis of the retention index identifies a talent leak in a particular segment of the workforce, that data can be used to support and justify the need for a specific type of internal recruiting program. This data can be used to make a business case for proactively recruiting from a certain segment of the workforce based on a sound and documented business need. Define a Talent Platform and Set the Stage for Change The good news is that most corporations already have the systems and data necessary to implement an effective internal recruitment program. It may require some integration, but it is very achievable. If you are evolving the internal recruitment process in your organization, the first step is to define a talent platform. This is essentially an inventory of all of the systems your company uses to capture and track information about employees. The most common systems include the HRMS and recruiting management systems (RMS) but may also include competency management systems, succession planning tools, performance management systems, and skills assessment tools. Once you have identified all of the sources of data, you will need to ensure there is a common unique identifier, such as an employee ID or SNN, for the employee record in each system. Next, you will need to determine which application should serve as the “system of record” for talent in your organization. This would most likely be the HRMS or the RMS, depending on the circumstances. Whichever you choose, be sure there is flexibility in storing and retrieving the types of data you will need for internal sourcing and recruiting activities. After you have determined the system of record, you need to define an integration and data flow strategy to ensure that any data element only has a single point of data entry. The integration should populate the employee file in the system of record with all of the data necessary for internal searching. Types of information include a resume, performance rating, salary grade, date of hire or transfer, and any of the demographics used in the retention index analysis. Once this is accomplished an HR representative can search the system of record to proactively seek out internal talent for key positions and focus in on the particular demographic where the organization is experiencing retention issues. Identify and Overcome the Obstacles to Success When building an internal recruiting program, it will be as important to address fears and obstacles to change as it is to use data to justify the initiative. In fact, it is important to acknowledge that the root causes for many of today’s restrictive internal mobility policies are actually valid business concerns. The following guidelines may prove helpful in launching an internal recruitment program:

  1. Only HR representatives should have access to conduct a proactive search for internal talent.
  2. Ensure that date parameters can be used in the search to determine length of time in current position.
  3. Once a candidate is identified, the first step should be a dialogue between respective HR representatives regarding the potential business impact of an employee transfer in order to anticipate any objections from the employee’s current manager.
  4. After the HR review, if it is determined that the employee should be considered, the HR representative should contact the employee’s manager to discuss. This provides an opportunity to listen to and resolve any objections from the manager without involving the employee in an awkward situation. Ideally, the manager can subsequently have a career planning discussion with the employee and be the one to make the employee aware of the potential opportunity.
  5. Finally, if the employee is interested in the opportunity, it will be important to bring him or her through the same process as any other internal applicant who self nominates.

These guidelines systematically create the opportunity for HR to provide coaching and guidance to the line managers regarding their role in the career development and retention of their employees. This can further position HR as a strategic business partner and change agent for the organization. Moving Forward: A Strategic Role for HR In recent history, the HR profession has had its hands full reacting to extremely tight labor markets followed by an elongated recession. Organizations built high-powered talent acquisition functions fully equipped with the latest and greatest tools and technology, only to quickly dismantle them with the economic downturn. As the economy continues to find its bearings, HR leaders are beginning to think about how they will manage the next battle in the war for talent, and they want to make sure they do it smarter this time around. Using the retention index analysis, HR decision-makers will be able to focus internal recruiting efforts on the segments of the workforce they want to retain, and identify the job classifications and skills that will most likely need to be replaced. It will create a process that will bring HR professionals and line managers together to foster better career development discussions with employees. But above all else, since people are a business’ most valuable asset, it is a good business practice to recruit from within and take a proactive approach to identify redeployment opportunities.

Ed Newman, chief evangelist at Phenom People, is a well-known thought leader in the HR field. With more than 25 years of experience in the talent acquisition and management industry, Newman has worked with many Fortune 500 companies in the design, development, and implementation of highly effective talent strategies, processes, operating models and technology infrastructure. Newman previously founded The Newman Group, a consulting firm specializing in the delivery of talent management solutions.

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