Hiring and retaining talent is the top concern of CEOs around the world, says the 2019 Conference Board global survey.
Ironically, “businesses have never done as much hiring as they do today,” says Wharton professor and HR director Peter Cappelli in the Harvard Business Review. “They’ve never spent as much money doing it. And they’ve never done a worse job of it.”
After World War II, US companies generally filled positions from within, using tests and interviews to move employees vertically or laterally.
But today, internal hires account for around only a third, even if research shows that they often prove to be ultimately better choices than outsiders recruited by headhunters. (See “Talent Begins at Home,” Jan. 4, 2019.)
“In addition to the time and effort of hiring … outside hires take three years to perform as well as internal hires in the same job, while internal hires take seven years to earn as much as outside hires are paid,” Cappelli says. “Outside hiring also causes current employees to spend time and energy positioning themselves for jobs elsewhere. It disrupts the culture and burdens peers who must help new hires figure out how things work.”
Why don’t businesses hire from within? Current employees are not qualified, managers say.
The blame most likely lies not so much on employees, but more on managers who do not take the time and effort to train successors, do not make the career path clear, or are threatened by capable colleagues.
Develop your people from the get-go. Set an appropriate career track and periodically mentor and assess your employees. So when the need arises, or when the time comes, promote from within. This will raise morale within the company. A deep bench is ideal not just in sports but also in business.
Unfortunately, poaching hires from competitors appears to be the norm now. Though employees may revel in the hiring-and-leaving merry-go-round, this does not bode well for many businesses that require some stability in order to grow.
“None of this is to suggest that outside hiring is necessarily a bad idea,” Cappelli says. “But unless your company is a Silicon Valley gazelle, adding new jobs at a furious pace, you should ask yourself some serious questions if most of your openings are being filled from outside.”
A lot of companies now outsource hiring to so-called recruitment process outsourcers, which rely on subcontractors in India and the Philippines, who in turn use LinkedIn or other sites to lure prospective hires.
Dubious data science is now a fad, with recruitment vendors touting algorithms or machine learning (“everything but tea leaves”), with no concrete studies to back up their claims.
Employers are desperate because very likely, their expectations are too unrealistic.
“My … research found that companies piled on job requirements, baked them into the applicant-tracking software that sorted résumés according to binary decisions (yes, it has the key word; no, it doesn’t),” Cappelli says, “and then found that virtually no applicants met all the criteria.”
Applicants can be divided into active and passive (those not actively looking to move companies in the first place). Passive job seekers are lured by more money; active ones by better career opportunities.
Many businesses feel that offering more money can seduce employees to jump ship. But Cappelli says that only 11 percent of open positions are filled by passive job seekers.
Moreover, “I know of no evidence that passive candidates become better employees, let alone that the process is cost-effective. If you focus on passive candidates, think carefully about what that actually gets you. Better yet, check your data to find out.”
Prepare for succession early, and build your people from within.
Queena N. Lee-Chua is with the board of directors of Ateneo’s Family Business Center. Get her book “All in the Family Business” at www.lazada.com.ph or call National’s Jennie Garcia at 0915-421-2276. Contact the author at blessbook.chua@gmail.com.