The War for Talent, Part 2
With unemployment at a six-year high of 5.7%, it would seem that companies would once again have their pick of the recruiting litter after struggling to find good people in the go-go economy of the late 1990s. Not necessarily, it turns out.
A surprising 88% of U.S. corporate managers believe that it's as hard as ever -- maybe harder -- to attract and retain talented employees compared with better times, according to a recent study by Towers Perrin, a global human resources consulting firm. (That study, which polled some 4,051 managers, was issued in early September -- before the terrorist attacks but after the U.S. slipped into a recession sometime in March.) Still more managers -- 92% -- say it's at least as difficult to motivate employees as it was during the boom years, the study found.
So if the quest for talent is still so trying, how do the best companies attract the best people? A new book aptly titled The War For Talent (Harvard Business School Press, 2001) provides some answers. The authors, McKinsey & Co. consultants Ed Michaels, Helen Handfield-Jones, and Beth Axelrod, drew from research on management practices at dozens of top companies including General Electric, Home Depot, and Nabisco. Although the authors found that better talent indeed leads to better corporate performance, "only one in four companies actually made strengthening its talent pool a top priority," the books says.
In Chapter Four, "Rebuild Your Recruiting Strategy," the authors argue that managers must find new ways to recruit quality execs, as companies can no longer afford to limit their search to just people who are looking for new jobs. What's more, the hiring process can't be left to a company's human resources department alone, the book declares. To persuade the very best outsiders to come aboard, a company's highest performers should lead the recruiting strategy, the authors proclaim. In fact, line managers should spend a day or two every month recruiting, the book argues. Following is the second part (see BW Online Careers 12/13/01 for Part One) the first partof an edited excerpt of Chapter Four, in which the authors detail their recruiting strategies for gaining a talent edge.
Chapter 4 Rebuild Your Recruiting Strategy
Rebuild Your Recruiting Strategy, continued
Tap Many Diverse Pools of Talent
In the past, companies generally looked for an experienced candidate for a specific job-a round peg for a round hole. They didn't have to go very far to find them, either. Companies could go each year to the same few schools, competitors, or companies in related industries to meet their hiring needs.
As the war for talent persists, though, it is unlikely that companies will find enough great talent in the same few places. Now companies have to look farther afield. They are being forced to hire people who don't have the traditional background. In many ways, they're better for it.
A decade ago, for instance, most of the big consulting firms looked strictly to the top five or six M.B.A. schools for their recruits. However, as these firms grew and that pool remained essentially static, they had to look elsewhere. Several of them widened their net to include the top ten to fifteen M.B.A. programs. Others began hiring college undergraduates, and created a new consulting position called an analyst expressly for this purpose. Many also started hiring lawyers, doctors, physicists, and experienced business managers. As a result, some of the consulting firms have reduced their reliance on M.B.A.'s to half of their total hiring and have found the non-M.B.A.'s to be very successful.
Other kinds of businesses can also tap into a much broader pool of talent. Arrow Electronics is a good example. The company had drawn its recruits from the same ten schools for years. But by the end of the 1990s, the hot economy was drawing some of the talent elsewhere. Arrow realized it had to change its strategy.
That's when Arrow decided to participate as one of the corporate sponsors of the National Collegiate Sales Competition, an intercollegiate sales competition held annually at Baylor University in Waco, Texas. Juniors and seniors who are studying professional sales and who come from more than twenty small colleges in the United States and Canada compete against each other in role-playing exercises. At the end, the contestants win prizes-and Arrow generally gets its pick of the top-placing competitors.
Arrow also searches other industries for salespeople. "If we need someone with five years of sales experience, does that necessarily have to be in electronics sales?" asks Les Gillen, Director of Strategic Staffing. "Why can't we pick someone with a financial sales background who has successfully moved mortgages?" Indeed, Arrow has done just that, and has found that a financial salesperson, with some specific industry training, can be a good fit.
The military is another source Arrow has tapped. In 2000, it hired fifteen military officers, taking advantage of their training, cross-cultural experiences, knowledge of logistics management, and technical knowledge. Arrow especially likes to hire former military officers who have troop leadership experience. "People like that are versed in 'what if' analyses and other competencies that match the skill sets our jobs demand," explains Gillen. "That's as valuable to us as someone who knows about electronics."
Arrow also discovered that by dropping the electrical engineering degree from its requirements, it has been able to hire other kinds of engineers-chemical, civil, or industrial-into field application roles. Many of these hires have been very successful because they have strong interpersonal skills and can relate well to customers.
Arrow currently fills 25 percent of its sales and distribution jobs with "nontraditional" hires and expects this percentage to increase. Like many other companies, Arrow has found that new types of hires not only fill empty positions but also bring a fresh perspective and a rich vein of creativity to the company. Likewise, companies increasingly recognize the need to build a more diverse talent pool. This doesn't just mean more women and more visible minorities (although this is important). It also means people with different experiences, different education, different ways of thinking, and different problem-solving styles. Diversity of this kind builds the strength of an organization.
Dee Hock, the founder and CEO emeritus of Visa, expressed his belief in the importance of hiring for intrinsics rather than for specific experience or knowledge. He said, "Hire and promote first on the basis of integrity; second, motivation; third, capacity; fourth, understanding; fifth, knowledge; and last and least, experience. Without integrity, motivation is dangerous; without motivation, capacity is impotent; without capacity, understanding is limited; without understanding, knowledge is meaningless; without knowledge, experience is blind. Experience is easy to provide and quickly put to good use by people with all the other qualities."
Hiring people who don't have a traditional background does pose challenges. It requires a careful assessment of the intrinsic skills and characteristics necessary for success. You won't be looking for people who fit the culture but, rather, people who can adapt to the culture-or in certain instances, people you sense can stretch the culture in productive ways. People from very different backgrounds will require more development and investment at the beginning, but as Arrow will attest, the efforts can pay off handsomely.
Develop Creative New Channels
The recruiting game is changing for yet another reason: It's no longer sufficient to target your efforts to people looking for a job; you have to reach people who aren't looking. Half of the 6,500 managers we surveyed in 2000 said there is a 30 percent or greater chance that they will leave their company in the next two years. Two-thirds of managers who switched companies in the last three years said that they left their last job not because they were looking for a new job, but because a better offer came their way. In other words, many talented people today are passive job seekers.
So there are lots of great people out there, but you have to lure them away from your competitors. For this reason, and because of the need to reach many different pools of talent, companies need new channels for reaching candidates.
The newest channel is, of course, the Internet. There are many ways a company can use the Internet to find candidates. You can attract prospective candidates when they visit the company's Web site, whether those people were looking for a job or not. You can post career opportunities on job boards and career sites, and you can search the résumés posted on job boards and by visitors to career sites.
The extremely hot market for IT talent in the late 1990s spurred many companies to develop creative Web-based recruiting techniques. Cisco was one of the leaders. Like a candy store for techno-philes, the company's Web site is designed to lure potential employees in. Among the treats it offers are the Make Friends @ Cisco program, which connects site visitors with a Cisco employee who does work that interests the visitor; the Cisco Profiler, a witty interface that enables site surfers to create a résumé to send to the company; and an "Oh-No-My-Boss-Is-Coming" button that transmits a graphic of "Seven Habits of a Successful Employee" (about 90 percent of the site's hits come during business hours from those who work for others). In 1999, Cisco received more than 80 percent of prospective employees' résumés electronically and two-thirds of hires were recruited via the Internet.
Using the Internet to manage the recruiting process can also help speed it up, which helps to fill jobs sooner and land candidates before they are lured elsewhere. Web-based recruiting applications can automate receiving résumés, initial screening tests, background checks, interview scheduling, communication with the candidate, sharing résumés across departments, and reporting.
Cisco's skillful Web-based recruiting process pruned many days off the time it takes to fill a job. Cisco reduced its recruiting cycle-the time from initial contact to the close of the deal-by 60 percent in three years, down from 113 days in 1996 to 45 days in 1999. That's precious time for the company and for the candidate.
Databases are another new channel. Just as marketers reach out to customers, companies can build a relationship with prospective employees. Database recruiting is more like hunting with a harpoon than drift netting. It starts with identifying individuals who have the characteristics that you are looking for and who might want to work for the company one day. Stay in touch with those people over time, and let them know that you would like them to consider joining your company. Learn about the personal and career factors that might affect their career decisions, and try to convince them to join when the time might be right for them.
To build a database of prospects, think of all the people your organization has collectively known at one time or another: friends and colleagues of your current employees, candidates who turned down an offer, people not suitable for one part of the business who may be great for another, and strong performers who left your company. These résumés are out there somewhere, waiting to be mined. In addition, actively search for people to add to your database: top performers at your competitors; people who speak at conferences or win awards; or people who are alumni of your target schools, associations, or companies.
Keep in touch with these people: Send them articles, invite them to events, and give them access to a Web site that has information of particular interest to them. Reach out to them from time to time and let them know they are always welcome to interview with your company. Electronic Arts (EA), the world's largest video game company, uses its résumé database to keep in touch with game developers who might someday be recruited to the company.
EA relies on its Web site to nurture the relationship: The first time a job seeker clicks "Jobs" at EA.com, he or she is asked questions about career goals and aspirations, backgrounds, interests, and capabilities. The Web script even asks permission to contact the candidate in the future. The system then notifies EA's hiring managers of possible matches and slots for each candidate. In less than a year, EA has assembled a pool of 34,000 potential candidates, 20,000 of whom have agreed to receive additional information.
Recently the system was put to the test. EA decided to move the development of its NASCAR game from Redwood City, California, to Orlando, Florida. The move required the quick hiring of forty local game developers. The solution was an interactive e-mail titled "Get in the Game" that invited 18,000 of the database's prequalified, previously assessed candidates to explore the new opportunities in Orlando. The details of the positions, required qualifications, and links to apply online were accompanied by a showcase of the studio's best graphics and animations, not to mention a sneak peek at a highly anticipated video game that was also developed in Orlando. Within days, 3,000 candidates clicked through to the Florida link for more information. From there, finding the necessary hires was easy.
The Internet may be the newest recruiting channel, but the most effective means of finding recruits is still probably the oldest: personal referrals. Some 40 percent of the managers we surveyed in our original research were hired as a result of personal contacts. Recruits referred by employees also tend to be quite successful. Surprisingly, though, few companies are deliberate and organized about mining the vast network of relationships that their current employees have to offer.
Talent Agents for Executives
For a long time, the only intermediaries in the recruiting process were executive search professionals, who represented the company's interests and helped find candidates. In today's market, where individuals have much more power, another type of intermediary is entering the talent market to represent individuals. Executives may soon have talent agents-just like movie stars-to help them find and negotiate the best jobs. Sound far-fetched?
There already are executive talent agents in operation today. One talent agent has about thirty clients. He counsels them, represents them, does PR for them, and markets them. Another executive agent builds deals around his CEO clients. He searches for the right business opportunity and the right financial backers. He coaches his clients to never say the "J-word." It isn't a job he's getting for them-it's a business deal.
We predict this is just the beginning of what will become a widespread phenomenon, starting with senior executives and spreading to lower tier executives. Think of the advantages for the individual: someone to constantly scout for the next best opportunity, to handle all those calls from headhunters, and to provide advice during compensation negotiations. Think about how this will change the dynamic between companies and individuals. Think about how this will change the recruiting process.
Everyone in the company should be a talent scout. Through participation in the right associations, conferences, online mailing lists, chat rooms, and visits to customers and suppliers, they should build their own network of candidates. Tap the resource that lies dormant in the contact lists of all the company's employees.
DoubleClick has generated hundreds of candidate leads by tapping into the personal networks of its employees. It used an employee referral program to hire 500 people in the first three months of 2000, growing the company by 30 percent. Rewarding people who delivered referrals helped: In addition to two Harley Davidsons rewarded to those who submitted the most referrals, employees got $1,000 for their first referral, $2,000 for their second, and so on, without a ceiling. Altogether, the employee referral program accounted for 43 percent of DoubleClick's new hires.
Be creative about the many different ways you might be able to reach candidates. There are endless possibilities for how you might open a dialogue between a potential hire and the company.
One company held a two-day, nearly round-the-clock telethon in which eighty employees, including company brass, called qualified candidates. One had a video game on its Web site and invited the high scorers to apply for programming jobs. Another invited hackers to break into its system and invited those with the most creative approaches to a job in its IT group.
Break the Compensation Rules to Get Who You Want
In today's talent market, where top candidates are in high demand and the value they create is tremendous, companies need to pay what it takes to get great candidates. After the extended effort of finding, selecting, and wooing a great candidate, don't let that person slip away because he or she is expecting more money than you had in mind. In other words, if you think you're paying enough to get good people, but you're not getting them, think again.
SunTrust's Bill Rogers learned this when he tried to recruit forty relationship managers with SunTrust's existing compensation structure (which consisted of a below-average salary augmented by big bonuses). It was an average compensation package, Rogers soon learned, and it wasn't attracting the A-level talent he had targeted.
So Rogers stepped up to the plate and started offering signing bonuses, paying moving expenses, and guaranteeing first-year bonuses. Eventually, he also bumped salaries up beyond the industry average-a first for SunTrust. It was an expensive move, but it worked. "Almost all of the new relationship managers have more than paid back what we originally invested to hire them," Rogers explains. "We would have gotten few of them if we had been unwilling to up the ante on compensation."
To win in this new market, you can't play compensation by the old rules. You have to ask yourself two important questions: How much will it take to get them? and How much value will this person create for my business?
The answer may be outside the compensation range you originally planned to pay. You may have to increase the top end of the range, or creatively use signing bonuses and other perks to raise compensation without disrupting the salary structure. The higher-performing companies are more willing to pay what it takes to hire the people they need.
Execute a Flawless Selling Process
In the past, the recruiting process was focused mostly on screening. Companies carefully chose the best people from a long line of good candidates. They could afford to take their time while the candidates waited nervously for a decision.
In today's talent market, it's the company's job to sell itself to the candidate. Yes, companies still have to be rigorous in the selection decision, but the harder part is convincing people to join the company, or to even listen to an offer. Every step of the process has to be a flawlessly executed courtship: persuasive, delightful, and artful. The candidate should feel sought after and valued. Every interaction should leave him or her thinking, "Would I love to be a part of that organization!"
In the past, companies didn't send their best people out on talent hunts; they sent people they could spare. This isn't the way to hook great talent today.
You need to have your high performers on the front lines of recruiting. Line managers should spend a day or two each month recruiting-interviewing candidates, making presentations on campuses, and persuading candidates to accept offers. Your highest performers should lead the recruiting strategy. HR managers should be orchestrating the process, not standing between the hiring managers and the candidates.
To get the best candidates, companies must play their best cards. "Recruiting the best talent was my sole goal the first year I was here," says Steve Macadam, Vice President of Georgia-Pacific's Packaging Division. "I worked closely with our human resources team to iron out the logistics involved with recruiting. But when it came to the hard sell and closing the deal, you better believe it was priority number one on my list. I personally flew around the country visiting prospects and spending as much time with them as they needed."
Macadam knew the only way to get people to believe in his leadership and join his team was to be there himself. He advises, "Any manager who wants to get the best people working for him had better go get them himself." Of the ninety-six people hired during Macadam's first eighteen months, forty-nine were personally interviewed and courted by him. Twenty-nine of those forty-nine are considered to have high potential for future leadership and almost all are still with the company.
John Thompson, Symantec's CEO, also understands the power of the personal touch. Symantec is a security software company based in Cupertino, California, best known for its Norton Utilities and Norton AntiVirus product lines. Thompson recalls a situation when the director of his research lab, a superstar, was lured to a dot-com. "I wrote him an e-mail note that said, 'I'm surprised. I thought you loved our company. And I thought you understood how important you were to what we're trying to get done. But I guess you didn't. Shame on us. I wish you the best,'" Thompson recalls. A week later the research director was back. He sent a note back to Thompson: "I'm back, and I do love this company."
There's another good reason to put your best people on recruiting: The people doing the recruiting are setting the standard for talent for the company. The caliber of talent they have in their minds is going to determine how high your organization will fly. As Sir Arthur Conan Doyle said, "Mediocrity knows nothing higher than itself, but talent instantly recognizes genius."
Develop a Recruiting Strategy for Each Division
We all know what a marketing strategy is like. Each customer segment is identified and sized, and its unique needs are profiled. A value proposition and pricing strategy for each segment is developed. Channels, tactics, and sales force programs are prepared. Target market share and sales goals are agreed on. Highly skilled marketing and sales managers spend hundreds of hours preparing these robust, written plans. The executive committee discusses and agrees on these marketing plans.
But does your company have a written recruiting strategy? For each division? For each type of talent? Is it as robust as your marketing strategy? Probably not. Before the war for talent, who needed such a rigorous exercise? But now a recruiting strategy that looks across the business, one as detailed as the marketing strategy, is required.
Here's what we recommend: Ask each division to develop a recruiting strategy. In the first year, it can be as simple as the one illustrated in figure 4-3. The second year, look for opportunities across functions or types of talent to share best practices and candidates across divisions.
Reflect with your leadership team and HR department on how you can shape your recruiting strategy to pump talent in at all levels, continuously hunt for talent, tap many diverse talent pools, develop creative new channels, break the compensation rules when necessary, and execute a flawless selling process.
Hiring great people is going to be increasingly important to your company's performance, and the competition in the talent market is going to get increasingly sophisticated at luring talent. Make sure your organization has a robust recruiting strategy that will help you win more than your fair share of talent.
Reprinted by permission of Harvard Business School Press. Excerpt of The War for Talent by Ed Michaels, Helen Handfield-Jones, and Beth Axelrod. Copyright © 2001 by McKinsey & Co. Inc.