Demonstrating to CEOs How Recruiting Can Directly Increase Revenues

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This new HR program will make

you $100 million…

do you care what it’s called?

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I was happy with our HR approach,

but now, “I want that one”

CEO of General Mills

DEMONSTRATING TO CEO’S HOW RECRUITING CAN DIRECTLY INCREASE

REVENUES

ERE.Net Fall, 2012

© Dr John Sullivan

3www.drjohnsullivan.com

Shifting to a focused recruiting strategy

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• To stimulate your thinking… (to get you to begin questioning your current “treat them all equal” approach to recruiting)• To show you how to become a

corporate hero• To answer your questions

3 simple goals for today

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What do executives care most about?

They often say that “employees are their most important asset”

But have you ever considered the possibility… that they are not being 100% honest? >

Let’s start with a question

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It’s time to shift to another premise

And that premise is that… executives actually care only about a few things that are known as “business results”

These “business results” appear in… the 10k , the annual report and in executive bonus criteria >

Continued

Here is a list of business results or impacts

Business results/ impacts1.Revenue / Sales2.Profit3.Stock price4.Profit margin5.Customer satisfaction6.Market share

These are not bus. results

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1.Cost per hire2.Offer acceptance rate3.Time to fill4. Interview to hire ratio5.Candidate experience6.We use social media7.A “seat at the table”8.Being a bus. partner

If it isn’t mentioned in the annual report, it is not a bus. result

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We now know that CEO’s rate TM

as the #1 business area that…

requires the most change

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Business areas where CEO’s expect the most change

1. Strategies for managing talent

2. Approaches to managing risk

3. Investment decisions

4. Organizational structure (including M&A)

5. Focus on corporate reputation and rebuilding trust

6. Capital structure

7. Engagement with the Board of Directors

PwC’s 14th annual global CEO survey found

Do you know why we were rated as the #1 area that needs change?

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Could having dissatisfied customers be a basis for their concern?

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The targeted satisfaction rate

What is an acceptable percentage of dissatisfied

and… very dissatisfied customers in any field?

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Customer dissatisfaction with HR support (Hackett)

Source: Business Services Talent Management Performance Study - The Hackett group, 2012

http://www.thehackettgroup.com/about/research-alerts-press-releases/2012/07192012-growing-talent-crisis.jsp

HR functions Very dissatisfied Dissatisfied Total % of unhappy customers

1. Collaboration/ knowledge sharing

48% 31% 79%

2. Retention 38% 32% 70%

3. Learning & develop.

29% 40% 69%

4. WP and succession 31% 37% 68%

With those kind of numbers and CEO’s expectation of change…

Does it make sense to consider a dramatic shift in your approach to

recruiting?

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The trailblazer best practice in business impact rec.

1.M Homula at FirstMerit Bank demonstrated the business impacts of recruiting so well to his CEO

2.That the CEO asked him to make the “business impact of recruiting” presentation… to the board of directors of the bank

3.Today’s benchmark firms – Google and Apple

Now let’s shift…

to the elements of a

“focused recruiting strategy”

for improving business results

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The top 15 focused recruiting actions

These are actions that recruiting can take to increase revenue and profit as a result of…

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• “Focusing resources” • Hiring “better people”• Data supported rec. tool selection

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The first focused recruiting action is…

1) Focus on high revenue business units Every business unit, geographic region and

function does not have the same opportunity to increase revenue and profit

So focus recruiting resources on SBU’s that…1) Produce a high % of corporate revenues 2) Have high revenue growth rates3) Have high profit margins

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Focus your TM to maximize your impact

2) Identify and then focus on using the most effective Talent Management approaches Determine which Talent Management functions

or processes have the highest revenue or profit impact and then…focus your HR budget on those high-impact Talent Management functions

Question – What are the highest impact TM functions?

What TM functions have the most business impact?

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Developing leadership Enhancing employee engagement Global people management/ global expansion Mastering HR processes Managing talent Employer branding Performance management and rewards Providing shared services and outsourcing Recruiting Onboarding and retentionSource: BCG/WFPMA - From Capability to Profitability: Realizing the Value of People Management, 2012

The HR functions with the highest business impact

21Source: BCG/WFPMA - From Capability to Profitability: Realizing the Value of People Management, 2012

The HR functions with the lowest business impact

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Bottom 5 performers with the lowest bus. impacts

17. Transforming HR into a strategic partner

18. Health and security management

19. Managing flexibility and labor costs (Contingent)

20. Restructuring the organization

21. Managing work/life balance22. Managing an aging workforce (Note: this one actually

resulted in a reduction in revenue growth)

Source: BCG/WFPMA - From Capability to Profitability: Realizing the Value of People Management, 2012

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Focus your recruiting… to maximize your impact

3) Focus hiring on revenue generating and revenue impact positions Revenue generating positions deserve priority

because… they have the most direct and easiest to measure impact on revenue

Support jobs know as "revenue impact jobs" can also increase revenues (i.e. customer service and sales support positions)

Work with the COO to identify these positions Assign these reqs. the highest priority, target

top performers and provide the most resources

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4) Develop hiring systems that place higher performers into all jobs

Start by calculating the performance differential between an average and a top performer in the same job

Are top performers worth all of the effort?

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"The secret of my success is that we have gone to exceptional lengths to hire the best people in the world… boy, does it pay off."

Steve Jobs“The difference between the average programmer and a great one”… it's at least 25

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4) Placing higher performers into all jobs (continued)ID prospects with a history of top performance Use an algorithm to ID performance predictors

(Google)

Market research can tell the unique job acceptance criteria that top performers have

Improve the hiring processes by using metrics to ID the best sources, screening & closing approaches

Reduce "hiring failures" by identifying hiring process “failure points” & the costs of a bad hire >

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To understand the cost of bottom performers… you need a hiring quality ROI calculator

http://www.shakercg.com/roi-calculators/sales-impact-of-better-selection-roi-calculator

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5) Focus on hiring more innovators, pioneers and purple squirrels Increasing innovation may have replaced

productivity as the highest HR business impactRealize that it takes unique recruiting

approaches in order to attract, assess and sell innovators

So first determine the dollar impacts and the performance differential of hiring innovators >

What is the performance differential between an innovator and an average employee

One top-notch engineer is worth “300 times or

more… than the average” …

“we would rather lose an entire incoming class of engineering graduates than one exceptional

technologist.”29

Alan EustaceSenior Vice President, Engineering and Research

Do firms with the most innovators make more $

Which firms (in this group) have the most/ least innovators?

IBM HP Microsoft FacebookGoogle Apple

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Do the firms with the most innovators produce the most revenue?

A comparison of employee output (rev. per employee) Average $208,000 IBM $246,900 (22% above the average)HP $354,800 (Nearly 1¾ times the

average)Microsoft $811,000 (Nearly 4 times the

average)Facebook $1,105,810 (5 ¾ times the average)Google $1,209,000 (Nearly 6 times the average)Apple $2,249,000 (Nearly 11 times the average)

Key learning - It takes 9.5 X more employees at IBM… to produce the same revenue as Apple (Calculated using 2012 data from http:// www.wolframalpha.com/input/?i=apple+revenue+per+employee )

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Do innovators increase profit?

Dollars of profit per employee (Profit per labor $ spent is a better measure)

HP $14,949IBM $37,057Microsoft $259,378Google $327,357Apple $610,063

Key learning - it takes nearly 16X more employees at IBM… and 40X more at HP to produce the same profit as Apple (Calculated using 2012 data from www.wolframalpha.com ) 32

http://www.wolframalpha.com/

Do innovators increase the firm’s stock value?

Market cap value comparison

HP $65 B

IBM $161 B

Google $185 B

Microsoft $214 B

Apple $623 B (The world’s most valuable firm)

(Calculated using 8/9/11 data)

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CEO’s are enamored with the performance of Apple

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The future of both Talent Management and business are shaped like an Apple!

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6) Focus on hiring productive people that stay longer The revenue differential produced by hiring a top

performer… continues each year that they remain on the job

Long retention times multiply the revenue impact of the new hire

When you source and assess prospects, consider their retention profile (which covers their likelihood of staying – Google algorithm)

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7) Focus on rapidly filling vacant revenue positions Slow hiring… allows revenue generating

positions to be vacant for inordinately long periods of time

Thus revenues from those jobs will stopFor example - when a loan officer position is

vacant at a bank, the $5000 in daily revenue that the position typically generates cannot be booked during the Time To Fill delay… and it may be lost to a competing bank

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8) Focus on hiring exceptional executives Obviously filling key executive positions like the

CEO, CTO, CIO and COO with exceptional talent can lead to better products and increase revenues

Unfortunately, most recruiting functions outsource this key executive search role, so they miss the opportunity to gain market intelligence and to take credit for the resulting revenue increases

So we must focus on internal executive search

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9) Focus on hiring more leaders at all levelsSuperior leaders plan better, prioritize, make

better decisions and get the most out of their teamHiring a larger % with superior leadership skills

all levels will increase revenuesHiring individuals with proven leadership skills,

gets you immediate benefits and… you also save the time / costs of leadership development

Hiring all employees with a high level of collaboration skills will increase cooperation and speed up the rate of change/innovation in your firm

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10) Focus on hiring key people directly from your competitors You can directly recruit the best directly away

from your competitors… if you have a robust hiring process and a strong employer brand

Not only does this get your firm new ideas, increased performance and higher revenues… but the revenue of your competitor will go down as a result of their loss of key talent

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Aggressive poaching from top competitorsWhat firm has directly poached 20,000+ hires fromMicrosoft – 4,981IBM – 4,480HP - 2,580Yahoo - 2,438Oracle - 2,043Accenture– 1,849Cisco - 1,620Intel - 1,367Apple - 1,345Sun - 1,340

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The world’s only recruiting machine

Source: Business Insider Apr. 9, 2012

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You must identify the highest-impact jobs to poach The best sales manager and salesperson The chief product development manager The top customer service person The Chief Technical Officer (CTO) The leading foreign tax specialist Partner relationship manager The best recruiter

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11) Focus on hiring magnet hires that will bring in additional top performers A magnet hire is an industry icon

If you hire a single high revenue producing “magnet hire”… they may bring 5 – 7 additional top performing hires over the 1st year

Hiring magnet hires and industry icons will further strengthen your employer brand

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12) Focus on hiring people that work more hours If employees are absent a great deal, you will

obviously suffer a loss of revenue and output If your process selects top-performs that are

absent less than the average employee, you may get as many as 7 days more productivity and thus revenue from each hire each year

If a new hire is in an exempt position and they end up working more hours than the average employee, you will also generate more productivity and revenue

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13) Focus on hiring individuals that demand less salary If your recruiting system targets and hires

individuals that perform at a high level but that will also willing to work for a lower average salary, you will generate salary savings

If you utilize these salary/labor savings to hire additional employees, you will end up with an increase in output and revenues, with no increase in overall labor costs

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14) Focus on hiring low maintenance employees that allow managers to focus on revenue If you hire "low maintenance" employees that

require less counseling, discipline, training and supervisory time, your new hires will spend a larger percentage of their time producing

In addition, with their reduced counseling and discipline load, their managers will be free to focus on activities that generate more revenue

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15) Identify & utilize the most effective recruiting tools You will get better performing hires if you utilize

only the most effective recruiting approaches It's important to continually gather and use data

that identifies the most effective employer branding approaches, sources, job posting sites and assessment and closing approaches

Require that the most effective recruiting tools be used on each high revenue / bus. impact job

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Use the right source to get quality hires Source effectiveness /quality of hire1. Employee referrals2. Large job boards3. Niche job boards4. Temp to perm5. Recruiters 6. Trade media7. Staffing services8. College recruiting9. Career fairs10. Co-op education11. Mass media12. Military

Source: staffing.org 2011

Source popularity Volume

1. Referrals 28.0%2. Job boards 20.1%3. Career site 9.8%4. Recruiter initiated 9.1%5. College 6.6%6. Rehires 4.3%7. Social media 3.5%8. 3rd party 2.8%9. Print 2.2%10. Temp to hire 2.1%11. Career fairs 1.9%12. Walk-ins 0.8%

Source: CareerXroads 2012

Are there any additional questions?

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Did I make you think?