How Organizations Identify and Hire Great Talent

How Organizations Identify and Hire Great Talent

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Exclusive HR.com

Research

An exploration of today’s recruitment challenges and tomorrow’s solutions

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Contents

Challenges Faced by the Talent Acquisition Function 5

Executive Summary 3

TA Practices Linked to Higher Organizational Success 13

The Future of Talent Acquisition 15

Top Takeaways 17



Executive SummaryToday’s talent acquisition (TA) function is ripe for disruption, according to new research conducted by HR.com in partnership with the IBM Smarter Workforce Institute. TA practitioners are facing a range of serious challenges, and those who are best able to meet these challenges will likely gain large advantages in today’s labor marketplace.

About this Survey

The survey How Does Your Organization Identify and Hire Great Talent? was conducted between March and May of 2018. Our sample was based on 555 HR respondents. About three quarters of the respondents were from companies primarily located in the U.S. More than 28% of all respondent organizations employed 1,000 or more people. All major industry sectors were included in the sample.

The survey was devised to:

● gather insights on issues such as quality and cost of hire

● determine employer satisfaction with the results of their hiring practices and processes

● identify challenges that arise from regrettable hires

● examine the extent to which advances in recruiting technology and hiring processes are benefitting employers today

● learn how aggressively employers are moving to adopt new TA technologies

Major Finding One: Finding, acquiring and keeping candidates with the right skills is a major challenge:

● The most widely cited talent acquisition challenge is simply finding candidates with the right skill sets.

● Regrettable hires are a problem. Study participants report that, on average, they would not rehire 31% of their recent hires if given the chance to do it again.

● Most employers have trouble filling positions quickly and at a reasonable cost.

● Too often, companies can’t hire the candidates they want most, as an average of 14% of job offers are rejected.

● Getting the desired candidates doesn’t mean keeping them, as an average of 18% of new individual contributors leave within the first six months.

Below is a quick overview of our findings:

Major Finding Two: Most TA practitioners are disappointed with job advertising practices and recruitment technologies:

● Less than half of respondents are either satisfied or very satisfied with the return on investment that job advertising produces.

● Only about a quarter say their recruitment technologies meet their current hiring needs to a high or very high extent.



Major Finding Three: Organizations with stronger financial results are better than lower-performing organizations at key aspects of talent acquisition:

● Higher performers far exceed their lower-performing counterparts in quality of hire and organization fit.

● On the other hand, neither higher nor lower performers excel in time-to-fill.

Major Finding Four: The future of talent acquisition will likely include new technologies and practices that are disruptive to today’s conventional practices.

● In the future, HR professionals want improved speed, quality and productivity from recruitment technologies enhanced with artificial intelligence (AI). Fifty-seven percent want the ability to fill open positions more quickly. Fifty-four percent want AI to help them improve the match between candidates and jobs, and 51% want to spend less time sifting through resumes.



Challenges Faced by the Talent Acquisition Function

Today’s employers face a uniquely challenging environment. With the economy maintaining its momentum and unemployment hovering at its lowest level in 18 years, they must search a talent pool that is not only relatively small but is also shifting in terms of demographics and skill sets.

Finding: Today’s top challenge is finding skilled candidates

The study shows that the greatest talent acquisition hurdle is simply finding candidates with the right skill sets. More than two-thirds (68%) of respondents said that was among the most difficult challenges they face.

The other challenge mentioned by over half of respondents (53%) was that wages and salaries were not competitive enough to secure talent. These two challenges sometimes go together as employers struggle to offer compensation high enough to woo the best talent in a tight labor market. When potential candidates spot an interesting opportunity, an inadequate salary may cool their interest, especially when competing companies offer compensation packages more in line with what the worker expects.

Sometimes, of course, organizations simply cannot offer more in compensation. In such cases, TA professionals can stress other advantages of working in their organization. Another option is for those organizations to develop the needed skills internally and hire from within.

The third most widely cited hiring challenge is the loss of promising candidates during the hiring process. In some cases, this is probably related to the length of time it takes for candidates to move through the process. If it’s too lengthy, candidates may go to competitors with faster TA practices. We will further address the issue of “time to fill a position” later in this paper.



0 10 20 30 40 50 60 70 80

Finding candidates with the skills we need

Wages and salaries not competitive enough

Losing promising candidates during the hiring process

Poor ability to track and attract candidates who are

not actively seeking new jobs

Lack of good assessment to identify best candidates

Lack of attractive employer brand

Too few recruiting staff

Outdated recruiting technologies

Poor hiring analytics metrics 21%

24%

24%

26%

28%

34%

38%

53%

68%

Survey Question: What are the most difficult hiring challenges?

HR professionals cited finding skills and offering competitive pay as the most difficult hiring challenges

Source: HR.com 2018 How Does Your Organization Identify and Hire Great Talent? survey (n = 555)



Finding: Employers are plagued by the costly problem of regrettable hires

Partly due to their difficulty finding candidates with needed skills, employers often wind up hiring people that they wouldn’t rehire if given another opportunity. How pervasive is this problem of regrettable hires?

We asked, “Thinking about those employees hired in the past 12 months, if you had the chance to do it over again, what percentage of them would you rehire?” The average response to this question was 69%, indicating that participants regretted an average of 31% of their hires. Only a small minority of employers (11%) say they would stick to their decision to hire a recently onboarded candidate 100% of the time.

Finding: Most organizations have problems filling positions quickly and at a reasonable cost

Only around half of HR professionals view themselves as excellent or good at quality hiring (55%) or hiring people who fit well in their organizations (51%). This lends support to the previous finding that an average of three out of ten hires turn out to be regrettable.

Even fewer think their organizations are doing well in other key areas, including cost of hire, time-to-fill and nurturing a pool of qualified candidates. In other words, many study participants are not confident in their ability to hire quality candidates in a cost-effective and timely manner. This strikes us as a system that is ripe for the kinds of improvements that fundamentally disrupt the way TA functions normally operate.

31%HR professionals regret

of new hires



0

10

20

30

40

50

60

44%41%

31% 28%

18%

11% 10% 7% 9% 7%

Quality of hire

New hire fit with the

organization

Pool of qualified

candidates

Cost of hire Time to fill a position

Excellent Good

Survey Statement: Please rate the overall effectiveness and efficiency of talent acquisition in your organization in terms of:

Just 38% say their organizations are good at locating and/or nurturing pools of qualified candidates

HR.com 2018 How Does Your Organization Identify and Hire Great Talent? survey (n = 555)

Percent of HR professionals who rate their talent acquisition as good or excellent in these five areas



Finding: It takes weeks to hire individual contributors and months to hire senior leaders

The poor performance on time-to-fill becomes even more evident when we break the results down by role. Although employers need an average of 37 days to hire individual contributors, they require more than twice the time—a mean of 84 days—to bring an executive or senior manager on board.

In some ways, a longer time-to-fill for corporate leaders is to be expected. Candidates who take on greater responsibility and require higher salaries are sure to be subject to a more rigorous vetting process. However, those realities don’t relieve organizations of the pressures imposed if leadership roles go unfilled.

0 20 40 60 80 100

IndividualContributor

Manager/Supervisor

Executive/Senior Manager

37

57

84

Days to fill open positions

Survey Question: Generally, about how many days does it take you to fill vacancies at the following job levels?

The higher the position, the longer the time-to-fill

HR.com 2018 How Does Your Organization Identify and Hire Great Talent? survey: Executive/Senior Manager (n=352), Manager/Supervisor (n=399), Individual contributor (n=457)

Average number of days to fill positions, by level



Finding: Too often, employers can’t get the candidates they really want

Based on the survey results, 14% of qualified candidates reject job offers, on average. While there may not be one definitive answer as to why such a notable proportion of candidates reject job offers, a previous study by the IBM Smarter Workforce Institute revealed that a positive candidate experience is linked to higher job offer acceptance. In fact, people who are satisfied with their candidate experiences are 38% more likely to accept a job offer.

Finding: Getting the desired candidates doesn’t mean employers can keep them

On average, 9% of new hires leave their organizations within six months of beginning work, but a closer examination reveals an interesting corollary with the time-to-hire for different types of workers. Of newly hired senior managers and executives, only an average of 3% depart within that first half-year. For managers and supervisors, that number is about 6%. Among individual contributors, the proportion is 18%, nearly one in five hires.

of qualified candidates reject job offers

of individual contributors leave

within the first 6 months

14%

18%

https://www.ibm.com/account/reg/us-en/signup?formid=urx-31832



One reason for these differences could be related to our previous findings about time-to-hire. When it comes to hiring for managerial and executive positions, the extra time spent vetting potential hires may help ensure fit with both the employer and the role. And there are other contributing differences as well, such as salary ranges and prestige of position. That said, no organization should be sanguine about losing 18% of its newly hired individual contributors, especially given the cost of replacing them.

It amounts to a very costly problem. Employers may spend up to a third of an employee’s annual salary on identifying, recruiting, hiring and onboarding a new worker, according to Work Institute estimates. If a new hire doesn’t succeed and departs the company after six months, not only has the business wasted 33% of their salary, it must then spend more to attract and engage a replacement.

We should note that the problem of voluntary turnover in general has become worse over the last two decades in the U.S. The Labor Department reported, for example, that in December 2017, the number of Americans quitting their jobs rose to a 17-year high.

Finding: Most HR professionals are not satisfied with their job advertising

When it comes to job advertising spend, 45% of survey respondents are satisfied or very satisfied with the return on their spending, or ROI. However, only 9% are very satisfied, and the majority are either ambivalent or dissatisfied with their job ads’ performance. But exactly how costly is job advertising? We found that organizations spend an average of about 29% of their TA budget on it.

http://info.workinstitute.com/retentionreport2018

https://www.usnews.com/news/business/articles/2018-02-06/quits-rise-at-fastest-pace-in-17-years-signaling-higher-pay



16%36%36%

0 20 40 60 80 100

4%

Neither satisfied nor dissatisfiedSatisfiedVery satisfied

Dissatisfied Very dissatisfied

9%

Survey Question: How satisfied are you with the return on your job advertising spend?

Only 9% of respondents are very satisfied with their job advertising spend

Source: HR.com 2018 How Does Your Organization Identify and Hire Great Talent? survey (n=553)

Finding: Few give high marks to their recruitment technologies

Technology is an area where most organizations see considerable room for improvement. Only about a quarter of participants said that their recruitment technologies meet their current hiring needs to a high or very high extent, whereas 46% said such technologies meet their needs to a moderate extent. Even worse, 30% said their technologies meet their needs to a low extent or not at all.

When it comes to investments in technology, a natural question is whether the data differs by size of organization. After all, recruitment technologies might be more important for organizations making many hires per year. It turns out that HR professionals from larger organizations (defined as 1,000 or more employees within the context of the survey) are more likely to say their technology meets their recruitment needs to a high or very high degree (31% versus 22% for smaller organization), but this still indicates much room for improvement among larger organizations.



0 20 40 60 80 100

Larger organizations

Very high/High

Smallerorganizations

29%

30%

41%

49%22%

31%

Moderate Low/Not at All

Survey Question: To what extent does your recruitment technology meet your current hiring needs?

Larger organizations are more likely than smaller organizations to be highly satisfied with their recruitment technologies, but they are almost equally likely to be dissatisfied

Satisfaction with Recruitment Technology, by Larger and Smaller Organizations

TA Practices Linked to Higher Organizational Success

To get an idea of how talent acquisition practices vary by organizational performance, we examined the data in terms of financial performance.

Finding: Stronger financial results are associated with key aspects of TA performance

We asked participants about how their organizations fared in terms of financial performance over the previous fiscal year compared to their industry competitors. We then looked at the relationship between talent acquisition practices and organizational performance.

Source: HR.com 2018 How Does Your Organization Identify and Hire Great Talent? survey: Larger Organizations (n=155), Smaller Organizations (n=358)



When it comes to quality of hire and organizational fit, organizations with better financial performance tended to far exceed those with lower financial performance. While all organizations can do better at time-to-fill, the most successful organizations excel at obtaining the right talent.

Although the study does not reflect causation, this finding seems logical. High-performing companies probably attract and retain better talent than other companies, and their business performance may well benefit from superior quality of hires—a kind of virtuous circle of organizational performance and recruitment.

We should note, however, that no group excels in time-to-fill. Even many of the best organizations appear not to have figured out how to speed up the hiring process while retaining quality of hire.

39%

66%

43%

27%

47%

39%

59%

24%

29%

23%

0

10

20

30

40

50

60

70

Quality of hire

Pool of qualified

candidates

Cost of hire New hire fit with the

organization

Time to fill a position

Below average performers Above average performers

Survey Statement: Please rate the overall effectiveness and efficiency of talent acquisition in your organization in terms of:

Time to fill a position remains a challenge for above average as well as below average financial performers

Percent that rated their organizations as excellent or good in the following areas, by financial performance

Source: HR.com 2018 How Does Your Organization Identify and Hire Great Talent? survey: Below average performers (n=59), Above average performers (n=160)



The Future of Talent Acquisition

Finding: HR professionals want improved speed, quality and productivity from AI

What can organizations expect in the future as artificial intelligence becomes more integrated into TA solutions? When asked what outcomes they would most like to achieve using AI, 57% cited the ability to fill open positions more quickly, while 51% want to spend less time sifting through resumes. But—and this is critical—they’re not willing to trade quality for speed. Notably, 54% want AI to help them improve the match between candidates and jobs.

In short, they are hoping that AI simultaneously can improve speed, quality and the overall productivity of the TA process.

0 10 20 30 40 50 60

Fill open positions faster

Improve match between candidates and jobs

Spend less time sifting through resumes

Improve candidate experience during the hiring process

Identify the best internal candidate

Reduce hiring regrets

Increase diversity of new hires

Reduce recruiting advertising spend

Prioritize open job requisitions

Reduce job offer rejections

57%

54%

51%

44%

39%

34%

31%

25%

18%

17%

Survey Question: If you had the opportunity to use AI in your organization for the purpose of talent acquisition and selection, what outcomes would you most like it to achieve?

Many expect AI to improve the candidate experience during the hiring process

Source: HR.com 2018 How Does Your Organization Identify and Hire Great Talent? survey (n=531)



Finding: HR professionals have high hopes for new technologies, which will help disrupt the TA function

Given the talent acquisition challenges faced by organizations today, we think it is likely that new systems and technologies will increasingly disrupt the traditional TA function in organizations. Already, new technologies such as AI and new processes such as recruitment marketing are starting to change the way employees are recruited. We expect these trends to accelerate in the near future.

In another research report by HR.com, The State of Artificial Intelligence in HR, about half of respondents predicted AI would be important or very important to talent acquisition in their organizations in five years. Moreover, when respondents were asked to select the areas where they thought AI had the greatest potential to improve the HR function in the next five years, 54% selected talent acquisition, more than for any other HR functions aside from analytics/metrics and time and attendance.

Similarly, 91% of respondents to another recent HR.com study, The State of Recruitment Marketing 2018, said that the future of recruitment marketing would become much more important (52%) or more important (39%) in the future. Half of the participants in that study stated that “artificial intelligence will play a growing role” in the evolution of recruitment marketing in the next several years.



Top Takeaways

What strategic and tactical lessons can we glean from this research? Here are eight key takeaways:

Conduct an audit of TA practices and success rates. This study indicates that for most organizations the status quo is not good enough. Analyze your organization’s performance in a range of TA metrics, including quality of hire, cost of hire and time-to-fill. Once you have an idea of your overall TA performance, determine what factors may be resulting in areas of weakness.

1

Keep an eye on wages and salaries, but don’t assume they are the only factors involved. Most organizations probably already have an idea of average compensation rates within their industries. Keep in mind that, although compensation rates are important, they are not always the determining factors when candidates select positions. It’s true that candidates may refuse positions that pay well below the mean for their industry and position, but candidates will examine a range of other factors. Employer brand and culture are often key factors. For recruitment experts, the goal is to show candidates that their organizations offer great opportunities.

2

Speed up even while increasing quality. Organizations generally take too long to fill positions, but how can they reduce time-to-fill without weakening quality of hire? One possible answer is to do a better job of locating and nurturing pools of qualified candidates. This will require organizations to engage with passive but qualified candidates who, although not actively seeking a new position, are open to interesting new possibilities in the future. This will require TA experts to master areas such as recruitment marketing.

3

Seek out the best technologies. Most respondents to this study are unenthusiastic about their current recruitment technologies. During the TA audit phase, determine what your organization likes most and least about its current technologies. Then find out what other technologies are available that might better suit the needs of your TA function. Keep in mind that TA is an area where there is much innovation thanks to new assessment instruments, artificial intelligence, social media apps and more. It can be difficult to understand and wade through all the emerging recruitment technology features, so find sources you trust that can help you cut through marketing hype.

4



Become more knowledgeable about AI and its role in TA. The technologies collectively referred to as “artificial intelligence” include solutions that potentially have the ability to speed up or streamline the hiring process even while boosting or maintaining quality of hire. For example, a good AI feature can improve candidate-matching and resume review in terms of both speed and accuracy, thereby contributing to reduced time-to-fill and fewer regrettable hires. In addition, the technology might be able to help personalize and enhance candidate experiences. In the near future, the trick will be to become a savvy consumer of technologies enhanced by AI.

5

Make sure top leadership is on the same page. Senior leaders often have the final say on issues such as culture, employer brand, salary levels and technologies. TA professionals and HR in general must communicate well and wisely with leaders about these issues. Leaders must be convinced that recruiting the best talent makes a difference and that investments in revised recruitment practices and systems are worthwhile.

6

Don’t forget the roles of onboarding, training and development. Successful hires are people who can integrate themselves into your company’s culture and operations, even if they don’t offer every skill or trait on your wish list. With so many organizations concerned about time-to-fill, waiting for the perfect candidate is sometimes self-defeating. Focus on hiring people who can learn to do the work with proper onboarding and training.

7

Make sure retention is a component of talent acquisition. Given the costs involved in replacing unsuccessful hires, the effort to keep employees on board should begin as soon as candidates are identified. Not only should organizations focus on identifying candidates with the needed technical skills and cultural fit, they should create the best candidate experience possible—one that is personalized and keeps candidates informed.

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About IBM Smarter Workforce Institute

The IBM Smarter Workforce Institute produces rigorous, global, innovative research spanning a wide range of workforce topics. The Institute’s team of experienced researchers applies depth and breadth of content and analytical expertise to generate reports, whitepapers and insights that advance the collective understanding of work and organizations. This paper is part of IBM’s ongoing commitment to provide highly credible, leading edge research findings that help organizations realize value through their people. To learn more about the IBM Smarter Workforce Institute, visit ibm.biz/Institute

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Documents

How Organizations Identify and Hire Great Talent