In the July 23, 2019 Ask The Headhunter Newsletter we take a look at how HR actually spends money to recruit the talent — or not.
In a recent column (10 reasons your company’s HR can’t fill jobs) we discussed how HR organizations bungle recruiting and hiring — when they have massive resources at their disposal. Reader David posted a comment and some questions that have nagged at me ever since. Why does HR reinvent the wheel every time it needs to fill a job?
HR is paying for an ATS [applicant tracking system] to store/file what’s coming through the pipeline. They are already sitting on a pile of resumes. Why not just turn the spigot off, and contact the people you already have in your pile?
Or worse yet, HR engages so-called third-party recruiters or headhunters who present the same people already in your database. I’ve had stuff like this happen to me before. I apply directly and interview for job X, but don’t get it. Later, a third-party agency comes knocking, asking if I’m interested in applying for the same job at the same company!
In other words, if you fill a position, you likely had people that were runners-up and could have done the job nearly as well as the person you hired. When you have another opening for the same role, why not call those people? Why not give them first crack at the job before you pay money for yet another job advert and waste time (we know that time = money) screening a new batch of people?
I’m not necessarily sticking up for ATS usage here, just so we’re clear.
I don’t read your suggestion as an endorsement of ATSes, resume databases or automated recruiting. You’ve cut to the core of what hiring should be all about: relationships between employers and people (aka, talent). Let’s look at why HR wastes good job candidates it has already met.
Personal contacts are a valuable asset
Whether these candidates arrived through an ATS, a third-party recruiter, or a personal referral, we’re talking about a special set of people: those who were judged worthy by the employer after interviews and assessments. That is, these are all now “personal contacts” — people the company knows, who are pre-screened, vetted, and somehow qualified.
In other words, unlike unknown people, they are already deemed good candidates for jobs at the company. That’s an asset worth a lot of money. After all, virtually every hiring survey ever done tells us that most jobs are found and filled through personal contacts. Every candidate a company meets is a new personal contact that it has already paid for. So your question should rattle every corporate finance executive: Why do companies pay again and again to hook the same fish and throw it back into the water?
What’s a personal contact worth?
I’ll let you in on a little secret about the dollar value of personal contacts. When headhunters find good candidates for their client companies, they stay in touch with those people even if they’re not hired. Having already invested in getting to know them, headhunters know these candidates are incredibly valuable — not just as potential placements at other client companies, but as sources of other good candidates.
When a headhunter gets paid $25,000 to fill a $100,000 job, a good-but-rejected job candidate is likely to be worth at least that much money on another assignment. These are people the headhunter keeps close for years to come. The headhunter will bring other opportunities to them, and even do favors for them when possible, to foster good relationships that are likely to pay off later — whether as placements or as sources of referrals to fill other assignments. One well-cultivated personal contact like this can be worth $25,000, $50,000, or upwards of $100,000 in future fees. (See Good Headhunters: They search for living resumes.)
HR: People are a fungible commodity
I suspect that because HR managers and internal recruiters are not paid like headhunters, for actually filling a position, those personnel jockeys aren’t concerned with maintaining relationships with good candidates. Does HR even know whether a hiring manager judged the person a good candidate before hiring someone else?
Because HR’s recruiting model depends on an automated system that delivers scads of new applicants every day, HR is not so concerned with tracking who it doesn’t hire. HR views job applicants as fungible, or interchangeable — and easily replaced.
While HR might pay a headhunter $20,000 or $30,000 for one hire, HR doesn’t see the potential future value in the other good candidates HR interviewed but didn’t hire. There’s no money to cultivate professional connections, but there’s always money to buy more resumes.
Why recruit again and again?
Over 15 years ago I met with top executives at two different companies — major players in their respective industries. They were independently interested in my suggestion that they make better use of time and money they had already invested to recruit, interview and assess job candidates who were qualified — but whom they could not hire. That is, these were surplus job candidates. They were worthy of serious consideration or worth hiring, but someone else was hired instead.
I pointed out to these executives that, when they have already spent a lot of money to recruit people, they should get the full return on their recruiting investment (ROI) by using smart methods to stay close to such good candidates. I offered to help build ongoing relationships with the best candidates without spending money to recruit them again.
The idea is simple, and it’s basically what you’re suggesting. Rather than reinvent the wheel every time a new job needs to be filled; rather than spend funds soliciting new resume submissions; rather than review thousands of unknown applicants (directly or via third-party recruiters); why not go back to candidates you’ve already interviewed — candidates you know? Why not turn to people you have already assessed as good candidates, but could not hire at the time?
The challenge, of course, is how to track and stay close to good candidates you don’t hire. That’s what I was selling. Neither company understood the value. In a moment, I’ll tell you more about what happened.
I finally gave up trying to explain recruiting ROI to employers after one of my clients hired me to train its internal recruiters (who worked in the HR department) to “do it like a headhunter.” The recruiters understood everything I taught them about getting close to their candidates. But their HR boss — who paid me to do this training — wouldn’t let them practice what they learned. He didn’t want them spending time building relationships. He wanted them to process the newest batch of incoming job applications from the company’s latest job postings.
Of course, some new jobs really do require finding talent you’ve never encountered before; that’s a given. But it’s certainly true that people who impress us are valuable people to stay close to. The excuses employers offer for failing to keep good talent close are astonishing.
- That’s not how we recruit.
- Our ATS doesn’t support it.
- We don’t have time to stay in touch with people.
- Resumes have a short lifespan — a few months later, they’re out of date and thus worthless.
- A year, or even a month, after being interviewed, a candidate’s employment status could change.
- They might not be interested.
- They might take another job.
- They might have moved or retired or otherwise be unavailable.
HR: Relationships don’t apply!
But the simpler answers to my questions are painfully obvious:
- HR is not compensated for cultivating relationships, only for processing applicants.
- HR is not compensated for filling jobs, but mainly for interview transactions.
- HR has a budget for job boards, but not for staying in touch with good talent.
- HR does not fully exploit the single largest channel of good candidates — personal contacts — except with paltry employee-referral programs.
- HR metrics do not capture the value of relationships, only the degree of matches between keywords on resumes and job descriptions.
- There is no personal “high touch” protocol for developing relationships and personal contacts in the employer’s professional community.
- HR relies almost completely on job boards, ATS vendors, and third-party recruiters that make money only when HR keeps paying to search for job candidates again and again.
In a nutshell, HR doesn’t actually recruit, catalog or pursue the best talent. (See HR Managers: Do your job, or get out.) HR pays to churn databases again and again for quick keyword matches.
Talent is not treated as a long-term asset to be held. Instead, people are reduced to job applications and resumes that are traded back and forth on job-board exchanges like commodities, or why would employers pay daily to sort through the same millions of resumes that their competitors repeatedly search?
HR technology vendors control recruiting
The problem is that the dominant hiring model peddled to HR by job-board and ATS providers — and accepted uncritically by HR — is high-volume automated keyword matching. In other words, high-profit, rinse-and-repeat database services. (See HR Technology: Terrorizing the candidates.)
This churn-and-churn-again model of recruiting is controlled by HR technology vendors. And it is perhaps best exemplified by the manager at a Fortune 50 company who complained to me that he couldn’t get a few bucks to take good candidates out to dinner to recruit them. Why not? Because the big job boards and ATS firms wined and dined his company’s executives to ensure the entire recruiting budget was spent on job boards and ATS services.
If the potential future value of an individual job candidate actually mattered to HR, every applicant would receive a nice note after applying. We know that doesn’t happen because, why bother? There are 100 million more in the database where that one came from. Job applicants are fungible. Who cares about staying in touch with them? We can pay to access all of them anytime!
Our HR isn’t set up to operate this way
So, what happened with the two companies that considered my suggestions about protecting their recruiting ROI by fully capitalizing on good candidates they did not hire?
It was Company A’s V.P. of Public Relations that initiated this discussion with me. She believed building solid, long-term relationships with job candidates would be a good way to enhance the company’s “presence” in its professional community, as well as a good public relations story to help it stand out in general. However, the V.P. of HR squashed the idea because “Our HR isn’t set up to operate this way.”
At Company B, it was an innovative HR manager that wanted to implement methods I had suggested to cultivate and track good candidates that managers had interviewed and liked but could not hire. When time came to execute a contract to develop a program, the company’s legal department squashed it because it had no precedent on which to base an agreement. The HR manager gave up. “We don’t do relationships.”
In both cases, one thing was clear: Recruiting and hiring the best talent was not the mission. Adhering to the status quo was paramount.
Why not turn the spigot off?
Reader David asks, “Why not just turn the spigot off, and contact the people you already have in your pile?” It’s a good question, and it shines a bright light on the dizzy dance of musical chairs that HR calls recruiting — if we might mix metaphors.
Every time HR finishes with a job candidate it does not hire, it wastes time, money and talent when it does not cultivate a relationship to keep the talent close. Should an employer look first at all candidates that it paid to recruit last time, before it pays to recruit again? That’s a bit dicier because a company doesn’t assess (or interview) everyone it recruits, so it doesn’t have judgments — or personal knowledge — about all of them.
I’d be happy if employers fully exploited their contacts with people they already know. This includes anyone and everyone they do business with, including current and past employees! Where do you think we headhunters look to find many of the candidates we present to our clients? We don’t turn on a fire hose; we’d drown.
Why keep screening new batches of people?
What does HR learn after interviewing and rejecting loads of people for a job? What company conducts an outcomes analysis after recruiting for a position? Do companies ever catalog and cultivate the best candidates they meet? Echoing reader David, why do employers keep screening new batches of people when they likely have good candidates in their surplus pile? It seems they do it because they can, and because they don’t know better. (See How HR optimizes rejection of millions of job applicants.)
HR should capitalize on its investment in recruiting, interviewing and assessing people it judges worthy of serious consideration or worth hiring — even if it doesn’t hire them. Paying all over again to search for candidates with every new job opening benefits no one but job-board and ATS vendors who, as we’ve already pointed out, make the most money when employers keep going back to search again and again. That’s what outsourcing recruiting is all about — paying for repeated access to databases and keywords, and avoiding taking people to dinner to forge long-term professional relationships and personal networks that can pay off again and again — for the employer.
Is it smarter for employers to collect and cultivate relationships with the best talent? Or to advertise anew each time they need to fill a job? Are there any employers out there who stay close to good candidates after interviewing them? How do you do it?