Are You Sitting On A Two Legged Stool?

Though this is going to sound contrarian, hear me out.  I believe many of today's HR metrics are deceptive when compared to more measurable and meaningful information.    Process efficiency, time and cost, seem to be the driving dynamics behind most metrics. What I don’t see as much of an emphasis on is the measurable quality of the work vs. the efficiency of it.

I would contend that “most effective” is a function of: time, quality, and cost.   (The three legs on the “stool” for those who don’t get my goofy titles.)The dynamics should be weighted differently for different roles, job families, and organizational levels.  I contend many lose sight of the quality part.  How quick and cheap can we turn around a job requisition and wipe it off the board is the focus.  (How do you measure your talent management people?  People perform to what they are measured.)  Though most will argue the quality factor, it is more about theory and pride than the ability to support the claim.  The challenge becomes how to measure the quality of a specific hire.  The scape goat is in the inability to measure coupled with what are “normative” practices.  The cold translation:  “I just do mediocre better than others.”  While it takes a bit more work to set up, being able to quantify quality of hire can be done.  As an example:

What is the value of a coder in hospital’s business office?  Sue is 20% more efficient in processing clean claims than Bill?  You have 8 coders in the department.  There is X amount of work.  How many Sues would it take to do the work vs. Bills?     What is the relative value of the performance differential?  You find that with 5 Sues you can do what it takes a department of 8 to do now?  You create a recruiting benchmark, integrated with selection/assessment tools, raise pay, say $10K more per person?  If the average compensation is $50K for the department of 8, or $400K, you raise it to 60K (20% more).  You have a motivated, effective workforce filling the function and for a total of $300K.  Your use of “metrics” or more correctly “measurement” just saved the organization $100K.  This is the kind of thing where HR can be a proven value vs. expense department.  My encouragement is to work to shift from a mindset of things like time to fill and cost of hire, to value of a hire… and be able to back it up.    I’m not contending you or anyone abandon other metrics, just don’t hang your hat on them too quickly as a quality measure.  Filling the organization with average quickly and cheaply is really not that impressive.  Getting rid of mediocre people costs much more than acquiring top-talent.

Here’s my biggest bafoozlement.  The greatest correlation of turnover/retention is the relationship one has with their boss.    Thus, the #1 turnover/retention strategy should be to have the very best leadership assessment/development/recruitment/selection strategy.  Right?

Pause for a second and consider that the turnover cost of a specialty nurse is considered to be $50K+.  A quick Google search puts one study in the $22,000-$64,000 range, depending on the factors you want to consider.   In speaking to one VP of HR recently, she reported their study attributed $13,800 as the average cost of turnover for all positions.  This averaged housekeepers to executives; all positions.  Regardless of the number, the math is always daunting.  Where the thought process breaks down is how it is addressed.

Take one multi-hospital system with 57,000 employees.  Do you realize that at 12% turnover (random #), that they have a $94M+ turnover cost for the system.  A 1% reduction in turnover is almost a $7.8M savings in a year.  If your organization has 1,000 employees, with 12% turnover, guess where $1,656,000 went last year?  (1,000 x .12 = 120 x $13,800 = $1,656,000 total turnover cost)  What was your facilities bottom line?  If you could craft and lead initiatives that would bring that to 10% next year, 8% the year after, a total saving of $828,000 could you get your CEO to buy off on spending $250,000 on “stuff” to do it with?  That leaves $578,000 as fudge factor for all the “arguable” costs of turnover.  I am confident, if the right CEO is leading, someone who supports a value-people environment, it would freak you out what you could do strategically with not a lot of $….some non-traditional things perhaps, but from a synergistic perspective…yep, pretty confident.  Multiply this up or down in comparison to your workforce and what do you find?

I was in college, doing and internship in the HR department of Wal-Mart’s top distribution center when I did my first turnover analysis.  It was obvious when there was a spike in one group vs. another.  There was some amount attributable to shift, but it wasn’t hard to isolate when there was a management problem.  Is it that difficult to do that today?   They addressed the issues.  And their turnover cost wasn’t near what a single RN or pharmacist is.

Ok, get to the meat, Don….Bottom line:  the most cost effective (expense prohibitive) practice is to recruit/develop the very best leaders possible.  Surely we can all agree on that.  Purely for speculative point here, let’s say each department director manages a 20 person department (credentialed staff with a turnover cost of $40K each).  10% turnover a year would be 2 people per year or $80K in turnover cost.  If 1 less person t.o. =  5%, 1 more = 15%.  That is a range of + or – 1 person, with an attributable cost range of $40-120K.

Aside:  Here’s the problem you are going to run into.  There is no line item on the income statement or balance sheet for turnover.  While it shows up in other costs, productivity, patient and physician satisfaction, it is a pseudo-nebulous thing lingering in the shadows.  Thus, in the heat of daily battle, it gets ignored.  Where is your value-add?  To many it is with their “stones”….in some fictitious place, if either actually exists.   While that may be harsh, running on auto-pilot or with the “average” is acceptable for some…not me.  In a competitive market, I consider life to be on an escalator: if you are standing still, you are going backwards. 

 

Here are the basics:

You have two situations in leadership today:

  1. Filled positions

  2. Vacant positions.

 

For filled positions:

  • Assessment:  What do you have today in regard to your leaders?  This has to be a top-down evaluative process.  This needs to have measurability…valid, reliable measurability.  Leadership competencies are measurable with both validity and reliability?  (longer discussion, but yes, they can be).  Where do your leaders rank on cognitive skills for those at a peer level nationally?

 

Aside:  It wasn’t my intention here, but is only fair to give a synopsis.  Most don’t realize with  testing/assessment tools with the validity and reliability coefficients to make meaningful predictive inference as well as be legally defensible, to access and utilize those tests require licensing.  At least a Master’s degree, an industrial/organizational psychologist is required.  This is to retain the integrity of the tests, how they are administered, etc.  Personally, I have partnered with a group of PhD I/O psychologists for this service.  In their 30 years, (testing/assessing leadership skills of thousands of individuals, have found 7 key dimensions as most

 

predictive when measured:

1.       Strategic Thinking Abilities

2.       Assertiveness

3.       Proactive Conflict Orientation

4.       Decisiveness

5.       Conscientiousness

6.       Goal Setting

7.       Task Orientation

 

(If anyone wants, I’m happy to send their white paper/report on the Seven Dimensions of Success.)

  • Top-grading or calibration as I’ve heard it called.  Basically, who are your A, B, and C players?

  • If you don’t have an organization that can buy into having A-players in every role, update your resume and find one.

  • Have a development plan for your A-players, B and B+ people.  Redeploy if possible your B, B-, and C players.  If there isn’t a role for them to be an A-player in, or there are unwilling, then work out the right exit plan.

 

For vacant positions:

  • What is your bench strength?  Really.  If you don’t have a true succession planning, leadership assessment and targeted development program, you most likely are banking on “potential”.  You owe it to yourself as well as the staff they manage to have an A-player in the role.  If they are a B+ with a specific development plan, ok.

  • Commit to an A-Player in every role.

  • Rottman’s Golden Rule of Leadership Recruitment: “Recruit only a boss for someone else as you would want your boss recruited.”  Think about this.  Do you want your boss to be that person you know isn’t ready, but is next in line?  Do you want the organization to go to the ATS and do a sorting and interview the best 5 you have in there and make a hire?  Where did they come from?  Why they were on a job board, your website:  Why were they investing their time looking for a job?  The reality is, you want the boss who isn’t looking; the one successful somewhere else, who if knew about this opportunity, could be interested for several plausible reasons.

    • Geography; closer to family, personal preference, better quality of life dynamic

    • Compensation: it could be a beneficial move for more $ in a time where many organizations have had salary freezes, they have kids about to go to college, etc.

    • Upward mobility:  They are in a larger environment in a #2 role, or a smaller one in a #1 role and this is the next step they have been ready and waiting for, but have focused on performing, not looking.

    • They are in adverse organizational dynamics:  This could be economic, could be culture of leadership, or the market.

 

FYI, by comparison to above,  if you call a Myers-Briggs or those kind of tools “assessment” for selection purposes, you are like a kid on Halloween getting  a book of matches,  powder keg, and “Pyromania for Dummies”.  They are good tools, but use them the right way for the right reasons.

The main point here is to understand the People Flow Continuum:  the life cycle of everyone as they come into and through an organization.  Recruitment à Selection à Training/Development à Motivation à Retention.  If you are ever going to maximize an organization’s value, you have to understand how this works sequentially.  

 

Statistically, forget your “exceptions to the rule” stuff.  You need to have a strategy and practice based on pragmatic norms, not exceptions.   Guess what, the roulette wheel falls on 23 red once in a while….are you going to put all your chips on it for one spin?  If in characterizing A-Players, their normative behaviors are NOT in actively looking for a job, what do you do?  Increase your prayer life is always a good thing, but isn’t the right answer here.  You either have a strategy to go directly to them, or you settle on the roll-of-the-dice and what everyone else is doing.

“Don, you are telling us to go use recruiters.  They are the most expensive, overpriced medium there is.  Most of them can’t even tie their shoes, let alone really provide value.  Retained?  HA! You really are a funny guy now.  We got burned once, won’t go down that road again.”  Translated:  We had a best practice model, but had the wrong service provider, so we won’t do that again, we’ll use the “other methods” and expect a superior result.

The short version:  If you have a leadership vs. staff role, it is more of a mind-set vs. skill-set search; leadership competencies applied to a specific skill-set or functional group.  The technical skill set becomes secondary in comparison to the leadership competencies.   While there is a place for both, contingency search and retained search are operationally very different.  Some of the surface mechanics may not be, but the analytics and art of it are.  The differences are much more than a fee basis.  While this is not intended to be a “how to” in regard to recruiters, you can find reasonable fees and structure basis from retained firms.  Be wary of the firm that will work for significantly less than the market; there are reasons.    Personally, I don’t want the discount surgeon working on my spine or working on a production line.   Work on flat fees vs. percentage basis, have accountability measure there to protect your relationship.  Communicate openly and be in partnership with the firm, not competition with it.

Social media, Linked-In, that’s great and all, can aid in targeting research, but there is still no more reliable, tried and true way of reaching A-players than picking up the phone and making the calls.  Direct, interactive recruiting and networking.  You can do it yourself.  It is the grunt work part of it, not pleasant for some, and likely why some break out in an anxiety rash.

Executive recruiters are hired guns.  You can pull the trigger and shoot the bullets yourself.  Call your competitors and poach their people.  That sits differently with different people.  However, when you engage a recruiter, you are paying them to do the same thing; it’s just seen as a nicer, friendlier way of doing it.  What else should you get?

  • Experience:  How many times a year do you do director to VP level interviews?  It shouldn’t be too often or you really do have a problem.  Being good at critical, evaluative interviews is a developed skill.  You do thousands of them, you hear things differently.  (FYI, behavioral interviews have become a crutch too, but that’s a different, too long, thesis)

  • Perspective:   If I am hiring for my own need, I am looking at how this person is a fit, how they fill my need….my need I want filled.  There is a component of objectivity which is psychologically lost.  It can’t be helped.  A recruiter, good one, (especially retained) should have a different critical eye/ear that is coming from more of eliminating reasons why the person is NOT a fit; then works through the reasons why they are.  This is a bigger factor than you may think.  It is one facet of fundamental attribution errors; a social psychology lesson.

  • Mediator:  Active listening by a third party, while not truly impartial, is able to be a function as a counselor through the entire process.  Relationship is developed with both sides along the way; listening, translating meaning, so the natural emotions of each side are diffused.  Counselor, not sales person is an experiential distinction.

 

Is this a guarantee you are going to get an A-player every time?  Heck no.  However, it gives you the greatest probability and best strategic approach to doing so.

The fees, Jerry, the fees….(ok, if not a Seinfeld fan…forget that).  If the cost of a retained search for a Director of Surgical Services costs you $24,000 and brings you a good “been there, done that leader” saves you a turnover differential of even 1 person,  with a turnover cost of $40,000, the net value difference is a $16,000 upside.  Was the search firm a cost or investment?  What about the surgeon that stays vs. leaves based on person A vs. B?  That may represent $2M+ in revenue, or brings more cases here vs. there?  (don’t make me find the research, but I do have it somewhere)

What‘s so wrong about using a best practice model first vs. last?  I’m not telling you to immediately jump in and retain a firm every time there is a position open.  Assess the role, the market, internal resources.   However, think beyond the surface, to the broader value proposition.  If you use a firm and it doesn’t “light your fire,” don’t throw out the right process; find another service provider.

In-house people:  Don’t get prideful, be strategic.  This isn’t a replacement of your role, your job, your function.  It is a specialty augmentation.   A leadership opening shouldn’t be an every-day thing.  The work involved, one person shouldn’t have more than 4-5 engagements at a time.  Mitigate your own risk (also known as CYA).  If your ATS, the postings and website flow, internal referrals are producing the people you are jazzed about passing on, then go with it.  Now think bigger for a minute.  Would you rather outsource one CNO search, or have 3 more nursing director searches and 10 other staff nurse positions to fill?  (Possible result of hiring the wrong person)  The right leaders make your job much easier and better allows you to focus on quality as well as just cost and time metrics.

Create strategy before it’s needed:  proactive vs. reactive.  You will operate from a different place psychologically.  In summary, effective recruitment is a function of time, cost, and most importantly, quality.   Make sure you know how to measure what you do.   Quantifiably support strategy beyond surface validity.  Think “quality” along with time and cost:  the third leg on your stool.

 

Don Rottman

don@rottmangroup.com

501-228-4433

Bonus example to ponder:  (It’s free)

Case study.  For the sake of free extra information:

Recently I had been in conversations with a corporate VP of Talent Acquisition of a large, multi-facility healthcare organization.  We were speaking about the importance of a few critical roles for the company at each facility.  When we spoke about comparative expectations, he had an in-house contract recruiter who was doing 8-10 of these placements per month.   Mind you, I’m all for efficiency, but there was no way I could do that.  I went back and did a time study on each facet of a leadership search.  I assigned a low, medium, and high value to the following:

  • Engagement specifications

  • Assemble organizational information

  • Assemble community organization

  • Write position overview

  • Assemble research

  • Sourcing

  • Candidate work

    • Initial contact

    • Phone interview

    • Interview evaluation

    • Reference authorization

    • Reference checking

    • Background summary written

    • Client interface

    • Candidate interface

    • Offer negotiation

    • Follow up

    • Miscellaneous

    • Written references for finalist

    • Offer and follow up

 

On the lowest side, and this is with minimal sourcing time spent, more of an ATS search/sort approach, and an overall hurry up quick job, 40 hours.  At the moderate or average, 90 hours, and on the higher side, 147 hours.   The company has 20%+ leadership turnover of its two key roles at each facility.  The staff turnover is even higher, though it is less than it was at one time.  They have implemented targeted selection.  For the $10,000 prize (and it is only monopoly money, and likely even just a photocopy of that), what is missing here?

  • At the 40 hour rate/search, working 60 hours/week, at most could fill 6 positions.  This means, in my opinion, (because I never got a comparative breakdown and I sent mine) that there are corners being cut in the process.  One area is likely the sourcing.  The candidate pool was whatever was coming in via job boards and the corporate recruiting site, which itself was arduous to navigate if you were a potential.

  • When you invest first in targeted selection, or behavior based interviewing, any kind of selection system, but don’t start first with recruitment….the gathering of the best candidates possible, what you have done is create a system where you are spending your time and $ selecting from a less than optimal candidate pool.  It may help you know who is the best of that group, but the bar is neither objective, the measures scientific, or the pool of people the best available in the market.  The result is marginal improvement, but much less than what it could be, improvement.  Monies were not maximized.

 

From a diagnostic perspective:

  • The VP of Talent Acquisition was relatively new to the company.  The company had done well to value and create the role.  I give them credit for that.

  • The person recruited came from outside of healthcare.  The company he came from, was an industry and persona that did bring a plethora of qualified people to their door via their website and other sources.  Very different value dynamic than the new company.

  • He was up to his eyeballs.  Internal recruitment staff formation and development, ATS system selection and implementation, targeted selection training and implementation nationally, etc.

  • His predominant focus, when it came to contract or outside help was purely cost and time.  How many positions filled in what time frame?  That was it.  Someone could do it, I couldn’t.

  • They had no way of measuring, creating a ranking system for performance measurement.

  • Unless you integrate selection systems into the recruiting process sooner, the candidates that make it to “the field” for interviews are not your best screened candidates.