What are we dealing with?
We've kicked off 2023 with more than our share of challenges. Double-digit inflation, high interest rates and stagnant wage growth exacerbate issues linked to the Russian invasion of Ukraine, which has curbed supply chains, driven up the price of core utilities and constricted the spending power of working people. The cost-of-living crisis is (not unexpectedly) impacting candidate motivations as well as raising operating costs for businesses. Prices are going up across the board, but salaries are not. The public sector is likely to see an average pay increase of 2% this year (against a 10.1% inflation rate) and numerous pivotal services (health, education, etc.) are taking unprecedented levels of industrial action.
According to the most recent CIPD Labour Market Outlook Report (Winter 2022-2023) over half the employers surveyed (across all sectors) reported hard-to-fill vacancies, one short-term solution of which involves increasing the duties of existing workers and spreading them too thin, while repeatedly going to the market for candidates. This incurs significant cost, drives down productivity and creates a wellbeing risk that will lead to higher rates of staff turnover, either through natural migration or through redundancies, as rising costs and shrinking outputs challenge employers' ability to preserve jobs.
The labour market remains tight, which means opportunities are plentiful, but candidates are not. This scarcity of talent puts the negotiating power in the hands of applicants who, coming out of the pandemic, have different expectations about how they do their jobs and how they are rewarded for them (read our Whitepaper on this topic which can be found here. Those with the strongest profiles are often considering multiple opportunities, negotiating more favourable terms with employers fortunate enough to haggle, and withdrawing from less-competitive recruitment campaigns at short notice. It creates a confluence of challenges that adds to the already cluttered agendas of organisations who are fighting for growth.
Economic pressures strike from all angles, encouraging haste in recruitment processes. This compromises quality and inflates the cost of what is already an expensive process (and that's when the hire is a good one!). To be successful with a recruitment campaign, especially at a senior leadership level, an understanding of the market is essential. Posting a vacancy unchecked increasingly means that businesses (especially SMEs) are either inclined to settle for second best, or else fail to generate a competitive field, and sooner or later, are forced to repeat the process. Too often, the aggregate costs of recruiting the wrong people are overlooked because they aren't immediately visible, but they are substantial, and go straight to the bottom line.
At any level, recruitment is a strategic investment, and we have to get it right. This means understanding how a role marries with organisational strategy and then crafting a focused job description that is needs-based and outcome-focused. Next, that proposition should come to the market as part of a clear and compelling campaign, one that enables candidates to visualise themselves in both the job and the business.
Adverts alone are simply not enough, you have to engage with your potential buyers directly. You have to persuade them.
Successful hires are ones whereby a solid connection has been made, where a partnership has been formed under the banner of shared intentions and mutual benefit. This connection is not only crucial for the long-term success of the business, but for growth within the economy also, as placing the right people in the right roles is a major driver of national productivity, worth approximately £7.7bn for the UK (Recruitment and Employment Confederation, 2021).
'People' determine the success of organisations and short-changing the procurement process can lead to placing the wrong ones (which is worse than finding no one at all).
The substantial cost involved
There is a wealth of literature available that sets out the impact of recruitment, good and bad. Poor recruitment practice costs UK industries over £2bn annually, a calculation that is based on a broad set of measures that businesses seldom consider in monetary terms. The Recruitment and Employment Confederation position the cost at 4.7 times the salary within the first 28 weeks of employment. This means that a £50k role incurs costs of approximately £177,500.
These costs go beyond the initial outlay of the time and administrative resource it takes to craft a job description, post an advert, and organise shortlisting and interviews. The amount businesses spend on recruitment will vary depending on the seniority of the role, the availability of complementary skills in the marketplace and the 'readiness' of the candidate to undertake the job. That 28-week benchmark refers to the average time it takes to onboard a new leader to a sufficient level of proficiency that the business can start recouping the costs of acquiring them. Meanwhile, the organisation must be prepared to absorb losses through reduced productivity and the impact of occasional missteps. And this is true when the hire turns out to be the right one. It's the lowest cost impact any business can expect to incur.
When the hire turns out to be the wrong one the impact is not contained to the aspects above; it is felt in other (far riskier) areas, such as:
Culture:
One of the biggest reasons for staff turnover is poor leadership. An incompetent leader, or one with the wrong behaviours, can exert a toxic influence over organisational culture whether they mean to or not. It has a direct impact on the morale and engagement levels of their team and the teams around them. Other workers lose trust in the senior leadership and their ability to make the right decisions for the business; they grow disenfranchised and dissatisfied and as a result are less committed. Poor strength of leadership puts pressure on teams to undertake tasks beyond their remit, which affects their wellbeing and fosters resentment. Invariably, team members seek new roles; they depart the business taking their expertise with them, leaving other hard-to-fill gaps in their wake (which brings fresh costs).
Brand Advocacy:
The workforce is the largest advocacy base a business has to promote its value and values. The power of a strong brand creates gravity both in terms of customers and prospective talent. Dissatisfied workers do not good advocates make. Negativity is a repellent that can result in lost business as well as making it increasingly difficult to replace them if (and when) they leave. There is no shortage of vehicles through which disgruntled team members can air negative views; when seen by others, these sentiments quickly misinform readers that this is not a company to do business with or for.
Lost Productivity and (More) Lost Business:
Underperformance is a drain on resources. It diverts attention away from more important matters. Even a good hire impacts the productivity of those around them, but a person with little drive to be successful can bleed teams dry. Unresponsiveness can lead to business opportunities slipping away; a lack of attention to detail can lead to erroneous pitches that skew the opinions of prospective business partners and a lack of quality leads to shoddy standards, which affects customer perceptions and profitability.
An organisation can experience one or all of these additional impacts in the first months of securing a poor fit for their business. The quality of recruitment practices should therefore have a firm place on the risk registers of all organisations because we know the impact of getting it wrong is severe. When, after 28 weeks of drain, the bad hire leaves the business (most likely via dismissal) the process will be repeated, and that minimum cost is added to an already hefty bill all over again.
Why we get it wrong, and how we get it right
Here are five of the biggest pitfalls facing in-house recruiters, and how to begin avoiding them. It's a high-level view, but awareness and acknowledgement is the first step toward resolution:
1) Too many recruitment campaigns are reactive instead of proactive. The size of the investment is often not appreciated and so recruitment takes a back seat to myriad other operational priorities, diminishing the margin of return. Speed undermines quality, therefore it's imperative we don't succumb to the lure of haste. Effective recruitment - particularly at a senior leadership level - is a project to be managed like any other, only more important. Too much haste largely means the right candidates are overlooked in favour of the most available ones, and when quality suffers, so does everything else.
2) Frequently we undertake conversations with employers who describe advertising roles they cannot fill and frequently we find the proposition itself to be misaligned with the market. When the labour market is tight, candidates hold the power, and they are weighing their options carefully. Bringing an opportunity to market unchecked increases the risk of failure. Undertaking research, or engaging a third party to do so, may seem like an unwarranted expense at first, but it will be far more cost effective in the long run as it strengthens the likelihood of success.
3) Cumbersome and overly prescriptive job descriptions are a turn off and adverts that re-hash this content are unlikely to resonate. Candidates cannot get a feel for their fit with our values and mission from a paper exercise, just as judging someone's CV alone offers - at best - a two-dimensional view of them (and often serves only to assess their ability to write a good CV). We know that language is crucial: terminology with an overly masculine tone for example will discourage applications from female candidates; crafting JDs that garrulously list every input of the role (like an instruction manual) alienates those with neurodivergences. Appealing to individual strengths and focusing on what the role aims to achieve (not what it does) is a far more engaging proposition and increases our chances of landing a whispering talent (i.e., someone amazing you might not otherwise have considered).
4) Engagement is key. If we agree that the successful outcome is a thriving relationship, we need to know the people we're interviewing are viable contenders. Technical skills and past experience are just one aspect; we have to assess the intellectual and emotional quotients also and give candidates an opportunity to conduct the same assessment of us. This is fundamental to a positive candidate experience. The quality of engagement is a make-or-break factor for both sides.
5) Lastly, we need to ensure the process is as bias-free as we can make it. Challenging our assumptions about what constitutes the 'right fit' is a healthy exercise in exposing this bias. When we close the door to candidates outside our industry, or those with unconventional career paths we limit the strengths base of our potential talent pool and close the door to diversity in the process. Cognitive bias and unfounded assumptions about different profiles mean we repeatedly hire ourselves, and therefore fail to stimulate growth. We review CVs and make snap judgements (like or dislike) then lean into confirmation bias to validate our assumptions rather than taking an objective view, and too often our egos lead us to employ people who are not as good at us, lest we feel threatened. Working with an objective external partner can help massively in combatting this, (and all the points above), as can shifting the focus away from conventional assessment criteria or approaches.
Conclusion
REC statistics show that UK businesses fail to hire the right person for 2 out of 5 roles (this applies to all levels of seniority) despite the much-documented costs of getting it wrong. Getting recruitment right is crucial at times of economic uncertainty as hiring the right people into the right roles is one of the single most important aspects of facilitating growth.
The COVID-19 effect has drastically altered the landscape, and it continues to evolve. We can already see that the volume of opportunity has increased in no small part because businesses are now less inhibited by factors like geographic proximity. Cost of living impacts mean that candidates are more attuned to the value of remuneration packages (not just the salary) and the flexibility of employers to facilitate balance between personal and professional priorities. There is a migration taking place, whereby candidates once long committed to their sector are seeking a better deal in new, more appealing climes.
We're no longer in an environment whereby employers can work on the premise of 'if we advertise it, they will come.' Candidates want to be clear on where their incentive lies.
Experience, purpose, remuneration and cultural alignment are the principal considerations for active and passive job seekers, so our proposition and our process need to be right. They need to be competitive or else our business is throwing money away. Reviewing in-house recruitment strategies in light of these insights is important. How well does your strategy align with the 5 points above?
However, businesses should also weigh the cost of working with an agency partner to get these aspects right on their behalf, against the costs of getting it wrong. They may seem high in the moment, but one approach is definitely more cost effective than the other.