Talent Acquisition: Operating expense or source of revenue?
September 20, 2016
At a recent client meeting, I heard the SVP of HR say something that has been resonating with me ever since. “If I could stop the business from focusing on cost and process and instead talk about recruitment in terms of revenue contribution, our lives would be so much easier.”
Simple but profound and, I think, illustrative of a turning point within our industry. Many talent acquisition and talent management professionals are beginning to see recruitment through a new lens, one that focuses on what an investment will bring to the business rather than what it will cost it. While this statement rings true within some organizations, I am well aware that it is not the case everywhere.
Motivated by the promise of cost savings, many large businesses have adopted a centralized recruitment model which, in turn, reinforces a focus on cutting costs. Whether in-sourced, out-sourced, or some combination of the two, these centralized delivery models share a set of common features aimed at reducing spend.
- An applicant tracking system
- Sourcing strategies focused on the direct deployment of the brand that drive traffic to a careers page through traditional channels as well as newer channels like social media
- Recruiters that are managed to varying rates of productivity and performance
- Increasingly lower cost locations, be that on-shore, near-shore or off-shore, used to maximize labor arbitrage in line with operating requirements and corporate guidelines
Centralization has brought a number of advantages to organizations that have embraced and invested in direct hiring, including reduced agency usage, greater focus on employer brand, and a more consistent candidate experience. In many cases organizations have realized a distinct competitive advantage in the pursuit of great talent, but the risk remains that they will cut their way to a lower quality of hire over time. For the most part, cost management remains a significant, if not the primary, KPI for the talent acquisition function.
At a time when CEOs continually reiterate how an organization’s people are its greatest asset, why do HR functions continue to focus on cost?
You could argue that HR systems have not been able to effectively capture the information needed to measure an employee’s value and, looking back, you would be right. While organizations may have wanted to accurately track and measure employee performance from attraction and hire through to off-boarding, it would have been difficult to do so in a meaningful way.
That’s about to change. The emergence of new technologies is changing our ability to capture and track talent data. The way we attract, deploy, develop, retain and reward talent is about to be revolutionized; soon we will be able to measure talent based on revenue not cost.
Companies looking to harness the potential of these technologies are investing heavily in HR technology. Eighty-eight percent of respondents in the 2015 KPMG HR Transformation Survey said they planned to spend the same amount or more on HR technology and systems in 2015 than they did in 2014. Additionally, organizations are replacing their core HR management systems more frequently than ever before — every three to five years versus every five to seven years as they have done in the past.
Some of these technologies leverage predictive analytics to accurately forecast how a candidate will fare in a particular role. Korn Ferry’s Four Dimensions of Leadership and Talent assesses both what a candidate can do (skills and experiences) and who they are (traits and drivers) to predict performance.
With these technologies, talent acquisition teams will be able to better measure quality of hire and to then link quality of hire to organizational performance. For example, when hiring a sales professional, they will soon be able to answer the following questions.
- What characteristics make a high performing sales person in our organization? By how great of a margin do they outperform their peers?
- How can we accurately assess for those characteristics throughout the hiring process?
- What factors should we assess during the interview process to ensure accelerated speed to contribution?
- How likely is it this individual will stay in our organization for more than 12 months?
- How likely is that individual to be promoted in the next 3 years and what is his or her leadership potential?
HR should strive to produce this type of data if it wants to change the conversation on talent acquisition and, ultimately, shift its role from support function and cost manager to strategic partner and revenue generator.
This change in approach requires talent leaders and heads of HR develop their financial acumen and business savvy. If they are to fight for investment dollars, in much the same way the CIO and COO do today, they will need to demonstrate in quantifiable terms the return on investment from talent acquisition and talent management initiatives.
Organizations looking to see this transition through, should consider the following steps.
- Invest in HR technologies to measure and track metrics with strategic value.
- Attract and develop the talent within HR to ensure they have the commercial acumen required to be an HR leader in today’s data-rich world.
- HR and talent functions should invest in the role of a business analyst to ensure investments are being monitored and measured with the same rigor as those in any other business function are.
- Talent acquisition teams need to shift the paradigm on how they measure and reward success, updating KPIs and SLAs to incorporate measures of quality and revenue impact.
It all begins with a conversation about the potential of HR technologies to reveal HR’s strategic value. With the ability to measure and track metrics tied to the overall business strategy, talent acquisition teams will be able to show how they can move the needle on both the top and bottom lines.