It is no secret that the current unemployment rate is extremely low. In answer to the scarcity of available candidates, organizations around the world are spending more money, time and resources on recruiting activities than ever before. To fill an unskilled position, the Society of Human Resource Management estimates that employers spend an average of $4,000. For skilled and leadership positions, you can expect to spend around 30% of the position's salary (E.g. A manager who earns $120,000 would cost around $36,000 in recruiting and hiring expenses).
With these rising costs, and the low unemployment levels in the US, many organizations are spending their resources trying to ‘hack' the recruiting game. The mentality has become that we are in a “War for Talent”.
Organizations are becoming increasingly aggressive about building talent pools and recruiting passive candidates… They spend thousands on Candidate Relationship Management (CRM) applications and recruiting fairs in order to attract and recruit as many qualified candidates as possible. This is akin to the mentality of the children’s game, “Hungry Hungry Hippo”. Everyone is trying to capture as many balls (candidates) as possible before the others.
The Hungry Hippo Mentality
In the game, players each have a hippo, that hippo can capture balls that rest in the middle of the board. Each hippo has a side reserve where the balls are stored. Whoever captures the most colored balls when all of the balls are gone, wins the game. The ‘War for Talent’ has started to look a lot like Hungry Hippo.
Organizations are recruiting constantly, managing their brand and building talent pools. These talent pools are like the reserve in the hungry hippo. The idea is that if the engaged candidate is in the talent pool, employers can then pick and choose more discriminately when they have a need. Sounds great in theory, but if this is the only approach an organization is taking towards managing their human capital, they will come up short long term.
Think about it.
What is the purpose of recruitment and hiring? To meet a need.
The perceived lack of available talent has created a starvation mentality among organizations that has led to the frantic grabbing of the Hungry Hippo Mentality.
It is important to remember what the true goal of these actions are: to find a person who can meet a particular need of the organization, which will ultimately allow the organization to pursue it’s larger goals.
The Other Half- Recruiting Internally
The current approach organizations have towards talent is not going to work long term. The solution is bipedal, and the Hippo only puts one leg to use. Hippo only focuses on external talent. This is the result of an implicit assumption that the person who can meet the need of the organization resides outside of the organization. In reality, the person you need may be sitting in the office next to you.
With so much focus on snagging as many external candidates as possible, organizations have lost sight of the resource they are spending so much time and money cultivating: internal employees.
For most positions, the chances are good that there is an existing employee who would fit the role. Organizations who do not consider their own people are shooting themselves in the foot in three ways.
1) Financially - It costs more to bring people in from the outside. Both in terms of recruiting costs and salary costs. Studies show that it can take internal hires seven years to earn what external hires make.
2) Time and Performance- Insiders are learning a new job. Outsiders are learning a new job, new people and a new culture. It takes them almost 3 times as long to get up to speed as an insider. Further, it is more difficult to determine the true skill and experience level of an external candidate. With an insider, you know exactly what you are getting.
3) Retention- Per the Bureau of Labor Statistics, 95% of jobs posted are filling existing positions. Most of those are a result of voluntary turnover. Reduce employee turnover, reduce positions to fill.
Recruiting from within an organization aids retention. When an internal employee is hired for a new role, that action can strengthen a sense of loyalty and commitment in not only the promoted/hired employee, but also other employees who witness it. When organizations hire too frequently from the outside, internal employees take notice.
Employers must remember that the ‘Grass is Greener’ mentality applies to both sides. Consider that the average internal employee’s annual raise tends to fall around 3%. When an employee leaves an organization, they tend to increase their salary by 15-20% in their new role. By recruiting and hiring primarily externally, employers are showing their existing employees that their best chance at furthering their career is to leave. Conversely, promoting and hiring from within builds a reputation of opportunities for career growth and development.
“But we don't have who we need in house!”
Organizations who consistently find they do not have the talent they need should take a good look at their training and leadership development initiatives. Building talent, as opposed to buying talent, can better position organizations to meet that ultimate business need at a more effective cost point. Short term T&D costs provide substantial returns by lowering turnover and reducing recruiting costs.
Employee development doesn’t have to be expensive. Consider stretch assignments and cross training as opportunities to help employees grow. Keep in mind that delegation is the cheapest form of development. Employers’ ultimate goal should be to help employees grow out of their current roles, and into new ones in the organization.
Bottom Line: Beware the Hungry Hippo and check the pantry before you go to the grocery store. There is a good chance that you already have the ingredients you need.
Employers who only look externally to build their talent pipeline are missing a valuable opportunity to harness internal talent- while simultaneously reducing turnover and recruiting costs.
https://executiveeducation.wharton.upenn.edu/thought-leadership/wharton-at-work/2014/06/cost-of-hiring-leaders/
https://hbr.org/2019/05/recruiting#data-science-cant-fix-hiring-yet
https://www.shrm.org/about-shrm/press-room/press-releases/pages/human-capital-benchmarking-report.aspx
https://hrforecast.com/ - Future-proof your workforce with smart HR tools.