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Skill-based Recruiting Saving Time, Energy, and Money

Skill-based recruiting has already become a buzz phrase in the HR world. It can be defined as a new recruiting approach by which candidates are assessed according to their skill sets. After all, a person’s skills — whether they are professional, academic, interpersonal, and more — are the very tools that enable him or her to perform certain tasks and to behave in certain ways.


The strength of skill-based recruiting lies in its simplicity; the specific skills of a candidate are matched with the requirements of a specific requisition. Also, skill-based recruiting allows recruiters to maintain accurately a short list of qualified candidates in an efficient and hassle-free manner. In order to save time, energy and money, the recruiting industry is moving away from traditional resume-based recruiting — which entailed OCR, text extraction and analysis, and unreliable keyword searches — to a more efficient recruiting approach: skill-based recruiting on the Internet.


Skill-based Recruiting and the Internet


With the rapid evolution of the Internet, skill-based recruiting is booming. This is thanks to online questionnaires, which make it easier than ever before to obtain skill sets from applicants. The recruiters can tailor the online questionnaires to detect the required skills, to meet the exact needs of a company, position, or requisition.


If the Internet helps recruiters to perform skill-based recruiting, it also simplifies job seekers’ lives by making the application process as easy as 1, 2, 3. Good news! With an easier application process, each posted job may receive hundreds and even thousands of applications. But now, how to find the needle in the haystack? Thanks to automated pre-screening, the latest feature in skill-based recruiting, applications are automatically filtered, saving the recruiter days and sometimes weeks of analyzing paper resumes. The ones matching criteria predefined by the recruiter are short-listed while others are kept in a central database for future needs.


recruitsoft.com: the Pioneer in Skill-based Internet Recruiting


The Recruiter WebTop — developed by recruitsoft.com — is the first to offer an enhanced skill-based, pre-screening pro-filer. In designing the Recruiter WebTop recruitsoft.com focused on streamlining and improving process quality by assessing skills. Customized questionnaires for each job requisition are linked to a central database for the corporation, which may include skills and competencies, levels of experience, or key behaviors. recruitsoft.com‘s approach is the simplest for the applicant and most comprehensive in the industry. It leads to a higher proportion of completed applications and a positive application experience for the candidate.


recruitsoft.com’s web-based questionnaires overcome one of the key limitations of the traditional resume: with a traditional resume, it is the candidate who decides what information is presented. But with recruitsoft.com, it is the recruiter who is in control. He/she first determines the questions to ask, depending on what information is required from the candidates. Then the recruiter decides what are the “must-have” criteria a candidate needs to possess in order to be considered suitable for a particular job. This recruiter-driven philosophy leads to a more accurate sorting of candidates because those who have met all of the “must have” criteria are immediately assessed and clearly distinguished from those who have met only some or none of these required criteria.



Filtering and Scoring with Skill-based Questionnaires


With the power of recruitsoft.com’s skill-based recruiting technology, the recruiter can configure a variable scoring system to his questionnaire. The recruiter can determine not only the content of the questionnaire but also the relative value given to each of the questions in it making for a more precise search for specific skills, knowledge, and levels of experience.


A score is given to each candidate and he or she is clearly ranked in relation to the results of other candidates. The process also adds flexibility to candidate assessment by permitting recruiters to enter their own average candidate grade. This grade is determined by a consensus of recruiters involved in interviewing the candidate, of line managers, and of others involved in hiring. While not affecting the overall ranking of candidates, this grade allows a recruiter’s judgment, when deemed necessary, to override the automatic scoring system.


These filters create a centralized and updated database of electronic candidate profiles, which opens up a world of possibilities that have until now been unavailable to recruiters. Because these profiles are much easier to filter and evaluate than the traditional resume, they allow for more informed decision-making, facilitate the sharing of information, and provide better access to recruiter resources. The end result is a much more efficient way to pre-screen candidates because the recruiter is in control of what information is entered into the system and how this information is evaluated as to the suitability of a candidate for a particular job. A better list of candidates is produced and retained in an easy to implement and use fashion.


What are the Advantages of Skill-based Recruiting?


Thanks to skill-based, automated pre-screening, recruitsoft.com‘s solution greatly reduces the time spent at every step of the recruiting cycle (time-to-hire), compared to the traditional resume-based approach.


By assessing the candidate’s skills, recruitsoft.com’s recruiting approach increases the probability of hiring the right candidate.


But the real metric to measure the success of a hire is the time-to-contribution or ramp-up time; that is the time required for a new recruit to train, to get acquainted with the new position, and to become a value-added member of the company. recruitsoft.com enables recruiters to reduce the time-to-contribution of their recruits. The principle is simple: by assessing the candidate’s skills, recruitsoft.com increases the probability of hiring the right candidate, that is the one who already possesses the appropriate skills and who, once hired, will need less time to be fully operational. In addition, consider the fact that a properly placed candidate is likely to be content and at ease in the workplace, which ultimately means greater employee retention and lower turnover.



The advantages of recruitsoft.com‘s skill-based recruiting application translate into huge savings for employers:


  • Reduced time-to-hire
  • Reduced time-to-contribution
  • Increased probability of hiring the right candidate
  • Improved retention
  • Lower turnover

recruitsoft.com‘s approach proves quicker and more efficient than traditional resume-based recruiting in another way, as well. Recruiters can configure requisitions so that when an applicant scores within a preset range, they receive automatically an email detailing the candidate’s profile. The recruiter then decides whether or not to view the resume and pursue the candidate further. The implications of this reduced time-to-interview are staggering. In some cases, candidates have been contacted by a recruiter within minutes after completing the online questionnaire. This not only decreases the time spent recruiting, but also attests to the competency and efficiency of your company.


We at recruitsoft.com were able to pioneer this skill-based recruiting technology online because we understand the importance of grasping the power of the Internet in order to satisfy your recruiting needs. This skill-based recruiting method is the next step in the evolution of online recruiting.

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Tools for Round-the-clock Staffing

Whenasking employees to burn the midnight oil, you’ll get better results if you:

  • Openthe lines of communication. Schedule meetings close to shift changes and use bulletinboards and e-mail to keep your people connected. Don’t let workers on the overnightshift begin to think they’re second-class citizens.
  • Safetyconsiderations come first, but whenever possible, encourage your workers to nap. A short,20-minute nap midway through a shift can have a significant restorative effect that willkeep employees alert through the morning hours.
  • Warnemployees about the dangers of caffeine abuse. Coffee has a half-life of seven hours andthe caffeine can stay in your system a full 24 hours. Tell your employees that afterroughly two cups, they’re getting no additional boost, just jagged nerves and fitfulsleep when they finally do get home.
  • Createa stimulating work environment. Bright lighting, a moderate level of noise (radios, musicand so on), and even certain aromas (peppermint, rosemary, lemon) stimulate the senses andkeep employees alert.
  • Provide24-hour cafeterias and workout facilities. Both services can be morale builders, and, likea nap, a 20-minute aerobic workout can have a marked restorative effect on alertness.

Workforce,September 2000, Vol. 79, No. 9, p. 40 — Subscribe now!

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How You Can Work Better With a Managed Care Provider

According to a recent managed-care study prepared by Watson Wyatt, a number of human resources managers are taking steps to ensure that their relationships with their managed care providers are somewhat secure:


  • Define what you want from your vendor. This can be spelled out in the original selection process, but there should be follow up during regular reassessments to determine if the vendor is working up to spec.


  • Use formal performance guarantees. These ensure that expectations are communicated in crystal-clear, quantifiable terms.


  • Reinforce expectations with performance monitoring. Ongoing performance monitoring allows you to determine whether the managed-care provider is slipping or improving.


  • Hold regular meetings. There’s nothing like the old face-to-face to review performance and develop plans to address any problems before they get out of control. These meetings also serve to build a rapport between the vendor and the purchaser.

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Questions to Ask About Options

Companies’insatiable appetite for employees is forcing many of them to supplement salaries andbonuses for non-exempt employees with stock option plans. Should you follow suit? There isno set formula for determining how deep within its ranks an organization should grantequity, but here are questions that can help HR frame a strategy for granting options, anddetermine your company’s ability to expand its options program to stay competitive.


Workforce,August 2000, Vol. 79, No. 8, p. 24 — Subscribe now!

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HR101 Health

Hospitals and doctors versus managed care. It’s a spat that goes back to the emergence of HMOs. For decades, insurance companies governed employee health benefits, paying hospitals and doctors for services rendered according to schedules of allowable fees.


As more sophisticated tests and procedures emerged, providers put them into play, prompted by patients who demanded access to the latest medical technology and as a defense against the rising tide of malpractice claims.


Managed care came on the scene as a way to reduce cost by trimming out inappropriate care. Community rating replaced fees for service and the accompanying incentives to order more referrals and tests that indemnity plans fostered. This approach seemed reasonable, and for a while there were significant savings in managed care plans.


Now, though, critics argue that managed care plans have gone too far in their efforts to cut cost by denying essential treatments and underpaying service providers. As the fight gets progressively nastier and the shouting matches get even more long-winded, a number of health-plan administrators and industry watchers are wondering whether the news will hit them where they live, and how hard it will hit them. And what they can do to soften the blow.


“There is an ongoing concern about employees having adequate coverage at reasonable prices,” said Judy Weil, executive director of the Massachusetts-based Northeast Human Resources Association.


Probably the only thing that can be considered definite is that managed care is as much a staple of office life as, well, the stapler: No company is going to survive without it.


Consider: North American Medical Management, which represents thousands of doctors nationwide, this spring threatened to sever its ties to managed care giant Humana Inc. of Louisville, Ky., unless Humana paid $10 million that NAMM alleged it was owed.


A few weeks later, St. Joseph Health System of Orange, Calif., said it would not accept any new HMO patients from its 17 managed care companies, citing $45 million in losses it reportedly sustained on its HMO contracts. Barely a week later, Greater Newport Physicians threatened to cut its contract with its largest managed care client, PacifiCare Health Systems Inc. of Santa Ana, California unless the HMO agreed to pony up more money for care.


“I do think it’s somewhat of a trend, but it’s going to depend on the area,” said Karin Landry, the group and health care practice leader for Watson Wyatt Worldwide, an international benefits consulting company.


“When you consider some of the providers in the New England area, with its large penetration of managed care, it may be difficult to say what will happen there versus some place where managed care has not reached the same level of penetration. I also think it’s a matter of supply and demand.”


Nasty little shouting matches aside, managed-care outfits are now dealing with ghastly levels of losses after 10 years of lustrous performance — if you go by popularity and fiscal conservatism: It’s expected that by the end of this decade one out of two Americans will be enrolled in some sort of managed care program; and managed care can be credited with helping to rein in the costs of the health care system.


Last year, for instance, Harvard Pilgrim Health Care of Brookline, Mass., posted tens of millions of dollars in losses and went through desperate measures to staunch its alarming flow of red ink.


The state’s Division of Insurance placed the company in receivership from which it emerged in May.


A few years earlier, Blue Cross and Blue Shield of Massachusetts, the state’s insurer of last resort, underwent a glaringly public process of regulatory overview in light of its financial woes (In 1997, the Massachusetts company was dead last among the nation’s 52 Blue Cross insurers in terms of fiscal stability, according to Weiss Rating Inc. of Palm Beach Gardens, Fla.).


“For several years HMOs just went crazy to get market share, and they did that, but in hindsight, they did it at the expense of running a good business. Now they’re feeling the crunch of financial losses,” said Raylana Anderson, a Peoria, Ill.-based human resources specialist and immediate past chairwoman of the compensation and benefits committee for the Society of Human Resource Management.


“We’re really looking at so many different sides of this, we don’t know which trend is going to come true.”


It may seem hopeless, but industry experts maintain there are a few things that human resources managers can do to ensure that their employees are not without some sort of coverage.


Still, managed care is not the only segment of the insurance industry guilty of slashing prices to lure customers. The practice is par for course with many insurance sectors, including life and property-casualty (the results have been especially pronounced among workers’ compensation providers).


The irony is that until the market hardens — that is, until policyholders suddenly start making a slew of claims on their policies, which often leads to jacked-up charges by coverage providers — insurers will continue to slash rates and offer discounts in an effort to retain their holds on the market, despite the effect the practice has on their bottom lines.


And then, there are the hospitals. Over the last few years, institution after institution reported huge annual losses, blaming them on Medicare and Medicaid reimbursement cuts and low managed-care rates. Hospitals blamed managed care organizations for not fronting their fair share on everything from basic medical visits to annual reimbursements for the coverage of various uncompensated care pools.


Where does this leave patients? What can companies do to make sure their health plans and their employees don’t go through the wringer as the turmoil plaguing the managed care industry gets more pronounced? No one quite knows.


Probably the only thing that can be considered definite is that managed care is as much a staple of office life as, well, the stapler: No company is going to survive without it. Once considered a perk that companies could offer at their discretion, health coverage is a benefit that even the fast-food industry cannot eschew if it wants to attract and retain workers.


So, what can you do?


“It’s not just a simple answer. It’s different for each organization. Some will accept increased costs and some will ask employees to accept increased costs. Really, the whole issue focuses on pricing. It’s a constant war on how to get a bigger piece of the pie. Until all that fleshes out, there’s no telling what the answer will be,” said Jerry Mattern, manager of human resources for Quebecor World in St. Cloud, Minn., and chairman of the benefits and compensation committee for the Society of Human Resources Management.


“You and I as consumers, we’re sitting here wondering what’s going to happen. You’re seeing a lot of issues tied to financial bills in Congress. You’ve got increased regulation, which causes more cost, which is driving more of the problems.” Some would argue that the answers to the managed care debacle should come from lawmakers.


Dr. Paul M. Ellwood, considered by many to be the founder of managed care, lambasted the system in a speech at Harvard University last year. Ellwood said that hospitals and health plans were not providing adequate care to patients. While the private sector needs to take the lead in fixing the problems of the managed-care system, government regulation would be necessary, he said.


And indeed, both the state and local level have seen a plethora of legislative initiatives over the last few years aimed at a so-called reform of the industry. The initiatives have attempted to address issues ranging from patient confidentiality to lengths of hospital stays.


Lobbyists, regulators, insurers, and doctors have argued themselves blue in the face over whether reform is necessary in light of the financial woes plaguing many of the players.


It may seem hopeless, but industry experts maintain there are a few things that human resources managers can do to ensure that their employees are not without some sort of coverage. The main thing is to make sure that the companies with which they contract are not going to implode fiscally any time in the near future.


“The basics are still going to be important,” Anderson said. “Check the A.M.Best rating, do some homework on whether things are financially stable. As long as you stick with a good decision-making process, that will probably be your best protection.” Oldwick, N.J.-based A.M. Best Co. (www.ambest.com) has a free company-rating search on its Web site that allows you to view the insurer’s profile. Or you can buy a company report, which contains a detailed overview of the insurer’s financial stability.


Another likely resource is the National Committee for Quality Assurance, a private, nonprofit group that assesses the quality of managed-care plans. The organization also has an accreditation program for these plans. The NCQA’s Web site (www.ncqa.org) and other managed-care industry watchdog sites provide easily accessible information to a company’s financial health.


Also working in an employers’ favor is choice. “They could look at the types of plans they offer and move from just managed-care plans to other platforms: points of service plans and PPO plans with out-of-network options. That means an employer who doesn’t want to go to a provider has a choice of going to those plans,” said Landry, of Watson Wyatt Worldwide.


Preferred provider organizations are a bit more expensive than traditional HMOs, but they do allow employees more control over the coverage they get.

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HR Takes a Turn in the Sun

More than ever, companies are dependent on human resources personnel to lead them towards growth and profitability.


The rise in discrimination-based lawsuits brought by employees, the stiff competition surrounding recruitment and retention, especially for workers with high-tech skills, and the complexities of the emerging global economy are just three of the 21st Century workplace developments that put the spotlight on human resources ingenuity.


It seems only logical then, that human resources personnel be awarded more of a role at the table when it comes to company-wide decision making involving both long and short-term strategies for success.


Human resources managers can play a key role in resolving claims of workplace discrimination.


Every company wants to avoid the costs of a legal settlement and the attendant negative press coverage. And yet as the workplace becomes more diverse, bias lawsuits filed by women and minorities against their employers continue to rise.


A company’s top brass needs to give human resources senior managers the leeway, the tools, and the time of day.


According to the Equal Employment Occupation Commission, resolution of sex-based discrimination charges rose from 18,817 in 1991 to 32,836 in 1997.


Likewise, while barely 10,000 charges of racial harassment were filed in the 1980s, nearly 50,000 were filed in the 1990s. “So the increase and trend is there,” reports Ida Castro, Chairwoman of the EEOC.


Human resources personnel are often aware of workplace tensions before they escalate, and they have the ideas and skills to keep those challenges from turning into crises.


Whether it’s implementing diversity training, heading up a company-wide diversity committee, or bringing in outside consultants to conduct an audit, human resources management can take the lead if they are allowed an opportunity to do so.


And, when a crisis erupts, their problem-solving techniques are often underutilized; indeed they are often left out of the crucial meetings where decisions are made about how to react to the problem.


The fact is that if human resources personnel are not involved in a company’s key planning from the outset, their effectiveness in helping a company avoid potential trouble and in benefiting from the full potential of its employee base, no matter how diverse, is limited.


Studies have shown that successful efforts in establishing a fair and friendly workplace environment often results in improved morale, greater productivity and increased retention.


Human resources managers can be the source of original and creative efforts to recruit and retain workers in an exceedingly tight labor market.


In today’s economy, companies are struggling to find and keep good employees with the right skills. Recruitment is difficult and time consuming, and losing a current employee costs one and one half of that person’s annual salary.


It’s the human resources department that keeps up on changes in benefits packages and hiring practices that can attract the people a company often desperately needs. Being on the cutting edge in offering and tracking alternative work arrangements such as flex time, job sharing and telecommuting can make a difference.


Alternative benefits such as vacation-share, stock options, cafeteria-style health coverage and professional development courses are additional perks that HR can initiate in order to attract and keep workers happy and on the job.


Today’s recruitment efforts often target people with high-tech skills. Those same skills can be put to use by human resources personnel to attract potential employees.


Creative Internet-savvy recruiters can make a company stand out among the thousands vying for attention in cyberspace. And those up-to-date on current information technology can evaluate a company’s present and future needs and create a workforce to fill them.


Finally, human resources managers can help companies successfully compete in a global marketplace.


It’s not just at corporate headquarters where HR personnel can make an impact. They can help to usher a company onto the global stage. Staffing offices throughout the world requires understanding cultural differences, as well as a company’s regional and country-specific objectives and its plans for future growth.


Increasingly, human resources personnel have the skills to do the job; sometimes, however, they are not privy to the strategic and tactical insights that will allow them to exercise those skills to the greatest advantage, insights that can only be communicated to them by senior executives.


Often a company’s human resources people are also responsible for developing the training and information systems that make an integrated whole of a company’s disparate and far-flung workforce. Determining how employees and offices will communicate and relate to one another is key to keeping morale high, avoiding misunderstanding, and helping a workforce feel part of one worldwide family.


It’s no small task, but top quality human resources managers can do it.


Most human resources departments today bear little resemblance to their predecessors of ten or twenty years ago. Their tasks are broader and more complex, their skills more sophisticated and creative. The challenge remains with a company’s top brass to give human resources senior managers the leeway, the tools, and the time of day in order for them to make a critical difference.

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Table of Contents September 2000

C

overStory:

EightDays a Week– By DaytonFandray

You love itwhen you click your mouse at midnight and get your package the next day. Butbehind those clicks lies the need for 24/7 staffing. Here is how old and neweconomy companies meet the we-never-close challenge. By Dayton Fandray

Features:

Caution: Children at Work– By Brenda Paik Sunoo

Millions ofteenagers show up for jobs every day. Thousands of them are hurt at work eachyear, and some die. But employers can help them to reach 18 alive and well.

Safety First – By Paul A.Gilster

When you’repicking a Web-based application service provider, look for three things:security, security, security.

Special Report: HR and the Olympics

This month,the world turns its attention to Sydney, Australia, to watch the world’s finestathletes compete for the gold. Behind the scenes, in Sydney and ColoradoSprings, people and organizations strive to bring Olympic ideals to HR.

Gold-medal HR – ByShari Caudron

The UnitedStates Olympic Committee succeeds in managing one of the must successfulOlympic teams in the world. Here’s how corporate HR professionals can catchthat winning spirit.

The Sydney Challenge – By Brenda Paik Sunoo

How do youhire 52,400 people for an event that will be watched by the world? How do youpromote diversity in such a workforce? No worries, say the HR people at theSydney Organizing Committee for the Olympic Games.

Get Your Benefit Ducks in a Row – By Gilbert Nicholson

The rightbenefit-plan language is the way to avoid costly “permatemp” problems.

Cracks in the Glass Ceiling – By Charlene MarmerSolomon

Companies arefinding ways to keep talented women from quitting. Cultural change, flexibleschedules, and leadership training all play a role.

The Workforce Interview – By Bob Rosen

Ken Blanchardblazed a trail with The One-Minute Manager. He talks to us about fowl-ups incompanies, and shares his retention formula (think Einstein).

Book Excerpt: Time for a Change

In thesesections from The Book of Management Wisdom, Gordon Bethune and Mary Kay Ashdescribe how they made critical changes in their companies — even when it wasexpensive and difficult.

Health Benefits Crisis

It isn’t apretty picture: doctors, hospital administrators, and managed care“suits”slugging it out over health-care costs. Meanwhile, your company’s costsare spiralling out of sight. Can you do anything? You can.

Departments:

On the Contrary – Thinking the Worst.

InfoWise – Making the Passage to a Portal.

The Buzz – Work Spaces for the “FacilityChallenged.”

  Money Still Talks When It Comes toRetention.

Forte – Health is Serious Business at   DaimlerChrysler.

Legal Insights – Does a New Right Make aWrong?

Your HR Career – Make It Your Business toWrite Clearly

Working Wounded – Fancy Footwork forReferences

In Every Issue:

Between the Lines

Mailbox

Dear Workforce:

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With a Project-Oriented Workforce, All the Rules Change

Remember the days when an HR Manager or recruiter wouldn’t think of presenting a resume to a hiringmanager that had less than a four-year track record at any one company listedon said resume?


Well, with the currenttight labor market combined with “time to market” deadlines, that oldrule of thumb has gone bye-bye.


Speaking for the SiliconValley area of California, I can say with a lot faith that we have entered intoan era that I will title “A Project-Oriented Workforce.”

It’s tough toturn down any technically qualified applicant today.

Take the case of arecruiter approaching a hiring manager and saying something along the lines of,”I’m a little embarrassed to show you this resume, Fran, but they have allthe technical skills you’re looking for.”

“Then what’s theproblem?” asks Fran, the VP of Engineering.

“Well,” saysthe recruiter, somewhat hesitantly, “The applicant has spent an average ofonly one year at his last four jobs.” Fran grabs the resume, quickly scansit, and says, “Bring him in for an interview, I won’t be needing him formore than a year anyway.”

What just happened here?

What happened is the VPis on a tight deadline, has interviewed five unqualified applicants in five days,and really doesn’t care if this person sticks around after the project is complete. TheVP maybe is a realist and knows that even if the applicant answersloyalty-based questions the correct way, they have also learned to play thegame.

With the “pre-IPO,everyone wants to get rich quick, I want mine now,” syndrome working both in ourfavor and disfavor, it’s tough to turn down any technically qualified applicant today.

Also, the idea that “pastbehavior is indicative of future performance” when it comes to the lengthof time someone will spend on a job no longer holds true.

Then you have what Icall the “Diversified Portfolio” syndrome. A design engineer can spend four yearswith one company and hopes he hits that “IPO home run” or he can stayat four different companies for one year at a time, vest 25% in each company,and “diversify” his “portfolio.”  In case the one company doesn’t make it, one of the four is boundto hit the “home run.”

All this makes it reallychallenging for the HR folks to put together meaningful programs geared towardlong-term development, not to mention a review process that has the samemeaning it did only a few years ago.

The bottom line is theHR community must educate its senior management team to this reality and makeadjustments. They must either learn to live with this or put a plan in placethat will address not only the “Project-Oriented Workforce,” butdecide how it’s going to spend its meritmonies, before or after the project is complete.

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Secrets of an Executive Search Firm

It’s both the best and worst of times for HR.


We are enjoying the most dynamic employment marketplace in recent history. Unemployment hovers around 4%, the lowest rate in 30 years. This year, the U.S. has been averaging the creation of 222,000 new jobs a month. Hundreds of thousands of jobs go begging for qualified people and 8 out of 10 Americans today feel secure in their jobs.


While the double-edged sword means full employment for workers and HR, employment needs in technology-related positions seems endless. Yet, the need for talent transcends into traditional corporate America, or old economy, as well as in higher education and the world of non-profits.


  1. Now and Ahead: The State of the Employment Marketplace for Executives


  2. Qualities in the Executive Candidate: The Universal Wish List


  3. Hire From Within or Without?


  4. Why Your Next Executive May Not Be Posting On the Internet


  5. Choosing a Search Firm


  6. The Candidate Defections Issue

 1. Now and Ahead: The State of the Employment Marketplace for Executives


The crunch in the hunt for talent is a function of:


  • Sustained economic growth and prosperity — the longest expansion of economic opportunity in several generations.


  • The effects of massive consolidation of American business that began in the 1980s and continues to the present with its consequent release of employees due to downsizing and rightsizing.


  • The consolidation resulted in massive migration from corporate America into a wide variety of alternatives for earning a living (i.e., self-employment, teaching, non-profits, early retirement, etc.)


  • The workforce, freed from constraints of the risk of unemployment, now has a much more mercenary attitude in light of multiple job openings and offers.


  • The baby boomers leaving the workplace due to early, semi- or full retirement and entrepreneurial opportunities, after a shorter lifetime in the workplace.

The net effect? We simply do not have adequate numbers of professional and managerial talent to fill their shoes.


One look at demographic trends explains what we are experiencing today may be just the tip of the iceberg. The next generation of workers is smaller in size than the current one, and decreases dramatically after that. Even with the recent liberalization of work rules for seniors and a possible loosening of immigration quotas, the shortfall is not expected to be cured.

Everyone wants to be “safe,” but in an environment of constant change and tremendous challenges, thinking out of the box is a major request.

As we look ahead, the demand for professionals, managers and senior executives will greatly outstrip supply, with the greatest demand for general managers, financial officers, marketing directors and the continuing need for a wide range of talent in information technology.


Already keenly aware how difficult it is to find and secure the talent your company needs to keep pace with normal attrition, let alone grow, HR is continually searching for recruiting solutions to fill positions.


The Executive Hunt

The challenge becomes even more daunting at the executive level. Senior management recruiting is different. At this level, the most wanted senior executives are tied up elsewhere, bound by the golden handcuffs of high levels of pure compensation, stock options and other benefits, vested pension plans and vested interests stemming from convenient geographic location, family constraints, and personal quality of life preferences among others.


Those with special skills in information technology, general management, marketing, and finance are in high demand — and they know it. For senior executives, it takes a compelling opportunity to pry them loose from their current positions.


Today’s high-demand executives — the people with proven track records and leadership abilities — come with their own special set of needs. At this point in their careers, they are apt to look long and hard at the company, its place in its industry, strategic growth plans, and the macro-economics of the business.


Smart recruits also evaluate the potential position within the company, its duties, responsibilities, reporting and evaluation measures and opportunities for promotion, even up to the top leadership positions of the company. Some potential hires may also judge the company and package as a springboard to their next career move.


Further, with your most likely executive already fully employed elsewhere and relatively satisfied there, approaching a desired candidate takes a more sophisticated approach for him or her to even entertain the idea instead of rejecting it out of hand.


Normal recruiting techniques, including job postings and looking within the company, may not yield high quality or appropriate candidates. Rather, both creative and targeted recruiting can be more productive in seeking your next executive.

External hires should not be made for quick fixes; there are none.

Given the current difficulties and differences in executive recruiting, the imperative to fill the position goes well beyond “getting a body on board.” In reality, the very future of the company depends on securing the kind of executive and attendant skills who will contribute significantly to its progress.


A new executive hire is (or should be) a strategic hiring decision because that person assumes responsibility for not just the department or division, but contributes to the overall health and well-being of the organization itself. Each new executive, either recruited internally or externally, has an impact, for better or worse.


Therefore, defining just what is needed now and in the next five or ten years, becomes part of HR and the company’s overall strategic planning. Restricting the depth and range of the search for key executives limits, in no small measure, the ultimate strategy and growth of the company. Viewed in the context of broad company strategy, the outcome of each executive recruiting event is critical.


In the following sections, we’ll examine the components of contemporary executive search for success.


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2. Qualities in the Executive Candidate: The Universal Wish List


Given the shrinking executive talent pool available, which will only get smaller in the years ahead, HR is under pressure to shift its traditional recruiting approaches. What has worked in the past may not be appropriate in today’s market. First-rate executives are not only unavailable, they are also critical in evaluating new opportunities.


For HR, flexibility, openness and adaptation to new realities are the cornerstones of successful executive searches.


In approaching the senior executive market, bear in mind:


  • The income of the nation’s executive corps is rising. Larger numbers are now making in excess of a million a year, but, in many cases, multiples of seven figures on an annual basis. The rise in top tier officers’ salaries and perks has implications all the way through the executive ranks.


  • With the money comes a closer tie of management compensation to results.


  • “Cash now” is still the cornerstone of executive compensation, enhanced dramatically today with stock options and deferred compensation.


  • Signing bonuses are now commonplace not only for senior executives, but also for middle managers and, in many cases, for non-supervisory personnel.


  • With loyalty and supply of quality executives diminishing, the “golden handcuffs” will grow brighter and tighter.

In spite of this tight labor market, the demand for executives and managers increases. Along with it comes the request for certain qualities that organizations have articulated as needs in facing their 21st century issues. In conducting executive searches, the most universally requested qualities from clients are expressed in this “wish list” time and again:


  • Global perspective. Candidates must be able to view domestic and international markets and operations in one overall, integrated management pattern.


  • Creativity. Today, it is one of the most sought-after qualities in executive search parameters. And the toughest to define and find. Everyone wants to be “safe,” but in an environment of constant change and tremendous challenges from every direction, creativity — thinking out of the box — is a major request.


  • Leadership. Executives must be leaders in every sense of the word. They must be aware of public opinion and lead it, not simply market products and services to it. This quality also impacts employees, investors and every stakeholder in the company and industry.


  • Visionary. Today’s executives must be able think strategically rather than concentrating on daily operational decision-making.


  • Communicator. Still one of the most important skills current executives lack, effective executives have the ability to communicate and advocate with not only the employees they lead, not only with Wall Street, not only with the customers they serve, but also with the public at large, as well as with special interest groups.

While employment opportunities for professionals, managers and senior executives have never been better, and the demand will continue and accelerate, HR managers have their work cut out for them in seeking solutions to the crunch in executive talent. A thorough knowledge of the options and alternatives help lighten the burden.


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 3. Hire From Within or Without?


Rather than a negative, the prospect of filling an executive position presents an opportunity for HR and upper management to look at the existing strength and depth of its executives’ capabilities and for orderly succession planning with an eye on the future.


An executive opening should prompt management to evaluate the position and the company in terms of:


  • Potential challenges of growth either internally or by merger, acquisition or buyout, the industry’s future, and larger economic trends that might hinder or help the company.


  • New areas of business development, planned or unexpected opportunities.


  • E-business, e-commerce stage of development.


  • Any and all identifiable and what-if scenarios, including the sudden death, illness or incapacitation, unexpected resignation, scandal or government inquiry of key personnel. These what-if propositions, as unlikely as they may seem, shed light on the company’s executive preparedness in safeguarding the continuation of the business, its competitive position with the smooth transfer of stewardship.

Most important, in defining the strategic direction of the company, the critical skills needed in the next executive will become abundantly clear. Depending on the company and what is important to its plans, it may be that a candidate’s leadership and astute analytical skills, industry knowledge and creative problem-solving, and ability to grow in the position to something greater may emerge as highly desirable traits vs. a particular skill set or experience.


Advantages of the Internal Search


Healthy organizations first look internally for an executive promotion for many reasons. Internal promotion signals to employees:


  • Opportunity for advancement in developing their skills


  • Opportunity to deepen and broaden their managerial skills


  • A value placed on and recognition of their work and achievements


  • A reward for jobs well done


  • A reason for their on-going interest and involvement with the organization’s goals

For HR, internal hiring saves costs in time and effort spent on external searches, additional compensation and perks needed to attract outside talent while protecting the compensation structure, reducing turnover, and, of course, as a potent morale booster.


There is also the power of “the known entity factor.” In other words, the internal candidates’ working relationships, work style and abilities are known and can increase the odds of success in the new position, provided the person can adapt to change. Formal and informal training programs, mentoring and coaching a newly promoted executive can help solve some of the issues involved in an internal hire.


Still, sometimes the necessity of going outside may be a better option.


Bringing in External Executives

External hires should not be made for quick fixes; there are none. Rather, an external search should be made to fill a need for long-term growth.


Looking outside the organization may be most appetizing when:


  • Internal skills are lacking or unavailable for development


  • Micro or macro business developments require new talents such as in the cases of stalled, declining or explosive growth, a competitive challenge or new business opportunities


  • Fresh thinking and new ideas are needed to revitalize an organization

Bringing in outside talent helps avoid inbreeding and a calcified corporate mindset. This cross-pollination opens up an organization to fresh perspectives and new ways of doing business for the corporate good. A new executive contributes a flexible and competitive response to a constantly changing business environment.


However, a new executive hire is not without its risks. Assuming a good, qualified hire, the new person must be able to bridge the gap between the company’s traditional methods of doing business and a different vision and method of work style.


By the same token, the company must be flexible in adapting to the new executive. Otherwise, the person will leave in frustration and a learning opportunity for the company will be lost. The company returns to corporate sameness, defeating one purpose for the hire.


However, going outside means additional costs in search, in premium compensation and benefits, and, the “unknown factor.”


Weigh both options against what is to be gained – or lost. It is a delicate balance set against the backdrop of the corporate mission and business plan to determine which route is best in a given situation.


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 4. Why Your Next Executive May Not Be Posting On the Internet


Reality check.


Senior executives may lurk, but it is highly unlikely that their resumes are posted in any of the Internet’s hundreds of job sites for the world to see.


And even the most attractive executive job posting, among the estimated half-million or so, may not elicit the resume you want from among the hundreds, if not thousands, that are bounced back to you.


Such is the reality of recruiting on the Internet today. What has been missed in the hype about job seeking and finding on the Internet is that when all is said and done, successful executive placements still depend on the old fashioned power of personal relationships. Nowhere is this more apparent than in seeking talent for upper middle management to CEO positions.


While Internet recruiting may be effective for entry level professionals, specialized technical jobs and middle management, it has yet to yield top tier executives who are eyebrow deep in their work and already have the connections if they are even entertaining the idea of change.


The Active vs. Passive Candidate

Internet recruiting rests on one invalid assumption — that the people who post their resumes on the various Web sites are prime candidates for these positions — the best of the best. In truth, Internet job postings appeal to “active seekers” — people who are shopping for jobs. This approach is not much different than the classified ads’ audience reach, with similar results.


A flood of resumes from job postings inundate the Human Resources contact, most of which are consigned to a database somewhere. Once in a long while, an appropriate potential candidate may be identified, but, with the l% or less who actually make it to the interview stage, and even fewer hired, this approach comes with a costly personnel effort-reward ratio.


What then of the large executive search firms and their new Internet recruiting offspring on the Web? Rather than conducting an exhaustive search of the appropriate marketplace, especially the more difficult passive one, they are relying on in-bound resumes. And, quiet as its kept, their collection of resumes are really an end run around the “off limits” rule in recruiting, an honorable agreement not to recruit anyone from the client-company for at least two years, even if approached by a current employee.


With this limitation, the larger the recruiting firm’s client base, the more restricted their talent pool is, and the harder it is to recruit. Yet, by spawning these separate Internet divisions, they are now free to recruit and place individuals in the companies they are already serving. Not an appealing prospect when you are the company enjoying a confidential client relationship with a search firm only to find your executives are being recruited through the same firm’s Internet “back door.”


On the other hand, in-house and external recruiters seeking senior executives know that the people they want are “passive candidates.” They are already fully employed and relatively happy with their positions. While some may log on and lurk out of curiosity, for most of the successful executives, a job change is furthest from their minds.


Confidentiality on the ‘Net

Confidentiality is still a major issue on the Internet. Despite promises otherwise, a posted resume has many reviewers; some welcome, others not, and it can easily be bounced around. From the active seekers’ perspective, there is more to gain by posting, even at the risk that the resume will end up on their current employer’s desk.


For the senior level executive, there is much, much more to lose. The lack of confidentiality is more than enough to deter a senior executive from risking their positions — and reputation — by posting a resume or submitting it electronically.


The All-important Human Touch

Enter the human touch. Personal recruitment, either through HR’s own resources or with the assistance of an executive search firm, identifies the best candidates for their clients through a value-added process well before a presentation of finalists to the client-company.


Armed with a clear definition of the job and knowledgeable about the client-company’s culture and expectations, and bound by confidentiality agreements, executive search surveys the current marketplace. In whittling down a list of anywhere from 15 to dozens of candidates acquired through a network of personal contacts and other tools coupled with intensive reference and background-checking, a manageable group of pre-screened, qualified prospects emerges.


For a search involving overseas experience, one executive recruiter went through 1,000 prospects, contacted over 200 people, of which 15 to 20 were interested and qualified, in order to present a final list of five candidates to be interviewed by the company.


Rather than settling for what’s out there on the Web, the company spent its money and time wisely in selecting from the objectively evaluated, highly qualified group of candidates and gained a satisfactory conclusion to the search.


Internet recruiting does provides a valuable tool for both companies and job-seekers to gather information about each other and, perhaps, eventually get together to fill certain jobs. But, while the Internet has its place in sifting through the active job-seeker market, the lion’s share of top executive jobs are still being filled the traditional way — by identifying viable candidates in the passive market, qualifying them and stimulating their interest in a meaningful and substantial opportunity for career advancement.


Filling these senior level positions are more about finding and evaluating the human qualities of leadership, vision and decision-making and that requires the human intermediation of experienced judgment.


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 5. Choosing a Search Firm


The greatest asset any company has is its people. Nowhere is that more important than in recruiting upper management who are the leaders of the troops and your company’s future. However, just when you need them the most, companies are keeping their executives close to the vest with guaranteed bonuses, stock options and compelling perks.


Given today’s 4.2% unemployment rate, the lowest in 29 years, experienced, knowledgeable executives are increasingly difficult to entice away from their current positions. The result — a limited pool of available talent in the market.

A contingency search agency generally has lower fees.

Yet, conventional wisdom says that the best recruit is someone who is already employed, and with good reason. Approximately 60 – 70% of executive placements are recruited from the ranks of the fully employed. High quality, seasoned executives have a known track record and an enviable record of accomplishment. With limited selection in a drum-tight labor market, what are the options available to a company with shoes to fill?


Conditions Indicating an External Search

In-house company resources, such as referrals, over-the-transom resumes, personal contacts, current staff suitability, online job postings, and even, where they exist, the Human


Resources department’s own recruiting staff, have their limits. In securing upper management, reaching out to use these resources only extends as far as the company’s grasp and the amount of time and patience available. The opening may call for a person with higher level skills and experience than is known to you or the company, or you may prefer to approach a desired candidate through a third party to feel out interest, let alone to negotiate the deal effectively.


Other signals that it is time to call in a search firm are:


  • A need for information about the current executive employment market. A search firm’s broad, continuing exposure fills you in on the larger picture of what is really out there these days.


  • A need for confidentiality, especially in highly sensitive competitive fields, or in making an overture to a competitor’s specific executive without tipping the company’s hand.


  • A history of high turnover (and accompanying costs) in your company. This indicates the company’s recruiting — and retention — process is not getting and keeping attractive candidates.
Specialist or Generalist Firm?

Executive search firms generally come in two flavors — the specialist firm which concentrates on a particular industry or area of expertise and the generalist firm, which ranges across a variety of industries and management levels.


Specialist firms have their advantages and drawbacks. Their in-depth familiarity with the language of their specialty area and the major players in the industry may make them cognizant


of appropriate candidates immediately. But be aware that they tend to call on the same base of people frequently with little fresh research as to the up-and-comers.


More importantly, potential candidates and companies within that industry and specialty may be “off limits” because of current client commitments and ethical considerations, severely limiting the depth and range of their reach.


Generalist firms, on the other hand, have a network of contacts across a broad range of industries and are ever watchful for candidates with transferable skills and complementary experience. Their expertise lies in search and research techniques to identify and secure high-demand candidates, without restriction.


Although they may not know all the nuances of a specialized field and may need to get up-to-speed on industry lingo and competitive players, the generalist firm relies on fresh research for each new search, thereby turning over all the stones in the field.


Retained vs. Contingency?

Another important decision before engaging an external search firm is the issue of choosing a retained firm versus a contingency agency. That choice hinges on the particular position to be filled. Best suited for hourly staff and lower to middle management searches, a contingency search agency generally has lower fees, partly from its limited service offerings.


They get paid when a candidate is placed and it is in their interest to send as many candidates as possible, without too much pre-qualification or evaluation. All responsibility for verifying candidate credentials and determining compatibility lies with the company. Companies are free to use as many contingency agencies as they want to, often resulting in producing the same candidate from the various agencies.


For their part, contingency agencies, without a binding retainer, are free to give up the search at any time. Even more important to the safety of your search: A contingency firm is not bound to honor the “off limits” rule affecting recruitment. That means the contingency firm is able to raid the very executives you paid them to place in your firm. Indeed, revolving executive placements are not unusual. One contingency firm re-recruited and placed the same executive in three different companies over the course of four years.


Retained search firms are a different breed. Most appropriate for upper level, executive and board searches, retained search firms offer valuable input to and assume responsibility for the search and placement process. They have a vested interest in producing attractive candidates for several reasons. The retainer focuses their attention and commitment to stay with the search until a satisfactory conclusion as good business; their reputation is at stake.


Retained firms put a great deal of unique research effort and candidate development into their work. Working with the company to define both the tangibles and the intangibles of what is sought, they are also objective in evaluating potential candidates to present for the best fit.


And, with their coverage of the market and lengthy experience, their work in reference and credential checking of candidates along with insight into just what the position and the company requires. This can minimize the risk of presenting inappropriate, unprepared candidates.

Hold retained firms to a higher standard than contingent firms.

Retained firms circumvent the potential land mines of the unexpected. For example, they uncover the candidates’ hot buttons: relocation issues, compensation expectations, willingness to negotiate perks, and other decision-makers and breakers in considering the position and the offer. With the client’s best interests in mind, a retained firm’s search intent is to leave nothing to chance or last-minute surprise for all involved.


What to Expect…

Regardless of the selection of the search firm, you should expect solid references, prompt responses to requests and questions, honesty, confidentiality and expert advice through the recruiting process. Any less, and you fire the firm, and seek another.


Expect contingency agencies to produce resumes of pre-screened for qualifications, although they may not be pre-interviewed before submission. They should provide information on the available talent pool, assist you in scheduling interviews, offer some insights into the candidate’s expectations, and help you negotiate the terms of an offer.


Hold retained firms to a higher standard, for, as collaborative partners, they add more value to recruitment activity. Beyond all of the above, a retained search firm presents only a manageable group of candidates already thoroughly screened and evaluated for qualifications and character-corporate culture fit. Retained firms perform market surveys, do complete background profiles, degree and employment verifications and reference checks.


They’ve seen all the tricks of the trade and know where the bodies are buried, if any. Experts in interviewing, they present objective recommendations of the candidates and submit periodic reports on the search’s progress to keep you informed. By the time candidates show up for interviews, you can expect them to be the best available.


In this era of reluctant job-switchers, a good search firm will market the position at your company to a desirable candidate, positioning the company, the position and the offer as advantageous and responsive to the candidate’s personal and/or career interests. It’s one thing to find a terrific candidate; preparing him or her to actually accept a change to your company is the second half of the retained firm’s task.


Finally, the hallmark of a really excellent search firm not only produces just what you are looking for, they also anticipate your needs before and during the search’s progress.


…And What You Should Not Encounter

Hiring recruiting expertise is important to your company’s short and long term development. You want a responsive firm who returns phone calls promptly and produces results.


You also shouldn’t have to suffer inundation with scores of candidates, even if they are qualified.


It’s up to the recruiting firm to be selective in its presentations. Be wary of recruiters who promise too much, too quickly; a typical search for quality candidates takes 60 to 120 days. Warning bells should go off if candidates say the recruiter didn’t accurately describe the position or the company.


Maximizing Recruiter Effectiveness

Before calling in a recruiting firm, check internal readiness. Know early on who needs to see the candidate within the company, what steps are required to hiring and identify any potential hiring issues so the recruiter has the complete picture.


Engaging a recruiting firm is a two-way partnership transaction. Just as you have expectations from the recruiting firm, do your part by being thorough and candid about the company, corporate culture, history and details of the position, and expectations for a candidate’s education requirements, special skills, personality traits, salary guidelines, and wiggle room.


Share the company’s current and future plans in confidence, including annual reports and collateral material, with the recruiter and provide access to the hiring manager and other decision-makers.


As worthy as recruiting firms are as contributors to the company’s progress, hiring does not happen in a vacuum. Take responsibility for managing the company interview process. Make sure company-side interviewers practice the finer points of current interviewing techniques, including the boundaries of legal questions, allow ample time to interview candidates, and communicate back any changes, feedback and recommendations to you and to the recruiter.


Similarly, be open to the recruiter’s suggestions. It may be, given the parameters of the search, you have to lower expectations of the hiring manager and about the position itself. Five years of experience may be just as useful as requiring ten years; a record of accomplishment can substitute for a degree from a top-tier business school.


Be flexible in structuring the job offer; one size does not fit all today. One desirable candidate’s decision point may be a highly attractive salary; another’s may be willing to forgo a portion of the compensation for more vacation time or less travel. With today’s seller’s market, be realistic and adjust accordingly. The exact executive you want may not exist, but there can be others with the right stuff who will grow into the position.


Should problems with the recruiting process arise, and they will, bring any issues up promptly, either with the recruiter or alert the managing partner of the search firm, to clear the air. A top-notch search firm will respond immediately; they want to preserve and deepen the relationship…and be called back for your next search.


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6. The Candidate Defections Issue


Just when you think you’ve got ’em, your prized candidate bows out. It can happen at any stage of the recruiting-hiring process, and for any number of reasons.


Essentially, candidates defect because somewhere all the process, a clue was missed, a dropped hint was not picked up on. The most common causes are:


  • Lack of deep knowledge about the candidate. The sought-after candidate may be dealing with personal or family issues, an unexpected crisis, a geographic/travel concern, or concern about their proposed job responsibility, title, reporting, growth and promotion prospects, or just plain seriousness about changing jobs.


    For instance, one candidate decided the medical resources were not sufficient for his handicapped child in the new company’s location. Another’s spouse refused to give up an accustomed living environment. From aging parents to the company’s competitive prospects, not knowing the candidate and his/her concerns thoroughly and dealing with them are enough to dismiss the opportunity.


  • Candidate remorse…and cold feet. Fear of change is a compelling emotion. Some executives may leap at the proposed position, only to have misgivings set in as the recruiting process gets underway with its demands on time and interview performance. Giving up a known environment is not never easy for most.


  • Failure to establish a personal relationship with the candidate. Internet and cold call recruiting lack the personal relationship-building that is characteristic of solid personal recruiting. If the candidate does not feel a personal connection with the recruiter, its all too easy for him or her to opt-out. Good recruiting also involves a concentrated effort to know the desired candidate as a person and develop a trusted relationship.


  • Lack of candidate consideration. Executives especially are used to being treated with warmth and dignity. Too often, company interviews are not structured, from the welcome to the good-bye, to reinforce the company’s concern with him/her as an individual.
    First-class candidates should be treated accordingly and by every person who comes in contact with him/her. Candidates these days are not willing to go through long, complicated interviewing marathons or protracted decision-making. Its too easy to entertain other competing offers — or just stay put.


  • Plain ‘ol out of the blue. Sometimes, candidates back out for unimaginable reasons. For example, one candidate was unhappy with his temporary accommodations at a local hotel. Some things are just beyond the company’s and recruiter’s control.
Lessen the Risk

With executives in a buyer’s market, HR and their recruiters would be wise to make sure that these things that are within their control are set up to minimize losing desired candidates:


  • Know the candidate thoroughly. Beyond the family and personal concerns, recruiters should know what the candidate’s “hot buttons” and relate them to the proposed position: challenges, vision, ability to make change, expectations, unique company qualities that are especially appealing. As relocation is one of the biggest dropout triggers, involve the spouse and children’s issues as quickly as possible. Make sure the candidate has a realistic grasp of what a move entails for all concerned.


  • Overcommunicate with candidates. Provide plenty of company and position information candidly in advance: company history, the working relationships, the position and especially the corporate culture, be it ties or jeans, what the company looks for in its employees, career paths, and constraints.


  • Walk them through the interview process. Prepare candidates before the interview by briefing them on the interviewer’s and others’ background, corporate role, personality traits and what to expect each step of the way. Let the candidate know how many interviews are necessary and the time frame in as much detail as possible. A well-prepared candidate is much more comfortable through the process and more likely to stay tuned.


  • Stay in contact with the candidate at each stage. Let him/her know the interview’s outcome, either favorable or not, right away, rather than stringing a candidate along. Honesty and candor create favorable impressions, for that person may one day be a customer or in a position to recommend the company. Staying in touch also involves the candidate further while allowing any candidate hesitations to surface.


  • Respond to candidate concerns honestly and promptly. Rumors and misinformation abound. When questioned about the company, its plans, management and business direction, don’t misrepresent the company but do answer with facts in order to calm spoken or hidden fears.


  • Detect wavering early on and throughout. Candidates may have one set of concerns allied, only to have others arise. Be aware that each must be met at any point until their first day on the job … and after. Anticipate each candidate’s turning points and which candidates are not likely to stay the course. Better to winnow down the field as soon as possible than to be disappointed after a great deal of time and resources have been spent on those who weren’t serious in the first place.

Above all, desired executives need to connect with the company and see themselves there. Every contact between the candidate and the hiring company should be warm and inviting. Informal meetings, meals and tours with the company’s senior executives help develop that connection so that by the time the offer is made and accepted, the new hire is already familiar and comfortable with the people there.


One candidate decided the medical resources were not sufficient for his handicapped child in the new company’s location.


After the new executive is installed, continue the relationship by anticipating questions, provide coaching or partnering with another executive, and generally smooth the way. Productive executives should not be bogged down with the details or frustrated by procedures. If they are, that becomes another reason for them to take executive recruiters’ calls.


Without question, the search for and placement of A-level executives is of strategic importance to an organization. Doing the job well does more than replace an executive successfully. It speaks well of the HR Department for its skills, resources, intelligence and forward-thinking in shepherding the health and welfare of all those involved.


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Posted on

Manage Temp Benefits Without Turning into the Next Microsoft Debacle

When the Internal Revenue Service ruled in 1989 that some 600 Microsoft contract workers were actually employees for payroll purposes, little did anyone know that it would start a fire that still rages today across the Redmond campus — and beyond.


In this feature, learn about:


  • Background of the Issue
  • Solutions to the Problem
  • ERISA and the IRS
  • The Length-of-Service Trap
  • Stock Options
  • Staffing-Agency Control
  • Benefits Waivers
  • An Opposing Viewpoint
  • Tips for Temp-Benefit Management
  • The NLRB’s Aug. 25 Ruling

    • The step that Microsoft took after the ruling — rerouting its contract workers through temporary agencies in an attempt to sidestep paying benefits — didn’t solve its 600-worker problem.


    Instead, the software giant found itself with a bigger, far more costly headache: a 10,000-person class of “permatemp” workers who, federal courts have ruled, now stand to collect as much as $100 million in back benefits.


    This and other high-profile lawsuits, combined with an emerging wave of political activism, have prompted HR professionals to ask, ‘Whose employees are these people, anyway?’


    Recruiting, training, job assignments, firing, complaints, raises and payroll issues, expense reimbursement — all these should be handled by the staffing agency as much as possible.


    It’s a sobering question: The Bureau of Labor Statistics reported in a February 1999 survey that 10 million Americans worked for temporary help agencies, contract firms or as independent contractors. Many are in the high-tech sector, which feeds on the economies of temp and contract workers.


    Flurry of Activity


    Microsoft isn’t the only employer with a perma-problem. King County, Washington, (where Microsoft is located) settled a class-action lawsuit in June for $18 million after a Superior Court judge ruled that some 500 long-term government temps had been denied benefits. Nor is the rash of action confined to the courts.


    In May, a coalition of civic activists, labor unions, and minority-rights advocates formed the National Alliance for Fair Employment to promote equal pay and benefits for “contingent” workers. In July, Senator Ted Kennedy (D-Mass.) introduced the ERISA Benefits Eligibility Act to compel employers to provide benefits to temp and contract workers and prohibit companies from forcing them to sign benefits waivers.


    Temporary agencies don’t want to discuss the issue. Officials at headquarters of Kelly Services and Adecco declined to comment for this article. Attempts to reach Manpower were unsuccessful.


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    Solutions


    Companies need not push the panic button, according to two nationally recognized experts on the topic: Ed Lenz, senior vice president, public affairs and legal counsel, for the American Staffing Association, a Washington, D.C.-based trade group for temporary agencies; and Fred Oliphant, a veteran employee and benefit-law attorney with the Washington, D.C., firm of Miller and Chevalier.


    They point to the volatile Microsoft case as a classic example of what went wrong, and say that a relatively easy step can help other companies avoid the same pitfall. Microsoft mistakenly re-classified contract workers as temps to avoid paying benefits, when instead it should have outright excluded the contract workers in the language of the company benefits plan, Lenz says.


    “The court ruled they could have excluded Microsoft’s temps from the benefit plan; it’s just that they didn’t do it.”


    Companies frequently make two major mistakes as they try to avoid paying benefits to temp and contract workers, Lenz says. They become preoccupied with classifying or defining employee status, or they rely on setting arbitrary time limits on job assignments to distinguish temps/contract workers from common-law employees.


    Both miss the mark. Instead, Lenz says employers should take advantage of recent Internal Revenue Service and appeals court decisions that allow employers to exclude temp and contract workers from benefits, even if they are found to be common-law employees.


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    ERISA and IRS Outline Exclusions


    “Companies need to revise their employee benefit plans to explicitly exclude groups that don’t need to be covered,” Oliphant says.


    Although there are exceptions, the Employee Retirement Income Security and Information Act (ERISA) does not compel employers to provide benefits, the two experts say. In Bronk v. Mountain States Telephone and Telegraph Co., a federal appeals court used ERISA as a basis to rule that U.S. West could exclude workers provided by a staffing firm, even if they met the test as U.S. West’s common-law employees.


    “The purpose of ERISA is to make employers make good on the benefits they’ve promised their employees,” Oliphant says. “ERISA doesn’t require all common-law employees to be covered.”


    There are exceptions. For example, if an employee is otherwise eligible, the employer can’t impose minimum age or length-of-service requirements to deny participation. But in general, ERISA allows exclusions, Lenz and Oliphant say.


    On the IRS front, a July 1999 Technical Advice Memorandum says that companies may exclude employees who are not reported on payroll records as common-law employees, even if a court has determined that they are common-law employees and not independent contractors. The memorandum said the same determination applies to those identified by a specific work status code on the employer’s payroll records.


    HR departments and legal counsel should be informed on these rulings when drafting eligibility status language for benefits plans, Lenz says.


    Another reason not to fixate on defining who or who isn’t considered a permanent worker, he says, is that the IRS and the courts have reserved that decision for themselves. Again, the key is for companies to be aware that they can generally exclude temp and contract workers regardless of their legal definition as employees.


    Even the IRS’s 20-factor test for determining common-law employees isn’t a good bellwether, Oliphant says.


    “They [IRS and courts] may cite the 20 factors in some cases, and in others they may come up with their own list of five, or six, or seven factors,” he says. “There are a great deal of subjective elements, and that’s what makes this test so hard.”


    Case in point is last year’s IRS technical memorandum, which states, “A worker’s status is based on facts and circumstances. Making a determination as to whether a common-law employment relationship exists is not always straightforward.” Businesses should be concerned because their assumptions of employee status based on the 20-factor test can be easily overturned by the courts or the IRS.


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    The Length-of-Service Trap


    The second error, the length-of-service strategy, draws arbitrary time lines on how long temps or contract workers can stay in order to distinguish between temporary and permanent workers. It also does not work, Lenz says.


    “There are no clear, bright lines you can draw where they can be assured there will be no employer liability,” he says. “Some client liability for staffing firm workers is not at all time-sensitive,” such as EEO and OSHA requirements.


    And while time limits may in some cases be used to deny benefits, they are not good solutions for companies needing long-term staffing help, Lenz says. The continuity and familiarity afforded by long-term temps and contract workers need not be sacrificed if the company stops focusing on time limits and employee status and instead excludes temp and contract workers with explicit, detailed language in benefits plans.


    “If a worker can position himself to be within a covered classification, then he’s going to be able to sue for benefits,” Oliphant says. “The trick is to review the terms of the plan and make sure it accurately describes who you want to cover and who you don’t want to cover. “You can say we’re going to cover this group of people and going to exclude the people we don’t treat as common-law employees, even if the courts or an administrative agency determines they are common-law employees.”


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    Stock Option Options


    Stock options, meanwhile, are a different ballgame. There, the IRS has jurisdiction in establishing participation rules for the purpose of tax breaks. Tax benefits generally require 100 percent coverage of all employees, Lenz says.


    “Stock options are not covered by ERISA, but by the tax code,” he says. Companies should consult legal counsel on details. However, most of the concern in the current controversy is with retirement, pension, 401(k), and health-benefits plans, not stock options.


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    Give Staffing Agency Control


    An essential protective measure with temporary employees is to defer as much control and responsibility, whenever appropriate, to the staffing agency, so temps are clearly distinguished from regular employees, Lenz suggests.


    Recruiting, training, job assignments, firing, complaints, raises and payroll issues, expense reimbursement — all of these should be handled by the staffing agency as much as possible. “Do only what you have to do legally, and let the staffing agency do the rest,” he says.


    Avoid the Microsoft mistake of shifting payroll duties to a staffing firm just for the purpose of trying to prove they’re temps, Lenz warns. Microsoft tried that after the IRS reclassified “independent contractors” as employees. But Lenz says the Ninth Circuit saw it as an evasive maneuver.


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    Wavering Waivers


    Not quite so certain is how the courts view waivers. A judge in the Microsoft case ruled that the company’s specifically written benefits waivers, signed before work actually began, “may” be valid, Lenz says.


    Two years ago, in Capital Cities/ABC v. Ratliff, the 10th U.S. Circuit Court of Appeals found that newspaper carriers, who claimed they were common-law employees due benefits, were not entitled because of agreements they signed stipulating their status as ineligible independent contractors.


    Lenz says the court dismissed their claim for benefits, not on the basis of the waiver, which relinquishes a right that already exists, but as terms of the contract they signed.


    He also says some benefits experts think waivers won’t be enforceable unless consistent with and expressly sanctioned by benefits plans.


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    Opposing Viewpoint


    The Center for a Changing Workforce, which has emerged as one of the nation’s leading advocates and watchdog groups for equal wages and benefits for permatemps, sees all this quite differently. The Seattle-based organization shares offices with the law firm of Bendich, Stobaugh and Strong, attorneys for the contract workers and temps in the Microsoft, King County, and Atlantic Richfield (ARCO) cases.


    The center’s executive director, David West, disagrees with Oliphant and Lenz on their interpretation that ERISA allows the exclusion of temps and contract workers from benefits plans.


    “We believe under ERISA you have to properly classify employees. They’re saying you can ignore some provisions of ERISA. I think the question here is which parts of ERISA are controlling parts and whether you have to comply with parts of ERISA or all of [it].”


    But he concedes that some appeals court decisions have ruled otherwise.


    “Some of these rulings essentially are saying the employer can give these leased or contract workers an incorrect label,” West says. “Our view is under ERISA, the employer has the responsibility to accurately classify workers. If the employer excludes people who are truly temporary, fine. The problem as we see it is they’re applying incorrect labels to contingent and contract workers and temp agency workers who qualify as common-law employees.”


    West says the July 1999 Technical Advice Memorandum issued by the IRS, which excludes contract workers from benefits, even if the courts say they’re common-law employees, is also in conflict with the Microsoft ruling.


    He cites the Center for a Changing Workforce’s interpretation of ERISA, which is that employers must properly classify workers. West notes that some employee benefits, such as stock-purchase plans and paid leave, are governed by state laws, not ERISA. Many state laws “are pretty clear on what a common-law employee is,” he says.


    He uses the King County case and its $18 million settlement as an example. “The advice to HR people is to make sure that managers, who have authority to bring in contingent workers, make sure that the contingent workers should be short-term,” West says. “Or if they’re going to call someone a contract worker or leased worker, they should be under the control of an outside company providing the work. It should be on a contract basis and should be a deliverable product, not ongoing work.”


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    Growing Activism


    The Center for a Changing Workforce belongs to the National Alliance for Fair Employment, one of a growing number of new activist groups on the offensive to help temp and contract workers secure benefits. Lenz sees the alliance and its AFL-CIO ties as another repackaged attempt to unionize workers.


    Oliphant agrees: “Organized labor and plaintiffs’ lawyers have moved this issue up on their agenda.” Companies should take precautions because it makes good legal and business sense, he says. And there are plenty of unknowns and gray areas that compel companies to be vigilant.


    “You’ve got conflicting decisions from various U.S. courts of appeal. You’ll have different laws in different parts of the country” unless the U.S. Supreme Court decides to resolve the disparities, says permatemp advocate West. “I’d say it’s very much up in the air.”


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    Give Benefits Where Benefits Are Due


    Here are steps that companies can take to minimize the risk of litigation by long-term temp or contract workers demanding the same health, retirement and other benefits as permanent employees.


    • Explicitly exclude temp and contract workers from benefits plans.


    • Minimize contact between the employer and assigned employee, letting the staffing agency assume as much control and responsibility as possible.


    • Avoid switching employees to temp firms just for payroll as a method to deny benefits.


    • In large companies, stay on top of how many temp and contract workers you employ, and for what reasons.


    • Have legal counsel review your benefits plans and tailor for exceptions and gray areas.

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    Observers are still mulling the implications of an Aug. 25 ruling from theNational Labor Relations Board involving temp agency employees and theirstatus in regards to union representation.The NLRB ruled that employees from a labor supplier may be included in thesame bargaining unit as permanent employees of the employer to which theyare assigned, when the supplied workers are jointly-employed by bothemployers.


    In doing so, the NLRB overruled its 1990 decision that bargaining units thatinclude both jointly-owned employees and employees of the user employer aremulti-employer bargaining units that require consent of the employers.

    This article is not legal advice; check with your attorney when making legal decisions.