Stemming the flood

by HCA16 Apr 2009

So, your corporate careers website has successfully sold your organisation to a prospective candidate interested in that impossible-to-fill engineering role. What now? Do you let them slip through your fingers by having an overly complicated application procedure, or perhaps leave them dangling with no progress updates on their application?
If the recruitment process is handled manually or is only partly automated, the above scenarios are possibly already occurring.

eRecruitment Systems
HRIS in all its forms - payroll, performance reviews, recruitment, talent management - ultimately aims to reduce the time burden on busy HR professionals and improve overall efficiency. This has certainly been the case for Applicant Tracking Systems (ATS) in the past. But because these systems now do so much more than merely track applicants, they are commonly called eRecruitment Systems (eRS).

The early ATS systems in the 1990s and some of the more basic systems today simply track candidates. They track the workflow of the existing recruitment process from sourcing, through interviewing and selection, and making an offer. According to Chris Phillips, vice president, international marketing, Taleo, the real opportunity with eRS is to use the technology to make recruitment processes are faster, cheaper, and more effective.

"Modern eRS allow you to engage candidates online and build a pool of potential candidates that you can tap into as soon as you have an open role," he says.

Slow on the uptake
Despite these time and cost benefits, Australian companies have been reluctant to embrace this technology. There are signs that this is changing, as more and more organisations start to develop and implement more sophisticated internet recruitment strategies.

For the past six years, Pinpoint HRM has been monitoring the utilisation of eRecruitment practices and systems by Australasia's 500 largest employers (the A500). Craig Aunger, principal at Pinpoint HRM, says that back in 2002 less than 50% of these organisations had a career section on their website. By 2008 this had increased to more than 90%. The uptake in eRS is consistent with this trend - in 2002, 21% of these organisations were using eRS and in 2008 this had increased to 57%.

"The uptake is much higher in sectors where competition for labour is high," Aunger explains. "Current economic conditions aside, this has been in mining, communications, engineering and financial services. We've found that when employers operate in tight labour markets they tend to be more progressive. Candidates from these sectors come to expect organisations to have sophisticated recruitment practices and systems and are influenced negatively when these don't exist. This would tend to suggest that as the labour market continues to tighten, these systems are a 'must have'."

Cost
Like any technology investment, it's necessary to spend money to save money. There are a range of e-Recruitment solutions on the market for different sizes of company. Taleo, for example, provides two different product lines. Taleo Business Edition is designed for smaller companies that are interested in low costs and ease of use. Taleo Enterprise Edition is designed for larger organisations that want one eRecruiting solution that can handle many different roles, a complex organisational structure, and probably different geographical markets. For these organisations configurability, scalability, reporting, integration with other systems, and security are usually important.

With over 30 vendors competing for clients in the Australasian region, the choice is not easy. Essentially these can be categorised into three tiers:

  • Basic systems, which provide simple functionality (such as enabling you to post jobs to the website)
  • Mid-tier products with some applicant management functionality (such as allowing applicant to register)
  • Top-tier products, which cover the end-to-end recruitment process (such as approving requisitions through to bringing new employees on board).

"There are many inexpensive basic and mid-tier systems available, and as you would expect the top-tier products are relatively expensive. But the returns from a well-executed project are compelling. Organisations are achieving at least 50% reduction in print media and 30% reduction in recruitment agency fees. For most Australasian employers these transactional benefits translate into big numbers," Aunger says.

In some ways, the cost will be dictated by the level of automation currently employed by the organisation's recruitment methods. Organisations starting from a 100% manual base will likely be up for the biggest outlay, but also potentially the biggest return on that initial outlay.

There are also less tangible benefits such as: improved candidate care; reduction in administration; greater transparency; more consistent messaging and selection processes; and access to data for strategic decision making. These benefits contribute to improved quality of hire and ultimately higher levels of employee engagement.

A further benefit is the improvement in brand reputation that comes with better communication with applicants.

"The returns from these transformational benefits are many multiples of the transactional benefits. One could argue that it's more expensive to select anything but a top-tier product!" says Aunger.

ROI
Aunger says that typically the payback period for these investments is less than 12 months. He recommends visiting staffing.org, which has developed the recruitment efficiency index (REI) - an effective measure of the transactional gains. It is calculated as follows:

Total costs of recruitment
Total remuneration of those recruited

"This is a better measure than cost-per-hire. Expressed as a percentage it enables the organisation to compare the efficiency of the recruitment function in two periods while removing inconsistencies in the volume and/or level of the roles. Staffing.org also publishes benchmarks by industry which are good for setting targets," he says.

This can be further broken down into the internal and external costs of recruitment. As organisations shift the delivery model between centralised/decentralised and outsourced/insourced this additional breakdown will enable the impact to be evaluated.

By moving recruiting online and building a candidate pool, agency and recruitment marketing costs are dramatically reduced. "Even in a recession most organisations don't stop recruiting because they have a degree of turnover, even if they are shrinking as a whole. If you can more than halve the cost of replacing that turnover that is a compelling cost saving to a CFO," says Phillips.

Planning
Simply purchasing a system will not yield the results outlined above. The biggest mistake an organisation can make is to rush out and acquire a system without the necessary focus on planning and execution. Aunger notes that more than 40% will change system or stop using it altogether within two years of 'going live'.

To be successful, organisations need to allocate the right resources to the project. Typically, this requires a dedicated resource with good knowledge of recruitment, solid understanding of the capability of eRS, sufficient IT and procurement know how to navigate these important stakeholders and sound project management skills (including the ability to influence). Needless to say, this combination of competence and experience is hard to find and even harder to justify without a planned approach (see boxout).

ASP or SaaS?
While it has been used to describe these systems, strictly speaking an Application Service Provider (ASP) purchases the licence for a software system, installs it on its infrastructure and then sells access to this system to its clients. In this sense the software vendor and ASP are not the same.

More than 80% of the A500 have opted for an eRS which is 'On-Demand' or 'Software-as-a-Service' (SaaS). With this method of deployment the application and data are hosted by the software vendor and accessed via the internet and typically all customers are on the same code base.

"The key advantage of SaaS over on-premise deployment - where the application and data are installed and maintained on internal servers - is centralised feature updating," Aunger explains. "When the SaaS vendor releases patches, functionality enhancements or full upgrades, every customer in this model is automatically updated. As a result, the SaaS vendor is able to offer enhancements with greater frequency and customers do not have to plan and resource large upgrade efforts. Over time this leads to a more functionally rich and usable application."

Other advantages include low implementation costs, shorter time to productivity and outsourced hardware maintenance. In addition, specifically for recruitment SaaS provides external job seekers (who make up the majority of the users) with easy access to the system.

The disadvantages are page speed, data security and a greater dependence on the vendor. Applications used over the internet will only operate as fast as the connection to the web, however, Web 2.0 enhancements in the user interface and faster broadband access is helping to overcome these concerns. Security is an issue as the data is stored in cyberspace, and as the application is hosted by the vendor, if their systems or business fail, access to the software will cease.

"All of these issues and risks should be considered in the overall evaluation and increase the importance of clearly defined vendor evaluation criteria," warns Aunger.

Do it yourself
While it is possible for organisations to develop and implement in-house eRS, only around 10% of the A500 have taken this approach and this has been fairly steady for the past six years.

The challenge to developing in-house recruitment software is providing external users (job seekers) with access to systems which sit behind the organisation's firewall. As a result the majority of these in-house systems are simple. Very few provide the ability for job seekers to maintain a profile and use this to apply for jobs over time - this kind of functionality is pretty standard for SaaS vendors.

Campbell Sallabank, CEO of LinkMe, advises that building an internal database of résumés can save on recruitment costs - but it needs the resources behind it to keep it fresh. "If you've got a large enough résumé database that tracks the right information and is kept fresh, and if you've got an easy to use and powerful search tool, you can find anyone anytime for any job. You shouldn't need to advertise. Advertising will always exist but with a good enough database you shouldn't need to."

But some organisations have fallen into the trap of building an in-house eRS, believing a purpose-built product to be superior to an off-the-shelf alternative. These systems can achieve short-term success, but they frequently become obsolete because companies neglect to commit the resources to upgrading them.

Metrics and reports
Access to data is one of the key drivers for implementing a system. With a good eRS, users can report on any aspect of the recruiting process for any combination of job roles, business unit or geography - thus providing the foundation for informed decision making and strategic planning. Over time, reports can track where candidates are coming from and where the sourcing strategy is delivering best value for money. This can also be tied back to the person hired and how they're performing in the role.

There are the obvious quantitative metrics such as the number and source of applications and hires. Then there are the more qualitative measures such as time-to-fill, cost-per-hire, and quality-of-hire. Surprisingly, relatively few of even the top-tiered applications provide a systematic way to measure quality of hire.

"We believe that organisations need to focus on what is important to their business, and more often than not these are not informed by the traditional recruitment metrics," Aunger says.

Again, the top-tier systems offer the best capability for interrogating the data and report building. The challenge then becomes what to report on. Pinpoint HRM recommends a structured approach to this, including:

  • identify the audience and their business objectives
  • determine information which can be provided to support them to achieve these objectives
  • develop the measures which most effectively communicate the information
  • identify the data required to enable the measure

"One of the most important considerations when you are choosing a system is to make sure that you can easily create and maintain reports yourself. If you have to pay your vendor for every single change to a report the costs will soon add up," says Phillips.

Configuration
As with any software, key considerations are its ability to mesh with existing technology and its ability to be customised.

With SaaS vendors, customisations are limited. Their model is to keep all their clients on the one code base. They seek to meet the divergent needs of all their customers by making the system configurable. Essentially this means that the customer is able to set up the system according to their needs, and importantly keep making modifications over time as these needs evolve.

Aunger notes that even the integrations with third party systems are becoming less like a customisation. Most of the top-tier vendors have established arrangements with third party systems (such as online testing vendors) which are increasingly 'plug and play'.

"The development roadmap for most eRS vendors is driven by their clients," he says. "As the client base grows, there is a seemingly endless list of functionality to be developed. This can lead to industry specific capabilities to emerge. The most obvious example of this is that there are two distinct markets for recruitment software - one for recruitment agencies and the other for employers."

Largely as a result of this, the strengths of the systems can be deemed from their heritage. Those that evolved out of graduate recruitment are good for volume recruitment, those from job boards are good at posting to the internet, those from recruitment agencies are strong at unstructured database searching, and those with multi-national capabilities are good for multi-organisational structures.

"The more sophisticated vendors also engage thought leaders and industry analysts to assist them to develop their product roadmaps. This helps to ensure that the product holds wider appeal and continues to innovate more generally," says Aunger.

The future
There is a seemingly endless list of functionality for eRS, and this list will continue to evolve into the future.

Specific recruitment specific examples include:

  • CRM capability to manage relationships with pools of candidates
  • social networking and collaboration tools
  • integrated internet searching

But the major development on the horizon is the convergence with learning management systems and performance management systems into what is referred to as Integrated Talent Management Systems (ITMS). "Vendors from all three areas are in a race to develop a comprehensive suite of functionality covering the complete lifecycle of employees, from workforce planning, through recruitment, development, succession, and performance management," says Aunger.

A step-by-step plan
Craig Aunger, principal at Pinpoint HRM, provides the following checklist for those planning to purchase an eRecruitment System:

  1. be clear about the recruitment strategy (strategy before systems!)
  2. develop a high-level discussion paper to identify the objectives, budget, plan and resources required
  3. map (in detail) current processes in consultation with stakeholders to identify the issues, opportunities and constraints in recruitment
  4. re-engineer the end-to-end processes in line with what an eRecruitment system enables
  5. plan how these changes will be rolled out across the organisation (the 'big bang' approach rarely works) and start executing the plan ASAP
  6. create a detailed business case containing the return on investment and baseline metrics to provide a benchmark for focused post implementation reviews. Importantly, this should include resources for the implementation, roll-out, ongoing support and optimisation of the system
  7. identify and weight the vendor evaluation criteria
  8. document the product requirements (such as functional and technical) and vendor requirements (such as viability and ongoing commitment to development)
  9. evaluate vendors according to the criteria - this should include scripted product demonstrations to enable comparative evaluation of usability
  10. manage the implementation project - don't expect that the vendor resources will do this for you
  11. manage the roll-out project
  12. commit resources to ongoing training, support and continuous improvement of the user's capability and ability of the system to enable the recruitment strategy

Final tip: Importantly, a project to select and implement an eRS should not be thought of as a software project. It should be considered part of business transformation project focused on how talent is sourced, evaluated, selected, hired and brought onboard.

 

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