Critical Thinking HR

Recruitment Sources

Internal versus External

Direct applicants and Referrals

Advertising

Electronic Recruiting

Employment Agencies

Colleges and Universities

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Recruitment Sources—Since recruitment sources are unlimited, an organization must decide how to reach the best sources of potential employees. The sources from which a company recruits potential employees are a critical aspect of its overall recruitment strategy.

• Internal versus External Sources—Relying on internal sources is useful since employees are well known and are knowledgeable about the organization and jobs. However, there may not be enough internal recruits. Outsiders may bring new ideas or new ways of doing business and strengthen the organization.

2. Direct Applicants and Referrals

a. Direct applicants are people who apply for a vacancy without prompting from an organization.

• Referrals are people who are prompted to apply for a vacancy by someone within the organization.

3. Advertisements in newspapers and periodicals – Typically are less effective than direct applicants or referrals and more expensive. The two most important questions to ask in designing a job advertisement are, What do we need to say? and To whom do we need to say it?

4. Electronic Recruiting – The growth of the information highway as opened up new vistas for organizations trying to recruit talent such as social networking sites., niche boards, search engine sites as well as job boards. Social networking sites such as LinkedIn, Facebook, etc. Help recruiters reach applicants.

5. Public and Private Employment Agencies—Agencies will search their computerized inventory of individuals searching for work for an organization at no charge. Executive search firms generate a small list of highly qualified, interested applicants, but this is an expensive source compared with other alternatives.

6. Colleges and universities may be an important source for entry level professionals. To increase effectiveness, organizations employ internship programs to get early access to potential applicants and to assess their capabilities directly.

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Chapter 5, HR Planning and Recruiting, examines factors that influence the supply and demand for labor, and focuses on what HR managers can do to plan and execute HR policies that give their firms competitive advantage. Two major ways that societal trends and events affect employers are through (1) consumer markets, which affect the demand for goods and services, and (2) labor markets, which affect the supply of people to produce goods and services. The market might be characterized by a labor surplus and in other cases, it may be characterized by a shortage of labor. Reconciling the difference between supply and demand for labor presents a challenge for organizations, and how they address this will affect their overall competitiveness. To effectively utilizing labor markets to one’s competitive advantage, companies must have a clear idea of their current configuration of HR, know strengths and weaknesses of their present stock of employees, where they are going in the future, how their present configuration of HR relates to the configuration that will be needed, and where there are discrepancies between the present configuration and the configuration required for the future. Under conditions of a labor surplus, this may mean creating an effective downsizing intervention. Under conditions of a labor shortage, this may mean waging an effective recruitment campaign. Chapter 5 looks at tools and technologies that can help an organization develop and implement effective strategies for leveraging labor market “threats” into opportunities to gain competitive advantage.

After reading this chapter, you should be able to:

• Discuss how to align a company’s strategic direction with its HR planning.
• Determine labor demand for workers in various job categories.
• Discuss advantages and disadvantages of various ways to eliminate a labor surplus and avoid a labor shortage.
• Describe various recruitment policies that organizations adopt to make job vacancies more attractive

5.List various sources from which job applicants can be drawn, their advantages and disadvantages, and evaluation methods.

6. Explain the recruiter’s role, limits and opportunities in the recruitment process.

An overview of human resource planning is depicted in Figure 5.1. The process consists of forecasting, goal setting and strategic planning, and program implementation and evaluation. The first step in the planning process is forecasting, as shown in the top portion of Figure 5.1. The second step in HR planning is goal setting and strategic planning, as shown in the middle of Figure 5.1. The purpose of setting specific quantitative goals is to focus attention on the problem and provide a benchmark for determining the relative success of any programs aimed at redressing a pending labor shortage or surplus. The goals should come directly from the analysis of labor supply and demand and should include a specific figure for what should happen with the job category or skill area and a specific timetable for when results should be achieved.

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Forecasting, on both the supply and demand sides, can use either statistical methods or judgmental methods.

A leading indicator is an objective measure that accurately predicts future labor demand. For example, in the cattle industry, the price of corn is closely related to the cost of beef. Hence, sharp increases in corn prices at Time 1 affect the price, and therefore the demand for cattle at Time 2. In turn, the demand for cattle affects the number of workers needed to staff slaughterhouses. Thus, when drought conditions in 2012 caused a spike in corn prices, this predictably meant that Cargill, a large beef processor, would need fewer workers in 2013. Thus, Cargill shut down a large plant in Plainview, Texas, well before the effects of the drought were even seen at the plant. Had the company not anticipated this drop in demand, as many as 2,000 workers would have had to be paid even though they had nothing to do.

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Determining Labor Demand-Labor demand can be predicted by the use of statistical techniques such as leading indicator, which is an objective measure that accurately predicts future labor demand. External in nature, it is derived from product/service demands.

Determining Labor Supply-Internal labor supply is determined by a detailed analysis of how many people are currently in various job categories, modified to reflect changes in the near future caused by retirements, promotions, transfers, voluntary turnovers, or terminations. A transitional matrix is a table used to project internal labor supply. Transitional matrices identify employee movements in different job categories over time to chart historical trends in company’s labor supply useful for AA / EEO purpose.

Determining Labor Surplus or Shortage—By comparing forecasts for labor supply and demand for specific jobs, the organization can determine what it needs to do.

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Table 5.2 above shows options for reducing an expected labor surplus including:

• Downsizing
• Pay reductions
• Demotions
• Transfers
• Work sharing
• Hiring freeze
• Natural attrition
• Early retirement
• Retraining

Table 5.3 shows options for avoiding an expected labor shortage such as:

• Overtime
• Temporary employees
• Outsourcing
• Retrained workers
• Turnover reductions
• New external hires
• Technological innovation

Unfortunately for many workers, in the past decade the typical organizational response to a surplus of labor has been downsizing, which is fast but high in human suffering. The human suffering caused by downsizing has both an immediate and a long-term element. In the short term, the lack of pay, benefits, and meaningful work has negative implications for financial, physical, and psychological aspects of individuals, causing bankruptcies, illnesses, and depression. Then, even if one can survive these immediate problems, in the long term, an extended bout of unemployment (e.g., lasting over six months) can stigmatize the individual, thus reducing future opportunities.

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Downsizing – the planned elimination of large numbers of personnel designed to enhance organizational competitiveness.

Reasons why organizations downsize include:

• Cost reduction through decreased labor.
• Technological changes reduce need for labor
• Closing outdated plants.
• Organizations changed location of where they do business.
• Mergers and acquisitions reduced the need for large bureaucracies. For economic reasons, many firms relocated parts of operations.

Although downsizing has an immediate effect on costs, much of the evidence suggests that it has negative effects on long-term organizational effectiveness, especially for some types of firms. Many companies that are doing quite well still downsize their workforce regularly for strategic reasons. For example, although Microsoft was doing fine in 2014, it still laid off 18,000 workers in the phone and tablet divisions after purchasing Nokia left the company with a surplus of workers in those areas. Similarly, Hewlett-Packard cut 16,000 jobs that same year and used $1 billion in savings to invest more heavily in cloud computing services.

Three negative long-term effects of an improperly managed downsizing effort include:

• Lower long-term profit, performance and productivity
• Loss of talent
• Disrupts social networks needed for creativity and innovation. The key to a successful downsizing effort is to avoid indiscriminant across the-board reductions, and instead perform surgical strategic cuts that not only reduce costs, but also improve the firm’s competitive position.

Many firms that announce a downsizing campaign show worse, rather than better, financial performance. Reasons include:

• Although the initial cost savings are a short-term plus, the long-term effects of an improperly managed downsizing effort can be negative.
• Many downsizing campaigns let go people who turn out to be irreplaceable assets.
• Employees who survive the staff purges often become narrow-minded, self-absorbed, and risk-averse.

Downsizing not only leads to a loss of talent, but in many cases it disrupts the social networks needed to promote creativity and flexibility. Many employees also start looking for alternative employment opportunities.

The negative publicity associated with a downsizing campaign can also hurt the company’s image in the labor market, making it more difficult to recruit employees later.

In an age of blogs and text messaging, once-private practice of laying off employees is increasingly transparent, and any organizational mistake that gets made in the process is likely to become highly public. The key to avoiding reputation damage is to ensure that the need for the layoff is well explained and that procedures for implementing the layoff are fair, avoid indiscriminant across-the board cuts, and instead perform surgical strategic cuts that not only reduce costs, but also improve the firm’s competitive position.

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The average age of the U.S. worker is increasing. Baby boomers are not retiring early due to:

• improved health
• fear that Social Security will be cut
• mandatory retirement is outlawed
• collapse of the financial and housing markets made it economically unviable to retire

Another means of reducing a labor surplus is to offer an early retirement program. Many employers try voluntary attrition among older workers through early retirement incentive programs. Because of improved health of the older worker and decrease in physical demands of the job individuals are able to work long past the traditional retirement age. Although an older workforce brings experience and stability, it can be more costly than younger workers because of seniority, higher medical costs, and higher pension contributions. Many employers are stressing early retirement by offering incentive programs to older employees.

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Hiring temporary workers helps eliminate a labor shortage and affords flexibility needed to operate efficiently during demand swings. Some strategies can be turned on and off fairly painlessly, such as the use of overtime and/or temporary employees. Operational flexibility is the primary reason for this, although the use of temps also frees the firm from many administrative tasks and financial burdens (health insurance, pension, worker's compensation, life insurance, etc.). Smaller companies may use temporary agencies to do their employment screening for them. Training may be done by the agency as well. Temporary employees bring a fresh perspective to the firm, particularly if they have temped in a number of other organizations. Employers today seem to appreciate the flexibility that comes with hiring

temporary employees and like being able to match quick changes in consumer demands for products and services with quick changes in the supply of labor.

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Outsourcing—This occurs when a firm is interested in a broad set of services performed by an outside organization. Cost savings in this area are easily obtained because rather than purchase and maintain their own specialized hardware and software, as well as specialized staff to support such systems, companies can time share the facilities and expertise of a firm that focuses on this technology. Companies increasingly outsource many of their HRM tasks to outside vendors who specialize in efficiently performing many of the more routine administrative tasks associated with this function to manage the HR unit and free HR managers to focus on more strategic issues.

Offshoring is a special case of outsourcing where the jobs that move actually leave one country and go to another. Steps to take that help ensure the success of outsourcing strategies include:

• When choosing an outsourcing vendor, it is usually the bigger and older the better.
• Jobs that are proprietary or require tight security should not be outsourced.
• It is a good idea to start small and monitor constantly.

Quality control problems, security violations, and poor customer service experiences can wipe out all the cost savings attributed to lower wages and more without sufficient steps.

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There are alternatives to downsizing such as

• Garner more hours from current employees
• Cut salaries
• Reduce contributions to 401(k) plans

Reduce number of hours of all workers. When a cut in hours is targeted at salaried workers rather than hourly workers, this is

called a furlough.

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Plan for various subgroups within a labor force. Workforce utilization review is a comparison that examines the proportion of a company's workers in a subgroup to the proportion that each subgroup represents in the relevant labor market. This comparison is used to determine whether any subgroups may be underutilized. Underutilization occurs when the proportion of the subgroup in the organization is lower than that of the labor market due to problems in selection process or from problems in internal movement or for other causes.

A voluntary affirmative action program may be implemented in which selection programs may be reviewed and revised to decrease the underutilization and/or increase the diversity of the organization and decrease the likelihood of a lawsuit.

Figure 5.4 shows an overview of the individual job choice – organizational recruitment process.

HR recruitment is the practice or activity carried on by the organization to identify and attract potential employees, designed to affect the number of people who apply for vacancies, the type of people who apply for them, and/or the likelihood that those applying for vacancies will accept positions if offered. The role of HR recruitment is to build a supply of potential new hires that the organization can draw on if the need arises. The goal of recruitment is to ensure that when a vacancy occurs, the organization has a number of reasonably qualified applicants to choose from. All companies have to make decisions in three areas of recruiting:

(1) personnel policies, which affect the kinds of jobs the company has to offer;

(2) recruitment sources used to solicit applicants, which affect the kinds of people who apply; and

(3) characteristics and behaviors of the recruiter that influence the nature of vacancies and of people applying for jobs that shapes job choice decisions.

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Personnel policies, in relationship to recruitment, affect the nature of the vacancies for which people are required and impact the organization’s ability to recruit.

A voluntary affirmative action program may be implemented in which selection programs may be reviewed and revised to decrease the underutilization and/or increase the diversity of the organization and decrease the likelihood of a lawsuit.

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• Internal versus External Recruiting—A decision must be made on whether to recruit from within or outside the organization.
• Extrinsic and Intrinsic Rewards—Lead‑the‑market pay strategy is a policy of paying higher than current market wages.
• Employment‑at‑will policies state that either party in the employment relationship can terminate that relationship at anytime, regardless of cause. Companies that do not have employment at will typically have extensive due process policies that describe steps an employee can take to appeal a termination decision.
• Due process policies formally lay out the steps an employee can take to appeal a termination decision.
• Image advertising promotes an organization as a good place to work in general and may be particularly important for organizations in highly competitive labor markets that perceive themselves as having a bad image.

Recruitment Sources—Since recruitment sources are unlimited, an organization must decide how to reach the best sources of potential employees. The sources from which a company recruits potential employees are a critical aspect of its overall recruitment strategy.

• Internal versus External Sources—Relying on internal sources is useful since employees are well known and are knowledgeable about the organization and jobs. However, there may not be enough internal recruits. Outsiders may bring new ideas or new ways of doing business and strengthen the organization.

2. Direct Applicants and Referrals

a. Direct applicants are people who apply for a vacancy without prompting from an organization.

• Referrals are people who are prompted to apply for a vacancy by someone within the organization.

3. Advertisements in newspapers and periodicals – Typically are less effective than direct applicants or referrals and more expensive. The two most important questions to ask in designing a job advertisement are, What do we need to say? and To whom do we need to say it?

4. Electronic Recruiting – The growth of the information highway as opened up new vistas for organizations trying to recruit talent such as social networking sites., niche boards, search engine sites as well as job boards. Social networking sites such as LinkedIn, Facebook, etc. Help recruiters reach applicants.

5. Public and Private Employment Agencies—Agencies will search their computerized inventory of individuals searching for work for an organization at no charge. Executive search firms generate a small list of highly qualified, interested applicants, but this is an expensive source compared with other alternatives.

6. Colleges and universities may be an important source for entry level professionals. To increase effectiveness, organizations employ internship programs to get early access to potential applicants and to assess their capabilities directly.

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Most organizations must choose whether their recruiters are specialists in human resources or experts at particular jobs (supervisors or job incumbents).

Two traits stand out when applicants’ reactions to recruiters are examined. The first, which could be called “warmth,” reflects the degree to which the recruiter seems to care about the applicant and is enthusiastic about her potential to contribute to the company. The second characteristic could be called “informativeness.” In general, applicants respond more positively to recruiters who are perceived as warm and informative.

Perhaps the most well-researched aspect of recruiting deals with the level of realism that the recruiter incorporates into his message.

Recruiters can provide timely feedback about the status of the job search, avoid unfavorable behaviors that send poor messages about the organization, avoid mixing recruitment with selection and recruit in teams.

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HR planning uses labor supply and demand forecasts to anticipate labor shortages and surpluses. entails programs that can be utilized to reduce a labor surplus (such as downsizing and early retirement programs) and eliminate a labor shortage (like bringing in temporary workers or expanding overtime). HR planning can enhance the success of the organization while minimizing the human suffering resulting from poorly anticipated labor surpluses or shortages. HR recruiting is a buffer activity that creates an applicant pool that the organization can draw from in the event of a labor shortage that is to be filled with new hires. Organizational recruitment programs affect applications through personnel policies (such as promote-from-within policies or due process provisions) that affect the attributes of the vacancies themselves. They can also impact the nature of people who apply for positions by using different recruitment sources. Organizations can use recruiters to influence individuals’ perceptions of jobs.

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