Recruitment and retention: Introduction
Despite fears of an economic slowdown and several firms announcing significant job cuts, a record number of people were working in the UK between February and April 2001. The proportion of the UK population of working age employed reached 74.7% - more than 28 million.1 At the same time, figures from the Office of National Statistics revealed that the number of unfilled vacancies in the economy was almost 400,000. As these relate only to unfilled posts notified to jobcentres across the country (typically only a third of all vacancies), the real level of available jobs during the period was well over one million - a figure higher than the claimant count unemployment total in May 2001, which at 976,800 was the lowest since November 1975. These figures pose challenges for employers either seeking new recruits or wanting to retain key employees.
Employers recognise that recruitment and retention are of major importance. Survey after survey reveals that recruitment and retention are growing problems facing businesses. The latest findings from the Chartered Institute of Personnel and Development's (CIPD) annual recruitment survey showed that in May 2001 more than half of participants had experienced difficulties in filling one or more vacant posts over the past year.2 Matched results also revealed that the easing of recruitment difficulties experienced in 2000 had ceased and problems were now accelerating again. Amazingly, the CIPD reported that almost half of respondents (42.6%) had failed to receive any applications for a vacancy. The main reason for recruitment difficulties, as in the previous two surveys, was a "lack of required experience".
Survey findings from the Institute of Management (IoM) and IRS provide further evidence of labour shortages. More than three-quarters (78%) of managers polled by IoM at the end of 2000 believed that their organisations faced a "severe skills crisis".3 This led the IoM to predict that "the focus of 2001 will be on recruiting and retaining the right people". A survey of 116 HR practitioners by IRS in May 2001 rated recruitment and retention as the profession's top priority, with half saying they are the most important issues on the personnel agenda.4 The proportion of HR professionals citing recruitment and retention as the priority issues in 2001 was higher than in the previous year when just over a third placed them in pole position.5
While the CIPD, IoM and IRS surveys illustrate that employers generally are having trouble filling vacancies and consider the effects of a tight labour market to be a burning business issue, some sectors of the UK economy are suffering acute recruitment and retention problems, as the following statistics demonstrate:
TURN OVER AND OVER
Recruitment difficulties are only one feature of the predicament being faced by increasing numbers of employers. The other is growing problems retaining employees, thus producing the vacancies in the first place. It is not surprising that, given the tightening labour market, turnover in many industries is on the up and that the most buoyant economic regions are suffering the biggest problems. The CIPD's annual labour turnover report for 2000, which relates to wastage in 1999, shows that sectors such as consultancy services, finance, insurance and real estate, information technology and manufacturing all experienced sharp upturns in turnover, compared with its previous survey.10 Regional analysis by IFF Research and Public Attitude Surveys, reveal that London, the south-west and south-east regularly top the labour turnover league.11
While a certain level of staff turnover is often desirable because it can bring new skills and more motivated people into the organisation, there are considerable costs associated with wastage, not just financial. Employers have no control over who leaves and who stays, so may lose a valued member of staff. This can disrupt work flows and impede projects. Recruits rarely move effortlessly into a new role; productivity tends to suffer; and where other members of staff are required to cover the shortfall, either by performing additional tasks or by working extra hours, they are often paid at a higher rate. Moreover, staff who are left are often placed under greater pressure, leading to a reduction in morale, lower productivity, falling quality of work and erosion in standards of customer service.
In raw financial terms the cost of recruiting a replacement varies according to the industry, the job and the role. In the call centre industry, a study by the Call Centre Association estimated that at the beginning of 2001 the average cost per head of staff turnover was £3,660.12 For the third of companies in the sector found to be suffering high levels of turnover - anywhere between 21% and 95% - this amounts to a colossal financial burden in terms of lost productivity, recruitment and training costs. An IRS survey of 24 NHS trusts in May 2000 found that the cost of filling a typical vacancy was up to £4,000.13 The CIPD's most recent labour turnover survey, referred to above, put the median cost per head of turnover at £3,546.10 The figures ranged from £1,127 to replace an unskilled manual worker to £5,206 to recruit a professional employee.
Aside from the human and financial costs of labour turnover, there are hidden factors associated with failing to retain key members of staff. These too can have a negative impact on the bottom line. It is not only the body that disappears when someone leaves: that person takes with them their accumulated corporate and customer knowledge, which can be the vital ingredient in a successful relationship or business partnership.14 Organisations' own reputations will suffer, especially among potential recruits, if the company is perceived as having a high staff turnover. This may give the impression, false or otherwise, that the business does not value its staff.
FINDING THE TALENT
The array of recruitment and selection tools available to employers to help them reach a wider pool of potential recruits and to aid their ability to make the right choice is increasing. Online recruitment is one relatively new tool growing in popularity as it enables employers to, among other things, mine CVs posted on job sites to identify possible candidates for vacancies and compete for talent globally. Technological developments have made using the Internet as a recruitment tool a viable option and many employers are set to expand their online recruitment activities. The CIPD's recruitment survey for 2001 found that more than 64% of companies polled used the Internet for recruitment in the previous 12 months compared with half of respondents in 2000, and less than 42% in 1999.2 A survey of 238 UK employers in March 2001 by Internet research organisation Forrester found that 44% of those already using online recruitment will increase the amount of money they spend on it, and a further 46% of companies plan to use the Internet as a recruitment tool over the next 12 months.15 Speed is the key advantage of online recruitment. Whereas Glaxo SmithKline normally takes up to eight weeks in the UK to fill a vacancy, it now has a target to fill each empty post within five days using online facilities.16
Methods of selecting recruits that were previously used by only a minority of employers are now becoming more popular. Psychometric testing - whereby an individual's personality characteristics are measured to determine their suitability for a post or the organisation - has been around for more than 50 years to help employers select new members of staff, but over the past decade the number of companies using testing, the level of sophistication and its prominence have all increased substantially. More than half (54.5%) of the companies surveyed for the 2001 CIPD recruitment report make use of general ability tests and almost 42% use personality questionnaires.2 The latter is the most widely used testing tool for candidates for managerial jobs. Many providers are also now putting tests online so applicants can complete them at their convenience and employers can sift out unsuitable candidates prior to interview.
Selection processes in an increasing number of organisations now involve candidates being assessed against the relevant behavioural and technical competencies for the post. This often takes place in assessment centres. Alternatively, interview questions designed to help recruiters probe for evidence of each relevant competency can be asked of potential recruits. BOC Distribution Services is one firm that makes use of both tools, having established a competency framework for managers in 1994. All HR staff, and some line managers, have been trained in competency interviewing techniques and competency-based assessment centres have been introduced for the company's fast-stream graduate intake.17
. . . AND GENERATING LOYALTY
Turnover tends to be at its highest in the first couple of years of employment. This suggests that large proportions of people quickly become disillusioned with the job or that the work or organisation does not meet their expectations. Good induction processes, including sufficient training, are important to stem the loss of often expensively recruited talent. Getting induction right, possibly by giving a new recruit a mentor or buddy, can prevent premature resignation and is a first step in generating loyalty. More than half of respondents to a survey for an earlier Management Review said improvements to their induction procedures had had a positive impact on turnover.18
Most employees leave posts for voluntary reasons. Good management lies at the heart of attaining an acceptable and manageable level of labour turnover. Being aware of problems or concerns among staff that could lead to higher turnover, such as inadequate levels of pay compared with local competitors for labour, will go some way to combating excessive turnover, so long as remedial action is implemented sufficiently quickly. Regular staff opinion polls can provide a clear picture of how employees feel towards the organisation, their colleagues, line managers and customers. The results will show what needs to be done to enhance employee satisfaction and generate greater loyalty.
It is a firm's ability to attract and retain talented staff that will differentiate it from the rest. Often retention solutions can boost recruitment and vice versa. On the one hand, allowing staff to work flexibly to enable them to balance their work and life responsibilities better, for example, is likely to improve retention. The corollary is that it will also make the organisation more attractive to people who need or desire a degree of flexibility in their working hours, often resulting in a larger pool of labour from which to recruit. On the other hand, recruitment strategies aimed at developing a more diverse workforce, such as employing older workers, may also aid retention: existing older workers may be more prone to stay and not take early retirement, for example, as it shows the firm values more mature workers, while a more diverse workforce can often make the workplace a more pleasant and interesting place to work, boosting loyalty among all age groups.14
This issue of Management Review examines recruitment and retention in today's workplaces. The following chapter discusses labour market developments and the factors affecting recruitment and turnover. Chapter three looks at the most popular recruitment and selection tools, including the use of competencies, online recruitment, assessment centres and psychometric testing. Managing the recruitment and selection process effectively is the focus of chapter four. Monitoring staff turnover is examined in chapter five, which includes analysis of different techniques to discover the reasons why people are leaving, such as exit interviews, separation surveys and staff opinion polls. Chapter six profiles the various strategies that employers can use to boost loyalty. These include establishing a balance between work and life, improving career opportunities and rewards. Chapter seven illustrates how five organisations - Brighton & Hove Council, Hewlett-Packard, King's College Hospital NHS Trust, Nationwide Building Society and Pret A Manger - are approaching recruitment and retention. The conclusions of our report are contained in chapter eight.
1Office of National Statistics.
2Recruitment, May 2001, Chartered Institute of Personnel and Development.
3"Business confidence soars - but managers fear a skills crisis in 2001", Institute of Management, press release 3 January 2001.
4"HR in 2001: the IRS audit ", IRS Employment Trends 728, May 2001.
5"Where next for HR?", IRS Employment Trends 704, May 2000.
6Annual survey of recruitment and retention among local authorities, Employers' Organisation, 2000.
7Reported in AccountancyAge, 31 May 2001; reported in Computer Weekly, 24 May 2001.
8Royal College of Nursing, 2001.
9Reported in The Times, 26 April 2001.
10Labour turnover: survey report, October 2000, Chartered Institute of Personnel and Development.
11Skill needs in Britain surveys, IFF Research and Public Attitude Surveys.
12Staff turnover scoping study, Call Centre Association, available free from: diarmid@cca.org.uk
13Health Service Report 27, summer 2000.
14"Employing older workers ", IRS Management Review 21, April 2001.
15"UK employers view the internet as a valuable recruitment channel, according to a Forrester survey", Forrester.com press release, 18 May 2001.
16Reported in Personnel Today, 27 March 2001.
17"Involving managers in competency design: BOC Distribution Services", Competency & Emotional Intelligence benchmarking survey 1999/00.
18"Staff retention ", IRS Management Review 13, April 1999.
19Labour Force Survey, spring 2000.
