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Saturday, February 21, 2009

To Recruit Well, Confirm Everything

I've just finished a three-day recruiting swing through D.C., Atlanta, and Ft. Lauderdale. This week reminded me that we don't recruit like a lot of other companies. Both the Regional Manager with whom I was pared and some of the candidates weren't prepared for our focus on fact-checking as a fundamental recruiting discipline. Here's the how and why of our process.

Facts are Important

Fact checking in recruiting is so fundamental to the process and yet its often not done properly, if at all. HR practitioners often defer to the on-line criminal background check rather than vetting the candidate's resume or application face-to-face. In Christian business hiring managers often think the best of candidate and accept the facts presented by them at face value. I've even had Christian hiring managers and even HR practitioners express concern to me that we were unfairly questioning a candidate's integrity by questioning their resume or application.

Depending on whose article you read, approximately 35 - 50% of applicants lie on their resume. From eight years of working in Christian business I can assure you that our applicants track that number. Christian organizations can't simply assume that dishonest people won't apply here; that only the other 50% will want to work in our organizations. Rather, we have to be diligent as HR professionals and hiring managers to make sure that only the other 50% get in the door. In organizations such as ours the damage to the brand done by one dishonest person can be significant.

The Trouble with the Traditional Approach

Typical recruiting starts with a resume and ends with reference checking. In between there's an interview. The problem with that approach is that all the information coming to you comes from the candidate. It is possible to completely fabricate a resume, give "personal" references, have a fabulously engaging and totally false interview, and get hired. Criminal background checks help screen such people if there's been a conviction. But if the candidate's never gotten on the wrong side of the law, or if they don't give you all their past addresses (since background checks are done by jurisdiction) even that won't surface the problem.

Collecting Information

Resumes can be made to say, or cover, anything. I personally like to have all candidates complete a standard application as well as submit a resume. We also have a strict policy in HR that we never accept an incomplete application. This forces all candidates' information onto a standardized template and discloses all the information needed for fact checking. I also like to have this on-line as an indicator of the individual's ability to navigate simple web applications.

Part of the information we collect are the names of past supervisors. This is important, since personal references tell you nothing you don't expect to hear; nobody lists a personal reference who'll say bad things about them. Past supervisors can both confirm that the person worked at the job listed and often aren't trained (like HR departments) not to talk to you when you call for a reference.

For those candidates whose application and resume indicate the required experience and qualifications, we also like to issue a questionnaire specific to each job to probe deeper into the individuals qualifications. Listing that you've programmed in a certain language is a lot easier than writing a simple narrative paragraph about how you do some task in that language.

Confirming Everything

Once I have this information and move to an interview I have the candidate start at their education and then account for their work history. Typically resumes and even applications will say something like:

Zondervan Publishing Editorial Assistant 2005 - 2007

Barnes and Noble Assistant Store Mgr 2003 - 2005

What few interviewers do, which is critical, is to ask for the months to go with the dates and why they left their job. "What month were you hired at B&N? What month did you leave? Why did you leave?" These simple questions often surface gaps in employment. Just as significantly, watching the candidate's body language, eye movement, and perspiration during this questioning often tell you all you need to know.

Assuming you had a good interview, the next step should be reference checking with former supervisors. If your application provides a release to check references, remember that you're not limited to the references given by the candidate. You can call the supervisors listed or even, if you know the company, call someone you know who works there. The point is you can't confirm the facts a candidate gives you with references provided by the candidate.

Finally, a drug test and criminal background check are important. Remember that background checks are done jurisdiction-by-jurisdiction. Make sure that the complete employment history you collected, and the jurisdictions the applicant lists on the criminal background check, agree. If you know all the communities in which they worked and check for convictions in all of them you're risk of a bad hire is reduced.

And in the end, that's what good HR does; mitigates the risk of hiring the wrong person while helping the hiring manager find the best person available at the time of the job opening. Bad hires are still possible because anything involving people is an inexact science. Good process, however, leads to good results more time than not and keeps the wrong people out of your organization.

Monday, February 16, 2009

Resumes Tell A Lot More Than You Think

I'm writing this from a Fairfield Inn near Washington, D.C. We are up here on the first of a three-city recruiting trip looking for contract outside sales professionals for our Live Events division. I don't do a lot of this type of recruiting anymore, so this has been a great refresher course to keep my recruiting chops current. We've had a response ratio of about 130 resumes for every opening, and for "my" three cities its told me a lot about what's going on in the economy, whose up, whose down, and whose surviving. It also has reminded me of the dumb things people do that sabotage their own job search.

Industries Responding
While applicant flow is up overall due to higher unemployment, some segments of the economy are represented more than others. Since sales is a profession that cuts across industries, you can tell which sectors are suffering more by the applicant flow from those industries. I read a disproportionate number of resumes from auto salesmen, Realtors (especially younger or less experienced ones), real estate closing agents, real estate loan brokers, construction estimators, bankers, retail managers, and retail workers. In the Atlanta market we had a large turnout from people recently employed at AT&T which suggests some type of layoff or buyout in that market. Its obvious that, while retail business is off overall, anything having to do with home building, buying, or financing is particularly hard hit.

Skill Sets Responding
About half of those responding to our sales ad had sales experience. Probably 80% of the rest of those responding described themselves as:
  • consultants
  • leaders
  • speakers
  • grant writers
  • community organizers
  • advocates
  • analysts

There's something that these jobs all have in common; they aren't at the core of most employers' businesses. If you sell landscaping, for example, you can afford "nice to have" jobs in good economies. In this economy, you don't want the consultant to tell you how to landscape, a leader to supervise your landscape crews, a speaker to inspire your landscape crew, a grant writer to apply for government funding for your small business loan, a community organizer (we elected one of those), an advocate for the social causes of landscapers, or an analyst to tell you how you performed vs. other landscape companies. In this economy you need to keep the people who dig holes, plant shrubs, throw mulch, and handle a water hose.

And This Tell Us What?

There's a lesson in all this about surviving a recession, and it has a lot to do with why I'm in Washington recruiting for sales talent. When a company has to decide who stays and who goes, it almost always errs for those who do; who execute at the core of what the business is all about. It is less likely to keep those who talk about it, attempt to lead it, aspire to inspire it, or analyze what the doers are actually doing. In today's economy survival looks like this; begin each day asking yourself, "What can I do today to cut cost or drive revenue today, tomorrow, this week, etc..."

On a final note, this is strictly an overall comment on what I'm seeing in the recruiting realm. It should not be inferred as a criticism to anyone let go in either of our RIFs this year. This is not a comment on their selection or a criticism of their work.


Monday, February 02, 2009

Medical Insurance Renewal Update: Ugly Numbers...

Insurance renewal negotiations are on-going and I thought it might be wise to give everyone an update on our activities and likely outcomes. Like everything else in this economic climate, the news isn't pretty. Here's the latest, and the timetable for a final decision and announcement.

Claims Experience
For the last five years our claims have run 84 - 86% of premiums paid. That leads to a flat or slightly increased renewal, as underwriting typically involves taking the last 12 months and trending those costs 15 months looking forward. This is done because the broker uses claims and census data after 9 months of the current plan year, at which point it is 15 months before the end of next plan year. Medical costs typically increase from 9 -15% per year, and average about 12% annually, or 1% per month. So, when we run around 84 - 86% of claims-to-premiums, we usually end up with a 0 - 2% increase.

This year our actual claims have been between 100 - 104% of premiums. We've had one or two large claims, but we've also had generally high utilization. This is typical in years when you have staff reductions; people get concerned about having insurance going forward and go to the doctor rather than putting things off. The combination of large claims and higher overall utilization have driven our claims up 15 - 20% over our typical trend at this time of year.

Another important fact to consider is the number of COBRA participants on our insurance plan. This is important because underwriters believe that the only people willing to pay COBRA premiums are sick and therefore will be high-cost participants. Also, proposed legislation from Congress and the new administration are scaring underwriters regarding COBRA participants.

In a typical year we have 10 - 14 people on COBRA at renewal time. This comes from the normal ebb and flow of hiring and terminations. This year, due to staff reductions and the slow job market, we have 70. The company is paying the premiums for a certain number of weeks depending upon each person's length of service, but the plan pays for the claims and they count against our experience. The COBRA law has always limited this participation to 18 months, but Congress has other ideas.

New proposed legislation, as part of the economic stimulus legislation, would extend COBRA for possibly as much as 10 years. Legislation before Congress would allow terminated employees age 55 and over to remain on COBRA until Medicare eligibility at age 65. Also, terminated employees who lose their jobs between September 1, 2007 and December 31, 2009 would be eligible to keep COBRA until age 65 regardless of their current age. Its important to stress that this is proposed legislation, but I believe it is having an impact on our renewal.

Underwriters assess risk, and when risk is not reasonably predictable the underwriting becomes more conservative. By conservative I mean that the underwriters assess a higher premium as a hedge against the worst case scenario because the risk is not predictable. The combination of 70 people on COBRA and the potential for COBRA to last for years, rather than months, is inhibiting our ability to get a competitive rate.

How We're Going to Market
Because of our higher claims-to-premium ratios we instructed our broker on the Wednesday before Thanksgiving to market our health plan to a variety of carriers. What we've found since then is that consolidation in the insurance industry only gives us four or five carriers from which to choose. We've gotten three quotes back so far, and all are in the 20% increase range. We've also gone to market on what's called a "self-insured" model, where the company funds the claims and pays a Third Party Administrator to pay the claims, manage the network, and do all the things you normally associate with an insurance company.

The main issue with this approach, in my opinion, is managing cash flow. Our insurance premiums are typically around $360,000 per month; with a fully insured plan we know that it won't vary much from month-to-month and so cash management is simpler. In a self-insured plan that number might average $360,000 or so, but could be $100,000 one month and $700,000 the next. Still, if our choice is between significantly higher premiums, reduced benefits, both, or taking a cash management risk then self-insurance might be a reasonable option.

We will have the final fully-insured quotes this week (altough that's what the broker's been telling me for two weeks). We will have self-insured quotes about 10 days after that. Meanwhile, we're running models on what different reductions in benefits would do to overall costs. This doesn't necessarily mean that benefit reductions are inevitable, but they are possible. It also doesn't mean that a large cost increase is inevitable, but it is possible. We're looking for one favorable quote that we can either accept or use as negotiating leverage with the other carriers. We've yet to see it, but not all quotes are in.

We must have a senior leadership decision by around February 20th in order to conduct Open Enrollment March 1 - 31 as required by law. I'll update you if/when there's news to report; otherwise we'll make a formal announcement of your FY '10 benefits sometime around the last week of this month. I'm not happy about where we are and we're working on this literally every day. Still, it is what it is and I wanted everyone to know the status of this effort.