This is Not Your Father's HR

Frustration over ineffective recruitment practices and high turnover are spurring a more integrated view of hiring and managing employees

By David Bogoslaw

The idea for "This is Not Your Father's HR" came from BusinessWeek reader James Gregware, CEO of FrontRunner Marketing, LLC and ProRezOnline.com. He lives in Orlando, Fla.

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Human Resources is no longer about hiring, firing, and managing benefits. Top companies are realizing that a holistic approach to what has come to be called "talent management"—one that aligns a company's goals with succession planning and employee career objectives — can produce big cost savings.

Smart companies have long recognized the shortcomings of hiring based on automated keyword searches of electronically filed résumés, and have begun to have candidates fill out customized applications online. Forcing applicants to provide specific data to help guide a selection process gives employers more control than relying on information the applicant wants to share, says Fritz Drasgow, who teaches a graduate Planning and Staffing course in the School of Labor & Employment Relations at the University of Illinois.

With unemployment poised to top 10% by summer's end and pessimists projecting a rate even higher before the recession ends, this would seem to be a strange time for companies to bemoan ineffective recruitment and hiring practices. But a lot of companies have become more serious about finding the right people for open positions—or retaining their best performers — precisely because they don't want to lose them in the tighter labor market they foresee once the economy rebounds.

A Turnaround on Long Island

Consider North Shore-Long Island Jewish Health System, which employs nearly 40,000 at 14 hospitals, a major medical research institute, and several long-term care facilities and trauma centers. The company has cut spending on recruitment advertising by $7.7 million a year with help from an aggressive focus on leadership development for existing employees, says Joseph Cabral, director of human resources for the Great Neck (N.Y.) system, the country's third-largest independent, not-for-profit healthcare organization. As part of its effort to align workers with company goals, North Shore-LIJ has built what Cabral says is the largest corporate university in health care. Its Center for Learning & Innovation is modeled after General Electric's (GE) John F. Welch Leadership Center for employees. That, plus the Critical Care Fellowship Program, which extends employees' education, has resulted in a low turnover rate, he says. While most hospitals struggle to stay fully staffed with nurses, "my CEO [Michael Dowling] loves to say, 'I don't have a nursing shortage,'" boasts Cabral. "A lot of that has to do with how you treat your workforce."

Golden Corral, a family-style restaurant chain based in Raleigh, N.C., with 480 franchises, reduced its manager turnover rate from 50% to 20% within three years by adopting a new screening system. At $25,000 to hire and train each manager, that translates to significant savings. The chain also trimmed its worker turnover rate from 148% to 90% after 18 months. Additionally, private equity firms are increasingly hiring HR professionals to assess the competency of the executives in the companies in which they are considering an investment. They understand that the closer the alignment between a new acquisition's leadership and the company's agenda, the better the chances of profit, according to a February 2009 article in Human Resource Executive magazine.

HR departments have generally been slow to invest in technology that can boost efficiency compared with the billions of dollars they spend on payroll, general ledger, and customer relationship management (CRM) systems, says Michael Gregoire, chief executive of Taleo (TLEO), a Dublin (Calif.) firm that supplies HR software to North Shore and other companies such as Honeywell International (HON), Hyatt Hotels , and Barclays (BCS). In the past, HR managers did not have tools "to understand where does talent come from and how to get talent into the organization, and once they're in, how to pay them and keep them motivated and [manage] succession planning," he says. Taleo's technology lets clients build a database of applicants that can be tapped when they need to fill a position. "Every time you're looking for a new candidate, you're not starting from scratch," Gregoire says.

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