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					       Recruiting

Prof. John Kammeyer-Mueller
          MGT 6366
         Recruiting Outline

1. Fundamental matching issues
2. Increasing information in recruiting
   processes
3. Internal vs. external recruiting
4. Yield ratios and legal ramifications of
   hiring methods
Fundamental matching issues

•   General matching principles
•   Specific areas for matching
    •   Person-organization fit
    •   Person-group fit
    •   Person-job fit
•   The problem of imperfect information
Why Is Recruiting So Important?

• Watson Wyatt estimated that if a company has an
  excellent recruiting function, is associated with 10%
  higher total market value
• All of the other staffing functions are contingent on
  recruiting the right people
   • You can only select qualified candidates if they apply in the
     first place
   • Good candidates could get more out of proper training and
     development opportunities
   • Individuals who are in high demand will be especially able to
     pick companies that do a good job of recruiting
     Developing an Effective
        Search Strategy
• How do you find out about jobs?
  • Write down your top three methods
  • For each method describe:
     •   Number of jobs you could find out about
     •   Likelihood of getting jobs from this source
     •   What information you would get from this source
     •   How well informed you’d be if you used this source
• What were your concerns?
  • List the top three things that attracted you to
    companies
The Staffing Components Model:
   Remembering the Process
 Applicant                                     Organization
  (person)                                         (job)



                   Recruitment
             (identification and attraction)


                     Selection
             (assessment and evaluation)


                   Employment
             (decision making and match)
A Matching Model of Employment

Employee needs and                          Employer compensation
     desires                                   and conditions
                             Match

                         Job satisfaction              Quit/remain

                     Job performance                    Fire/retain

                             Match
Employee knowledge,                            Employer job
 skills, and abilities                         requirements
 Ways of Matching: Fit with
Organization, Group, and Job
                    Culture and values
                    Reward systems
   Organization
                    Authority/decision making

     Group

                    Work preferences
      Job           Personality
                    Demography



                    Task requirements
                    Rewards for this job
                    Authority for this job
    What Information is Conveyed
          During Recruiting
•   Levels of fit
•   Information sought by employees
•   Information sought by employers
 Job Choice and Decision Making
• Most job choice literature was originally based on decision
  theory
    • Use of the rational weighted model
    • Incorporated preferences
• Stages in the rational model
    •   Define a problem
    •   Identify decision criteria
    •   Allocate weights to criteria
    •   Develop multiple alternatives with associated values
    •   Calculate expected utilities
    •   Select the best alternative
• The VIE framework can partially explain decisions regarding
  career preferences and job pursuit options (e.g., Lichtenberg,
  Shaffer, & Arachtingi, 1993; Holmstrom & Beach, 1973).
 An Example of Rational Decision
       Making in Practice
• Being rational decision makers
   • First, write down the criteria that went into deciding to
     either take your current job or attend graduate school
       • Examples: income, personal growth, job skills, interests, sheer
         love of the Gainesville area
   • Next, write down how important these criteria were by using
     a percentage importance weight
   • Think about alternatives you considered and rate each of
     them from 1-10 on each criterion
       • Consider other colleges
       • Also consider going straight to work
   • Multiply the weights by the ratings and total up the score for
     each alternatives
Questions about recruiting: What
do you look for as an applicant?

                     •Culture and values
  Things about the
                     •Reward systems
    organization
                     •Authority/decision making


                     •Work preferences
  Things about the
                     •Personality
    work group
                     •Demography


                     •Task requirements
  Things about the
                     •Rewards for this job
        job
                     •Authority for this job
A Major Question for Employers:
Hire for the Company or the Job?
• What do employers say?
  • Companies use extensive on-campus recruiting
    methods to give employees a sense of exactly
    who they will be working with
  • However, most companies ask questions related
    to job experiences, qualifications, and long-range
    suitability for the tasks they are doing
• What are the advantages of each strategy
  • Hiring for the job?
  • Hiring for the company?
    What recruiters say they are
    seeking in initial interviews
Job-specific                     % of recruiters
         Job-related experience      89%
        Job-related coursework       76%
General
                  Articulateness     94%
                    Appearance       68%
        General communication        61%
Less commonly sought characteristics include teamwork,
focus, work ethic, leadership, self-confidence, and GPA
  Chapman, Uggerslev, Carroll, Piasentin, &
                   Jones:
    Applicant Attraction and Job Choice

• What do we consider “recruiting”
  • All practices and decisions that affect the
    number or types of individuals that are
    willing to apply for or accept a given
    vacancy (from Rynes)
  • Activities subsumed under this definition
     • Posting advertisements
     • Process of contacting potential applicants
     • Conducting initial interest interviews
   Chapman, Uggerslev, Carroll, Piasentin, &
                    Jones:
     Applicant Attraction and Job Choice
• Major outcomes of the recruiting process
  • Job pursuit intentions—
     • measured early in the process as a desire to enter the
       application pool
     • obviously can’t involve much of the recruiting process
  • Job-organization attraction
     • an overall attitude regarding the organization
     • similar to the idea of “liking” a company
  • Acceptance intentions
     • behavioral aim of taking a job if offered
     • typically studied later in the process
  • Job choice
     • a final point in time measure of (dichotomous) behavior
    Chapman, Uggerslev, Carroll, Piasentin, &
                     Jones:
      Applicant Attraction and Job Choice
                         Attraction   Acceptance    Job choice
                                       intentions
Compensation               0.27          0.42         0.12
Type of work               0.37          0.52           --
Work environment           0.60          0.53           --
Recruiter behaviors        0.29          0.32         0.11
Procedural justice         0.39          0.40         0.09
Perceived PO fit           0.46           --          0.18
Perceived alternatives     0.16         -0.06         0.07
Hiring expectancies        0.26          0.36         0.17
  Chapman, Uggerslev, Carroll, Piasentin, &
                   Jones:
    Applicant Attraction and Job Choice

• Conclusions
  •   Job characteristics really do matter
  •   So do recruiting characteristics
  •   Fit is a very important consideration
  •   Acceptance intentions are probably the
      best proxy for actual job choice available,
      but they still are only approximately (not
      very closely) related to actual behavior
  Field-Specific Models of Job
            Choice
• Family background
  • Children tend to take on jobs that are similar to
    the jobs held by their parents in terms of status
    and educational requirements (e.g., Ganzeboom,
    Treiman, & Ultee, 1991).
  • Aspirations of parents influence career tracks
    (O’Brien & Fassinger, 1993; Young & Friesen,
    1992).
  • The tendency for parents to have higher
    expectations for their male children translates into
    different career trajectories (Poole, Langan-Fox,
    Ciavarella, & Omodei, 1991).
  Field-Specific Models of Job
            Choice
• Personality
  • Realistic, investigative, artistic, social,
    entrepreneurial, and conventional vocational
    typology (Holland, 1997) predicts vocational
    choice better than five factor personality types (De
    Fruyt & Mervielde, 1999).
  • Individuals with a more agentic personality and
    higher aspirations are likely to select career paths
    that will allow for greater growth and
    advancement over time (e.g., O’Brien & Fassinger,
    1993).
Measuring organizational culture:
  What is your company like?
• The problem
  • Recruiters say they are seeking applicants who
    “fit” with the company’s culture
  • Unfortunately, they find it hard to define the term
    “fit” precisely leading to ambiguity
• Researchers asked hundreds of MBA students
  and accountants to sort out their values and
  the values of their employers
  • Card sorting technique
     Major cultural dimensions of
            organizations

Dimension     Cultural values       Specific items
Change        Innovation            Experimentation, risk taking
              Stability             Rule oriented, secure
Performance   Outcome orientation High expectations, action oriented
              Attention to detail   Analytical, precise
              Aggressiveness        Opportunities, competitive
Support       Respect for people    Fairness, tolerance
              Team orientation      Collaborative, people oriented
      Empirical Evidence on Person-
             Organization Fit
• 127 accountants and MBAs described their preferred
  culture and their organization’s culture
• Matches were significantly related to job satisfaction,
  commitment, and retention in the firm

                Satisfaction   Commitment      Retention
Fit               -0.36**        -0.28**        -0.64*
Age               -0.05**        -0.11**        -0.02*
Gender            -0.01**        -0.04**        -0.05*
Tenure            -0.08**       - 0.01**         n/a
   Ordering of preferences: What
           really matters
• Comparing fit to job characteristics in importance
    • Useful to see how fit compares to more traditional
      organizational inducements
• Three main types of organizational characteristics
    • Perceived rewards: pay, benefits, promotions
    • Perceived image: image, supervisors, type of work
    • Perceived security: job security, location

                                                Job choice   Job satisfaction
Job characteristics   Perceived rewards          0.13**          0.12**
                      Perceived image            0.20**          0.08**
                      Perceived security         0.30**          0.59**
Fit perceptions       Person-organization fit    0.20**          0.26**
                      Person-job fit             0.07**          0.18**
Differences in preferences for
organizational reward systems
               • Scenario studies
                 show that
                 individuals with high
                 need for
                 achievement are
                 more interested in
                 working for
                 companies with
                 merit-based pay
                 structures
   Major implication: You can’t
please all the people all the time!
• The research clearly shows that people
  differ in what they want, and matching
  things up can improve satisfaction
• The research also suggests that
  organizations will tend to attract people
  who are a lot like the people already
  there.
  Decision Making in Practice:
    How We Really Decide
• Scott Highhouse has critiqued the reliance on rational
  decision models in our field
   • We use much less well-defined decision criteria
   • People typically have one or two job options at most
• What do real job choices look like?
   • Problems are poorly defined
   • Decision criteria often not known a priori
   • Weights are cognitively difficult to use
   • Develop a small number of alternatives without knowing real
     values
   • Guess as to the value of combinations using heuristics or
     use non-calculative comparisons
   • Satisfice
    Attention: A Response to
  Limited Cognitive Resources
• We can only process a few things at a time
  • Limited attention resources
  • Incomplete information
  • Cognitive economizing
• Result: we use heuristics and shortcuts
  • Choosing only from those choices that are most
    salient
  • Disregarding remote options altogether
  • Elimination by aspects
  • Lexicographic decision making
                 Heuristic Thinking:
                   Image Theory
                                      Screen                       Select

Bad reputation          DCI Assoc
                         DCA Inc
Work would be                                        DCI
                         DFI Co.                                            DDL
uninteresting                                       DDL
                         DDT Ltd
                                                  D, G, & I
 Offices in an           DDL LLP
 undesirable             D, G, & I              Great benefits
   location                                    package, friendly
                                                   people

                                 Key Features:
       Pay much more attention to negative information in early phases
  Options treated as individual pieces of data only during the selection phase
Implications of Heuristic Decision
             Making
• Concepts from marketing are important
  • Overall organizational image matters
  • Simply getting your name out there is a crucial
    recruiting task
• Simply looking at applicants is misleading
  • Need to understand the group of people who
    never even consider the job
  • Need to understand how your employment
    “brand” is viewed by the market
Signals in the recruiting process:
Examples of inferences about fit
• Inferences about interpersonal fit
  • “I wasn’t sure of the fit at first. But after talking
    with the people there, I feel like there was a
    pretty good fit. I have talked to seven people
    there and liked all of them.”
• Inferences about corporate culture
  • “They interviewed about a hundred people in a
    day. Then, based on the initial interview, people
    were asked to re-interview the next day in
    different divisions. So instead of just putting
    resumes in a pile and having people look at them,
    they were on the ball.”
 Signals in the recruiting process:
         Strong negatives!
• Inferences about skills
   • “_____ has a management training program which the
     recruiter had gone through. She was talking about the great
     presentation skills that _____ teaches you and the woman
     was barely literate. She was embarrassing. If that was the
     best they could do, I did not want any part of them.”
• Inferences about diversity
   • “The guy at the interview made a joke about how nice my
     nails were and how they were going to ruin them due to all
     the tough work.”
   • “For example, the ______ companies wouldn’t even put one
     woman on my schedule. That scares me.”
  Avery: Reactions to Diversity in
     Recruitment Advertising
• Relational demography predicts that individuals will react more
  positively to organizations that are like them
• Main effect of number of minorities
    • Research suggests Blacks have shown racial congruence effects
      when viewing advertisements, whereas Whites do not
    • Obviously, there is a serious confound (very few recruiting
      advertisements show “all Black” workplaces)
• Number of minorities in position of authority
    • Black employees perceive less trust and support from White
      supervisors (Tsui & O’Reilly, 1989)
    • Seeing Black managers may also inform applicants about their
      opportunities for advancement
 Avery: Reactions to Diversity in
    Recruitment Advertising
• Participants were directed to a fictitious
  consulting firm website
• Constructed websites for three types of
  organizations
   • Uniform: displayed two pictures containing five
     White employees, as well as a picture of three
     White managers
   • Skewed: displayed two Black employees and three
     White employees, while still using the same three
     White managers
   • Balanced: displayed two Black employees and
     three White employees, with one Black manager
     and two White managers
 Avery: Reactions to Diversity in
    Recruitment Advertising
• Critical variables
  • Organizational attractiveness: not intention
    to take a job, just whether you think this
    would be a good place to work
  • Other-group orientation: an inventory
    designed to assess people’s perceptions of
    other races or ethnic groups (e.g., “I like
    meeting and getting to know people from
    ethnic groups other than my own”)
Avery: Reactions to Diversity in
   Recruitment Advertising
                    • Interaction shows a
                      different story
                    • White viewers with high
                      other-group orientation
                      preferred diversity, Whites
                      with low other-group
                      orientation preferred
                      homogeneity
                    • Blacks with high other-
                      group orientation disliked
                      the skewed picture most
                      of all, whereas Blacks with
                      low other-group
                      orientation preferred more
                      Blacks at any level
  Avery: Reactions to Diversity in
     Recruitment Advertising
• Other group orientation is a very important
  moderator in these results
   • Some Whites prefer homogeneous workplaces, others prefer
     heterogeneous workplaces
   • Some Blacks prefer any situation that results in more Blacks
     at work, others are especially wary of situations where
     Blacks are in the setting but only occupy low status jobs
• Future research possibilities
   • Is this a common effect for other types of minority status
     (religion, national origin, gender, sexual orientation,
     disability status, etc.)?
   • What might the behavioral correlates of these outcomes be?
     Increasing Information in
       Recruiting Processes
•   Increasing employee knowledge of
    employers
•   Increasing employer knowledge of
    employees
•   The importance of recruiting sources
    as an alternative
        Major Sources for New
              Employees
• Media sources
   • Company website, job boards, newspaper
     advertising
• Recruiting fairs
   • Campus recruiting offices, community hiring fairs
• Social networks
   • Friends and family referrals, professional networks
• Staffing organizations
   • Headhunters, temporary agencies, recruiting
     firms, unemployment office/job service
  Employment and bounded
rationality: Credibility in action
• Employer knowledge             • Employee knowledge
  • Job conditions                 • Experience level
  • Compensation                   • Motivation level
  • Career paths                   • Intention to stay
          Both sides have incentives to oversell
  • Higher quality workers          • Better working
  • Ability to pay less               conditions
  • Unlikely workers will quit      • Ability to get paid more
    right away                      • Unlikely the firm will fire
                                      someone right away
                 Result: adverse selection
The number one complaint made
by recent hires: Lack of honesty
•   I felt schizophrenic the first 6 weeks I was here…the lip service thing
    was, well, welcome and we’re so glad you’re here. But in daily
    practice, you would accidentally get in trouble because of something
    you didn’t know.
•   The salary that was guaranteed to me when I accepted this position
    has not been met. While I do not intend to quit over this issue as the
    amount is only about $1000 less (per year), additional behavior such as
    this, and my co-workers' lobbying against my salary, will be detrimental
    to my continuing employment.
•   I was ready to go on day two, and I’m still ready to go. I spend two
    hours a day looking for a new job…I have to say, the job is not what I
    was led to believe it is. The things I’m doing, I did four or five years
    ago. I took this job because I was able to grow in my career and learn
    more and do more…And it’s also, HR didn’t know their packages very
    well, so I have less medical than I had before, and those are things I
    checked out prior to starting. It’s been frustration every step, in just
    about everything.
The number one complaint made
by recent hires: Lack of honesty
• If I am asked to do any more work than what is currently in my
  job description, I will quit. The job I signed on to do is easily a
  2-person, full time job and I am expected to do it all in 40 hours
  a week. It is impossible and unrealistic, and it constantly sets
  me up to fail.
• I intend to quit because the job description and conditions I was
  recruited under aren't at all what I've been doing—I was told no
  travel, but I have to travel. I was told I'd be doing instructional
  design, project management, and administrative work, I’ve been
  since that I had a specific function, doing whatever my manager
  doesn't want to do. I've been here since May and was promised
  benefits (health, 401K) starting May 15. It's mid-November and
  I still don't have any benefits.
          A Model of Recruiting and
                Information
                             Realism processes
                           •Coping & role clarity
                           •Perceived honesty

Recruiting sources/                                           Work outcomes
    pre-entry                                              •Attitudes
   information                                             •Withdrawal behavior

                           Individual differences
                           •Ability
                           •Personality

    The paths in bold are generally better supported; the evidence that good
                employees have better friends is relatively weak
       One possible solution:
   Increase employee knowledge
• Realistic job previews
   • Workers told both the good and bad points of jobs
   • Based on the assumption that turnover is the result of a
     mismatch between information that’s typically provided and
     what jobs are really like
• Examples from Prudential’s realistic recruiting
   • A Prudential representative finds that a high degree of
     personal recognition is available. And a successful Prudential
     Special Agent is recognized in the community as a
     professional. But there are times when every Special Agent
     feels discouraged. A career as a special agent is not an easy
     one. It can mean many personal sacrifices; it can mean
     working four or more nights a week, in the beginning; it can
     mean postponing a special outing or an evening at home; it
     can mean having to take extra insurance courses.
  Phillips: Effects of Realistic Job
               Previews
• Realistic job previews
  • Workers told both the good and bad points of jobs
• Theories explaining why RJP should work
  • Applicant self-selection: applicants who don’t fit
    will get out of the recruiting pool (Wanous)
  • Vaccination: employees have a small taste of
    organizational reality so they can be prepared to
    cope (McGuire)
  • Commitment: if employees know the bad parts of
    the job, and they take it anyway, they’ll be more
    committed to their decision (Wanous; Bem)
  • Honesty: Companies who provide realistic
    information upfront will be seen as more honest
    (Hom et al.)
     Example from Prudential’s
        realistic recruiting
• A Prudential representative finds that a high
  degree of personal recognition is available.
  And a successful Prudential Special Agent is
  recognized in the community as a
  professional. But there are times when every
  Special Agent feels discouraged. A career as a
  special agent is not an easy one. It can mean
  many personal sacrifices; it can mean
  working four or more nights a week, in the
  beginning; it can mean postponing a special
  outing or an evening at home; it can mean
  having to take extra insurance courses.
  Phillips: Effects of Realistic Job
               Previews
• Factors that moderate the effectiveness of
  RJPs
  • Settings—laboratory settings may be missing
    important elements of the employment setting
  • Timing—RJP information should be more effective
    if it’s provided before a choice is made
  • Medium—verbal information is typically more
    persuasive and salient, so one would expect that
    verbal RJP would have more of an effect
  Phillips: Effects of Realistic Job
               Previews




• Setting and timing don’t matter as much as one might think
• Verbal RJPs are more effective across most categories for
  influencing attitudes
• Videotaped RJP does seem more related to performance
  because they can show actual instances of performance, which
  might be hard to do verbally
• RJP does very little in general to improve satisfaction or
  commitment
     Realistic Job Previews and
        Applicant Reactions
• Concerns about realistic previews
  • Negative information is used more by applicants
    than positive information on pay and promotions
  • If given a choice, most individuals prefer jobs that
    are “sold” during recruiting
  • Bretz & Judge, 1998 (after the Philips meta-
    analysis)
    One possible solution:
Increase employee knowledge
      However, Realism Can Have
       Positive Effects After Hire
                                Employer
                                 honesty

      Realistic                                   Organizational
      preview                                      commitment


                                 Coping
                                                   Withdrawal
                                                   cognitions
This empirically supported model shows how
realistic previews seem to primarily have their
effects by encouraging employees to cope with
the difficulties of their new jobs                  Voluntary
                                                    turnover
From Hom, Griffeth, Palich, & Bracker, 1999
 Remaining Questions Regarding
       Realistic Previews
• Does it matter who delivers the RJP
  message?
• What are the behavioral
  consequences of RJP once one enters
  the job?
• How does the negativity of the RJP
  influence its effects?
• Can the RJP literature be tied to more
  substantive research streams?
    One possible solution:
Increase employee knowledge
• Job trials, internships, and temps
  • Employees a chance to see the
    organization from the inside
  • Get a chance to interact with co-workers
    in a variety of situations
  • Results suggest an even stronger effect
    than for realistic job previews.
    HR in the News: Job Searches
           and Connections
•   Who might be your greatest asset in networking? – A spouse or partner
•   Why?- The only people as devoted in a job search as unemployed
    people themselves are job seekers’ partners and spouses.
•   Situation
     •   Job creation increasing but not as much as forecasted.
     •   Average duration of unemployment for professionals is nearly 24 weeks.
•   Advantages of using connections
     • Spouse can help in a number of ways
          • Asking a large employer if a spouse can use the company’s resource library
          • Actually putting the resume into the hands of the human resources director
     • No law against an employer relying on word of mouth recommendation to
       fill a job opening
     • Spouses and partners are often seen as reliable references
•   NY Times- Feb. 29, 2004 Looking for a New Job? Help May Be
    Snoozing Next to You
    One possible solution:
Increase employee knowledge
• Applicant source effects
   • Those who are recruited by friends and co-workers:
       • Are more satisfied and/or committed
       • Are less likely to turnover.
   • Contacts in a social network provide jobs that:
       • Pay more
       • Are more likely to be set up specifically for the applicant
   • Applicants with information from formal and informal
     sources:
       • Higher pre-hire knowledge of the job
       • Lower turnover
       • Higher qualifications
    The effects of personal contacts
            on satisfaction
                              Formal          Personal           Direct
                              means           contacts         application
Very satisfied                30.0%            54.2%              52.8%
Fairly satisfied              46.0%            36.8%              32.1%
Fairly-very dissatisfied      25.0%             9.0%              15.1%
N                                50              155                53



Note: Formal means include advertisements, public and private employment
agencies, interviews, and placements sponsored by universities or professional
organizations, and the like
    The effects of personal contacts
           on compensation

                               Formal        Personal           Direct
                               means         contacts         application
High pay                       6.0%            14.3              3.8%
High moderate                  24.0%           31.2             15.4%
Moderate pay                   42.0%           31.8             30.8%
Lowest pay                     28.0%           22.7             50.0%
N                                50            155                53

Note: Formal means include advertisements, public and private employment
agencies, interviews, and placements sponsored by universities or professional
organizations, and the like
 Another Possible Solution: Using
        Recruiting Firms
• Typical processes for professional recruiting
  firms
  • Candidates can apply directly to these companies
    to get their names into a database
  • Often, these companies will have official recruiters
    (e.g., headhunters) who seek out full time
    employed individuals who might be attractive to
    employers
  • Employers can solicit these companies for access
    to the database of applicants
  • Example: recommendedrecruiter.com maintains a
    searchable database of recruiters by location
Internet recruiting exercise
                    •   Identify the major features
                        of three corporate websites
                         • What information is
                           given?
                         • What information is
                           withheld?
                    •   Describe the type of
                        person you think this
                        website would attract or
                        dissuade
                    •   A few corporate websites
                        worth checking out:
                         • SAS institute, Merck, 3M,
                           Ford, Morgan Stanley
                    •   E-mail me a copy of what
                        your group comes up with
    Internal vs. External Recruiting

•    Strengths and weakness of
     internal/external recruiting methods
•    Methods of external and internal
     search
•    Determining the company’s overall
     strategy
•    Assessing the need for firm-specific
     vs. general human capital
  HR configurations: Matching
  HR practices to one another
• Internal market                 • External market
   •   Internal promotion            •   External recruiting
   •   High levels of training       •   No training
   •   Pay for time-in-position      •   Pay for performance
   •   Commitment is                 •   Individual performance is
       emphasized                        emphasized
• Examples                        • Examples
   • WalMart, 3M, Publix,            • Broadcasting, consulting,
     Proctor & Gamble, FedEx           advertising, and
   • Japanese firms are                investment banking are
     almost entirely internal          largely external
  HR configurations: Matching
  HR practices to one another
• Consider two idealized types of HR practices
   • Internal market
      • Internal promotion, high levels of training, high pay
        for time-in-position, commitment is emphasized
   • External market
      • Almost all external hiring, almost no training, pay
        only for performance, individual performance is
        emphasized
• Classic examples of companies who have a major
  emphasis on internal promotions
   • WalMart, IBM, 3M, Proctor and Gamble, FedEx
   • Japanese firms are almost entirely internal
     The Classic Internal Market
             Structure

                         Execs


                                                            Increas
                       Directors
                                                              e in
                                                            decisio
                                                               n
                   Senior managers
                                                            making
                                                             power

                 Entry level managers


Operatives/clerical/functional positions (outside of ILM)
 Conical model of
organizations and
the Internal Labor
           Market
Rank: Increases in decision
                  authority

Centralization: Increases in
  social integration into the
   firm’s underlying culture

    This protects the firm’s
     decision making core
  Internal Labor Markets and
     Employer Knowledge
• Why are ILMs good?           • ILMs are bad
  • Observe people during          • Political processes are at
    the course of their work         work
  • Firm-specific human            • Peter Principle
    capital                        • Ossification of ideas
  • Build employee                 • No information about
    commitment                       competitors’ operations
  • Reduce turnover


    Not all employees are in the same internal market! Most
        companies have multiple tracks for promotions.
 Should you hire internally or
         externally?
• The obvious answer is “it depends”
  • Uniqueness of human capital
  • Value of the employees to the firm
• Because companies often have a
  mixture of “core” and “peripheral”
  employees, most use a mix of internal
  and external markets
   Internal Labor Market Tracks:
      Many Options in Practice
Traditional professional                    Traditional professional mobility path
     mobility path

   Senior consulting                       Vice President            Senior consulting
       engineer                             Engineering                  engineer

  Consulting Engineer                  Manager Engineering         Consulting Engineer


    Senior Engineer                    Supervising Engineer            Senior Engineer


        Engineer                                            Engineer


                                  Lateral Mobility Path
  Production                Project             International               Sales
   manager                 manager                  sales                  manager
EEOC v. Chicago Miniature Lamp
Workers: Referrals As a Problem?
• In 1980, the percentage of entry-level workers in
  Chicago who were black was 36.4%
• Between 1978 and 1981, Miniature hired 146 entry-
  level workers. Nine of these workers (6%) were black
• The percentage of black applicants who were hired
  was 16.4%; the overall percentage of applicants who
  were hired was 6.1%
• The court said the applicant pool was more relevant
  for consideration than the regional job market, so the
  company was not found in violation
• It is important to note that this hinged on the fact
  that the company wasn’t actively recruiting
              Yield Ratios

•   Basic concepts in calculating yield
    ratios
•   Alternative metrics for recruiting
    method outcomes
      Accounting for Recruiting

• The cost of finding a new employee
  •   Cost of advertising a position
  •   Cost of selecting good performers
  •   Cost of training the newcomer
  •   Other costs? (Hard to measure)
• The outcomes of a new employee
  • Retention/duration of employment
  • Job performance
     Evaluating the Quality of
  Recruiting Methods: Yield Ratios
                 Media      Website      Walk ins      Referrals   Totals

 Applicants        50          100           40              20     210
  Job offer        10           8            15              13     46
    Hired           9           8            14              13     44
   Survival         5           4            12              10     31


How to compute yield ratios:
Job offer rate: job offers divided by number of applicants
Hiring rate: hired divided by number of applicants
Survival/retention rate: survival divided by number of hires
    Evaluating the Quality of
 Recruiting Methods: Yield Ratios
             Media   Website   Walk ins   Referrals   Totals
Applicants    50      100        40          20        210
Job offer     10       8         15          13        46
             20%      8%        38%         65%       22%
  Hired       9        8         14          13        44
             18%      8%        35%         65%       21%
 Survival     5        4         12          10        31
             56%      50%       86%         77%       70%
   Supplementing Yield Ratios with
         Cost Information
                    Media       Website           Walk ins       Referrals
 Setup cost     $ 1,000.00     $   500.00     $              -   $    250.00
 Apply cost     $      10.00   $      8.00    $       15.00      $    100.00
Total apply     $    500.00    $   800.00     $      600.00      $ 2,000.00
    Total application costs are application costs * number who apply
Training cost   $ 1,000.00     $ 1,000.00     $ 1,000.00         $    750.00
 Total train    $ 9,000.00     $ 8,000.00     $ 14,000.00        $ 9,750.00
     Total training costs are training costs * number who are hired
 Total cost     $ 10,500.00    $ 9,300.00     $ 14,600.00        $ 12,000.00
     Total cost for a method is setup cost + total apply + total train
          The “Bottom Line”
   Estimating Which Method to Use

                      Media      Website      Walk ins     Referrals
   Total cost       $10,500.00   $9,300.00   $14,600.00   $12,000.00
     Hired              9           8           14            13
 Cost per hire      $1,166.67    $1,162.50   $1,042.86     $923.08
    Survival            5           4           12            10
Cost per survival   $2,100.00    $2,325.00   $1,216.67    $1,200.00
  Other Metrics That Have Been
           Proposed
• More about applicants
  • Applicant demographics by source
  • Applicant qualifications by source
  • Applicant performance ratings by source
• More about recruiter
  • Can also collect effectiveness data based on
    specific recruiters to identify good performers and
    also to identify good recruiting strategies that can
    be taught to others

				
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