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The (near) Future of Applicant TrackingSystems

2006-04-03T16:48:00.000-07:00

The (near) Future of Applicant TrackingSystems

– by J.P. Winker

Applicant TrackingSystems (ATS) have been around for about two decades now. Initially they were all the rage, especially in large companies, but are now available to just about anyone. These products are designed to assist in the hiring process and there are several different software offerings used worldwide, bringing a range of capabilities to various users. While the recruiting industry has adopted these systems en masse, things are about to change. Our purpose is to shed light on the significant changes which are right around the corner.

In order to project where the industry is going, it helps to understand where the industry is now: how the vendors are positioned, different approaches to market, and the disposition of buyers. In doing so we glean insight into the limitations of the assortment of vendors, systems, and the industry itself. As these limitations become clear, we improve our ability to see beyond them.

Current State: Supply Chain
ATSs have been adopted in large numbers. The design of these systems is based on supply chain concepts. Essentially, a supply chain coordinates the design, production, delivery and service of products. Traditional manufacturing companies do one or two of these things then pass the material to the next. Today, manufacturing organizations are intertwined from beginning to end, linked by communication devices. For example, when you buy a widget at Wal-Mart, the moment it's scanned at the cash register, an order for a replacement goes to the stocker, then to the warehouse, then to the supplier, then to the manufacturer. Costs are saved by avoiding capital tied up in inventory. Examples of leading recruiting systems include BrassRing, Taleo and Vurv (formerly RecruitMax). Each of these systems utilizes sequential processing to collect information on, measure, and manage recruiting efforts. As in manufacturing, the software linking recruiting events is centralized in one system on the recruiter’s desktop.

A supply chain approach is most effective for companies selling products. It works best for things you can inventory – finite, inanimate objects. When the model is applied to human beings, as in a recruiting process, it is less effective; the complexity and range of human beings makes quantification, management, and predictability extremely difficult. No matter how you look at it, it is not an ideal model on which to base the recruiting of talented people. (Even so, it’s a good place to start).

The need to integrate with other systems and services – like sourcing and payroll – creates further challenges. Technical hurdles are relatively easy to overcome, but forcing unaffiliated vendors to cooperate can be very difficult. Sourcing components in particular, are left out. The result is that many recruiting systems are not implemented across the entire supply chain and instead are comparatively “closed” systems.

In order for the ATS to encompass the entire supply chain, sourcing components need greater inclusion. Because these components (job boards, referral systems, websites, resume dbases, etc.) undergo frequent change, the challenge to include them is one of maintaining (changing) the specs on an ongoing (and reactive) basis. This is particularly painful for software vendors who see their role more as builders of systems rather than maintainers of them. Including sourcing components is maintenance headache. But the failure to sufficiently integrate sourcing components has left many ATS’s more closed than open. Whether sourcing components have been excluded by design or accident, users need to distinguish between them and ensure the sourcing tools are adequately represented. Failure to do so results in the purchase of a very expensive filing cabinet - a closed system.

Current State: Vendors
ATS vendors primarily come from the fields of software, supply chain, or media, with varying amounts of recruiting expertise mixed in. When approached from a software background, technology is the driver. Vurv (formerly RecruitMax) founders are technologists. Other vendors, such as Taleo, came our of the supply chain industry. BrassRing is backed by newspaper organizations. In each case, they have come to where they are through very reasonable activity given their backgrounds and desires to participate in the recruiting industry.

With the advent of ASP technology, the cost of acquiring software has fallen quickly. The ASP model consists of a single system used by many subscribers (who login online). Costs are saved by limiting installation, support, and upgrade expenses. While ASP pricing is attractive, delivery can be dicey. Vendors at the top of the food chain focus on the Global 1000. For these vendors, marketing is about branding, and touting Global 1000 companies as customers builds the ATS brand. These customers, experienced in buying highly customized ERP systems demand customization. ATS vendors, hotly pursuing this customer base, concede to these demands. Inevitably, they support multiple versions of their software at the expense of the business model. Emphasizing marketing over profits, many companies employing this strategy have fallen by the wayside.

Another marketing approach is “selling bells and whistles.” This involves side-by-side comparisons of competitor’s software. It is common among direct sales marketers and technology-driven vendors. It is hard work and relies on a patient audience. A third approach, taken by ERP vendors (Peoplesoft, Lawson, SAP) is to offer second rate software as an extension of their existing product line. By offering 80% functionality at a fraction of the cost, it is often a fine deal for the user as well as a profitable sale by the vendor. It is a legitimate, profitable approach to the market and positions the vendor to compete in the long run.

Surprisingly, a vendor’s origins do not always correlate with their approach to the market. In other words, technologists do not always rely on bells and whistles, and media companies don’t always rely on branding. And given the high cost of branding campaigns, in a highly competitive field of roughly 150 vendors, 2 are profitable. It is a very difficult field to do business in.

Current State: Buyers
Now that we’ve taken a look at the limits of the supply chain model and a brief overview of the vendor world, it is time to turn our attention to the buyer. Today’s buyer is a usually a Human Resources executive, with some assistance from the IT department. Unfortunately, HR professionals are not ideal candidates for making software selections. Lacking adequate training in software, supply chain, or business issues, the HR buyer’s ability to discern value-adding software from “neat” software is, at best, limited. Without some background knowledge, it is unrealistic to expect the HR buyer to differentiate what is important for their company from what is simply available.

Given the limitations of the buyer, it is predictable that the likelihood of a successful selection would be comparatively low. And buyer feedback supports this prediction.
Surveys show that few companies are happy with their ATS. There is a “honeymoon” period of about one year before buyer’s remorse sets in. The consensus is that the ATS doesn’t do what the buyer hoped it would. Additionally, the costs of changing the system and training employees how to use it are unexpectedly high, and reports generated by the systems are inaccurate.

What’s Next?
The next big development in the ATS market is the use of the value chain. This is where buyers analyze the recruiting supply chain as a business function (complete with measurement and ROI evaluations). In simple form, a value chain is a supply chain with a value judgment for each event on the flow chart.

Building on the supply chain concept, a value chain follows the same sequence, adding a value judgment at each step. Some events add more value than others and core processes become apparent. By differentiating between high and low value-adds one can prioritize system needs. With this framework comparing how a particular system meets those needs is relatively easy. A system is only valuable to the degree it meets (your) specific needs.

With a completed value chain sequence, a system is graded on how well it meets high-value events. The system’s automated supply chain is compared to the recruiting value chain. Positive matchups are noted as are negative ones. In effect, a mini ROI is being calculated for each event in the sequence. Ideally, a combination of high-value events matched with low cost automation is found. Mathematical equations can be developed where the aggregate ROI measures value gained by automating the larger process. The degree to which a system meets a customer’s specific needs can be measured and compared across systems, making the selection a straightforward issue.

Another important benefit is that value deficits can be identified and avoided. These are situations where a change in the event reduces value. An example would be buying a system which forces candidates to submit all resumes through a website. While the system pushes resume submission away from the recruiter – seemingly adding value - the attrition rate (candidates abandoning the effort) generally erodes value. With a flow chart, such activity appears reasonable. In a value chain analysis one can see the value deficit and this foolishness can be avoided.

Value Chain è Satisfied Customer
Getting the right ATS is a matter of clarifying mission critical needs and matching them with a system that addresses them best at an efficient price point. Despite the fact this is rarely done, it can be done very effectively using a value chain analysis. Failure to utilize a value chain construct is the reason most companies are not satisfied with their ATS system. It’s difficult to be satisfied with a software purchase without specifying what it is supposed do, and clearly understand how those needs will be met. This is precisely what a value chain model does. It allows one to analyze needs through the supply chain, and pair those needs to value-added services provided by an application.

Given the myriad challenges in the ATS market, the question of change is not ‘if,’ but ‘when.’ With HR beginning to learn from other disciplines (supply chain, ROI, measurement, etc), they will begin to understand that the best route to improving selection is the use of a value chain. How quickly this model will penetrate the industry is hard to predict. However, once adopted, buyers will be very clear in describing their needs and select systems which meet them efficiently. Today, technologists and marketers drive development. Using the value chain, buyers will again drive the development of recruiting systems.

How To Use A Value Chain

2006-04-03T16:46:00.000-07:00

How To Use A Value Chain

– by J.P. Winker

In a previous article, we covered how the supply chain model has been applied to today’s applicant tracking systems (ATS). Here we’ll take the next step and elaborate on that model by developing a value chain. This will allow a meaningful needs analysis enabling buyers to select an ATS more effectively. The method is quantifiable, straightforward, and relatively simple.

Creating A Value Chain
Conceptually, a value chain builds on the supply chain concept. It follows a similar step-by-step sequence, but focuses on the values added (or lost) at each step. Where a supply chain is used to define each step in a recruiting timeline, a value chain rates the value added at each step. In effect, the value chain identifies the most important components in the recruiting process. When managing a supply chain the focus is on streamlining a flow chart. Managing a value chain is different. The intent here is to recognize the strengths of the process and invest in them. The idea is to identify where change would add the most value, and leverage them. (In recruiting, this often means investment in automation). At it’s core, a value chain helps differentiate between ‘needs’ and ‘wants’. It also simplifies complex system selections using weighted averages across several factors.

Because the nature of the technique is specific, we’ll take a real life example using a mid-market company. Like most companies, this organization has some local presence, but lacks strong brand recognition. In other words, they don’t have the luxury of placing an ad and watching a plethora of qualified (or unqualified) applicants pour in. Recruiting needs include both professional and administrative staff of varying kinds, as well as several exempt staff. Their needs are increasing steadily, while the supply of available talent slowly but steadily declines. This is a situation many companies find themselves in today.

The Supply Chain
The recruiting sequence used by our mid market organization is outlined below. We are using an abbreviated version for illustrative purposes.

Planning
Sourcing
Resp. Mgt
Screening
Assess
Offer
Onboard

Fleshing out the steps in this sequence then creates the supply chain. Each link in the chain contains the following elements:

Planning – includes forecasting (existing & forecasted workload), researching markets for available talent, reviewing the skills inventory for the job, earmarking funds for the acquisition of candidates.

Sourcing consists of checking the internal database for candidates, running ads in newspapers and on job boards, searching commercial resume databases, direct mail campaigns, campus postings and, job fairs.

Response Management – primarily, this is the intake of resumes where applicants create a profile, and acknowledgements or replies sent back to them.

Screening – the task here it so confirm eligibility, classify each candidate’s skills, experience, and certifications.

Assessment – using legally defensible instruments, assess candidates for likelihood of success on the job

Interview – Q & A regarding applicants ability and willingness to perform on the job

Offer – formulation and extension of offer, negotiate contingencies and terms. Conduct

background check, drug test, security, references, etc.. notify also-rans.

Onboarding – registration, orientation, training, and retention.

The fleshed-out supply chain is outlined in Figure A, with the major functions listed.

Figure A.

Supply Chain for mid market organization

Planning
Sourcing
Resp. Mgt
Screening
Assess
Offer
Onboard
Needs assess
Internal dbase
Submit resume
Confirm eligibility
Accuracy
Extend fast
Registr.
forms
No. openings
Ad - paper
Create Profile
Classify skills
Test
Yes/no
Orientation
KSAO
Ad - online
Acknowledgement
Experience
My test?

Pay
Resume dbase

Certifications

Job fair

Campus

Next, these are evaluated and assigned weights to create a value chain.

The Value Chain
To create the value chain, values are assigned to the supply chain. For each element, the recruiting staff at our sample company made the following value determinations:

Planning – rated at 4. While important, this company has been doing very little planning and has managed to get along without it. Therefore, it isn’t critical.
Sourcing – without adequate sourcing, their recruiting effort stops cold. They know this from experience. This is a 10.
Response Management – here, the recruiters have learned that ease of submission is most critical. They feel they cannot afford to have any obstacles to candidates submitting applications. The acknowledgement is not as important. 8.
Screening – rating of 6, recruiters feel that screening quickly and accurately are important. It is an easy job, but getting it done quickly is important to success.
Assessment – This organization relies heavily on a customized assessment profile. They rated this a 10, however admit that if their profile was not available, this would drop to a 4 or 6.
Offer – if the preceding steps are done quickly and effectively, this is a 2.
Onboarding – rated a 0, recruiters felt this had no impact on their ability to recruit.
Other factors – The value chain concept allows the addition of elements for value-adding consideration. In addition to the link-by-link analysis, a Gestalt view can be useful in identifying segments of the chain which are critical. Further, we can identify areas which, if changed, would erode value. In this case the consensus was that speed from Response Management through Assessment was critical to success. Speed here was rated at 8. In addition, it was agreed that if reports measuring the effectiveness of each source, and information related to bottlenecks in the “speed” area were available during the Planning phase, then the value that Planning adds would increase to 8. They also noted that, with decreasing candidate supply, the planning function will increase over time.

In Figure B, rankings of 1 – 10 have been added to each column to designate the importance of each step in the recruiting process, with 1 as the least critical and 10 at the top.

Figure B.

Value Chain for mid market organization

Planning
Sourcing
Resp. Mgt
Screening
Assess
Offer
Onboard
Needs assess
Internal dbase
Submit resume
Confirm eligibility
Accuracy
Extend fast
Registr. forms
No. openings
Ad - paper
Create Profile
Classify skills
Test
Yes/no
Orientation
KSAO
Ad - online
Acknowledgement
Experience
My test?

Pay
Resume dbase

Certifications

Job fair

Campus

4
10
8
6
10
2
0

speed through this section important = 8

reports on this section also important, high 'want'

reports added to Planning increase its value

Using The Value Chain:
In converting a supply chain to a value chain, weights, were assigned to each link in the chain. The company has made precise value differentiations, which, taken together, reflect their specific needs.

At this point we can mentally identify the highest scoring elements (6-10) as ‘needs’ and the lower ones (1-5) as ‘wants’. It is important to also look at sections of the chain, to determine if a larger need is addressed by a group of links. In our example, there are shortages in certain professional positions(engineering), so the time between application to offer is a critical determinant of success. So, completing the application, screening, and interviewing elements quickly would add great value together.

With the value chain it is much easier to quantify how well a system meets those needs. Functionality that meets ‘need’ areas are given high scores, while functions that meet ‘need’s poorly are scored lower. At the same time, functionality that meets ‘wants’ are also graded as to how well those are met. To score how a system meets ‘needs’ and ‘wants’ simply multiply the value of each by it’s functionality score.

(N x S1) + (W x S1)

Where N = need score (6-10)
W = want score (1-5)
S1 = functionality score for System #1 (1-10)

By multiplying the values of needs and wants by a system’s ability to meet them,
we calculate the weighted average of a system’s ability to meet our requirements. By doing so across systems, (S1, S2, S3, etc.) we can make compare apples to apples. This narrows the field in a quantifiable way as systems that score too low do not meet needs and are eliminated.

Next, we determine value by integrating price into the equation. This is done by dividing the weighted score by the price of that system. Done across multiple alternatives, we can measure which offerings meet our requirements at the lowest price.

V = Sum(N x S1) + Sum(W x S1)
P

Where V = value
P = price

Notes:
Value increases as price decreases
Also, “needs” are ranked between 6-9, while “wants” at 1-5 are inherently lower. In our example of a mid-market company, reporting falls into the “wants” category as they do not get bodies on board.
Last, since most recruiting systems sold use the ASP model (meaning the software itself is not customized) the ability to tailor services delivered through the application increase a systems value at a disproportionate rate.
Tools that are automated but rated score a zero. They are unrated because they haven’t been identified as ‘needs’ or ‘wants’ by the buyer. As such, they are not considered value-adding components.

System Selection
Returning to our mid market company example, a number of systems were evaluated as to how well they met each specific need in the value chain. Like the value chain exercise, each offering received a rating between 1-10 for each link in the chain, depending on how well the system met that requirement. This rating, ‘S’, was multiplied by the rating of importance (the numerical value of each link in Figure B) and the totals were added up for that system. This total represented the system’s ability to meet the company’s specific needs (and wants). This same number was then divided by price, allowing a comparison for value across systems.

Given that our company has limited brand recognition, it is not surprising that systems with strong sourcing tools scored well in terms of meeting the company’s needs. Systems scoring highest (offering the greatest values) combined good sourcing tools with minimal other tools, or could be configured in a modular fashion excluding features not critical to the recruiting effort. Other options, tended to score lower for two reasons: 1) there were a number of extra features (non requirements) built into the price; and 2) the additional cost did not add significant value to the recruiting process. In a nutshell, they were overpriced relative to the company’s specific needs. The company did not wish to pay for things they did not need.

Too many buyers invite vendors to conduct presentations (the ubiquitous dog and pony shows) then attempt to compare systems to each other. Given the range and complexity of systems available, this can be very difficult. Insofar as this does not formally address company needs, it is a system-specific approach. Using a value chain draws attention to specific needs, placing company requirements at the center, and compares prospects to this standard. Value is then determined by meeting that standard at an efficient price.

Given the Value Chain’s quantifiable nature, and building on the now familiar supply chain concept, companies faced with a system selection will find the Value Chain construct allows them to clearly determine which system offers them the best value.

Maximizing the Value Chain - The ROI of ASP

2006-04-03T16:42:00.000-07:00

Maximizing the Value Chain - The ROI of ASP

– by J.P. Winker

Using a value chain consists of finding leverage points where making investments can leverage value. However, investing in an Applicant Tracking System (ATS) without understanding the value chain may erode as much value as it adds. On the other hand, companies can realize greater returns on their ATS investments if they understand the limitations of Active Server Pages (ASP) systems and leverage the right points.

Getting a return on an investment in a recruiting system means the results (recruiting productivity) outweigh the costs of a system. That’s simple. But maximizing an investment in ASP delivered system requires an understanding of the value chain in order leveraging the value-adds that are most important to your company. Using the value chain helps differentiate between your company’s needs and features that are not worth paying for. Developing a value chain and selecting a system is covered in an earlier article (How To Use A Value Chain). This article is about getting the most out of the recruiting system investment.

Investing in an ASP Solution

As a rule, recruiting systems today are ASP solutions. Indeed, the introduction of ASP software marks a watershed moment. ASP software consists of a single platform which is shared by multiple users, who log in via the Internet. By spreading the development and operating costs across clients, ASPs offer software at attractive prices. This delivery method has brought costs down and made Applicant Tracking Systems available to most companies. The reduction in cost, more than any other factor, has caused the widespread adoption of recruiting systems. But there is an inherent conflict between the ASP model and meeting the individual needs of a client. ASP systems are not easily customized, and when they are customized, the vendor’s profitability is threatened.

In order to maximize the investment in an ASP solution, there are a few things to consider. First, the majority of users are dissatisfied with their recruiting systems. User displeasure is an indication buyers feel they’re not getting value. (Another way of saying they’re paying too much.) Its important because value is about getting something good at a price that feels right. There are a couple of possible reasons for this widespread discontentment. First, software tends to commoditize. That is, it devalues naturally when, 1) its on the market for an extended time without an update; and, 2) it faces increased competition. Anti-virus software is good example. Last year’s release isn’t as valuable as this year’s, and the release from two years ago is almost worthless. So it goes, with varying rates of decay, for all software. But because upgrades happen regularly in ASP delivered systems, the ‘aging’ process is minimized. This leaves competition as the primary force commoditizing ASP software. And with the number of vendors in the space, many users do feel they’re paying a premium for a commodity product. Which, to some degree is the case, what's more, many vendors have failed to differentiate their offerings. But the competitive environment alone does not explain the exceptionally high rate of dissatisfaction among users.

One explanation is that users still seek some level of customization and are frustrated by the inability to meet divergent needs. It is understood that each company’s recruiting process has it’s own nuances. However, it is not uncommon to find several different recruiting processes within a single organization. Few companies would use the same process for hiring engineers that they use for hiring hourly workers, executives, sales, or support staff. So, within any company there are a range of hiring processes which would be best served by a separate niche application for each one. Without some form of customization, recruiting systems don’t perform as well – or they perform well for one job category at the expense of another. They act and feel like commodity products, and paying a premium doesn’t make sense. This may explain the widespread negative perceptions among users.

Premium System or Premium Services?

The question is, how do we gain some customization while reaping the benefits of the ASP delivery model? There are two schools of thought: pay for a premium system (which cannot be customized). Or, spend less on an ASP system and surround it with support services tailored to user’s needs.

Since ASP software cannot be customized easily, there will be a corresponding limit on it’s level of performance. In fact, many companies paying for premium systems have made significant investments in workarounds, spot solutions, and “enhancements” designed to improve the system’s performance. It would appear that paying for a premium system does not ensure a return, and may require other investments to ensure a reasonable level of performance.

Given this experience, it makes sense to lower the system costs, and invest in spot solutions – services (or systems) tailored to the client’s specific requirements. In fact, an argument can be made that an ASP recruiting system will be valuable to the degree it can be tailored to meet one’s needs. Using a value chain tells where to invest in order to leverage the entire process. Without some ability to customize, the value of ASP software is limited as a stand-alone or closed system. In the end, an ASP system’s value is enhanced in direct proportion to the degree it can coordinate or deliver other services.

The antithesis of good business is to buy the best branded system in an effort to cover one’s assets. Although this is common in the human capital space, the driving force is political (nobody ever got fired for buying IBM), rather than maximizing the return on the investment. In well-run organizations this type of behavior will go away.

Service Is The Key

What would justify paying a premium? The value chain construct tells us there are points within a process where investments increase productivity, and that identifying and investing in those points leverages returns. Investment at these points justifies a premium.

While spot technical solutions abound, there is considerable difficulty (read: investment) integrating them with an ASP solution. Even the largest clients can’t force separate vendors to cooperate. Smaller clients have no leverage at all. This means the significant opportunity lies in leaving the software intact, and accentuating leverage points with services. The lesson here is that ASP systems with a service-oriented open architecture offer significantly more value than their competitors due to the ability to complement the system with services. This is consistent with forward-looking articles about Web 2.0 platforms and the future of the Internet. This ability to customize through tailored services is the future of ASP software in the talent management industry.

One example of investing in leverage points is a company that outsources it’s resume database sourcing. This organization has an ATS but was increasingly reliant on agency hiring. Through a value chain exercise they ascertained that adequate resume sourcing would allow them to do more in-house work. Although they had tried technical solutions in the past, they produced only limited results. But given that improving this function had potential for a great return they outsourced resume mining to a service provider that does it manually. It has worked so well they have arranged to have the vendor add telephone screening to their service.

What To Expect

New strategies for attracting talent, including media, formats, and messages will continue to evolve. In one generation we’ve seen the evolution from newspaper ads to job boards, chat rooms, blogs, and podcasts. New approaches to making contact and developing relationships with potential employees will continue to advance. In a changing labor environment, the common challenge will be diagnosing where your recruiting capabilities fall short and then adding the needed services, systems or skills quickly. This will happen on a frequent basis – at least annually (more if you deal with multiple job categories). Maintaining a platform flexible enough to adjust to changing needs will only increase in importance.

The evolution multiple venues and formats creates a need for niche skills. A company projecting a shortage of a specific job category - engineers, for example - might determine the need to attract prospects through a number of efforts. They could attract talent promoting their work, or featuring one of their leaders as a speaker at industry events, writing blogs on a relevant topics,
Create podcasts, conduct radio interviews, or create online dialogues like a wiki. All of it designed to create community or network of contacts to be skillfully mined over time. The question becomes, do you assign a recruiter to these tasks, or outsource? And, can your platform coordinate these services, or do they exist outside the system. (Hint: the less the system handles the less valuable it is).

In a knowledge economy, where companies with the best talent win, not doing these things will not succeed. Those responsible for recruiting results will have to focus their organizations on the development of superior sourcing techniques, communication with targeted groups, and creating attractive work environments. Low cost ASP software is here to stay; investing in platforms which coordinate and deliver flexible services around the software will be the key to maximizing return on those investments.

Healthcare Recruiting: Vacancy Rates and Revenues

2006-04-03T16:40:00.000-07:00

Healthcare Recruiting: Vacancy Rates and Revenues

– by Sam Patrick

It is well know throughout the medical care industry that the nursing vacancy rates are high and continuing to climb. What is not widely known is that there are still more problems with vacancy rates in specialty areas for medical care, as well. In looking at the recruiting systems of medical centers and hospitals and what is being done to change them, we can see how some hospitals are changing the tide of low nursing rates and high revenue loss. While nurses are still the most needed in hospitals, the reasons for the decline of their availability are many. Some of those reasons lie within the recruiting systems of hospitals and some lie in the frustrating area of declining enrollment for nursing school.

Since there are problems with filling positions throughout the industry, we decided to take a look at the overall approach of hiring medical staff. All of our examples come from a study done by one hospital system. This is both because it is a thorough study that is recent and relevant, and because they have implemented a successful program that has shown vast improvements in this area. You’ll see this as we look at the history of the problem, see a concrete example of success and find out how to implement these changes in other clinics and hospitals.

In order to understand the context of these examples, a bit of background of this hospital system is necessary. The organization has been around for almost a hundred years. It is a 600+ bed system serving a fifteen county area with a population of nearly one million. It includes a flagship hospital and two rural county hospitals. They have a workforce of about 5,000 employees with an HR staff to employee ratio of 1:140. This includes 9 full-time recruiters. In 2003 there was a voluntary turnover (all staff) of 12.4%.

The recent history of the nursing vacancies for their flagship hospital broke down like this: In 2000, they had an 12.4% vacancy rate (the national rate in 1999 was 11%). These rates increased steadily with a 13.2% vacancy rate in 2001 and 15.3% rate in 2002. It was obvious that action was needed, so in 2001, the nursing management initiated a cross-functional study to understand recruiting and retention. The team, consisting of nursing leaders, HR leaders and financial leaders, started by surveying all RNs and LPNs. Once the data had been gathered, they initiated a review of related data in order to understand the scope of the improvement initiative.

One of the outstanding revelations was that while RN/LPN applications had increased by 84%, offers only increased by 3%. When looking into the data further, they discovered that the average time to fill an RN or LPN position (requisition posted to requisition closed) was 68 days. In typical hospitals throughout the nation, it takes 11 days to begin the search, 27 days until the first interview, 17 days until an offer is made and then 10 days until the applicant is employed totaling 68 days. When Best Practices says that it should take 5 days from interview to offer, then five more from offer to start date, 68 days is far off that mark. Applicants were finding other opportunities. In addition, the time it took to fill specialty area positions, including surgery, OBGYN, oncology, ED, MICU/SICU, pediatrics, OR/PACU and cardiac care, averaged 111 days.

Because of the amount of time it was taking to get positions filled, agency replacements were a constant need, and the costs for agency replacement in 2000-2001 increased by 16%, which accounted for the largest single portion of replacement costs. In 2000, the affect on revenue was a marginal profit loss of $1,622,454. In 2001, these losses increased to $2,465,138. The inordinate amount of time it took to process applicants accounted for these losses.

The survey results clearly demonstrated that there was no single area that was wholly responsible for the time lag in filling positions. An unexpected finding of the study was that the declining enrollment in local technical schools was not due to disinterest in becoming an RN or LPN, but that there was not enough faculty to teach students when these schools were a major recruiting source. It’s a frustrating dilemma due to the fact that there are waiting lists for students who are interested in enrolling in these classes. While this was a problem that the study could not directly address, it did show that other methods of recruiting had to be at the forefront of the search for these positions. In order to address the problems, four teams were developed including a Compensation Team, New Hire Orientation and Support Team, Recruitment Pipeline Team and a Chief Retention Officer Team.

The goals of the Recruitment Pipeline Team were to assess the practices of the recruiting process and redesign them, develop recruiting turnaround performance standards and develop real-time application tracking. The team also looked into reengineering the Bedside Nurse recruitment process. First, they redefined the Nurse Recruiter position to include only licensed positions. Next they hired dedicated support staff for Nurse Recruiters and developed benchmarks and pathways (pipeline indicators) for process improvement. They purchased and implemented a new applicant tracking system, which was key to their success.

The results of the changes were obvious. Not only did marginal profit losses decrease substantially, but the differences in cash loss due to the new system was also astounding.

By eliminating the sign-on bonus, in 2003 there was a savings of $760,000. By eliminating the need to constantly replace nurses and other licensed staff, the savings in 2002 were a whopping $3.5 million (77,000 hours). In 2003, this savings improved by eliminating 25,000 additional hours of replacement agency use, adding $1.4 million in savings over 2002. As of 2003, there was only one agency nurse in the OR.

In creating and adopting these enormously helpful policies, the company learned many lessons. They found it essential to adopt a no-blame policy in order to assure everyone’s honest input and to have their full dedication to the project. They also found it necessary to track and measure everything consistently using the same guidelines using and presenting only data that could be validated. As a result of these procedures, they found that building relationships through the course of the process was not only intrinsic to the cause, but also a natural result of it. It allowed all involved to focus on the project which was another critical element for success.