MANAGING CHANGE, MITIGATING RISK
Positioning talent to drive business success
from Trust the Leaders Issue 19, Summer 2007
Kurt Ronn is president and founder of Atlanta-based HRworks, a national recruitment firm, and developed the company’s process and approach to large-scale recruiting and executive searches. For the past 10 years, HRworks has helped many of the world’s most-recognized brands solve their recruitment challenges. Ronn speaks nationally on diversity, recruitment process related to managing organizational change, and governance related to recruiting compliance. He is a member of the RPO (Recruitment Process Outsourcing) Association Board of Directors.
The global economic landscape has seen significant growth of private equity firms either taking companies private, or buying distressed companies and rolling them up into new companies. This trend, which is likely to continue, brings about much change in scope to businesses and individual job functions. It is critical, therefore, to commit resources and planning to structure the right talent pool for a company’s long-term success.
How is the growth of private equity deals impacting talent acquisition?
One of the most important keys to success during private equity deals is to properly address the talent needs of the new company. Here, speed is critical, as a short window exists to position the right talent in place to drive the new business. Company management is less visible to the external market than public companies, but the pressure to perform is just as great. Waiting to address talent needs is a common mistake.
What should companies do to address the issue of speed?
Time is of the essence, yet most companies only recruit known openings. There are three types of recruitment needs, which we label as A, B and C. The “A” group is the talent that you know will stay with the new company, so there is no need to recruit for these positions. The “B” group is the talent pool that is undecided about migrating to the new company because of relocation issues or a spouse. And the “C” group is made up of the known openings and potentially new positions, either because the individual is not joining the new company or because the scope of the job has changed so dramatically new openings were created.
The strategy then should be to recruit the B’s and C’s — those that are undecided — in conjunction with the new openings. If the B category makes the leap, then you have minimized downside by being proactive.
Why doesn’t this happen in most deals?
There are a number of reasons — undercapitalizing the deal, belief that the existing group of talent can support the new organization, or poor talent planning. These scenarios often result in slow and painful change. Undercapitalization, or “boot-strapping” reorganization, is a problem, as many companies simply do not budget for the recruitment of talent. The chance that the existing recruitment organization can build the new company fast enough is similar to a doctor performing surgery on him or herself; outside help is critical.
The success of a new company is as much about cultural fit as it is about skill. There is a reasonable chance that the existing talent will not be able to handle new roles created by the merger, acquisition or bankruptcy. Many companies wait for the players to fail rather than evaluating the talent objectively based on the new role. Recognize the reality that the status quo evaporated along with the change. Keep in mind that investors are more tolerant of trouble at the point of integration than further down the road.
Too often, the deal is so focused on the product or service offering that an actionable workforce plan does not exist. A comprehensive strategy relating to assessing existing talent, identifying future roles and planning the aforementioned ABC’s of talent acquisition can result in a smoother transition.
So, what should private equity or senior managers do to be prepared for change?
When major events challenge the talent pipeline, it is crucial to have a strategy in place to address the expanded talent needs. I have yet to meet an investor or business manager who did not wish he or she had acted more quickly to address situations. Good planning and good partners improve performance and the likelihood of success.
In addition to the current trend of public companies going private, another hot issue is compliance. Employers have spent much time and energy over the past year reacting to the new Internet Applicant Rule promulgated by the Office of Federal Contract Compliance Programs (OFCCP). However, the OFCCP has fundamentally changed the way it investigates applicant adverse impact. Coupled with the ruling, there are major implications for federal contractors and the third-party search firms they use.
The OFCCP implemented the Internet Applicant ruling in February 2006. The lengthy definition considers the electronic advancements in recruiting. It defines Internet Applicants, identifies specific electronic data techniques, creates a new “Basic Qualification” standard and sets the record-keeping requirements necessary to be compliant.
*What is significantly different about the OFCCP’s approach to the new Internet Applicant guidelines
that should cause employers concern?*
It is the responsibility of the company to keep the records necessary for the OFCCP to review the hiring process. Failure to produce proper records will force the OFCCP to reconstruct your hiring process and the related data. The record-keeping requirements extend to all of the activities by all of parties involved, including hiring managers and recruiters, both internal and external.
“Systemic discrimination,” as defined by the law, can be present at any stage within the hiring process and is inclusive of the entire queue of candidates, not just those selected for the final interview. Basically, it involves any decisions made that result in an “adverse impact,” such as selecting fewer women to advance to the next round of interviews.
The electronic nature of recruitment provides much more data, and the analysis of the data gives better visibility to systemic discrimination issues than ever before. The impact on the recruiting landscape is huge; the recruitment industry is now subject to a much higher level of governance. Additionally, the Equal Employment Opportunity Commission (EEOC) is heading in the same direction, as indicated in the EEOC’s Systemic Task Force Report of March 2006.
How can companies mitigate risk?
Companies need to analyze both their internal recruitment process and their external recruitment relationships and require compliance. Waiting until the OFCCP comes to audit practices before instigating changes is not prudent, as issues of systemic discrimination can be both expensive and disruptive to business.
Consider centralizing your recruitment functions. Such a focused approach can ease training, certification and auditing. Bonus benefits include better performance and economies of scale. External search-firm contracts should be amended to include specific OFCCP-compliant language, particularly related to record keeping. Then, you need to regularly audit the practices of all players, both internal and external, to ensure the recruitment execution from Internet search to hiring-manager interview and offer is compliant.
For more information, visit HRworks.com.
SGR provides employer services to HRworks.
