Why Traditional Talent Acquisition Is Failing Companies Today

Angie Malerba

Recall a few years back when Forbes reported that Snapchat leveraged geofiltered overlays (targeted messages on top of images) to poach high potential employees from other tech companies. “Feeling pinned down?” messages sent to Pinterest employees. “This place driving you mad?” sent to Uber workers.

With research revealing that nearly three-fourths of hiring managers have difficulty hiring top tech talent, it’s no wonder why companies like Snapchat are resorting to such covert measures to find people with highly specialized, sought-after skills and expertise. The Bureau of Labor Statistics reports that employment has continued to trend up, adding more than half a million jobs in professional and business services this year — that’s 130K more jobs than last year.

The impact of the lowest U.S. unemployment rate in nearly 50 years impacts companies across industries. Nearly 80% of the 1,200 executives surveyed by PwC reported concern over the availability of key skills.

75% of hiring managers have difficulty hiring top tech talent
80% of CEOs are concerned about the availability of key skills

A tight labor market presents a host of potential challenges for business leaders. With more jobs than workers, in-demand innovation-focused expertise is harder to find and engage than ever before. Korn Ferry released a study predicting that the talent shortage could create more than 85 million unfilled jobs and nearly $8.5 trillion in unrealized revenue across various industries, including financial and business services, technology, media and telecommunications, and manufacturing. Incredibly, that unrealized revenue amounts to nearly half of the U.S. GDP.

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At a micro level, CEOs understand that the pain from not accessing the skills and people they need is often felt most acutely not in their core, but in their efforts to expand beyond it with new products or new customer segments. The gap between the skills they have and those they need is a key rate limiter to their growth. There’s nothing that will grind innovative work to a halt faster than a lack of talent with the right expertise to execute the work, which is precisely why traditional hiring methods for finding and engaging top talent are just not cutting it anymore.

Maintaining Speed Is Critical

Traditional hiring is a painfully slow and time-consuming process. It takes an organization an average of 36 days to fill an open position. What’s an already timely hiring process is actually continuing to lengthen, according to research, and this is largely because of economy-wide factors such as fierce competition and shifts in the composition of employers and job titles.

As the number of employees increases at a company, so does the number of days it takes to fill a role, which is a challenging reality for large, complex organizations. While positions are left open, businesses lose valuable time that could and should be spent on executing against growth targets.

Steps in the Hiring Process Avg. Number of Days to Complete
Approve job opening 8 days
Approve job posting 3 days
Start screening process 9 days
Screen applicants 7 days
Conduct interviews 8 days
Make a final decision 5 days
Move from offer to acceptance 4 days

Source: Customized Talent Acquisition Benchmarking Report, SHRM

Traditional Processes, High Costs

Such a slow hiring process is extraordinarily expensive. The average vacancy costs approximately $500 per day, according to CEB research. A recent CareerBuilder survey found that 69% of companies have vacant jobs for more than 12 weeks, costing them nearly $1 million each year.

As a last ditch effort to fill positions that have been left vacant for so long, business leaders sometimes choose to lower education and experience requirements, resulting in acquiring talent who do not possess the right skills and expertise for the job — a costly mistake. Bad hires can cost companies thousands of dollars; some sources estimate as high as 30 percent of an employee’s first-year earnings.

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$4,425

Average cost-per-hire for a typical employee

leadership-white

$15,000

Average cost-per-hire for an executive

But it’s not just positions sitting vacant that cost so much money. Filling skills and expertise gaps among employees with traditional methods is an expensive endeavor in and of itself. According to SHRM, the average cost-per-hire for a typical employee is $4,425 and nearly $15,000 for an executive — not to mention hidden costs such as lost productivity during typical ramp-up periods, which can last anywhere from 8 months to 2 years.

Full-time employee turnover is also expensive. Between loss in productivity and difficulty transferring knowledge, it costs roughly $15,000 to replace an employee with a salary of just $45,000. Research shows that the average tenure of an employee is only 4 years and that one in three full-time hires will leave their jobs within 2 years. With roughly 3 million people quitting their jobs per month, companies can expect to pay a fortune for employee turnover in the upcoming years.

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4 Years

Avg. tenure of an employee

calendar-indigo

2 Years

Avg. time 1/3 of FTE leave their jobs

staff-augmentation-indigo

3 Million

Number of people who quit their jobs each month

Sources: Employee Tenure in 2018, Bureau of Labor Statistics
Why people job hop and how employers can ease the cost, HR Dive
Job Openings and Labor Turnover Summary, Bureau of Labor Statistics

From Acquisition to Access

The quickening pace of technological change coupled with business model disruption has raised the stakes for companies to engage the skills and expertise they need to execute mission critical work. The need to operate with agility and quickly bring multiple skill sets under one roof to accelerate execution and adapt to the disruptive market is more important to future growth than ever before.

Finding and engaging the right people for the right work is critical as traditional strategies prove unable to keep up with today’s fierce hiring competition and rapidly changing market expectations. It’s imperative that businesses move past the notion of only hiring full-time talent and focus more on accessing the right skills and expertise both inside and outside of their organizations.

The talent acquisition infrastructure put in place at many companies over the last few decades is ill-equipped for today’s realities. For business leaders the mandate is clear: adapt and embrace new, agile ways of accessing talent or risk falling behind.

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