Calculating the true cost/benefit ratio of an employee is not an impossible quest.
By Elizabeth Boudrie
I’ve just read human capital expert Peter Cappelli’s recently released book Why Good People Can’t Get Jobs: The Skills Gap and What Companies Can Do About It. In the book, Cappelli confronts the sad irony of the United States (if not global) employment situation: In the midst of staggering unemployment, open positions remain unfilled seemingly forever.
I read the book with great interest and recommend it. Whether or not you agree with his conclusions, it’s a very quick read and offers some intriguing data. It hits dead center on a couple of key issues that the HRO Today Institute is undertaking.
Cappelli, the George W. Taylor professor of management at The Wharton School and director of Wharton’s center for human resources, outlines the main reasons employers cite for their inability to fill open positions: Schools are failing to teach students the right skills; the government is not allowing enough high-skilled immigrants into the U.S.; and workers aren’t willing to work for offered wages, among others.
He then counters these arguments, saying that his research shows (again, among other points) that employers confuse worker affordability with availability. That employers can’t hire workers at specific wages doesn’t mean make them unavailable, it simply makes them unaffordable. Employers are inflexible, creating sometimes absurd requirements for even basic positions that, in reality, workers with less skill and experience could fill; and employers, often unwilling to take up cost or time for even basic training, expect new hires to come to the job able to make a full-level contribution literally from day one.
Cappelli’s ultimate diagnosis of the problem? It isn’t as much a supply or demand issue as it is a problem at their point of intersection: the hiring process. And this is where I see great synergy with the HRO Today Institute. We’ve said from the start that the Institute is focused not on the why of the large strategy issues, but on the what and how. As we bring together HR leaders to help each other to run HR as a global enterprise, some of Cappelli’s points tie in perfectly with our efforts.
One of Cappelli’s findings is that it’s not a dearth of a talent that is the problem, but instead a process problem (or a series of process problems). Our agenda includes research on just that topic:
• What are the perceptions and realities of the “talent gap” issue? Insofar as talent gaps exist, where and what are they?
• How are leading global organizations successfully addressing these issues, both now and for the future? How is “success” defined in different geographies, different-sized companies, different company structures?
• How does talent management play into the issue? Can any “early career” strategies effectively help alleviate the “gap” concern?
• How, too, does learning come into play? What are the effective ways of accelerating learning and development so that someone with two-to-three years on the job can achieve the equivalent of six-to-eight years of experience? And how do organizations effectively move people faster across the businesses?
Another reason Cappelli says that job openings languish unfilled is that some people within organizations—hiring managers, finance and operations staff, maybe even some in HR—see only the cost savings when those spots are left open. Because it is comparatively easier to calculate the cost of an employee than it is to calculate the benefit, many simply believe they’re helping their organizations by not hiring. He points out, “Organizations typically have very good data on the costs of their operations—they can tell you to the penny how much each employee costs them—but most have little if any idea of the value each employee contributes to the organization.” This one-sided view of the human capital equation drives many organizations to a non-hiring bias.
This point resonated soundly; we regularly hear from (frustrated) HR leaders that, while the C-suite has a laser-like focus on the cost of their human capital, it gives little attention to the value of human capital. Absent an accepted opportunity cost calculation for all positions within an organization, it is virtually impossible for HR leaders to be fully effective, not only in recruitment but in strategic talent management as a whole.
At the risk of being branded unicorn hunters, we’ve placed this topic on our agenda, given its impact on both our CHRO/HR leader constituents and the effective operation of their organizations. Through a variety of efforts—researching the strengths and weaknesses of existing schemes, networking among our HR leader members, engaging C-suite leaders, and profiling successful measurement programs, among others—we hope to approach the elusive goal of balancing out the human capital cost/benefit equation. Even if we never find the magical animal, we’re sure to learn a lot along the way.