HRMDirect President Colin Kingsbury writes on the latest in recruiting and technology.

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There's currently a thread on ERE asking how one goes about calculating the ROI on an ATS. You can replace "ATS" with any other business software acronym here and it's the same story pretty much: we can help you shave a nickel off every $5 bill that passes by, and at the end of the year you'll have this jar full of nickels.

Perhaps the best put-down of this I ever received was some years back when I was an SE presenting a knowledge management product to a leading manufacturer of power-generation equipment that would have helped their techs find answers and relavant documentation much faster than they could currently. They had about 8,000 techs, so these were big numbers we could work with. We ran tests that showed techs spent an hour or so looking things up each day, and with our system, they could find the same info in 30 minutes or less. Multiple .5 hours times 8000 people times $50 per hour cost and we could show a positive ROI in one day.

The decision-maker never argued with our basic assumptions. He just said, "So they save 20 or 30 minutes? They'll just take an extra cigarette break." Far from being flippant, the VP was making a really important point. You can definitely get the pennies and nickels out of the process, but they have a habit of disappearing on their way to the jar.

ROI analyses work well when the dynamics of the system are very well known. For instance, the ROI on replacing a dirt-cheap inkjet printer with even a moderately-expensive laser printer is a no-brainer if you do much printing, because the laser doesn't guzzle ink that costs more than first-growth Burgundy by volume. You can easily plot a graph that shows that after X pages, the laser will be putting money back in your pocket. The variables are easily identified and quantified.

Looking at the ATS business, there is a major gap between cost and value. We charge $1200 per year per recruiter using our product, and we know from our clients that the vast majority of users spend nearly their entire working day staring at our system. Many of those users will cost $100k or more in salary and benefits, and they use our system because it makes them vastly more productive. How do we know? Because not a single client whose subscription was up for renewal has ever cancelled because "we realized we really don't need an ATS after all." A huge chunk of our business comes when a new head of recruiting or HR joins a company that doesn't have an ATS and says, "you gotta be kidding me!"

How do you quantify that value? Time-to-hire may not be good because the time saved by the ATS may accrue to recruiters spending more time sourcing or screening, to give just one example. There are a lot of moving parts, but I think it's safe to say that if ATS's were as anti-productive as they are often made out to be, there wouldn't be such a strong market for them that a company like HRMDirect could add 70 clients in the past 12 months without spending Jobsterbucks on marketing. But because we can't pin the numbers down the way we can an inkjet-vs-laser, we end up charging what the buyers are able to pay. CRM systems, which in many cases provide a similar set of functionality to our ATS, often sell for much more. Why? Because they're often bought by sales departments, which have far better access to budget.

In my experience, the sort of ROI analysis attached to most software buying decisions is made after the vendor has been selected, which is to say after it really matters. More often than not, the analytical model used to calculate the ROI was provided by said vendor, and is about as objective as asking a Red Sox fan what she thinks of this year's Yankees. But then, most buyers are by this point in cahoots with the vendor, and care about the ROI case only to the degree that it provides posterior insurance should the decision prove unwise*.

And to be entirely fair to all involved, often this is just a case of the buyer complying with internal bureaucracy. I wonder sometimes whether the finance departments that ask for this stuff really look over it carefully each year, or whether everyone except the shareholders is in on the joke.

All of this isn't by any means to say that thinking about things in terms of ROI is fundamentally misguided. But the systems by which we approach this today are for the most part barely nicking the surface of what's really going on. What I do know is that once a recruiter starts using a tool like Resume Direct, it becomes an indispensable if unglamorous part of their job, for less than most of them spend at Starbucks on their way into the office. Maybe our applicant tracking system is really that much better, or maybe people just like to complain, but I don't think I'm hallucinating.

If there's any good news in all this, it's that I'm being asked to provide these sorts of ROI studies far less often than 2 or 5 years ago. The once-ubiquitous "ROI calculators" (which are about as serious a forecasting tool as a magic 8-ball) no longer occupy prime billing on vendor websites. I'll take progress where I can get it.

* And therein lies my next post, which will be about ROI's evil degenerate twin, the dreaded RFI.

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permalink  |   ( 2.9 / 936 ) In my previous post I stated that "The notion that jobseekers should get everything for free is quaint, infantilizing, and damaging." In the past I've talked about similarities to online dating and eBay, but in this post I want to visit the alternate universe of college "recruiting," where admissions officers approach many of the same problems from very different directions.

Pay to Play
The first thing in college admissions that you notice is that every application comes with a handy form to attach a check, or you can apply online with a credit card. My alma mater charges $70 for the privilege this year, and between SATs and whatnot, it's pretty easy to spend $1000 or more on the process with no guaranteed outcome.

Here's a nice chart showing last year's pipeline. With 15,000 applications, there's around a million dollars coming in to help offset the cost of printing glossy brochures. In the context of an annual budget well into the hundreds of millions, that's not big money, but it's not noise, either.

Ahoy, polloi!
Admissions in college is to some extent what a sales department is to a company, since (almost) every doe-eyed freshman represents four years of tuition. But somewhat like recruiting, the job is also to keep customers out. In Tufts' case, around 75% of people who were willing to fork over a hundred thousand or more were told to have a nice life. And unlike corporate recruiting, there really are no second chances. Sure, you get transfers and whatnot, but the classic undergraduate experience is a once-in-a-lifetime thing. And that in a sense frees colleges, because rejection is pretty much permanent.

Graduation Rates and Success
I haven't looked closely enough to say for sure, but my gut sense is that in terms of the most basic metrics, colleges do far better than companies when recruiting new blood. It's hardly a perfect comparison, but colleges do care about underperforming students, and no matter how well you pay your tuition, if you fail systematically, they will broom you out. Likewise, students are a lot more reluctant to leave when things get bad. Still, when a college admits someone, they often do so with a >90% expectation that person will perform reasonably over the next four years. I wonder how many companies can say the same over even 18-24 months?

Assessment: a World of Difference
When it comes to pre-decision assessment, colleges make companies look like the amateurs most of them are. Depending on how you look at it, the SAT and ACT tests are either a necessary evil, or just plain evil. Leaving aside the controversy, standardized tests are extremely effective at predicting 4-year GPAs when applied correctly, and are heavily used by employers as well.

One reason for the effectiveness of the SAT/ACT tests is their market penetration. Because these two tests are used universally, year after year, there is a great baseline of data for everyone from admissions officers to test designers to work with. Aside from Myers-Briggs and the MMPI (both of which are fraught with legal complexities in their use), there are relatively few "gold standard" tests used by HR. The last time I looked at the space, it seemed like there were thousands of tests available from hundreds of vendors.

There is no question that generally speaking, colleges are looking for a more consistent and easily-defined pedigree than companies. But the business model also leads inherently to fragmentation. In software engineering, for instance, there are hundreds of tests available, many very narrowly focused on specific languages or products. In my experience managing engineers and consultants, I never saw a smart person fail because they couldn't learn a new set of tools quickly enough, but I saw many marginal people fail because they had memorized the words to the song but couldn't tell you what it meant.

The SAT works well whether the applicant goes on to major in dance or chemical engineering because it exercises basic engines of reasoning that apply across many disciplines.

What College Admissions Isn't
In a candidate-pays world, I suspect we would see a very limited number of assessments rise to the top. Because candidates would pay to take them, companies would have data on all or most applicants, and not just those biased through the initial screening, the validity of which few bother to consider.

Contrary to those who see this as a crueler world, I think greater use of fundamental testing would expand employment opportunity. In talking about how college admissions compare to corporate recruiting, it's worth noting how much less it relies on networks and referrals.

And it is not because such networks do not exist. A generation ago, going to a New England prep school gave you a better-than-even chance of getting into at least one of the Ivies, and two generations back it wasn't even debated. While I have nothing but good things to say about where I went to high school, even by my time the edge was long gone. Networks may give you more, but I suspect it will be mostly of the same old, same old.

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permalink  |   ( 3 / 803 ) There's been a bubble of interest out there in the relatively dismal world of recruiting with both TechCrunch and Venture Beat weighing in on the recent proliferation of players in advertising and sourcing.

I can't find it anymore but there was a great comment on the TechCrunch article which basically said, "this space will stink so long as candidates don't pay."

There is perhaps no more cherished assumption in this business than the idea that candidates shouldn't pay for anything. How cherished? Check out this post at recruiting.com, which states,

If any employer asks you to pay for any part of the employment process call the police immediately.

While true, this is often read to mean "anyone involved in finding you a job" and not just the employer proper, with the end result being that anyone aside from a "career coach" or resume writer gets labeled a crook. See this post at Joel Cheesman's site on The Ladders, which has the temerity to charge jobseekers $30/mo for access solely to $100k+ jobs, and makes very clear that if you've never pulled down a six-figure package, you should go somewhere else.

The notion that jobseekers should get everything for free is quaint, infantilizing, and damaging. There is a rule, by no means universal, but nonetheless generally useful, that business processes are set up primarily for the benefit of the people paying for them. While employers complain endlessly about job boards (and not entirely without reason), think about what a dismal abbatoir they are for candidates, who can look forward to spend hours clicking through poorly-targeted job ads and forced to complete brain-dead screening surveys for jobs they know full well they have maybe a 1-in-50 chance of even getting an emailed rejection letter.

When the only thing that every single person who's ever come within range of the recruiting process is that it stinks like week-old fish, it's time to reconsider cherished assumptions. Let's dispense with the ethical questions, because if it's bad to charge people a modest sum of money to help them find a well-paying job, how much more reprehensible is it to charge them to find true, scientifically-engineered love?

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permalink  |   ( 2.9 / 884 ) Over the weekend we released Resume Direct 2.1 as a way of celebrating two years (to the day) since launching the beta. We've added over 70 clients since then (60 of them in 2006 alone) and the functionality we offer has grown far and wide with them.

Aside from some great new features like custom fields, the largest part of this release was dedicated to an "Extreme Makeover" of the requisition UI screens. The requisition pages have probably undergone more changes in the past two years than any other single part of the system. In 2005 it was little more than title, department, and location. Now there are roughly two dozen standard options, and with custom fields, clients can take that number as high as they want it.

Starting around six months ago we began noticing that in both demos and new client training sessions, an inordinate amount of time was being spent on screens that represented less than a quarter of the overall functionality we offered. No one (either prospects or clients) was complaining that it was too complicated, but the internal feedback loop between our support and training staff and the product development team kept coming back and saying "we need to do better."

Design-centric thinking may be newly in vogue in the software industry but for me personally it is old hat. Both of my parents were working artists, my father the head of creative services for nearly thirty years at the fragrance company Coty. Along the way he got to work with Sophia Lauren (who once baked him banana bread in her hotel suite) and threw away a bunch of original sketches by Andy Warhol, then just another mediocre freelancer looking to make a few extra bucks.

One of his greatest successes was the launch of Exclamation! in the late 80s. Perhaps his proudest achievement was to see the bottle exhibited at the MoMA, which had been his favorite museum since he was in art school. It's not an exaggeration to say that bottle helped put me through college. What is perhaps the most fascinating thing is that when I mention it to people, the first thing they remember isn't what the fragrance smelled like, but what it looked like.

For HRMDirect, the benefits of good design are no less acute:

- Reduced training cost
- Reduced support cost
- Increased adoption by end-users (especially hiring managers)

Most software vendors only care peripherally about these issues because:

a) they make money charging extra for training
b) they make money charging extra for enhanced support
c) the licenses were sold up front, so it's out of their hands

Why does HRMDirect care? As a software-as-a-service provider we are set up entirely differently.

1. We include training in our base prices, so the less training clients require to become effective, the better we do

2. We include full support in our base prices, so the more support clients require, the less money we make

3. Our licenses are sold annually, so we need clients to renew and hopefully increase the number of licenses each year to succeed.

In a SaaS world, we succeed the more closely we align with client needs, and good design, an afterthought in virtually every system out there, takes pride of place for us. While I don't know that I'll ever see screenshots of our new requisition UIs in a museum, and I'm quite sure that Scarlett Johanssen will never bake me banana bread, good design sensibility is in my genes and permeates everything we do here at HRM.

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permalink  |   ( 2.9 / 716 ) Boy do I hate it when that happens.

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