Executive Insight

What is the Cost of a New Hire? A New Standard Methodology Proposed

A new Standard issued by The American National Standards Institute (ANSI) describes the definition, assembly, display and documentation techniques required to produce a cost-per-hire metric, a commonly used measurement in human resource (HR) functions. Cost-per-hire is a measure of the effort exerted, defined in financial terms, to staff an open position in an organization.

Cost-per-hire metrics have been used for decades in organizations, though previously no standard formula had been widely adopted. The new ANSI Standard serves to provide HR professionals and managers with a methodology to establish hiring and workforce management budgets as well as serve  as a benchmark for assessing recruiting effectiveness and the efficiency of staffing processes.

ANSI, who co-developed the Standard in collaboration with The Society for Human Resource Management (SHRM) report that a central requirement in developing the CPH Standard is to provide standard tools to practitioners wishing to calculate a cost-per-hire metric, while recognizing that organizations operate differently; one organization may incur a type of cost that another organization may not. This Standard allows for variance within organizations while still providing a robust methodology for creating a standard CPH metric.

The Standard is designed as a tool to allow an organization to determine accurate and comparable costs of recruitment through a standard algorithm to calculate the recruiting costs to be incorporated into cost-per-hire. The Standard is structured at a high level. Specific consideration and responses are also addressed for consideration by individual organizations based on specific hiring environments and requirements.

The report describes three types of cost-per-hire formulas:

Cost-per-Hire, Internal (CPHI): Defines a formula and methodology for creating the CPH measure appropriate for a particular organization. This metric is not designed for comparison with other organizations’ CPH data. It is designed to be a comprehensive reflection of cost and hire data for a single organization.

Cost-per-Hire, Comparable (CPHC): Defines a formula and methodology for creating the CPH measure appropriate for comparison across organizations. This metric uses a similar methodology to CPHI; however, it uses a subset of data that is more likely to be used across organizations and is helpful in building acceptably strong comparisons of costs between organizations.

Recruiting Cost Ratio (RCR): Defines a formula and methodology comparing the total cost of hiring against the total compensation of the newly hired individuals in the first year of their employment. This formula varies from the CPHI or CPHC only in the denominator; whereas CPHI or CPHC are ratios of costs to the number of hires, the RCR is a ratio of costs to total first-year annual compensation of the new hires.

While the equation provided by ANSI is the same for each, the report applies different constituent elements to the calculation depending upon the circumstance and measurement purpose.

Read the report.

Source: The American National Standards Institute (ANSI)

Effective Leadership Development

How leaders really develop; the keys to implementing an effective and sustaining leadership development process and why experience is the best teacher.

Effective Leadership Development

View more presentations from Charlesmore Partners International.

Effective Succession Management

Why succession management is so important to leadership continuity and future enterprise performance; implementing an effective succession planning process; protecting your organization from the risk of management discontinuity.

Effective Succession Management

View more presentations from Charlesmore Partners International.

Salesforce Rypple - Social Performance Management for Every Employee

Salesforce.com unveils the next generation of the social enterprise at CLOUDFORCE 2012.

Its new Rypple acquisition will enable companies to engage and align people across their enterprise and in effect create an employee social network that can continuously connect and interface throughout a workforce. In a news release that accompanied today’s glitzy – and social media streamed – announcement at the CLOUDFORCE conference in San Francisco today, the company reports:  

“The way people work has changed. It's less hierarchical, and more social and collaborative. But the tools to manage people and process at work were designed before the age of social and mobile cloud computing. They automate antiquated processes, and don't enable companies to transparently manage performance across an employee social network.

Social enterprises and progressive HR leaders are embracing Salesforce Rypple, which focuses on the inherently social nature of performance management. Salesforce Rypple allows companies to engage and align every employee -- to set goals, manage objectives, and provide feedback and recognition -- all from within their employee social network. Designed for users, Salesforce Rypple thoughtfully incorporates badges and other social gaming concepts to keep them engaged.

Thousands of companies including Facebook, LivingSocial and Spotify are already using Salesforce Rypple's web-based social performance management apps to liberate performance management from a once-a-year, top-down process and integrate them into daily work, where they can finally make a meaningful impact on performance.”

While the Release contains plenty of marketing hype, this has the potential of being extremely disruptive – in a positive way – to how we manage workforce engagement and interaction in the future.

Source: Salesforce.com

New Supermarket Scanner Recognizes Objects. Will Barcodes Become Obsolete?

The latest supermarket scanner developed by Toshiba Tec may make conventional barcodes in supermarkets obsolete.

Currently, at most supermarkets, a laser scanner is used to recognize barcodes, but the newly developed Object Recognition Scanner instantly recognizes the merchandise itself, be it fresh produce or packaged goods, by identifying it directly via a camera.

This scanner utilizes pattern recognition technology being developed by Toshiba. By recognizing the difference between merchandise and other objects and discarding the latter as noise, the scanner can operate at high speeds.

As well as fruits and vegetables, the scanner can recognize printed items, such as beer cans and coupons.

Source: DigInfo Tv

Gen Y Working Women – An New Analysis from Accenture

Source: Visual.ly

Read the report: The Path Forward - International Women’s Day 2012 Global Research Results

Women Board Representation Increases Slightly Worldwide

GMI Ratings released today, International Women’s Day, its annual report on Women on Boards. Based on data on over 4,300 companies in 45 countries, the results show incrementally small improvements in the proportion of board seats held by women. For example:

• 10.5 percent of the directors in are now women, a 0.7 percentage point increase from last year
• At the same time, the percentage of companies with no female directors at all has fallen below 40 percent for the first time, to 39.8 percent (a 2 percentage point decrease since last year)
• The percentage of companies with at least three women has risen by 1.3 percentage points, to just under one‐tenth (9.8 percent) of companies worldwide

As the report says, however, while the aggregate statistics show small improvements, they mask significant differences between individual countries and between industrialized economies and emerging markets. For example, when the world’s industrialized economies are viewed as a group, 11.1 percent of directors are women, 63.3 percent of companies have at least one woman on the board, and 10.5 percent of companies have three or more female directors. For emerging markets as a group, only 7.2 percent of directors are women, 44.3 percent of companies have at least one woman on the board, and 6.3 percent of companies have at least three female directors. What’s more, large national variations exist within market blocks. For example, Norway’s boards have 36.3 percent female representation, while Italy has only 4.5 percent. Japan has only 1.1 percent, but Hong Kong has 9.4 percent.

In its Release, GMI quotes Director of Research Kimberly Gladman, PhD, one of the authors of the report, “This heterogeneity reflects the wide range of approaches countries are taking with respect to board diversity. In the past year, France has seen the largest increase in female directors, due to a legal requirement. Australia has also made significant gains, in response to a corporate governance code change and a mentoring program by the Australian Institute of Company Directors. In the US, progress is slow, but many investors are pressing for change.”

The full report includes detailed studies of the statistics in 10 individual countries.

Download the report.

Source: GMI Ratings

Talent Gap Must be Addressed as Workforce Ages

Lessons from the UK. The Chartered Institute of Personnel and Development (CIPD) publishes a guide to help employers manage a healthy ageing workforce.

CIPD warns that employers need to act now to avoid losing their talent and competitive edge as the ageing workforce triggers a huge recruitment gap. UK Government figures show that an estimated 13.5 million jobs will be created over the next 10 years, but only 7 million young people will be available to fill these roles.

Older workers can plug this gap, the CIPD said, but employers must revisit their workforce planning strategies to accommodate this major change. To help employers make the most of opportunities and avoid potential pitfalls the CIPD has published a new guide called Managing a healthy ageing workforce: A national business imperative.

This issue is particularly pressing as further government figures reveal that 36 per cent of the UK’s working population will be over 50 by 2020, and the number of people aged 90 and over will triple by 2035.

CIPD research shows that older workers are increasingly looking to extend their working lives, with more than 50 per cent of workers aged over 55 planning to work beyond the previous state retirement age. Financial reasons are a key factor but many older workers also wish to continue using their skills and experience and enjoy the social interaction of the workplace.

Source: CIPD

Read the report: Managing a healthy ageing workforce: A national business imperative.

The World’s Most Admired Companies Outperform the Market by 5x

Since 1997, Hay Group has partnered with FORTUNE magazine to identify and rank the World's Most Admired Companies. The study also reveals how they win their strong reputations.

Being one of the World’s Most Admired Companies (WMACs) means much more than just peer recognition. The best practices that help organizations become and remain Most Admired have direct financial consequences. And as the table shows, these benefits endure over time. Over the last 10 years, shareholders of top the 50 World’s Most Admired Companies have enjoyed returns that outperformed the S&P 500 by over five times.

Candidate companies include the FORTUNE 1000, Global 500 and top non-US companies. To determine which companies have the strongest reputations, 15,000 top executives, directors and financial analysts were asked to rate companies overall and relative to peer organizations.

The World’s Most Admired Companies study examines nine attributes of reputations:

• Innovation
• People management
• Use of corporate assets
• Social responsibility
• Quality of management
• Financial soundness
• Long-term investment
• Quality of products/services
• Global competitiveness

This year's top 20 are:

Hay Group reports the following key findings:

• 90% of WMACs succeed in aligning various business units/subsidiaries around a common strategic vision vs. 78% of peers
• 79% of managers at WMACs understand their roles and responsibilities in implementing strategy vs. 58% of peers
• 61% of WMACs use planned career assignments in developing high potential future leaders vs. 35% of peers
• 82% of WMACs regularly reinforce rewards philosophy in communications with employees vs. 64% of peers
• 94% of WMACs feel that their efforts to engage employee have reduced turnover vs. 67% of peers
• 81% of WMACs use performance measures to encourage leaders to think short term and into the future vs. 43% of peers
• 94% of WMACs managers and employees are encouraged to take reasonable risks to improve effectiveness vs. 77% of peers

Hay Group has prepared a report and analysis on the World’s Most Admired Companies, reflecting back over the 15-year term of the survey. It makes interesting reading. It is structured around what Hay has determined to be the four most essential ingredients of the Most Admired Companies’ recipe for success, namely:

1. Strategic excellence
2. Structures and processes that sustain performance over time
3. Achieving success through people
4. Placing a high value on leadership and talent

Read the report

Source: Hay Group

Looking Ahead on CEO Succession Planning

A lot has changed since Justus O’Brien and I wrote Examining the Impact of SEC Guidance Changes on CEO Succession Planning for The Conference Board in early 2010. CEO succession is more frequently a high priority on more board agendas. Institutional investor requests for disclosure of board succession process and practice more often reach agreement than proxy conflict; certainly more boards report that CEO succession plans are in place. All of which constitutes progress.

So what does 2012 hold for boards and CEO succession? Here are my predictions:

1. More boards will more definitively take responsibility for CEO succession planning, relying less on management to steer the process;
2. Boards will increase their process capability, putting in place those key elements that make for a robust and effective process and training designated directors accordingly;
3. Disclosure will increasingly become more process-descriptive than boilerplate, and investors will find this helpful and reassuring; where companies are reluctant or passive, investors will press the point often publicly;
4. More testy conversations will happen between boards and sitting CEOs on transition intentions and timing;
5. Shareholder activists will increasingly leverage succession planning inadequacies to advance their agenda.

First published in Laurel Hill’s The Advisor, Volume 8; March 2012, together with predictions and expectations for Proxy Season 2012 from:

Francis H. Byrd, Senior Vice President, Corporate Governance, Risk Practice Leader at Laurel Hill Advisory Group;

Douglas Chia, Assistant General Counsel & Corporate Secretary at Johnson & Johnson;

Robin A. Ferracone, Executive Chair of Farient Advisors, LLC;

Brian Foley, Managing Director of Brian Foley & Company, Inc;

Philip Goldstein, Partner, Bulldog Investors;

Suzanne Hopgood, President & CEO, The Hopgood Group, LLC;

James McRitchie, Publisher, CorpGov.net;

James (Jim) O’Bannon, Partner, Jones Day;

Karl Wagner, Assistant Secretary & Director of Stockholder Services, Merck & Co., Inc;

Paul Washington, Senior Vice President, Deputy General Counsel, Time Warner.

Topics include: executive pay and Say-on-Pay, corporate governance, shareholder activism, proxy access, CEO succession planning, the global economy, board responsiveness.