Supply-Side HR Revisited

Aug 23, 2004

Years ago, I coined a term called “supply-side human resources management.” The basic theory of supply-side human resources management goes something like this: If an A/E or environmental firm invests heavily in its recruitment function, it will impact every aspect of its business. The firm will be less tolerant of poor performers on its staff (because it will have confidence they can be quickly replaced). It will be more likely to push the limits of its marketing capability (because it could staff up to do the work if the firm won it). I think it’s time we revisit supply-side human resources management. The facts are that the business climate is improving. The talent pool, on the other hand, is not increasing. The net effect of this is that it will get harder and harder to hire good people. Firms will get more competitive with each other as the talent war heats up again. And it will undoubtedly get worse. Once we get a new transportation bill in place and find a way to extract ourselves militarily from Iraq, there’s going to be an upswing in demand for the talents provided by our firms as the market gains even more steam. And the problem will worsen. Most firms that want to grow do so either by spending more money on marketing or through acquisitions. The third option, that is less often considered, is spending some real money on recruiting. Put enough money into it that you can hire someone to manage the process in your firm. Put enough money into the budget that you can hire the best outside recruiters. Put enough money into the budget that you can afford to pay signing bonuses or do what it really takes to relocate someone really critical to your firm. When I’m out working with A/E firms on their business planning, this idea often comes up. And the truth is, while we are successful some of the time in selling this idea, we probably aren’t successful even more often. Design and environmental firms STILL see recruitment as a cost to be minimized. They just don’t get the idea that recruiting can be an investment and that to make the investment pay off you first have to make the investment. Years ago, I was the human resources director for two different A/E/P/environmental consulting firms. I was lucky. In both cases, these firms were run by people who understood the competitive advantage that spending real money on recruiting gave them. But I am not sure that either of these companies would have done what they were willing to do to ramp up the recruitment supply line had I not aggressively sold them on the idea. Where do you stand on this issue? Do you have a budget for recruiting? A reasonable budgeting formula for recruiting goes something like this: Take the number of employees you have and multiply that by your average turnover rate. Hold that number to the side. Then take the number of employees you have and multiply that by your projected or desired growth rate for the coming year. Add those two numbers together and multiply by $7,500. This is a good place to start with developing a recruitment budget. Use the budget to hire an in-house recruiter or recruitment manager (I prefer doers who manage as opposed to full-time managers). Use the budget for executive search services— the best firms typically will not work on a contingent fee basis but may be willing to work out some sort of volume discount plan with you. Use the budget for signing bonuses and relocation allowances. Use the budget to get on the best Internet job boards. For a 100-person company with 12% annual turnover and a 10% projected growth rate, we are talking about 22 jobs times $7,500 each for a total budget of $165,000. This kind of money is not at all unreasonable and should, in fact, probably be considered a floor for what you need to spend EVERY year IF you want to get into a position where you can start to enjoy some of the benefits of supply-side human resources management. Originally published 8/23/2004

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