Opportunity is knocking: Why retailers should be investing in talent now

Brent Holland

Economic recovery efforts in the U.S. aren’t looking so hot. Last week’s jobs report showed a slowed (think “glacial”) hiring pace by U.S. companies for the month of May, as well as an increase in the unemployment rate. While this is sure to be a cause for concern for those on the job hunt or those looking to make a transition, opportunity is knocking (perhaps, literally) for retailers.

The current applicant-to-hire ratio obviously makes for a very positive employer’s market when it comes to filling vacant positions, but according to Brent Holland, Vice President of Research and Consulting for FurstPerson, it may also be an ideal time for long-term investment as well. In a recent interview ahead of NRF’s Loss Prevention Conference (which includes sessions on workforce recruitment and retention), Holland shares his talent management insight on hiring strategy (and why it should line up with your business direction), the impact of business intelligence on recruitment, and why now is not the time to “sit on the sidelines” when it comes to workforce development.

What do you think is the biggest challenge for retailers when it comes to talent management?

The biggest challenge is to create a talent management program that begins in the here and now, but focuses on the future. Regardless of whether the plan is for retirement, education, or strategic staffing, the principles remain the same. Most retailers – most companies for that matter – create talent management plans that are designed to clone high-performing employees without considering how the economy, competitive environment, or even the company’s or store’s culture might impact what the next generation of employees will need to be successful. I believe these backward-looking programs are similar to retirement plans based on savings accounts and safety deposit boxes – they provide a sense of security, but their failure to keep pace with the broader environment results in a net reduction in long-term value.

Given the current economic climate and unemployment figures, what trends are you seeing in retail hiring?

The downturn has impacted retail hiring in at least two significant ways. First, a large number of layoffs coupled with fewer employment opportunities created a significantly high applicant-to-hire ratio. This means that many retailers are seeing more applicants for each job opening. Second, some companies have opted to not backfill job openings created by attrition due to the relatively weak economy. The combination of more applicants and fewer job openings has created an employer’s market for talent. The competition for job openings is fierce, but those companies with a more strategic talent management practice have used the influx of job seekers to bring on better talent (like Macy’s, who announced plans last year to hire 3,500 employees over two years) as an investment in the company’s future. Other companies seem content to sit on the sidelines until the economy springs back to life.

Let’s talk social media. How do you think HR departments should be leveraging this ever-changing resource in recruiting and hiring?

The social media movement has captured the collective imagination of the HR field, and many others for that matter. Despite the widespread publicity and potential opportunities for social media to redefine recruitment and hiring, our experience – and many of our customers’ experience – with social media suggests that it’s an unwise investment during recruitment. First, the time and cost associated with generating a single applicant from social media is much higher than more traditional and web-based recruitment strategies. Second, many prospective candidates have given feedback to FurstPerson’s customers that they would prefer to reach out directly to a company if interested rather than being approached via social media by the company. And, finally, with such a large candidate pool in most markets today, companies would probably be wiser to invest dollars into a solid referral program to take direct advantage of their employees’ social networks. After all, our research suggests that employee referrals tend to stay longer and perform at a higher level than hires from traditional sources (e.g., radio and newspaper advertisements).

In what ways are companies like FurstPerson maximizing business intelligence for their customers?

FurstPerson delivers business intelligence to our customers in myriad ways. In the interest of time, however, I’ll focus on the two channels that differentiate us from other consultancies. First, we have amassed an industry-leading data warehouse that has allowed us to capture regional, national, and global trends in customer-facing jobs. This proprietary information enables us to help our customers understand similarities and differences between their jobs and other companies operating in the same segments. This type of intelligence is particularly important when building recruitment strategies and redesigning jobs to create a more robust customer experience.

Second, the keys to making the right hiring decisions are to understand your company and its jobs, and also have accurate and detailed information about a job candidate so that you can evaluate “fit”. Unfortunately, most companies are missing one or both of those keys, so they often make poor hiring decisions. FurstPerson’s approach combines (a) client-specific research to understand what it takes to be successful in their specific business with (b) a battery of individual assessments that provide detailed and accurate information about each candidate. The combination of strong research and accurate candidate information enables our customers to make far more informed and, therefore, accurate hiring decisions.

Retailers are unique in that they are not only hiring for distribution centers and headquarters – they’re hiring for stores in towns all across the country (and the world, in some cases). How can companies implement broad changes in hiring processes while taking into account special needs at local or district levels?

Every company is unique and deserves to have a hiring process that has been customized to its specific culture, business goals and needs. Far too many consultancies and assessment providers offer off-the-shelf assessment recommendations for customer service, sales, etc. What these companies are actually selling is a test and/or assessment profile that was developed based on your competitors’ businesses. So unless you see little or no difference between your business and those of your competitors, a profile that’s customized specific to your business is essential to help reinforce competitive differences between your company and others.

The same issue of understanding similarities and differences is also true in a company (e.g., stores, distribution centers, and headquarters). Although everyone’s on the same team, there are usually small differences within the same job(s) across facilities and regions that should be incorporated into the hiring profile to maximize fit. This is where a well-designed research study comes into play. The study should sample across stores, regions, and facilities to determine whether the qualities that predict successful performance and retention are the same or slightly different. With this information, the screening recommendations can be adapted to reflect any differences that may exist across the body of the organization, thus enhancing the likelihood of making the right hiring decision.

How much weight do you feel companies should place on psychological assessments during the hiring process?

Regardless of whether a company is using standardized testing, virtually every company is using a test in one form or another. For example, did you know that an interview is subject to the same standards of fairness and validity as any other psychological test? It’s true. What might be even more interesting, however, is that very few interviews are subjected to rigorous reviews or research to prove their fairness and accuracy. The net result is that far too many companies are using pre-hire screens that cannot be demonstrated to promote fair, accurate hiring decisions – often the very same companies that balk at structured testing.

In my opinion, the use of properly validated psychological tests and assessments should be given substantial weight during the hiring process. In fact, I believe that every step of the hiring process – pre-screens, background checks, interviews, tests, etc. – should undergo research to demonstrate its validity and impact on different groups of people. Upon completion of the research, the company and its stakeholders should have supreme confidence in the accuracy and fairness of the hiring process.

If a retail CEO walked up to you and asked for three pieces of advice on how to hire the best and brightest, what would you say?

First, clearly define what it takes to achieve success (and how it’s measured) in every one of your company’s jobs. You must clearly document what knowledge, skills, abilities, and other characteristics are necessary for an employee to have in order to perform the job at a very high level. If you get this piece of the puzzle wrong, your recruiting and hiring processes will underperform.

Second, you must select well-validated assessments that measure the knowledge and qualities that are critical to perform at a high level. Conduct well-designed research in your organization – across stores and regions – to ensure that the tools will help you identify exactly those people that will perform at a high level. Only after the tools have proven their ability to help you make the right decisions should you incorporate them into your hiring process, but once you’ve made the decision to implement do so with swiftness and your visible support.

Finally, repeat the research process every year. Your business changes often and so must your hiring process. By conducting research every 12 months, you will be assured that your hiring process remains in lockstep with the direction of the business. Failure to conduct research on a regular basis will almost guarantee that in 12 – 24 months your hiring process will no longer be aligned properly with the strategic direction of the company.

FurstPerson has also made available a free whitepaper to retail executives on this very issue.

Your new tagline is “who you hire decides who hires you.” What exactly do you mean by that?

Every person hired into a customer-facing job will become the face of the company in the eyes of its customers. The way in which the representative interacts with the customer will go a long way in determining whether the customer returns and/or recommends the company to others.

What are you most looking forward to at NRF’s Loss Prevention Conference next week?

This is my first NRF Loss Prevention Conference, so I’m most looking forward to attending sessions and learning from the attendees and thought leaders.