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Many businesses now believe that their people and the management of their talents are their
most significant competitive advantage. There have been many improvements in talent
management practices over the last few years.  E-recruiting has improved the speed, efficiency
and effectiveness of building candidate pools.  Candidate tracking systems have automated
many tedious tasks allowing recruiters to spend more time assessing, interviewing and building
relationships with candidates.  The quality of information available on candidates has greatly
improved leading to better hiring decisions.  New recruitment and assessment technologies have
improved the employer’s ability to evaluate a candidate’s fit with both the organization and the position.   

The competitive advantage of having a talent management strategy is more clearly understood by
business managers today.  Employers have increased their efforts to become an employer of choice,
so that they can acquire the best talent available in the marketplace.  Yet, many organizations today
do not monitor and evaluate critical talent management processes and outcomes.  A study by Watson
Wyatt, for which more than 750 publicly traded companies were surveyed, showed that the organizations
that had very effective human capital management practices produced a five-year total return to shareholders
that was more than three times that of organizations with poor human capital management practices.   

How Can We Evaluate Human Capital Management Effectiveness?

There are five processes and outcomes that organizations can monitor to evaluate the effectiveness
of their talent management practices.  

Five Processes

• Talent Sourcing Alternatives

• Recruitment Efficiency

• Selection Assessment Validity             

• Individual Development Planning          

• Human Capital Strategy                                  

Five Outcomes

• Selection Ratio

• Time to fill

• Job Performance

• Retention

• Profit Per Employee

Outcomes provide the evidence that separate the successful talent management strategies from the
failures.  Unfortunately, many business managers do not take time for evaluation of organizational outcomes.   

Why should companies  invest in new recruitment and selection solutions?

Employee turnover is very costly, yet many firms seem unable or unwilling to do what it takes to stop it. 
Hiring mistakes include the cost of termination, replacement, vacancy and learning curve productivity loss. 
Mistakes are much more costly than most managers realize!  Click here for a detailed review of the high
cost of hiring mistakes.  The U.S. Department of Labor estimates that hiring the wrong entry-level person
can cost an organization more than $5,000 within the first three months. At higher organizational levels,
these costs increase.  Hiring the wrong manager at $100,000 per year costs an employer about $300,000. 
It costs about $4900 to hire the wrong engineer.  It costs about $2500 to hire the wrong computer programmer. 
HR Magazine reported that employee turnover and retraining cost U.S. companies about $1 billion annually.
As the above statistics show, it is easy to make a strong business case for investing in new recruitment and
selection solutions.

How do we estimate ROI from investments in new recruitment and selection solutions?

Investing in e-Recruitment technology (e.g. Total APS) automates processes, reduces costs, shortens
 time to fill, improves the quality of hire, and it also improves the company’s image among candidates.  The
right investment can also reduce the total number of HR staff needed and it should pay for itself within a
short time frame.  Even with all of the above ROI outcomes, it is still necessary to evaluate new talent
management processes and outcomes. Recruiters, charged with filling vacant positions quickly, should
now have more time to build relationships with the most desirable candidates and more time to sell the
organization as the right place to work.  The greatest ROI occurs when the CEO and other senior managers
champion the new initiatives.  The Senior Managers send the message that the new talent management
initiatives are a strategic priority that everyone needs to support.

The War for Talent Will Continue to Heat Up in Coming Years

The accelerating exodus of aging baby boomers from the workforce is a pressing problem for many organizations,
especially within management positions.  By 2010, the overall labor shortage, measured in unfilled jobs, will be
21.3% according to the Federal Government (Bureau of Labor Statistics, 2000 to 2010 Projections).  Those
organizations that develop the ability to find, hire, and retain good people, will have a valuable competitive
advantage in replacing the aging workforce.

Workforce Planning

Organizations will need to engage in workforce planning.  The table on the next page shows the projected
Age Demographics in this country from 2000 to 2050. 

Projected Population of the United States, by Age and Sex: 2000 to 2050 

     Age Group           2000                2010            2020              2030             2040               2050 

Recruitment Process Improvements 

E-recruiting improves how quickly and inexpensively a candidate pool can be created.  In addition to expanding
sourcing alternatives and recruitment efficiency, the quality of initial orientation and training greatly influences
the new employee’s perceptions of the organization and their attained level of engagement and loyalty. 
Addressing the new hire’s future development needs is very important during the on-boarding phase,
because it is during this time that new employees become integrated into the organization’s culture, get
up to speed and begin contributing. Reviewing the individual development plan during the initial orientation
of a  new hire helps them realize that the organization is making a long term investment in their career,
which in turn facilitates long term retention. 

Is the organization getting the outcomes it desires?

Selection Ratio - The number of applicants per position should be substantially larger following the investment
in a new e-Recruitment technology. 

Time to Fill – The number of days required to fill a position should be much less.                                   

Performance – Organizations should be hiring more employees who perform at the level of the top 20 percent
in the position.  The metrics defining high performance on the job should be clearly above the average
performance metrics for the position.   

Retention - Total days or months employed should be substantially longer. 

Profit per Employee – As the number (percentage) of top performers grows within the organization, the
organization can accomplish more with fewer people - and the profit per employee should increase substantially.

              Dr. Neil Clark is the Executive Director of HireSmart,
              a human capital management firm in Mesa, Arizona. 
            Phone: 480.503.2945, Web: www.hiresmart.com, eMail: info@hiresmart.com