4

Talent Acquisition and Integration

New Developments: From Recruitment to Top-Grading

In the last decade, recruitment systems have changed a great deal. The following are some of the key changes:

• Across the world, and particularly in India, the need to recruit competent people has increased. Consequently, there is an increased emphasis on searching for, and being able to identify, talent. Some firms are willing to pay substantial amounts, and undertake pay hikes, for new recruits, to ensure that people of the highest standards are recruited. Even the big business houses like the Birla Group and the Tata Group have reorganized themselves, and have resorted to a great deal of talent-hunting. Over the last decade, firms have wanted to make themselves world-class, and thus they have felt the need to recruit world-class managers. The resulting focus on competencies—particularly, leadership, entrepreneurship and change management—has been intensive.
• The last decade has also seen an upsurge in the growth of management schools and technical institutions. Institutions like NIIT have made a tremendous contribution to the upgrading of technological competencies and technical education in the country. Campus recruitment has shot up as a direct result of this movement. In some companies in India, HR managers find themselves preoccupied for at least six months a year registering themselves as campus recruiters, trying to ensure that they are listed for recruitment on the first day or ‘Day Zero’, which allows them access to the cream of graduating students. The pre-placement process is an elaborate one, involving coordination with line managers, training them in interview skills, developing tests and participating in lengthy pre-placement talks. These activities have become a full-time, or at least a major, preoccupation for many HR managers and staff.
• Assessment centres are being increasingly used by some firms for recruitment purposes. Though they may not be used as systematically as outlined in this chapter, competencies are identified and relevant tests are developed. Some organizations use group discussions, case analyses, psychometric tests and interviews to measure competency. A few use simulations.
• There has been a growing emphasis on the use of psychometric tests for recruitment purposes. The most popularly used tests are: Myers-Briggs type indicator (MBTI), 16 personality factor (16 PF) inventory and the Thomas profiling system. Of these, MBTI is the most popular.
• The number of placement and recruitment agencies has risen. Today, there are as many as 1,000 agencies recruiting people in India alone.
• The outsourcing of recruitment has risen sharply in the last decade. Under this system, a firm gives its list of requirements to the recruitment agency that then does the advertisement, interviews and shortlisting, before the firm makes its final selection. The recruitment agencies have varied competencies. Some of them merely maintain a database and supply it to registered firms, while others actively search for, interview, test and shortlist candidates, and also participate in their final selection. They charge the firm 10 per cent to 20 per cent of the cost to the company (annual salary and other costs included) for a candidate.
• Internet-based recruitment has also become popular. For Internet-based recruitment, there are agencies that maintain the biodata of individuals, and organizations simply subscribe to these agencies to access their biodata. On the basis of the résumés received, organizations may shortlist and contact candidates, or recruit through other procedures. Popular recruitment sites include: http://www.naukri.com, http://www.jobsahead.com and http://www.jobsdb.com. Internet or web-based recruitment is a very handy tool and makes things much easier for candidates and recruiters alike. Companies are also known to use e-recruitment and e-résumé scanning, which reduces the time for processing applications.
• Employee referrals are also on the increase. Here, the firm does not advertise outside the firm for new candidates. The information is given out internally. Employees themselves are asked to look for potential candidates. Candidates known to the present employees are likely to stay longer. In-fosys, one of India’s top employers, was the first to start a reward scheme for referrals at different stages of recruitment. ICICI rewards employee referrals with bonuses ranging from 20,000 to 50,000. In 1999, 30 per cent of the new recruits at ICICI came through referrals. The company has also automated its recruitment through its career site, which includes features like job postings, organization profiles, online skill tests and virtual interviews.
• Placement continues to be the most neglected area. The inappropriate placement of individuals wastes a lot of human resources. A suitable placement involves understanding the individual’s competencies and the competency requirements of the job, and finding a match between the two. Mapping the competencies for both the role and the individual is a time-consuming process. Most organizations are unwilling to invest their time and energy in such a task. Most firms adopt the position that the individual must learn the required competencies by herself/himself and begin to use them. Though firms assume the responsibility for placement and competency matching, it is not done meticulously enough. Improper placements result in HR wastage and attrition, and an adverse effect on employee motivation. These issues will be dealt with in subsequent chapters.

Talent Identification and Assessment Tools

The success of India’s IT firms over the last decade has contributed to the upsurge in recruitment and outsourcing in a big way. HR managers at IT giants like Infosys, Wipro and Mahindra Satyam spend substantial amounts of their time in recruitment and induction. A high level of professionalism is being brought into the recruitment process. Assessment centres are likely to become even more central to recruitment as the need for competent managers increases.

Internationally, the emphasis is shifting to the recruitment of talented employees. Proactively searching out, identifying, hiring and retaining top-graders or A-class performers in every job, redeploying C-class players to internal positions where they can become A-class players, and coaching employees to improve their performance certainly makes a difference to organizational efficiency. The use of assessment centres for determining competency levels and the emphasis on new assessment methods is on the increase. Bradford Smart (1999) has suggested the following to improve the recruitment of A-class players, thus enhancing human capital and talent management in a competitive economy:

1. C-class performers or players (as contrasted with A-class players) do not hire A-class players. Therefore, deploy talented people to hire talented people. Firms should be cautious about who they use for recruitment purposes.
2. You may think that you are hiring A-class performers, but they may turn out to be C-grade employees. Use an in-depth interview and other assessment methods to ensure that you hire the best. A behaviour event interview (BEI) or chronological in-depth interview is suggested for this purpose.
3. HR department staff is overworked. This affects the process of careful recruitment, and consequently there is a dearth of A-class players in the organization. There has to be an active search for top-graders. The top management needs to be involved in recruitment. There is no substitute for this.
4. Search firms do not find A-class players. The search process and the search firms need to be managed by the recruiting corporations themselves.
5. A-class players need to be protected from being undermined by the existing personnel.
6. Chronic players need to be redeployed and A-class players need to be paid what they deserve.
7. Big search firms have little or no time to engage small search firms (or those that serve fewer clients) and build their competencies. Manage the search firms rather than be managed by them.
8. Hiring people is an investment, and hiring the wrong people can be very expensive indeed—sometimes costing as much as minus 500 per cent.

A number of assessment methods discussed in the subsequent chapters on assessment and development centres can be used for talent assessment. Psychometric tools have emerged as particularly popular. These are discussed in some detail in this chapter.

The Theory of Psychometric Testing

In this section, we will consider the following:

• What is a psychological test?
• Psychological measurement
• Types of scales
• Classification or types of tools/instruments
• Uses of instruments

What is a psychological test?

Any systematic procedure in which a person is presented with a uniform set of stimuli (tasks, questions or problems) intended to elicit particular responses, which are then scored and interpreted according to a specified criterion or performance standard, can be called a psychological test.

It is a standardized instrument to measure, objectively, one or more aspects of a total personality by means of samples of verbal or non-verbal responses, or by means of other behaviour.

The key words here are: standardized, objectively, samples, behaviour. The critical elements of a psychometric test are:

• A series of tasks or test items administered to examinees under uniform conditions
• Responses to test stimuli
• Scores based on the responses that have desirable psychometric properties
• Scores interpretable according to certain performance standards

Psychological measurement

Measurement is defined as rules for assigning numbers to objects in such a way as to represent quantities of attributes (Stevens 1946). The key elements are:

• A category of objects
• Symbols representing various values
• Rules of correspondence relating to elements of these two categories

Types of scales

There are four types of scales that are used to measure things: nominal, ordinal, interval and ratio scales. These scales have interesting properties that are briefly described here:

Nominal scales can measure anything that exists in a certain quantity. The moment you say some thing exists and have assigned a name to it and associate some property with it by virtue of the name assigned, you have scaled it. The naming of an individual, quality, process or phenomenon is the most primitive form of scaling. Examples of nominal scales are: licence plates, house numbers, security numbers, caste, groups, and so on.

An ordinal scale indicates the order or position of an object or variable in relation to other objects or variables. For example, first-born, second-born, third-born, and so on are ordinal scales, as are first-ranker, second-ranker, third-ranker, and so on. They indicate positions, but do not indicate the distance between the positions. The age difference between the first-and second-born may be three years and the difference between the second-and third-born may be 10 years. The first-ranker may score 97 per cent, the second-ranker 87 per cent and the third-ranker 86 per cent. These are just ordinal positions. This is a slightly better developed scale than the nominal scale.

An interval scale is a scale where the difference between any two consecutive numbers is equal to the difference between any other two numbers. The numbers are additive and subtractive, but not divisive or multiplicative. The difference between 70 kg and 69 kg is equal to the difference between 14 kg and 13 kg. Whenever you take two consecutive numbers, their difference is the same. This is the unique property of the interval scale. If this scaling is applied to recruitment, the difference between a candidate who gets a score of 78 points on a given test and one who scores 77 points should be equal to the difference between one scoring 45 and another who scores 44. We know that our recruitment tools are not accurate enough to be able to add and subtract. However, we pretend as if test scores are can be subjected to addition and subtraction.

The ratio scale is a highly sophisticated scale with an absolute zero, and may be used for addition, subtraction, multiplication and division. This scale is used in disciplines like space science and physics.

Most psychometric tests pretend to use the interval scale while, at best, they use nominal or ordinal scales. This property of the tests needs to be understood by anyone who intends to use psychometric testing. However, as is now explained, achievement tests and ability tests are a lot more objective than personality tests.

What is a construct?  A construct is a particular type of concept, a product of informed imagination in a given field, which can be used for descriptive or explanatory purposes. When constructs are measured, they vary over a range of values and become variables. Constructs are developed on the basis of the systematic observation of similarities in (summarized and labelled) behaviour.

In psychometric testing, a construct should be clearly defined. The definition of a construct or variable is critical, as the definition may indicate the actual behaviour the candidate needs to exhibit on the job.

This definition of a construct is called operational definition. Standardized tests like 16 PF and MBTI have used their own operational definitions over time and across cultures. When customized tests are to be developed, research is required to understand the nature of the variable and to generate operational definitions. Test construction is a long-drawn-out process. The ROI on test construction is likely to be high only if it is meant for mass usage, and the developers have enough time, patience and resources to invest.

Once the construct is operationalized, a framework for measurement can be conceptualized.

Testing is domain sampling  Measurement indicates the extent to which a variable is present in, or characterizes, the individual candidate. It is an indication of magnitude. The measurement of behaviour is not the same as the measurement of physical qualities. The former is based on responses to a sample of items, rather than a total population of items. For example, qualities like sociability or introversion–extroversion tendencies are measured on the basis of a sample of responses by the individual to items relating to the variable. The various components or areas of behaviour where the trait, quality or variable can be expressed by the individual are called domains.

For example, the verbal reasoning domain includes:

• Classification of objects into categories
• Analogies or syllogism
• Discrimination among similar elements, and so on

The response of an individual to a sample of items in each of the three parts of the domain gives an indication of the individual’s verbal reasoning ability.

The item domain includes all possible tasks that measure each of the behaviours included in the construct.

For example:

• Student is to teacher as Socrates is to …
• Light is to day as darkness is to …
• Shoelace is to shoe as … is to shirt.

Tests can never measure all the aspects of behaviour in the entire domain.

Tests as predictors of future performance  Some tests are virtually identical to the situations that employees will encounter in the course of their actual job: for example, how one edits the manuscript of a journal article will present a fair picture of one’s skills as an editor. But there are cases where the test and one’s work itself are less similar: for example, performing well in the Graduate Record Examination (GRE) or an analogy test can hardly predict one’s possible success as a medical doctor.

Types of psychometric tools

Psychometric tools or instruments can be classified on the basis of various dimensions. The most popularly used classifications are based on the following dimensions:

• Intended use (recruitment, training, selection, promotions, development, placement)
• Content area (interest, aptitude, personality, guidance and counselling, vocational testing)
• Strategy for item construction (multiple choice, true/false, objective type, essay type)
• Type of stimuli and response (projective tests, objective tests, multiple-choice inventories, semi-projective tests, paper and pencil tests, performance tests, block-building tests, non-verbal tests)
• Method of test administration (online, classroom, timed, no time-limit, self-administered, administered by experts)
• Degree of procedural standardization (standardized, with norms, reliability and validity)
• Criteria for scoring (right and wrong, computer-scored, hand-stencil scoring)

Types of instruments: content-based classification  Instruments can be classified on the basis of their content in the following ways:

• Scholastic aptitude
  • Mechanical ability
  • School readiness
• Personality traits
• Vocational interests
• General interests
• Values
• Attitudes
• Motives

Types of instruments: based on nature of competence measured Based on the nature of competence measured, instruments can be classified in the following ways:

• Cognitive
• Affective
  Or
• Typical performance (answers require the candidate to respond the way she/he usually responds; all trait and type inventories, attitude surveys, personality testing)
• Maximal performance (achievement and ability tests where the candidate is expected to give her/his best)

Other classifications  Here are some other ways of classifying instruments:

• Ability tests
• Aptitude tests
• Personality
  • Type
  • Trait
• Interest inventories
• Achievement tests

Further, tests or instruments could be of the following kinds:

• Personal-or individual-level tests
• Interpersonal (dyadic situations)
• Role-related
• Group-related
• Organization-related

Instrumentation science: some basic requirements  Instrumentation is a science. Thousands of psychologists are working across the world to discover new dimensions of personality and measure them. Organizations are laboratories where behaviour can be captured in the context of one’s work, and the tools to measure behaviour can be developed. As the cost of developing new tests is comparable to the cost of every patient manufacturing her/his own medicine for every ailment, it is recommended that standardized tests and variables relevant to the organization be used. Even selecting the appropriate test requires some basic knowledge of psychometric testing. Such knowledge should include:

• Knowledge of the theory of psychometric testing
• Technical knowledge in selecting or developing a test
• Competence to construct tests
• Competencies in the administration and scoring of tests

Steps in preparing instruments  The following are the steps followed in developing psychometric instruments:

1. Identify the variables to be measured.
2. Select the appropriate theory.
3. Collect the items.
4. Edit the items.
5. Select the items on the basis of those that have a discriminating or differen-vitiating capacity (or score variations), and those that can predict the total score.
6. Use item–total correlations to measure the predictive ability of an item of the total score.
7. Examine item variation to measure the discriminating capability of the item.
8. Use item difficulty level (that is, percentage answering the item correctly) for a certain set of items where there are correct answers, and to select a set of items that have varying difficulty levels.
9. Standardize the tool by establishing reliability, validity and norms for interpretation.

Reliability  Reliability gives an indication of the extent to which the test can be relied upon and the extent to which it gives accurate or consistent results or the same result. It also deals with the extent to which the test is internally consistent. Reliability is measured by:

• Test–retest reliability (test administered at a given time and again after some time on the same individuals, and the two scores correlated; or, the same instrument administered at two different points of time to find the coefficient of correlation or r)
• Alternate form reliability (two instruments constructed and simultaneously administered to find r)
• Split-half reliability (instrument split into two equal halves and the results compared: or, r between the two parts calculated)

Validity  Validity is the extent to which the test measures what it purports to measure when compared with accepted criteria. Validity is measured by comparing the test performance of a group of individuals on actual performance in real-life situations, where the variable being measured is expected to play a significant role. Since it is difficult to always find situations where a single variable plays an important role, it becomes difficult to validate most of the instruments by this method. In some cases, the test is validated through the assessment of known people (like supervisors, colleagues, and so on). In other cases, test scores are validated with already standardized tests. The different forms of validity are as follows:

• Predictive validity is the extent to which the test can predict later behaviour.
• Face validity is assessed by experts on the basis of the nature of items.
• Content validity is assessed on the basis of the content of the items included in the test.
• Construct validity is assessed on the basis of factor analyses and other such studies of the scores of the selected candidates, and testing the extent to which the test behaviour of the candidates is consistent with the assumptions made on the variable or the internal properties of the variable.
• Concurrent validity is the validity of tools as correlated with other standard tools.

The following are some tips to improve the validity of the tools:

• Include an ample number of appropriate items.
• Reduce response bias (social desirability).
• Be objective in administering the instrument.
• Recognize the weak link between attitude and behaviour.

There are different forms of psychometric tools or instruments. They are:

• Projective instruments (for example, story-writing, inkblots, guessing, and so on)
• Essays (write an essay on ‘My role’, ‘Who am I?’, and so on)
• Adjectives (ask candidate to use adjectives to describe herself/himself or her/his role, or a co-worker she/he likes to work with, and so on)
• Sentence completion (‘On a holiday like to …’; ‘Whenever am in a new city enjoy …’, and so on)
• Guessing responses (mother to her daughter, ‘How many times should tell you not to play with boys?’ Daughter’s response, ‘…’)
• Cartoon pictures (present an incomplete cartoon and ask the candidate to complete it)
• Checklist (present a checklist of items; the candidate is expected to tick those applicable to her/him)
• Paired comparison (present pairs of items that the candidate has to choose or rate, according to the relative magnitude of preference)
• Summated ratings (use a 5-point scale or a 10-point scale and add up the scores on various items)
• Semantic differential (present bipolar adjectives and ask the candidate to place herself/himself between the two so as to indicate which part of the pole is an accurate description of the candidate; for example: cool and calm versus emotional and impatient)
• Equal-appearing scales (ask the candidate to agree or disagree with prescaled items or items that carry different weightage as judged by experts, using an equal-appearing interval method of scaling)

Besides reliability and validity, good instruments should be simple, brief, economical and easy to administer.

Uses of instruments

Psychometric instruments can be used for the following purposes:

• Selection and recruitment, including placement of individuals based on their aptitude, preferences and competencies as indicated by the test performance
• Research
• Potential appraisal
• Promotion decisions
• Individual growth (providing inputs to the individual about where she/he stands on a particular construct, and the extent to which she/he needs to develop a certain behaviour in order to grow)
• Training
• Organizational development or making improvements in organizations

A discussion of two of the most frequently used instruments—MBT and 16 PF—follows.

Myers–Briggs type indicator (MBTI)  MBT contains four separate indices dealing with attitudes and processes. Each index reflects one of four basic preferences: (a) extroversion-introversion (E–I); (b) sensing-intuition (S-N); (c) thinking-feeling (T–F); and (d) judgement-perception (J–P). These are grouped under attitudes and processes, the combination of which makes up a particular type of person. Attitudes refer to extroversion and introversion. Processes of perception are sensing and intuition. Processes of judgement are thinking and feeling. One deals with the outer world through judgement or perception. A lot of research has been done on this tool. Although its founders are against its use for selection and recruitment, most firms find it useful. MBT needs specialized training and there are special courses conducted for training potential users. Manasayan, an agency in New Delhi, conducts an annual certification course on the use of MBT and also supplies other tools.

The following are some further details about MBTI:

• It is designed on the basis of Jung’s psychological types.
• It is based on 50 years of research.
• Feedback from it helps one to identify one’s gifts.
• It helps one to understand differences among people.
• It encourages cooperation with others.

Components of personality

• When people are active they are involved in one or both of the following:
  • Taking in information or perceiving
  • Organizing that information or coming to conclusions
• There are two opposite ways in which people perceive things:
  • Sensing
  • Intuition
• There are two opposite ways in which people judge:
  • Thinking
  • Feeling
• People tend toocus their energy or tend to get energized by the:
  • Outer world
  • Inner world
• Extroversion is a preference for acting on the outer world.
• Introversion is a preference for reflecting on the inner world.

Extroversion and introversion

Attitudes refer to extroversion and introversion. Where does one focus one’s attention? Where does one get one’s energy from?

Extroverts have the following characteristics:

• They are oriented primarily towards the outer world.
• They tend to focus perception and judgement on people and objects.
• They direct their energy and attention to the outer world, and receive energy from interacting with people and taking action.
• Their attention seems to flow out or is drawn out to objects and people in the surrounding environment.
• There is a desire to act on the environment, to affirm its importance or to increase its effect.
• Extroverted persons tend to:
  • Have a high awareness about their environment
  • Rely on the environment for guidance and stimulation
  • Be action-oriented
  • Be impulsive at times
  • Communicate easily with others
  • Be sociable

Introverts have the following characteristics:

• They focus on their own inner world.
• Their energy is drawn from reflecting on their thoughts, memories and feelings.
• Their chief interest lies in the inner world of ideas and concepts.
• Introverted persons tend to:
  • Be drawn into their inner world
  • Prefer to communicate in writing
  • Be interested in concepts and ideas
  • Rely on enduring concepts rather than transitory events
  • Be thoughtful
  • Have a contemplative detachment
  • Enjoy solitude and privacy

Sensing and intuition

The processes of perception are sensing and intuition.

The following are the elements of sensing perception:

• Refers to the perceptions observable by the senses
• Refers to absorbing information on what is real and tangible
• Establishes what exists
• Creates awareness about what is occurring at present

Those with a high level of sensing perception tend to:

• Focus on immediate experiences
• Enjoy the present movement
• Have high realism
• Have acute power of observation
• Pay attention to, and remember, details
• Be practical

The following are the elements of intuitive perception:

• Refers to the perception of possibilities, meanings and relationships by way of insights
• Perception by way of the unconscious (Carl Jung¹)
• May come to the surface suddenly
• Permits perception beyond what is visible to the senses

Those with high level of intuitive perception tend to be:

• Imaginative
• Theoretical
• Abstract
• Future-oriented
• Creative

Thinking and feeling

The processes of judgement are thinking and feeling.

The following are the elements of thinking judgement:

• Links ideas together by making logical connections
• Relies on the principles of cause and effect
• Tends to be impersonal

Those with a high level of thinking tend to:

• Have high analytical ability
• Be objective
• Be concerned with principles of justice and fairness
• Be highly critical
• Have a balanced time orientation that links past, present and future

The following are the elements of feeling judgement:

• Relies on personal and group values
• Decisions taken on the basis of values of the self and others
• Importance given to what matters to others

Those with a high level of feeling tend to:

• Show high concern for human beings, rather than the technical aspects of the problem
• Have a high need for affiliation and warmth
• Desire harmony
• Prefer preservation of past values
• Be tender-hearted rather than tough-minded

Judgement and perception

The outer world can be dealt with through judgement and perception.

The following are the elements of a judging attitude:

• Concerned with making decisions, seeking closures, planning operations and organizing activities
• Decisions more likely to be based on logical analysis (thinking-judging type)
• Decisions and plans based on human factors (feeling-judging type)

People who predominantly have this attitude tend to

• Shut off as soon as they have observed enough to make a decision
• Be organized in their outer behaviour
• Be purposeful
• Be decisive

The following are the elements of a perceptive attitude:

• Attuned to incoming information
• Sensing-perceptive type more likely to be alert to immediate realities

People who predominantly have this attitude tend to be:

• Spontaneous
• Curious
• Adaptable
• Open to new events and changes
• Careful to try and not to miss anything

One’s individual MBT score is presented as

• Extroversion versus introversion: Is one an ‘E’ or an ‘I’?
• Sensing versus intuition: Is one an ‘S’ or an ‘N’?
• Thinking versus feeling: Is one a ‘T’ or an ‘F’?
• Judging versus perceiving: Is one a ‘J’ or a ‘P’?

The 16 personality factor questionnaire (16 PF) The second type of psychometric test, 16 PF, assesses the individual on 16 traits though a self-administered questionnaire: These include:

1. Warm versus reserved
2. Abstract thinking versus concrete thinking
3. Affected by feelings versus emotionally stable
4. Submissive versus dominant
5. Sober versus enthusiastic
6. Expedient versus conscientious
7. Shy versus bold
8. Tough-minded versus tender
9. Trusting versus suspicious
10. Practical versus imaginative
11. Forthright versus polished and diplomatic
12. Self-assured versus apprehensive
13. Conservative versus experimenting
14. Group-oriented versus self-sufficient
15. Perfectionist versus tolerates disorder
16. Relaxed versus tense

Factor A: warm versus reserved

• Reserved people tend to be more cautious in their involvements and attachments. They tend to work alone, often on mechanical, intellectual and artistic pursuits.
• Warm people tend to have more interest in people, and to prefer occupations dealing with people. They are comfortable in situations that call for closeness with people.

Factor B: abstract versus concrete

• High scorers tend to solve more of the reasoning problems correctly.
• Low scorers tend to exhibit concrete thinking, lower general mental capacity, lower intelligence and an inability to handle abstract problems.

Factor C: emotional stability

• High scorers tend to take life in their stride and to manage emotions and events in a balanced, adaptive way.
• Low scorers feel a lack of control over life. They tend to react to life, while high scorers make adaptive or proactive choices.

Factor E: dominant versus submissive

• High scorers tend to be forceful, vocal about expressing their wishes and opinions even when not invited to do so, and pushy about obtaining what they want. They feel free to criticize others, and try to control others’ behaviour.
• Low scorers tend to avoid confrontation by acquiescing to others’ wishes.

Factor F: lively versus serious

• High scorers are enthusiastic, spontaneous, and attention seeking. They are lively and drawn into stimulating social situations.
• Extreme scorers may be seen as flighty and immature.
• Low scorers take life more seriously, are quieter and more cautious.

Factor G: rule conscious versus expedient

• High scorers perceive themselves as strict followers of rules, principles and manners.
• Low scorers tend to evade rules and regulations either because they have a poorly developed sense of right and wrong, or because they tend to be more unconventional.

Factor H: socially bold versus shy

• High scorers consider themselves to be bold and adventurous in social groups, and show little fear of social situations. The need for self-exhibitionism is evident.
• Low scorers tend to be socially timid, cautious and shy. They find speaking in front of a group a painful experience.

Factor I: sensitive versus utilitarian

• High scorers tend to base judgement on personal taste and aesthetic values. They rely on empathy and sensitivity in their considerations.
• Low scorers tend to have a more utilitarian focus.

Factor L: vigilant versus trusting

• High scorers expect to be misunderstood or taken advantage of, and they perceive themselves to be different from other people.
• Low scorers tend to expect fair treatment and want to maintain satisfactory relationships.

Factor M: abstract versus grounded

• High scorers are more oriented to internal mental processes and ideas rather than particularities.
• Low scorers focus on their senses, observable data and outer realities in their environment and in forming their perceptions.

Factor N: Private versus forthright

• High scorers play their cards close to their chest and tend to be guarded.
• Low scorers put all their cards on the table. They talk about themselves readily, are genuine, self-revealing and forthright.

Factor O: apprehensive versus self-assured

• High scorers tend to worry about things, and to feel insecure and apprehensive at times.
• Low scorers tend to be more self-assured and present themselves as confident and satisfied.

Factor Q1: open to change versus traditional

• High scorers tend to think of ways of enjoying things, and enjoy experimenting. They’re inclined to change if they perceive the status quo as dull and not satisfactory.
• Low scorers prefer traditional ways of looking at things.

Factor Q2: self-reliant versus group-oriented

• High scorers enjoy time alone, and prefer to make decisions for themselves. They like to do their planning alone, without interruptions and suggestions from others
• Low scorers are group-oriented and prefer to do things with others. They like to have people around.

Factor Q3: aiming at perfection versus being disorganized

• High scorers tend to do things right. They tend to be organized, keep things in their proper place, and to plan ahead.
• Low scorers leave things to chance and are more comfortable in disorganized settings. They may be perceived as laid-back and unprepared.

Factor Q4: tense versus relaxed

• High scorers tend to be restless and fidgety when made to wait. Extreme tension may lead to impatience and irritability.
• Low scorers tend to feel relaxed and tranquil. They are patient and slow to become frustrated.

Assimilation and Integration

Inductions have traditionally focused on new recruits at the entry level. This is partly because newcomers fresh out of college often need to know a lot about the company, and make the transition from an institutional learning mode to an organizational action mode. Also, there are a large number of such graduates inducted into the company, and it is both feasible and economical to induct new batches in groups. The induction of employees recruited at senior levels has not attracted much attention in the past. It is still not considered an important issue in most companies. However, let us pause to consider the experiences from the West that show the significance of induction of new employees at senior levels. Studies have linked the retention capacity of a firm to the induction and assimilation process. The new economy and the need to be competitive require people to be inducted into a company even before they join it (Rao 2002). If a new employee joining at the top level enters the organization with a full understanding of its culture and her/his role, attrition rates can be checked.

According to studies in the USA, while firms go to great lengths to hire new employees, only 20 per cent of them stay for more than two years. Nearly 70 per cent of the newly hired seniors leave within two years. There is only a 50 per cent chance that when someone takes up a new job she/he will be with the company for more than two years. In a three-month period in 2000 alone, 350 CEOs in the USA left their jobs. According to a Harvard Business Review article (Peter Cappelli 2000), 80 per cent of a pool of executives changed their jobs within two years. Another study reported that 47 per cent of executives appointed as presidents left within four years. In a study of 359 résumés, it was found that 68 per cent of job-seekers had left their previous jobs within 12 months (Downey 2001).

Smart (1999) estimates that the cost of mis-hires is perhaps 40 times the base cost at top levels, when one considers the recruitment, actual compensation expenditures, severance, the additional cost of lost productivity, the time it takes for someone to become productive, business mistakes and missed opportunities. Research by Sibson & Co. in four high turnover industries has revealed that replacement costs have reduced the earnings and stock process by an average of 38 per cent. The estimated cost of replacement has to be multiplied at least threefold for every top leader who does not make it, fails or leaves the organization.

The effects of losing a leader have a ripple effect throughout the organization, as follows:

• The loss affects the organization’s competitive position due to the leadership vacuum.
• It triggers a turnover at other levels.
• It creates a loss of developmental and intellectual resources.
• It disrupts and weakens customer relationships.
• Employee turnover has a significant effect on a company’s bottom-line by inhibiting its ability to keep current customers, acquire new ones, increase productivity, and pursue growth opportunities.

People don’t quit companies. They quit bosses. Numerous studies have indicated the correlation between job satisfaction, and direct supervisors and managers. According to a new study (Dobbs 2000), 41 per cent of high-value employees who intend to leave their jobs are dissatisfied with their managers or supervisors. A Gallup poll of 20 lakh employees from 700 companies has shown strong links between employee tenure and employee-supervisor relationship.

New leaders join three types of teams:

• The functional team they lead
• The executive team they collaborate with, including the senior leaders
• The cross-functional teams related to the project

When leader turnover is high, the working alliances across the organization are not in place long enough to integrate any changes that are introduced. The purpose of induction and assimilation therefore is to ensure that leaders will adapt and become full contributors in the new organization faster and better, and with fewer destabilizing effects to the individual and the organization. A successful assimilation is one in which both the individual and the organization are transformed for the better, and are able to leverage each others’ strengths to achieve mutually beneficial goals. The individual and the organization need to work together for this purpose.

Assimilation of new leaders occurs in four stages. It begins at the point of hire and is completed when the individual becomes a full contributor and is no longer an outsider. The journey towards assimilation is a continuous negotiation between two extremes, and a balance needs to be struck (Downey 2001).

There needs to be a balance between:

• Being patient and becoming productive
• Setting one’s own pace versus following the organization’s pace
• Trusting one’s intuition versus making data-based decisions
• Pleasing various stakeholders versus addressing one’s own priorities
• Implementing change versus respecting the culture of the organization
• Demonstrating competence versus seeking advice when one needs it
• Building relationships based on trust versus testing assumptions about others
• Intervening appropriately versus waiting until one has all relevant information
• Drawing on past experiences versus not letting the past bind one
• Acting with authority versus staying in the learning mode
• Not leading egoistically versus staying on with confidence
• Making one’s position clear versus seeking feedback
• Associating with people versus maintaining boundaries

The HR department as well as the top management and other line managers have a responsibility to ensure that managers inducted at the top levels assimilate the company’s culture, the competencies associated with the role and other aspects of the company fast, and manage the contradictions mentioned in the foregoing list. This alone will ensure that the retention is higher and top management personnel recruited into the firm give their best and yield a high ROI.

Assimilation is both fluid and dynamic. It can be influenced by different factors at different points of the organizational life cycle. New leaders are most likely to leave when they do not receive the support they need to work best. Attrition usually occurs when employees find that they cannot contribute what they were hired to contribute. People are most likely to stay if they feel a deep commitment and affiliation to an organization.

Effective assimilation strategy

Briefly, an effective assimilation strategy:

• Acknowledges the difficulties of entry into a new organization
• Legitimizes an individual’s adjustment period
• Builds in multifaceted support mechanisms at an institutional level (peer support, tips on bridging organizational knowledge and learning gaps) to assist the new leader through the process of initiation (Downey 2001)

Further, assimilation-savvy organizations should:

• Focus on assimilation as a tool for retention and leadership strategy
• Have a formal system and programme for assimilation
• Use coaches for assimilation
• Use HR for the assimilation process

People may join an industry that is perceived as a business leader, but they stay only if it meets their intellectual and emotional needs.

Hurconomics: How to Calculate Recruitment Costs

The following inputs go into the calculation of recruitment costs. The R-COT for the time spent by various role holders in the firm should be taken into consideration, besides the direct costs incurred by the firm (including the fee paid to the recruitment agency, advertisement costs, and so on).

The time spent by line managers for each recruitment includes:

• Requisitioning time: Most line managers take time to prepare a requisition letter, or manpower estimate letter and may need a departmental meeting to draft the note to the HR department or to the recruitment division. Sometimes, requisitioning time may also include the time taken to convince the top management of the need to recruit, and the time taken to evolve a recruitment strategy or process
• Processing time: This is the time taken for the recruitment agency or the HR department to provide a shortlist of candidates.
• Testing time: This is the time taken if the department decides to conduct any tests.
• Time for interviewing the candidate: Normally, the line managers are present at each interview or at the final interview.

The HR time or time taken by the HR department staff includes:

• Requisition processing time, top management approvals, and so on
• Identification of recruitment agency and formulation of requirements
• Negotiation time
• Time for formulating or examining and finalizing the advertisement
• Receiving applications
• Screening applications and shortlisting candidates (even if a recruitment agency does a part of this, HR needs to spend some time on it too)
• Designing the interview and other tests
• Administering the tests
• Interviewing time
• Negotiation time with the candidate
• Shortlisting time

When all this is put together, it is safe to estimate that about 40 hours to 100 hours of managerial time are spent on each candidate. At an average R-COT of 500 per hour, additional costs for recruitment include 20,000 to 50,000 of the firm’s managerial time, and O-COT of 80,000 to 5 lakh (80,000 if it is an IT firm with 25 per cent of its revenue as people costs and 5 lakh for a manufacturing company with 10 per cent of its revenue as people costs).

Assuming that the recruitment agency is paid 50,000 per candidate as fee, and adding advertisement costs, and so on, of another 50,000, a total of 1 lakh becomes the additional direct cost. The ROI expected will range between 1.8 lakh at the lowest end to 6 lakh at the highest.

The foregoing exercise is meant to give an overview. Each HR department should be able to calculate the costs and expected returns on their own, using their culture, processes and systems to arrive at a more accurate figure.

A good way to ensure ROI on recruitment costs is to include the recruitment cost as a part of CTC for the purpose of calculation. The results expected of a candidate in her/his first year should normally reflect the recruitment costs as a part of R-COT.

Thus, the point is this: If a person is being hired with a CTC of 20 lakh per annum, her/his real CTC is 21.2 lakh to 21.8 lakh (including 1.2 lakh as recruitment cost for an IT company and 1.8 lakh for a manufacturing company as already shown). This is a very conservative estimate as, for each candidate, around ten candidates get seen and the cost gets added ten times, making the recruitment cost of each candidate an additional 12 lakh (1.2 lakh × 10) for an IT firm and 18 lakh (1.8 lakh × 10) for a manufacturing firm.

Recruitment economics

A few years ago, Sri Lankan Airlines was finding it difficult to find cabin crew with the required skills. Whenever it advertised, it received hundreds of applications, but very few of the candidates actually had the necessary skills. It contacted the applicants rejected during the interviews and offered them a course that would prepare them to appear for tests and interview. The course (of a few weeks’ duration) was offered for a fee, to be paid by the participants. Hence, only serious candidates joined it. After the course the candidate would be permitted to reappear for an interview before the selection committee, like any other candidate. The course taught the basic competencies and additional skills needed by cabin crew members. The airlines soon found that the quality of cabin crew recruited from the rejects programme far surpassed its other recruits. Thus, the airlines partly solved its recruitment problem, while also earning an income from its course.

If recruitment is scientifically done, the ROI is high. Using recruitment agencies does not make recruitment scientific. Most agencies merely download and screen applicants’ biodata before passing it on to companies. This is merely the logistics being outsourced. The agencies rarely map competencies and assess applicants scientifically. It is, in fact, unrealistic to expect recruitment agencies to proceed scientifically. At best they might conduct a scientific screening, but not an assessment. The organization concerned should set up its own systems and methods of assessment. Without these, there cannot be any guaranteed ROI on recruitment. The following measures would ensure a good ROI:

• Mapping the competencies required for the role
• Passing on the list of tasks, competencies and indicators to the recruitment agency for screening
• Using tests in the final selection, and preferably the assessment centre methodology, for critical positions
• Promoting self-screening among the candidates by supplying role profiles and related information at the very outset; accurate description of the nature of work, tasks involved and competences required to also be provided
• Allowing candidates to ‘experience’ the organization by visiting the website or physically visiting the plant location and interacting with some employees
• Tying up with institutions and offering special courses that may prepare students to be employed in the organization
• Promoting online tests and achievement tests to familiarize candidates with the line of business, and throwing up certain challenges even before they join

A motivated and well-prepared candidate is likely to stay longer and contribute better than an ill-motivated and ill-prepared candidate. The loss due to mismatches often outweighs the gain from matches if an organization is not careful. A single mismatched employee can do much more damage than the recruitment of 10 well-matched ones. Look for soft data and do not delegate the final choice to a recruitment agency. Remember, research suggests that small agencies do a better job than big ones for large-scale recruitments.

The economics of integration

Hitesh Lonawalla topped the 1986 batch at IIMA. He worked for an FMCG company for 20 years, and grew to be the SBU head in it. However, he began to feel that his portfolio had remained narrow and that he could contribute a lot more to a company with a larger portfolio. Finally, he was offered a position as vice-president of a profitable 20-year-old company that was into electronic durables. As marketing head, Hitesh was required to handle the marketing function of the company’s three SBUs. He was required to report to the president who was also the company’s CEO. His career path was well laid out: if he proved his mettle, he could become the next president.

Professor Manish had been Hitesh’s teacher at IIMA, and happened to be offering consultancy services to the company that Hitesh had joined. A month after Hitesh joined, Manish happened to run into him. Manish expressed his joy at seeing Hitesh on board, and said he expected Hitesh would be able to contribute a lot to the company; it was very important to establish efficient new systems for achieving business growth and positioning the company for the future. Hitesh said he was only just beginning to understand the business. Most people always seemed to be travelling, which was why he had not quite got the hang of things and what he was expected to do.

Six months later, when Manish met Hitesh again and enquired how he was doing, Hitesh replied, ‘Professor, it is only now that I have more or less found my feet. I now know what needs to be done and where. I am sure I can make some difference now.’

After another six months Manish learnt that Hitesh had resigned. He had been offered a position as the CEO of another company, for which he would be leaving shortly.

Hitesh, who was being paid 48 lakh a year (CTC), was leaving for almost double the salary as CEO of the new company. The consumer electronics company would have to again look for a new vice-president. It had already lost three months before Hitesh joined and four months after his joining. Hitesh’s actual contribution was just for six months. Was there any way the company could have got a good ROI on Hitesh? What had the company invested in Hitesh? What was expected and what did the company receive, assuming that in the year Hitesh worked there sales had grown by 20 per cent, of which 50 per cent of the growth occurred during the last two months of Hitesh’s tenure and was largely attributed to the payoff of the new marketing strategies he had evolved (the sales turnover went up from 600 crore to 720 crore in Hitesh’s time: Q1 = 150 crore, Q2 = 170 crore, Q3 = 190 crore and Q4 = 210 crore). On an annual turnover of 600 crore in the previous year, the people costs of the company amounted to 60 crore.

What would have been the projected income if Hitesh had been integrated into the company within his first month, and had begun contributing from the second month itself? What was the loss to the company for not inducting Hitesh into the company properly? What was the cost of replacing Hitesh? How much performance-linked pay might have helped retain Hitesh?

Some answers

With a CTC of 48 lakh, Hitesh’s CTC for six months was 24 lakh. The six months had been a wasted period because of his improper induction. This wastage could have been reduced by 20 lakh if he had been properly inducted through the methods of integration and assimilation explained in this chapter. The opportunity cost of the five months lost due to the poor induction is 10 times the CTC: that is, on a conservative estimate the company could have gained benefits worth at least 2 crore more (20 lakh of R-COT multiplied 10 times). Assuming that the company had gained 20 crore in the third quarter and an additional 40 crore in the fourth quarter, Hitesh may have made a great deal of difference if he had continued. Even if one were to attribute a 10 per cent gain to Hitesh’s efforts and strategies, the company could easily have matched his new salary and retained him by giving him a 100 per cent performance-linked pay. The company should have invested another 48 lakh in order to gain a 20 crore advantage. Of course, other implications also need to be considered, such as, for example, the exact difference Hitesh made to the company in financial terms.

References

Cappelli, Peter A., 2000, ‘Market Driven Approach to Retaining Talent’, Harvard Business Review, 78 (1), pp. 103–111.

Dobbs, Kevin, 2000, ‘Train your Managers’, Training, pp. 62–66.

Downey, Diane, 2001, Integrating and Assimilating New Leaders: The Key to Executive Retention, New York: American Management Association.

Friedman, Brian; Hatch, James and Walker, David, 1998, Delivering On the Promise: How to Attract, Manage and Retain Human Capital, New York: Free Press.

Mayo, Andrew, 2001, The Human Value of the Enterprise: Valuing People As Assets—Monitoring, Measuring and Managing, London: Nicholas Brealey.

McCall, Morgan W., 1998, High Flyers: Developing the Next Generation of Leaders, Cambridge, MA: Harvard Business School Press.

Pestonjee, D. M., 1997, Handbook of Psychological Instruments, Volumes 2 & 3, New Delhi: Concept.

Rao, T. V., 2002, ‘Assimilation and Integration’, Seminar on Assimilation and Integration, TVRLS: Ahmedabad.

Smart, Bradford, 1999, Top Grading: How Leading Companies Win by Hiring, Coaching and Keeping the Best People, Paramus, NJ: Prentice Hall Press.

Stevens, Stanley Smith, 1946, ‘On the Theory of Scales of Measurement’, Science, 103(2684), pp. 677–80.