According to McKinsey’s book: ‘Leading Organisations’ by senior partners Scott Keller and Mary Meaney , 82% of Fortune 500 organisations don’t believe that they recruit highly talented people. I find that a shocking statistic. What is even more shocking is that their research also found that less than a quarter (23%) of managers and senior executives who were engaged in talent related topics believed that their current acquisition and retention strategies would work! Additionally, research by John Wallace, former Head of Resourcing for Tesco Bank, RBS & Barclays and author of Hire Power, found that 87% of CEOs struggle to find the right people, for the right jobs, at the right time. Yet they don’t know what to do about this—accepting the familiar, reactive approach that has made this a constant issue.
So, let me pose a question. Could this be because there is an increasing over-reliance on internal talent acquisition teams?
There is no doubt that internal talent acquisition teams have grown in number and size over the last few years. Often driven by the need to make cost savings, they have been seen as the ideal solution to the problem of reducing external recruitment spend resulting in a step change in hiring models. But is this move away from using recruitment firms actually harming senior talent pipelines? Should the internal talent acquisition team always be the first port of call? Not according to John Wallace, “For one thing internal talent acquisition teams always have too much to do because of the ongoing fluctuation in demand – you never build an internal recruitment team to the peak of your demand which means that often there is a rush to get jobs filled – rather than a rush to quality! That is not to say that an in-house team, if managed properly cannot improve the quality of hire – but that has to be done in conjunction with niche specialist suppliers who can tap into specific areas.”
In House Executive Search - a false economy?
So, while historically internal teams have generally focussed on more volume driven roles, some organisations are setting up internal executive search teams – a trend which John Wallace thinks could in some circumstances be a misguided one. “When I worked at both Tesco and RBS, we did establish in-house executive search teams but there was a recognition that there were certain things they could do and certain things that they couldn’t and so there was still very much a need for a niche supplier base. There are always candidate segments that internal teams – however good they are – will struggle to connect with and so the work that is put in is always disproportionate to the outcome. Where in-house executive search has worked well is in volume senior roles. So, for example at Tesco, it worked well for a general manager role as that was basically a volume recruitment exercise. The primary driver of setting up an in-house team is always cost – but sometimes for senior roles that can be a false economy.”
James Ryding, Talent Acquisition Senior Director at PepsiCo has a different perspective but agrees that the business case of a niche operator is a strong one. “I have developed in-house executive search teams at three different organisations and for me, this was a wider issue than purely a cost saving. First, it means that I am their number one client – there is no-one else for them to serve; and second, I think it’s a weird situation to be paying an external company to map the market which in essence, although valuable to me, is also increasing the intellectual property of the search firm. That said, there will always be a need for specialists as your internal team will always be a generalist. They will be able to map the market in their particular industry sector but if I suddenly need a Head of Strategy then the amount of effort required to get up to speed for a specialist search like that is completely out of the question as it’s (hopefully) not an exercise that is going to be repeatable."
Both James and John agree that niche suppliers need to be subject matter experts who understand their particular market segment, know the people in that market segment – and who crucially understand what motivates these people to move. Clearly then it appears that as internal talent acquisition teams only have a finite resource, it makes far more economic sense to point that resource to the roles that they know they can fill easily so that cost savings can be made while still retaining quality and that all other specialist roles should be outsourced to the specialists that understand that sector. That way organisations don’t just get great candidates – they get great employees and future talent for the business – a fact underlined by our own track record at The Barton Partnership. An analysis of our placements over the last three years has shown that 84% of those people are still with the same employer and of those, 50% are within the same company in a different role. I feel passionately that a good recruitment firm has to be a true partner – a high capability consultancy that has inch wide mile deep networks and that are true subject matter experts. As James Ryding says: “The reason I use The Barton partnership is that not only is the firm very knowledgeable with a high level of attention to detail but there is also a real hunger to do the best job possible that is simply lacking from some of the bigger search firms who seem to have a sense of entitlement. With The Barton Partnership I always get the impression that they care about the search as if they have to prove themselves every time.”
Can technology be a silver bullet?
The other area of internal talent acquisition that is evolving rapidly is the technology that is supposedly assisting the hiring process. I say supposedly as for some years LinkedIn was seen as a silver bullet for talent acquisition teams and while there is no doubt that it is a powerful tool, it is by no means the solution. In fact, contrary to popular belief – not everyone is on Linked in and the growth in fake profiles has led some people to simply remove themselves.
And even if potential candidates are on LinkedIn, there is often the problem, because of the workload of the department, that the internal team don’t necessarily understand the nuances of the roles and so it becomes a buzzword matching exercise which will never find the best person for the role – but just the best person who is apparently available (that’s if they exist at all!). Partnering with a specialist means you get the best person for the role. Period.
But what about other AI driven matching technology and predictive analytics tools that are now being used by internal talent acquisition teams? Are they a threat to recruitment firms? Not according to John Wallace: “It’s difficult to envisage any AI that can be totally effective. It can do the easy matching of what someone is technically capable of doing but I can guarantee that if an organisation looks back at some of their bad hires it will be because of an over reliance on that sort of purely technical matching rather than the softer areas of passion, motivation and emotional intelligence. Will AI be better at screening people out? Yes. Will it be better at making the choice? No!”
James Ryding agrees. “The problem with predictive analytics is that the only thing that they have to go on is the past and so they always use the past as a predictor of the future which is dangerous.” In fact as we pointed out in a previous piece, a recent McKinsey study found that while there is no doubt that automation is growing, just pushing technology to its fullest extent because we can is not always the most desirable approach. “How automation affects employment will not be decided simply by what is technically feasible which is what technologists tend to focus on,” says the report. I wholeheartedly agree - just because driverless cars are a possibility doesn’t mean that everyone wants to drive them! And in a more sinister example, recent research by the Foundation for Responsible Robotics has found that programmes designed to preselect candidates for university places are inherently sexist and racist. Extrapolate that to the hiring process and the ramifications are unthinkable as Amazon has recently found out to its cost when it had to ditch its secret AI recruiting tool that showed a gender bias against women. According to an article on the Reuters website, Amazon’s system taught itself that male candidates were preferable.
Of course, the other issue around technology is the candidate experience – at the senior end of the market, potential candidates still want to interact with a human being so as John Wallace points out: “If the part you play in the recruitment process is a transactional role then you should be worried about AI. If the role you play is all about relationships then you shouldn’t be worried at all!”
Relationships and networks matter
Well I would say that wouldn’t I. But just as an illustration, The Barton Partnership runs an annual strategy networking event which is now in its fourth year. It brings together over 300 senior strategy stakeholders from over 250 companies. The event is zoned to allow individuals to network within their particular industry group and we have a guest speaker – this year it was Sir Ranulph Fiennes. If you were interested in hiring senior strategy talent, would you go to your internal recruiter, or would you want access to that network? Because that network is the true value a niche recruitment firm can add. As one of the attendees Rakhi Williams, Chief Strategy officer at ITE Group said: “These guys know what they are talking about, they have the right networks, they attract the right people. You’re meeting really relevant people. You’re hearing relevant content and it’s a fun event.”
Internal recruitment teams are here to stay. I fully get that and I understand the economic arguments for filling the roles that can easily and quickly be serviced through an internal resource. But next time you have a niche role that will have an impact on the direction and growth of your company in an area like strategy - then perhaps it’s time to challenge that ‘internal recruitment team first’ mantra and, in the words of Oliver Cromwell, ‘Think it possible you may be mistaken!'.