CASE STUDY I

What

gets measured gets managed

I

BY DR. PRAGEETHA G. RAJU

ajestic Hotel, Bengaluru, is located at the heart of the Bengaluru city in India. It is a multi-dimensional lifestyle complex, set on 12 acres. The hotel has 153 rooms with a workforce of 200. The hotel is considering expansion within a year. After the expansion, the hotel would have 200 rooms with staff strength of 220. In order to thoroughly evaluate the performance and productivity of each department, an internal audit was conducted. One department that auditors found difficult to audit was the HR department, specifically the recruitment section, as there were no metrics in place to take proper hiring decisions. To get things corrected, Naveen N. Gowda (Naveen), the HR Manager, Majestic Group of hotels,has been asked by the CEO, Srikant Amanaganti (Srikant) to put in place a set of recruitment metrics for the hotel to streamline the decisions taken on recruitment and the costs involved thereof. For Naveen, it has become a herculean task as the hotel has never used any such measurement technique in the past to measure recruitment, and he is not clear as to what recruitment metrics comprised of. So, he browsed through the Internet to gather some informationonmeasuring

recruitment in quantitative terms. He finally managed to understand that recruiting metrics is a standard form of measurement that HR professionals use to gather, analyze and present important data on the hiring process. He also gathered that many HR metrics have been developed by The Saratoga Institute, a wing of the Society for HRM, USA. These

statistics help to make well-informed decisions and also help focus resources and actions in order to receive the best Return on Investment. Hiring costs represent a significant portion of the HR expenditures, particularly whenthe effects of the turnover are

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I CASE STUDY

considered, yet, Majestic hotels had, until now, overlooked these aspects of the hiring process, to its detriment. According to Srikant, the simple philosophy of 'what gets measured gets managed' can help them evaluate the efficiency of recruitment in the organization. At the same time, it would help them take steps towards increasing recruitment efficiency, considering the expansion plans. Naveen decided to take a step by step approach for the same. He decided to start off with the Associates and General Managers of all the departments and then extend it to all other positions, such as Assistant Managers, Supervisors, Duty Managers, and Lead Associates after attaining satisfaction on his methodology for the same. Recruitment process at Majestic The recruitment process begins in August, when various departments send in their requisitions to the HR department, which in turn sends it to the recruitment team. Majestic hotel outsources its recruitment for Associates to Green Apple Recruitment Agency that charges 50,000 INR for candidate processing. The hotel advertises in newspapers and leading business dailies as well. Other externalsources suchas employee

Finding the right candidate for assigned roles is essential for any business to succeed. Even if there are excellent HR strategies in place to further the growth of the organization, the possibility of failure can still not be ruled out, if there are no right fits to implement the same.

referrals and campus placements are also used, which cost around 60,000 INR. The hotel also has the policy of giving a referral bonus of 7,000 INR. The recruitment team at the Majestic hotel comprises of three people. Recruitment of associates: The number of associates in each department is 15, with five departments in all. So, the total number of associates currently working with the hotel is 75. Facts a) Every year around 30 per cent of the associates in each department

get promoted (around five from each dept.) b) Turnover for associates is close to 10 per centannually (Eight associates overall) c) Keeping the expansion plans in mind, the company recruited one additional associate for each department d) The total requirement amounted to 38 associates e) The total cost with respect to recruitment for 38 associates amounted to 15,000 INR f ) The travel costs for candidates coming from outstation (rail fare 2nd class) amounted to 8,000 INR g) The company accounts for miscellaneous expenses to the tune of 10 per cent Based on this information, Naveen decided to calculate the cost that is incurred on each hire: COST PER HIRE (CPH): It is the cost incurred in hiring a candidate and is calculated as: = (AC+AF+RB+TC+RE+RC+NC)/ H + 10%, wherein, AC = Advertising Costs (60000) AF = Agency Fees (50000) RB = Referral Bonus (7000) TC = Travel Costs (8000) RE = Relocation Expenses RC = Recruiter Cost (15000) NC = No Cost Resumes H = No of Hires (38) Thus, CPH = (6000+50000+7000+ 8000+ 15000)/ 38 + 10% = 3684.2 + 10% = 4052.6 INR In order to hire 38 associates, the number of candidates at each level of selection was, Leads/applications: 912

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CASE STUDY I
Candidates invited: 152 Candidates interviewed: 114 No. of offers made: 76 No. of hires: 38 This data enabled Naveen to arrive at the 'Yield Ratios' for the recruitment of associates across all departments. From these ratios the 'Recruiting Yield Pyramid' was drawn as shown as follows: These ratios would serve as a benchmark for all future recruitments. The referral date for associate positions at various departments was 5 August. The applications for posted jobs started coming in from 15 September. The date the first offer was accepted was 10 November. The new hires joined the hotel on 1December. Naveen calculated the following metrics based on the information: Response time: = Referral Date - Date of receipt of job requisition = 5 August - 15 September = 41 days Time to fill: DR PRAGEETHA G. RAJU = Date of receipt of job requisition Associate Professor IBS Hyderabad date of offer acceptance = 15 Dr Prageetha G. Raju is an Associate September - 10 November = 56 days Time to start: Professor at IBS Hyderabad. She has taught MBA Students for 15 years. She = Date of receipt of job requisition specializes in Organizational Behavior, the date new hires start work = 15 Human Resource Management (HRM), September -1December = 76 days and courses of HR electives in the MBA For the 38 openings, 12 program as well as the Executive MBA candidates were referred by the existing employees. This led Naveen Program. She is an avid researcher besides to devise a ratio, which was called the being an active teacher. She likes referral factor. experimenting on novel pedagogical tools Referral factor: to teach model based courses. = R/O, where R is the number of candidates referred for the interview, and O is the number of openings. Thus, the referral factor came out to be = 12/38 = .316 i.e., 31.6% The process for the selection took place in the 1st week of November, and lasted for six days. The three recruiters spent a total of around 50 hours interviewing around 114 candidates. Thus, Average length of interviews: =50/114 = .44 hours, around 25 minutes per interview Based on the number of interviews conducted, applications received, referrals, and the total number of hires, Naveen calculated the Hire rate as a measure of recruiter efficiency for associates. Hire rate: = (I/A) (R/I) (H/R) (H/A) = (114/912) (12/114) (38/12) (12/912) = (.125) (.105) (3.17) (.013) Out of the 76 candidates who were given offer letters, only 38 accepted. Hence, the offer acceptance rate/hit rate (offers accepted/offers extended) came out to be 50 per cent. Although these metrics did quantify the recruitment process at the Majestic group, Naveen knew that hiring for talent is the key to hiring successful employees. If he wanted to be sure that all the new hires and employees became longterm successful employees, he needed to make sure that all employees were competent and had the talent to perform. The performance of the hires on the job calculated on the basis of short-term performance reviews, and the time for which they remained with the organization was also a very important factor in determining the recruitment effectiveness .Thus he calculated the quality of hire. Quality of hire: = (PR+HP+HS) / N Where PR=Average job performance rating of new hires, HP = % of new hires promoted within one year, HS = No. of hires retained after one year, N = Number of indices of the 38 people hired, around 30 per cent were promoted within one year, and 10 per cent left the organization. For the remaining, the average performance ratings were calculated to be around 65 per cent. Hence, the quality of hires = (65+30+90)/3= 61.66% Despite all these metrics that were introduced by Naveen, he was still not able to evaluate the efficiency of the recruitment process; hence he came up with a comprehensive formula to measure recruiter effectiveness, which is the efficiency of the recruiter to select the right candidate for the right job. Recruiter effectiveness: =RT+TTF+CPH+OAR+QH)/N Where, RT= Response Time (41 days) TTF= Time to fill (56 days CPH=Cost per hire (3684.2) OAR= Offer

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acceptance rate (50%) QH= Quality - date when the new hires started of hire (35%), N=No. of indices (5) work = 20 November - 1 April = 131 The hotel had also recruited two days General Managers in the previous Out of the four offers extended, two year. This led Naveen to compute the were finally accepted. Thus, the hit recruitment metrics for General ratio is 50%. Managers too. The CEO spent five hours General Manager (GM) interviewing the candidates, hence For the GM post, the headhunting the average length of the interviews firm, Hotshot Hunting & Co. charged was 5/6 = .83 hrs or around 50 an agency fees of 1, 50,000 INR. The minutes. travel costs were reimbursed to all After articulating the metrics outstation candidates to the tune of and calculating the values for the 60,000 INR. The interviews were current year, Naveen realized that conducted by the CEO. The the recruitment process needed monetary value of the CEO's time certain changes in order to make it spent interviewing came out to be more effective and efficient. So for 50,000 INR. Relocation expenditure the next year, he decided to make for the two GM candidates came out certain changes in the recruiting to be 1, 20,000 INR. pattern. Cost per hire= (AC+AF+RB+TC+RE+ The time to recruit for the RC+NC)/ H + 10 %, wherein, Associate level was 56 days, which AC = advertising costs (0) was quite high as compared to the AF = agency fees (150,000) industry benchmark, as set by the RB = referral bonus (0) Saratoga Institute (48 days). It also TC = travel costs (60,000) RE= attracted Naveen's attention that Relocation expenses (120,000) RC = the advertisements released by recruiter cost (50,000) NC = no cost Green Apple were ambiguous in resumes H = no of hires (2) CPH = terms of the job description and (150000+60000+ 120000+ 50000)/ 2 specifications, which led many + 10% = 190,000 + 19000 = Rs 209000 unqualified candidates to apply, and The selected candidates were the processing of the applications provided incentives in the form of increased the time to fill. This was sign- on- bonus ( When there is partly due to the fact that the shortage of critical skill required, the information was not correctly incentive given to the prospective supplied to the agency. Thus, he candidate to join the company) to decided that for each position a the tune of 1 lakh INR, due to meticulous job analysis would be shortage of requisite skills in the done, and the specification and labour market. description of the job will be given The openings for the posts of GM to the agency. were given to the agency on 25 The offer acceptance rate was September. The agency sent the list very low (50%). After talking to the of qualified candidates (to be recruitment team and the interviewed) on 20 November. After applicants who rejected the offer, a rigorous interview process, finally Naveen found out that many the offers were accepted on 6 candidates who got selected from January. The new hires joined the various campuses rejected the offer organization on 1 April. because they were not given clear Response time: information about the profile and = Referral Date - Date of receipt of location of the job. Naveen then job requisition = 25 September - 20 decided that from then on the HR November = 56 days team will give proper pre-placement Time to fill: presentation to all the campuses, to = Date of receipt of job requisition ensure that the candidates have date of offer acceptance = 20 clarity, aiding them in making November - 6 January = 47 days informed decisions. Time to start: Further, since the quality of hires = Date of receipt of job requisition was not as per expectations, he

decided to suggest certain employer branding initiatives in order to attract top notch candidates. For instance, Naveen decided to position Majestic hotels as a destination for employees to get world class trainings, therefore increasing their employability. This, according to him would lure quality candidates looking for selfdevelopment. Majestic hotels also offered internships to students from colleges it visited for hiring, but did not have a policy of hiring them as full- time employees. Naveen devised a five step program for interns, to be able to convert them into full time employees viz., a) Organize the program with adaptation in mind b) Make the conversion process clear and smooth c) Provide students with real work, and make it exciting and meaningful for them d) Assess the interns realistically; coach them well e) Separatethepoor performers, and maintain contact with good ones He also began considering about the quality of hire. He believed that the cost per hire and quality per hire were two distinct things and would be directly linked to the ROI. He believed that if the quality declined, the associated costs became meaningless. To measure quality per hire ROI, Naveen felt the need for two important tools, viz a viz GTalent scorecard to measure incoming candidate quality GMeans to convert this scorecard into financial impact The CEO saw the metrics, appreciated Naveen, and raised the following questions. 1) What if an impact multiplier is assigned for each quality group in order to assess the financial contribution each level makes, would it be the same for all hierarchical levels? 2) Using the tools, how can one calculate hire-quality ROI? 3) Whatarethestrategic advantage(s) of these metrics given the changes the hotel is likely to undergo/undertake in a dynamic environment?

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