What’s wrong with corporate hiring?

Post from Alan Brown:

Alan Brown

If you’re like me, you’ve probably seen the news stories about corporations only wanting to hire people who are currently employed.

Rather than tap the vast pool of talent available in this rotten economy, many businesses limit recruitment to stealing away people doing the exact same jobs at other companies. This is a real issue for engineers, as well as anyone else looking for work.

In his new book, Why Good People Can’t Get Jobs: Chasing After the ‘Purple Squirrel,’ Peter Cappelli, head of Wharton School of Business’s Center for Human Resources, asks why this is so. And if you never saw a purple squirrel, then you are already half way to getting the point.

Many employers complain that applicants lack the skills they need. But Cappelli argues that the problem often lies with the companies themselves. The problems, he says, range from accounting systems that favor not hiring workers, low pay and lack of training, to the gutting of human resource departments and a reliance on computerized applicant-tracking systems.

Cappelli recently gave an interview to Wharton’s Leadership Digest that is well worth reading. You can view it here. Meanwhile, here is the short-and-sweet version:

Accounting. Accounting systems are like statistics in sports—they do a good job of measuring one very tangible thing. In sports, statistics measure tangible accomplishments, like scoring, batting average or completions. Accounting systems tabulate revenue and spending. But statistics don’t tell the whole story about the character and stabilizing influence of an Eli Manning or Derek Jeter. Accounting does not measure such things as lost opportunity, reduced competitiveness, poor customer service, and lowered productivity when everyone else has to fill in when someone is not hired.

Yes, not filling that job seems to boost profitability, but only because the other costs are hidden. As Cappelli noted about business, “The way their internal accounting is designed encourages them not to hire.”

Pay. Cappelli noted a survey done by Manpower. Of employers who said they had trouble finding people to hire, 11 percent said they could not get people to accept the wages they wanted to pay.

“If 11% admit this, my guess is the real number is probably double that,” Cappelli said. “But if they’re not finding [employees], don’t call it a skills gap; don’t call it a skills mismatch—you’re just being cheap.”

Training. In 1979, young workers averaged 2.5 weeks of training per year. By 1991, only 17 percent received any training the previous year. Twenty years later, only 21 percent said they received any training during the previous five years.

Cappelli argues that business used to train employees. It could create apprenticeships, pay people less until they finished their training, or require people take a training class as a condition of employment. He noted that large hospitals, consulting firms, and accountants lose almost all their young workers over five years, but they still find it profitable to train and employ them.

Why don’t other businesses follow that model? Because their accounting systems cannot tell them what it costs to train somebody. “They have no idea whether they’re actually saving money by trying to chase these people who already have jobs and hire them,” he says.

Older workers. If you are older than 50 and especially 55, losing your job could be a disaster. Many companies are reluctant to hire older workers, perhaps because they worry their skills are not up to date or their energy and enthusiasm have flagged.

They may be missing an opportunity. Older workers, Cappelli said, “have everything that those employers say that they want in new hires—better work attitudes, experience doing the work, they don’t need ramp up time, they don’t need training—or they don’t need as much.”

Automation. “HR departments have been gutted over the past 20 years, and especially during this recession,” he explained. In the past, HR professionals could help managers create the right type of job description and push back on crazy requirements.

Now, Cappelli explains, “Those folks are gone, and basically, those wish-lists of hiring requirements get baked right into applicant tracking software. Human eyes rarely see applicants until the very end of the process. So, we’re trying to push the automation too far. Human judgment is still pretty important.”

Schools. Many companies claim high school and college graduates are less qualified than their foreign counterparts. It is a powerful argument because many people believe U.S. schools are failing. The truth is that U.S. schools have been in the middle of the competitive pack for a long time, and that a greater percentage of U.S. students go to college than anywhere else in the world.

As a result, U.S. students are, on average, better educated than other students. He notes that “employers are not complaining about a lack of academic skills among job applicants.” Instead, employers complain about lack of job-specific skills, but they don’t want train incoming workers.

“I’m not making any argument that employers ought to do something simply for the social good. But it’s just not in their interest to do what they’re doing now, which is to chase the same small group of people who already are employed someplace else. It makes sense to train people. It makes sense to give people a chance. It makes sense to be more realistic about what your job requirements are so that you can actually fill the positions.”

5 Responses to “What’s wrong with corporate hiring?”

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The Editor

John G. Falcioni is Editor-in-Chief of Mechanical Engineering magazine, the flagship publication of the American Society of Mechanical Engineers.

August 2012

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