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Centralized, decentralized or hybrid? Perform recuriting functions wherever they add the most value to your business.
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Three years ago, General Motors North America switched from a decentralized recruiting system in which each business unit did its own hiring to a system centralized at corporate headquarters in Detroit. Why? GM wanted to strengthen its employment brand—especially among new hires—and erase the image of GM as old-fashioned, highly bureaucratic, white-male-dominated and slow to foster opportunities for advancement.
“We wanted to break away from these old views and be portrayed more realistically,” says Kevin Smith, manager of talent acquisition for GM North America. “We are striving for consistency in our message to potential hires.” He adds that the company wanted to develop more-effective recruiting procedures.
“Now, one department handles the requisition process, setting up interviews and everything else related to recruiting talent,” says Smith. About 45 professionals in GM’s Talent Acquisition Department handle recruiting for all of GM’s North American plants.
Taking a Fresh Look
GM is one of many companies looking at how the recruiting function can add value to the business. Hence, the debate: Should recruiting activities be centralized at the headquarters level or decentralized at each business unit?
For Paul Marchand, director of corporate recruiting for Merrill Lynch, a global financial services firm based in New York, the issue is about “challenging the status quo and going through a thought process that asks the question ‘Are we recruiting the right way for our business?’ ”
That’s different from how HR once looked at the question. “Historically speaking, the general wisdom was that, if similar types of positions are being filled on a regular basis, then centralized recruiting would be most efficient,” says Cydney Kilduff, SPHR, director of recruiting and staffing for Kellogg Co. at the food manufacturer’s headquarters in Battle Creek, Mich.
Kilduff, who once worked at a bank that moved recruiting to a centralized—or what she prefers to call “shared services”—approach, says a major advantage of centralization is that duplication of work is minimized, resulting in increased productivity.
“Particularly in staffing, you can leverage synergies,” explains Kilduff, who is a member of the Society for Human Resource Management Employment Committee. “Instead of looking for one financial analyst, you can recruit for five positions from the same candidate pool. Technology solutions, best practices, sourcing techniques are leveraged across the enterprise.”
Other advantages of centralization are:
But “all cultures can’t support a centralized environment,” says Ron Weber, talent acquisitions sourcing consultant for Hewitt Associates, a global consulting firm based in Lincolnshire, Ill.
For some companies, the most effective recruiting structure is a combination of centralized and decentralized approaches. Merrill Lynch, for example, leans more toward a decentralized model, but uses “a shared-services approach for some areas of the recruiting function,” says Marchand. The decentralized part of this hybrid model allows the 58,000-employee company, operating in 40 countries, to be fluid and flexible in meeting the needs of each business unit. The shared-services part of the structure—the centralized part—permits synergy within the organization in aspects of recruiting that apply throughout the company, he explains.
Two Approaches in One
The shared-services portion of Merrill Lynch’s recruiting is done to implement standardized metrics companywide, minimize duplication, leverage the best use of technology and identify best practices. The decentralized portion allows recruiters great flexibility in meeting the needs of each specific business unit, ensures quality in the talent hired and retained, and helps build a stronger, more credible relationship with hiring managers and providers.
Marchand oversees the shared-services portion of recruiting. Each busi.ness unit employs a recruitment director who works with line managers. An addition to Merrill Lynch’s recruiting structure is a Recruiting Operating Com.mittee. The committee is co-chaired by Marchand and Andrea Beldecos, head of global campus recruiting, and includes recruitment directors from each business unit, other HR professionals and key business advisers. The committee’s purpose is to foster regular communication among colleagues as well as to identify exactly how recruiting will be measured and what activities should be considered best practices and implemented throughout the organization.
“It used to be everyone was doing their own metrics and keeping this information in their own silos,” says Marchand. “The committee helps ensure that the recruitment function is working together and becoming more consistent in how it aligns itself with the business. A major focus of the committee is innovation—pulling out the best practices and implementing them throughout the organization.”
Turning to the Outside
In 1999, Kellogg, which has 14,000 employees worldwide, revamped its recruiting function by taking the unusual step of outsourcing the hiring of all but hourly employees. A vendor now works directly with hiring managers in each phase of the process, manages the company’s online recruiting efforts and uses its own recruitment technology to track all data and details. Staffing professionals at each location hire hourly employees.
Although the switch to outsourcing reduced overall recruiting costs, Kilduff says, the change initially was made to align the company’s staffing needs with its business needs. “Our industry has peaks and valleys in terms of staffing, and we did not want to build up a large in-house recruiting department [that], at some point, we might have to trim,” she explains. “The way recruiting is structured now gives us more flexibility and agility, as well as cost efficiency.”
For example, Kellogg recently needed to hire 200 salespeople in a short period. “The vendor was able to fill those positions quickly and with the right talent,” Kilduff says. “In the old model, we could not have done that hiring so quickly and efficiently.” Instead, the company would have had to use an outside search firm, which would have bumped up the already high costs of recruiting. Kilduff says Kellogg reduced agency fees by $1.3 million from 2000 to 2001, and the average cost per hire dropped to $3,800 from $6,000.
Getting Used to Change
When the new structure was installed, there was a definite learning curve for Kellogg’s hiring managers, Kilduff says. “They were working with totally new people who had to learn their business. The new structure has been in place now for a couple of years, so hiring managers are more comfortable with it. They see they have quality talent as well as cost efficiency.”
There’s also a cost incentive for hiring managers to use the vendor. Managers’ business units absorb the cost if they hire a different search firm, but not if they use the designated vendor.
The vendor’s performance is measured according to cost, timeliness of filling the job and quality—reflecting both the quality of service to hiring managers as well as the diversity of candidates. “Our vendor has a whole series of metrics to perform to,” Kilduff says. “The value of the contract is built around metrics.” A Kellogg senior project manager works daily with the vendor, which enables close supervision.
The centralized portion of Kellogg’s recruiting structure involves policy-making, metrics and the use of technology. Says Kilduff: “You need to have a single owner that is leading staffing and ensuring that activities are aligned with the overall business goals. You also need consistency in strategy to drive the external view—the employment brand—of the company.”
A Tilt Toward Decentralization
At Hewitt Associates, recruiting activity is decentralized, but business-unit recruiters have access to a lot of data and resources available at the company’s headquarters. “We have market groups that employ cadres of HR and staffing professionals. They rely on us for policies, sourcing strategies, metrics and consultation advice when needed,” says Milton Perkins, director of global talent acquisition and transition.
The decentralization part of recruiting is necessary, says Perkins, because diverse business units have varying needs for talent, and recruiters at each business unit understand the business and the skills needed.
“We want the professionals at the business units to have the specialized skill to recruit the right people and have an allegiance with the market group and line of business,” Perkins says. “But we also want to provide the business units with the tools and resources that will make their jobs easier and more efficient.”
A year ago, talent acquisition specialist Weber was hired by Hewitt to provide the business-unit staffing professionals with much more than standard metrics and technology. Weber’s mission is to develop the company’s Job Selection Profile, a system that identifies the best practices in hiring for all of the couple-hundred job positions at Hewitt.
To develop the system, Weber researched the company’s historical recruiting data for each job. So far, the system provides all the best- practice details for 55 of the company’s jobs. The database shows recruiters:
What Works Best?
Ken Gaffey, a longtime staffing consultant in the New England high-technology and financial services marketplace, says employers should ask whether there is value for the business in centralization or decentralization.
Gaffey says the recruiting-model debate needs to include how a company’s structure affects other aspects of HR, such as retention. He cites the example of a corporation with offices nationwide. Each office has an HR administrator but most of the decision-making authority lies with the senior HR/staffing person at the company’s headquarters.
Much depends on what the employees in each office do. Are they mostly retail staffers with little training and low pay? Or are they 100 specialized research scientists who cost $25,000 to replace?
“When employees ask questions and the office HR administrator is always saying, ‘Let me get back to you,’ you have to ask yourself—as a business—how much staff can I afford to lose with that answer,” Gaffey says. “If the employees are scientists, you may need better HR presence at the local offices to keep them retained.”
Gaffey says he has found some form of recruiting centralization is happening within most organizations. “Centralization usually encompasses policies and procedures that provide some level of uniformity for the employer,” he says. “Decentralization provides the flexibility you need to recruit in each particular region. Most employers are providing a set of parameters from headquarters and giving leeway in other areas. So, recruiters can work best in their specific locations.”
The Core Questions
Although each company has its own approach to recruitment, practitioners interviewed for this article shared these common concerns:
What’s most important, says Hewitt’s Weber, is that the recruiting structure chosen uses data and metrics to track performance that adds value to the business.
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