Whitepaper: The Use of Talent Pools in Australia

The Use of Talent Pools in Australia

Executive Summary

Talent pools and candidate database systems are becoming more prevalent in Australia today due to a number of reasons. These include continued pressure to reduce candidate cost per hire, reduce time to fill, and target leaders for the future. As a result recruitment teams are becoming more strategic, looking to longer term solutions to achieve this ongoing return on investment. Candidate databases for recruitment are one method to achieve these returns, and when a fully functional candidate relationship database is implemented with a supporting recruitment process, the reduction in sourcing costs can be around 25-50%.

A two year study of Australia's Top 100 companies by employee number was conducted to establish their approach to talent pool management for external recruitment purposes. In total, of the 75 companies that participated in the study 43% had a talent pool by the end of year two. Of those organisations without talent pools, one third of these companies recognised the importance of building a candidate database and were planning to implement technology to do so within the next 12 to 18 months. By the end of 2007 talent pool adoption is predicted to be 63%.

The main findings from the study were:

1. The most successful approach to talent pool adoption appeared to be one of phased implementation, with most companies starting with the introduction of an Recruitment Management System (RMS) to help manage the recruitment process.
2. Financial justification was perceived as the largest hurdle to implementation despite the apparent ROI benefits. This barrier is expected to diminish as more companies adopt talent pools and the financial benefits become more transparent.
3. There were clear differences between sectors with regards to talent pool uptake. This is expected to influence relative competitive advantage. Any companies that lag their peers may quickly find themselves at a disadvantage, especially given the skill shortage currently faced by the Australian market.

The main reasons behind establishing talent pools, or candidate databases, were:

1. to reduce recruitment time to fill
2. build a pool of rare skill types
3. minimise advertising costs.

The main reasons why the remaining organisations were not planning to build a candidate database included:

1. It would be difficult to manage a talent pool in a decentralised model
2. Hiring is outsourced to recruitment agencies
3. Candidate data would become out of date too quickly
4. Currently not recruiting

The first two of these reasons are not surprising considering that the majority of organisations with talent pools have a centralised in-house recruitment team who have implemented technology ensuring candidates provide the recruitment team with personal information updates.

47% of the Top 100 companies that participated in the study have implemented a RMS. Most organisations recognised the advantage of utilising their RMS as a starting point for talent pool management with 78% of those companies with talent pools purchasing a 3rd Party software system. In total 94% of organisations used an in house or third party technology solution to search for talent, whilst the remaining 6% used a manual process such as paper based or Microsoft Excel to store candidate data.

Organisations that planned to implement a candidate database or talent pool within the next 12 months felt that the biggest hurdles to implementation were the introduction of technology to replace existing manual processes and re-engineering current recruitment processes. Both of these hurdles were related to change management issues and managing the move from a traditional manual based process to a more proactive approach. A follow up survey one year later found that financial justification to senior management or the executive board had become the greatest perceived issue.

This is not surprising given the lack of hard data in the Australian market as to the benefits of talent pools. Over 30% of companies did not search their pool prior to advertising and the majority did not accurately measure the success of their talent pools. Additionally many organisations are still using their database primarily as a filing cabinet instead of a dynamic candidate relationship system. However, as companies adopt a more proactive approach and cost and time benefits become more tangible, barriers to adoption are expected to diminish.

Organisations which had implemented candidate databases and talent pools had managed to overcome these hurdles by phasing the implementation of online recruitment systems and talent pool processes. Resistance to implementing talent pool systems, remains, however, largely due to the reactive nature of some professionals in the industry. If organisations wait until labour shortages become apparent, they will find themselves behind the eight ball and struggling to find the correct talent. In the meantime those organisations that have been proactive in implementing talent pools will find that they know exactly where to find their staff and will be able to do this more cost effectively.

At an industry level the Financial and Consumer Staples sectors had the highest penetration of candidate database technology. This suggests that any peers that lag in the uptake of talent pool processes may find themselves at a competitive disadvantage. In contrast the Resources & Construction (Materials) and Industrials sectors, along with the Consumer Discretionary sectors exhibit poor uptake of talent pool processes. Clearly any peers who have already adopted these processes are at a competitive advantage; especially during a time of skill shortage such as that currently faced by the Australian market.

Australian organisations are very much in the infancy stage of building effective candidate databases and talent pools. The first step has been taken with the implementation of infrastructure to facilitate building a talent pool. The second step is ensuring that the processes and tools are in place to maintain and measure such systems. Organisations who have taken the steps to implement candidate database systems and started the process of building talent pools will find themselves ahead of the competition due to the fact that they are not only lowering sourcing costs but getting a short list (of candidates) more quickly. Research in the US has indicated that although Data Mining of candidates can be complex it is essential to companies that see recruiting as a strategic component of future growth. Those organisations that have not even started on the path of mining databases and talent pools will find themselves at a competitive disadvantage as their direct competitors recruit more effectively via maintaining cost effective relationships with key talent.