If you have read ‘Design your own HR and learning quality system’ you will realise just how simple quality systems are, even when applied to the apparently less tangible world of HR. Then, if you look at the first SHRM/ANSI ‘standard’ – Cost-per-Hire – you might think that it follows the same steps but there are some fundamental flaws and omissions. So let us take a look at where the concept of cost-per-hire might fit into a complete Quality Management System and compare that to the ANSI standard. So what are the building blocks of a quality management system? Let us define the key terms.
A. Quality – if your company manufactures a product – say, screwdrivers – then the purpose of a quality system is to assure the quality of the product. More specifically it has to be fit-for-purpose, an absolutely essential term in the quality lexicon. So does it insert and remove screws without breaking or damaging the screws? However, it has to be fit-for-purpose at the right price, otherwise it won’t sell. That means having to manufacture the right quality of screwdrivers at the lowest possible cost. If the quality and cost of the product can be sold at the right price it can be translated into value – profit in hard $’s.
B. Management – Then you have to manage every aspect of quality. That’s where it starts to get complex. How do you structure the company around the processes? What if the system breaks down – e.g. sub-standard materials are ordered – you will have to ensure all suppliers follow the same quality system, checking specifications and meeting deadlines.
C. System – The whole system will dictate whether you are successful. If you want to stay in business making screwdrivers you have to have a watertight system that guarantees quality throughout the organisation. The system will be made up of a series of processes, from purchasing raw materials, to production, to marketing and accounting. The whole system should ensure all the processes are working in harmony.
If A, B and C are in place you can apply your standards to the design and components of the screwdriver. How do you design it to be as strong as possible with the least cost of materials, for example? Now let us apply this to the ANSI Cost-per-Hire (CPH) standard.
Is the ANSI Cost-per-Hire standard fit for purpose?
The CPH standard focuses only on one measure – cost. If the screwdriver manufacturer only measured cost and tried to keep reducing it they could easily end up producing sub-standard screwdrivers that snapped and could not be sold. In exactly the same way, if all you measure in the hiring process is the cost you could be hiring sub-standard people. So already the CPH standard itself is too narrow.
Let us take a step further back and look at this from a process perspective – what exactly is the hiring process? Where does it start and where does it end? It starts with someone identifying the need to fill a job or role but what process do you need to go through to identify and fill such a vacancy? This goes all the way back to how the organisation is designed and structured. So the quality of the hiring process is dependent on the quality of the organisation design process. How well the new starter fits into the organisation is also at the mercy of those they have to work with. So a ‘successful’ hiring process could still add no value if the new employee leaves very quickly. Or, if job roles are poorly designed or defined then the hiring process is likely to result in inefficient screwdriver production. None of these issues are captured in the narrow focus of CPH.
Now let us re-phrase what we have said above by asking how do you bring people into the organisation that are fit for purpose – that is doing the right things at the right salary? This requires a performance measurement system that will assure us they are performing at the right level. That, in turn, means managers have to know how to use the performance management system effectively. This is not captured by the CPH standard. It does not even capture how the quality of the new employee is measured against the requirements of the role. Is this new employee 90% of what is needed or as low as 50%? At what point is the percentage too low?
HR cannot afford to ignore the difficult questions
All of these questions are important in quality systems thinking; the CPH cannot ignore them just because they are difficult to answer. For more senior positions they become even more important and the indicators of fit-for-purpose more complex, including having the right values and attitudes as well as the necessary qualifications, experience, knowledge and skills. For CPH to have any meaning as a ‘standard’ it has to be integrated with all of these indicators.
The SHRM taskforce that produced this standard argue that it has to be set alongside other standards to have meaning and utility but you cannot have a partial standard of cost. The only standard worth having is one of value. That has to incorporate 4 variables at once – cost, output (or productivity), revenue (or financial return) and the intrinsic quality of the person. So while CPH looks at the average cost of hiring someone it should also include how much the new hire produces and their value to the business in terms of how long they stay and the extent to which their capabilities are fully utilised. In other words all standards have to relate to the complete picture of value – in $’s.
Against these criteria the ANSI CPH standard fails the test and leaves the door open for another national certification body, such as the British Standards Institute, to produce a better standard for HR. Maybe a better standard can be produced before SHRM gets their ANSI standard adopted by ISO but, then again, there are much more important HR and learning standards that should be at the top of ISO’s list of priorities.