REDUCING THE RISK OF ENTRY-LEVEL HIRING By Robert J. LaBombard The insurance industry, especially the claims profession, is a great fit for thousands of new college grads every year. However, in talking with claim managers, we know there is a significant level of angst related to hiring college grads to fill entry-level positions. From how to recruit college grads to the cost of training and finding the right fit, implementing a successful entry-level hiring program is tricky. The downside of a poorly designed program is turnover, and turnover is expensive. How expensive? Well, if you add together recruiting and training costs from the original hire, new recruiting and training costs to find a replacement, lost productivity from the position being unfilled, administrative and other costs, it is commonly believed that the cost to replace an employee is equal to two to three times the annual salary. Now consider the following example. Let’s say you hire ten trainees per year at an average salary of $40,000 per year. Assuming a replacement cost of twice the annual salary, if you experience 30 percent turnover during the first year, then your total cost to replace exiting employees will be $240,000. At 50 percent, the replacement cost rises to $400,000. Based on this very real fear, some claim managers have opted not to hire at the entry-level. They prefer instead to have other companies train for them and then hire away trained people after working elsewhere for 2 to 4 years. While hiring managers should be opportunistic in hiring experienced people, over-reliance on this approach can be costly. This will become apparent when experienced claim professionals are in short supply as "baby-boomers" transition into retirement over the next few years. The answer, of course, is to reduce turnover and increase retention; in essence, to develop a way to reduce the risk of entry-level hiring. It can be done. Here’s how. Why Entry-Level Hiring is Difficult We’ve talked to hundreds of hiring managers who have told us that the hardest position for them to fill is an EL position. The reason is that the candidates typically have little professional work experience and usually no direct experience pertaining to the job to be filled. When hiring managers can’t probe past experience, in most cases, they are lost. Some will look to grade point averages (GPAs) or majors. Those parameters, while important, are just not great predictors of future success. When claim managers are asked what attributes or traits set their star performers apart, they seldom talk about experience, regardless of the level of position. This is what they tend to often mention:

Great communications skills Excellent organizational skills Ability to stay calm in stressful situations Strong interpersonal skills Attention to detail The goal then is to develop a profile of the ideal candidate and then a process to identify candidates that match the profile. In addition to attributes, it is important that your profile also assess how candidates should mesh with your unique culture and environment. With the above as background, to be successful in entry-level hiring, you must first develop a profile of the type of candidate you are looking for. This is not a job description. The profile can be developed by thinking about the new grads you have hired in the past for your entry-level positions. What attributes made the great performers stand out? For the candidates that weren’t a fit, what attributes or traits ruled them out for the position or culture? A common mistake is to develop a profile that identifies too many desired attributes. Keep in mind, the more you look for, the less likely you will find the perfect candidate. Be realistic. Typically, each position will require three to four essential personal attributes. Finally, it is important to factor company culture, work environment, supervisor management style and other factors into the profile of the ideal candidate. Successful Screening Resumes of new college grads are very difficult to distinguish, as so many look the same. So how do you decide which ones to pursue? Go back to your candidate profile. If multi-tasking skills are critical, then look for candidates that seem to have balanced a lot of activities in college. A person who played a sport, participated in student government, and had a strong GPA in a demanding major would indicate a person who can manage their time well. If you’re looking for good communications skills, then look for classes, projects, volunteer work, or internships where communications skills were important. Keep in mind that resumes can be deceptive. Before you schedule anyone for an in-person interview, conduct a phone screening with the candidate. This will allow you to ensure that minimum requirements are met — such as salary expectations, commute, and so on. It can also confirm that your impression of the candidate gleaned from the resume seems to be accurate. Specifically, you should quickly assess communications skills, flexibility, motivation, and enthusiasm. I would like to issue a word of caution about majors and GPA. Quite simply, these items should be considered, but they are not always great predictors of future success. Many companies require that applicants present a minimum GPA to be considered for employment. Most commonly, 3.0 to 3.25 GPA minimums are required; however, some firms desire a minimum of 3.5. Our caution here is based on the fact that GPA standards between schools and majors vary considerably, so it is like comparing apples and oranges. Further, there can be huge differences between candidates in terms of their involvement in extra-curricular activities, leadership positions, and jobs. A well-rounded candidate with a lower GPA in many cases is a better

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candidate than one with a high GPA who was not engaged in college life. Finally, a lot of candidates struggle during the first year in college as they adjust to college life and search for a major. If you could remove their first-year GPA from the equation, then a lot of candidates would have had an overall GPA as much as 0.25 to 0.50 points higher. Minimum standards run the risk of needlessly eliminating many good candidates. In short, don’t eliminate candidates based on criteria that are not good predictors of future success. The Trouble with Excess Our first recommendation related to the interview process is to avoid the temptation of interviewing too many candidates. We’ve seen many hiring managers want to interview a dozen or more candidates to "ensure" they hire the best candidate. In our view, this is a huge waste of time and a sign the hiring managers do not truly know what they want. If you develop accurate candidate profiles and screen well, then you should only need to interview two or three candidates per position. There are several important points to keep in mind as you conduct interviews to work toward candidate selection. First, your interviewing technique should help you determine if the candidate possesses the attributes required for success in the position. We recommend performing a behavioral-based interview. In this approach, open-ended questions are used to allow candidates to demonstrate proficiency in different skill areas using real-life examples. By assessing initial answers and in asking followon questions to delve deeper into a topic, a candidate’s relative strengths and weakness should become apparent. For example, an initial question might be, "Tell me about a time when you had a difficult problem to solve." A follow-on question might be, "What resources did you use to get the information required to make your decision?" or "Why did you choose option A over option B?" In preparing for the interview, you should think about open-ended questions that can be used to uncover strengths/weaknesses in attribute areas important to the entry-level position to be filled. Second, an interview should also include a career exploration. In this step, you learn more about the candidate’s career expectations, interests, and goals. You may also assess salary expectations, attitudes on the work/personal life balance, and so on. Third, you should give the candidate the opportunity to express why he or she thinks this industry, your company, and this position is a fit. Ask the candidate to comment on why he or she would be successful in the position. In short, give candidates the opportunity to sell themselves. Also, give them the opportunity to ask questions. We feel that this part of the interview is very important. It shows how much research the candidate has done and if he or she does truly want the job. Finally, if you like the candidate, then be sure to use the opportunity to sell your company and the position. Keep in mind, regardless of the job market, there’s always competition for great candidates. When the interviews are over, make the match — select the candidate that is the best fit and most resemble your star performers.

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Hire and Retain In buying a new or used car, the best way to see if you like the vehicle is to test-drive it. In the same way, when hiring for entry-level positions, the best way to determine if a candidate will succeed in a position is to watch the person perform in it for a period of time. Interviewing a candidate two, three, five, even ten times, will very seldom identify anything you didn’t know from the first interview. As a result, we recommend hiring for entry-level positions using a probationary period, typically 90 to 120 days. This can also be accomplished by using an outside service via a temporary-to-hire, temp-to-permanent, contract-to-hire, or similar approach. Seeing the candidate perform in the position prior to finalizing the employment arrangement is a critical strategy in determining the long-term fit of your candidate and reduces the risk in making your final hiring decision. Once you’ve made the hire, it is important that your organization implements a coordinated retention strategy to ensure that your best employees stay. Key elements important to the socalled "millennial" generation include: Fair compensation, based on performance Effective two-way communication Feedback Recognition Work/personal life balance Career planning Organizational Vision While formal performance reviews may be administered on an annual basis, it is important that informal feedback be provided regularly. Compensation, opportunities to work on important projects, and advancement should be based on the objective criteria of performance and the ability to interact successfully in a team environment. The organization should also value the employee and be conscious of the need for a healthy work/personal life balance. Finally, those organizations that are successful in communicating an overriding vision and purpose (and live up to it) generally foster better long-term retention. As outlined above, developing and implementing a strategic hiring process for entry-level positions is critical. Such processes have proven to be highly effective in reducing turnover in the first year after hire and in delivering long-term retention. Turnover will never be eliminated (and a certain amount is necessary). Even so, with a well-conceived entry-level hiring strategy, a company should see no more than a 10-percent turnover rate in the first year of hire. Further, of those employees that reach their one-year anniversary, long-term retention should be as high as between 85 and 90 percent after 5 to 7 years. Robert J. LaBombard is the CEO of GradStaff, Inc., a provider of outsourced college recruiting services that focuses on filling entry-level positions on a nationwide basis. He has developed extensive expertise in recruiting, team-building, succession planning, and retention issues.

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