Buy or Build?

by Evil HR Lady on May 24, 2007

Frequently, when we talk about the leadership pipeline, the question comes up, buy or build? This means, do we train and develop the people we have (build), or do we go out and seek new people (buy). It’s almost always cheaper to build than to buy. Not just in saving you recruiting fees, relocation costs and sign on bonuses. It also helps retain the talent you have, improves employee morale and makes you, all other things being equal, an employer of choice.

ER Nursey writes this about her profession:

Hospitals spend a lot of time and money on recruiting nurses. A lot of the nurses they recruit are inexperienced new grads.

At the same time they do nothing to keep their experienced staff happy so they often leave seeking greener pastures.

Why not spend a little time and effort keeping your experienced nursing staff which is your best resource? If your staff didn’t keep leaving you wouldn’t have to spend so much money on recruitment.

Duh.

Yes, you have to pay experienced nurses more than new nurses. Experienced nurses also know what they are doing, understand policies and procedures and have developed relationships with the other staff. Even treating them right, it is cheaper to build than to buy.

The problem is, managers see recruitment costs as “unavoidable” while they see anything done to improve retention as “extra costs.” Boy are they wrong.

I have no idea what it takes to get a new nurse up to speed. I know that, in my department, we feel like it takes 3 to 6 months to get HR people up to speed. That’s 3 to 6 months of salary you are paying, plus recruitment, plus sign on bonus. Hello, it would be cheaper to give your existing nurse a 10% increase.

Sometimes you don’t have the talent available in house. That’s fine. Sometimes you have your best talent leave you through no fault of your own. That’s a cost of doing business. But, if you consistently look to buy new talent and reject the talent you already have, that’s just plain dumb.

{ 5 comments… read them below or add one }

Dean Dad May 24, 2007 at 1:19 pm

How does succession planning work in a context in which searches have to be truly open? It seems that if you’ve already tagged an heir apparent, then the open search is really a charade. If the heir apparent is a white male, you have some serious affirmative action liability, I’d think.

From an HR perspective, how does that work?

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Mike Doughty May 24, 2007 at 2:14 pm

I could probably write a book on this subject based on debates that I’ve been a party to with top management and HR people over the years. Here are some thoughts (aimed at professional positions, especially engineering jobs).

1) If you’re going to hire, make sure you hire the right people. We used to hire only the engineering grads with the highest GPAs, to the exclusion of just about everything else. However, we weren’t really doing cutting-edge work (more plant optimization). These people often got bored and left after a couple years.

2) Hiring new grads can lead to high turnover based on disillusionment. People learn things in school and think that’s how the real world works. Then they get to the real world (your company) and find out things don’t, in fact, work that way. They think that it’s the company that’s screwed up, not the world, and they leave after a year or so, looking at greener pastures. When this happened, my approach was to leave the door open for that person to come back, saying something like, “Good luck to you at XYZ Corp., but if things don’t work out, give me a call”. Over the years I’ve hired many good people back, once they’ve learned that every employer is pretty much screwed up, just some more than others.

3) In order to retain good people they need a path to advancement. Management’s a pyramid, with only so many promotions available, so moving up the chain can’t be the only way to advance. We instituted a “technical ladder” to enable professionals who didn’t want to supervise to be promoted to higher grade levels, yet basically stay in their same job. By keeping these people in the same positions for a much longer period of time we were able to substantially reduce the number needed and eliminated lots of errors.

Our company greatly reduced turnover and greatly increased efficiencies by going to a policy of mostly experienced hires and increased attention to retaining good people. Sure made the HR Department’s job a lot easier too.

4)Promoting from within is like motherhood and apple pie….who’d argue against it? However, smaller companies have a problem here. It’s often difficult to have people in “training positions” in a smaller company, plus you may not have the talent pool necessary to develop the next Manager level person. You may hire someone to develop for a position a number of levels higher and a number of years in the future, only to find out that they plateau a level too low. Do you then get rid rid of them when they’re doing the current job? How do you keep good people “passed over” from become disaffected? This area is one of the toughest in HR in my opinion, with no really pat answers. It one of the reasons they pay us HR people the big bucks. :)

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ERnursey May 24, 2007 at 4:27 pm

Thanks for the acknowledgement, not only the obvious – but in my business it can mean the difference between life and death. Take a new grad that rally doesn’t know the subtle signs that someones condition is deteriorating so no interventions are made before the condition is grave. Or during a crisis, who would you want – the experienced nurse who knows all the meds and drips and just how to administer and titrate them or the inexperienced nurse who is not experienced?

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Wally Bock May 27, 2007 at 8:15 pm

I believe Dr. Dean is confusing a search to fill an individual position (a discrete process) with succession planning which is an ongoing function.

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Wally Bock May 27, 2007 at 8:21 pm

I might quibble with some of Mike Doughty’s language, but his points are dead on. Good succession planning today should include an individual contributor track of some kind. Development should organize around developmental assignments that build both skills and visibility. There also needs to be a way for the vast majority of people who enter the management ranks, but won’t ever see the rarefied air of the top of the org chart opportunities to make enough money doing somehting they love with people they like. I much prefer the term “leadership development” as an umbrella because I think it covers both the folks aiming for the C suite and the folks who will be quite happy managing marketing in the outer boroughs.

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