It Is Time To Dump The Transactional Recruiting Model

We face three challenges in the healthcare talent management equation:

A series of changes related to healthcare reform
Waves of new balanced budget act-styled cuts in reimbursement that will test the ability of hospitals and physician practices to survive
An outdated recruiting process model that is not up to the task to find the quality of leaders necessary to successfully confront these changes

If we only had to deal with the recently passed healthcare (payment) reform legislation, that would be like a walk in the park. We are, after all, an industry whose leadership is among the most adept adapters in any business sector. But there will be more. With skyrocketing budget deficits fueled in large part by high healthcare costs that stretch the Medicare program, it would be unrealistic for hospital CEOs and physicians not to expect a series of balanced budget act cuts that will squeeze out additional savings.

Medicare is not sustainable in its current form. Everyone in Congress knows it, but that was conveniently not part of the healthcare reform debate. Things are getting so bad that the US government will not have the money to pay the bills in about 10 years, according to David Walker, President of the Peter G. Peterson Foundation and former Comptroller General of the United States, unless it makes dramatic changes in the portfolio of benefits and the amount of money it pays to healthcare providers. Absent that, the treasury department must borrow 100 percent of every dollar that is paid to hospitals and physicians, piling on the already out-of-control national debt. Ironically, some industry analysts believe these types of reimbursement cuts will probably lead to more structural reform than anything Congress might have the courage to attempt. If you cut enough money out of the system, these analysts posit, hospitals and physicians will be forced to make dramatic and cost-saving changes in delivery systems in order to survive.

Only the best leaders and managers will be able to clearly anticipate the dramatic changes before they arrive at the front door of our U.S. hospitals and physician practices. Only the best will be able to create new strategies and new solutions on the fly. So, there is an important connection between the financial mayhem that is certain to occur over the next seven to 10 years and the strategies we use to recruit and retain the best people

Unfortunately, the current recruiting business model used by the majority of search firms, outsourcing companies, placement agencies, and internal recruiting departments is on its last legs and cannot deliver the desired results.

Transactional recruiting that is in use today by the majority of search firms and internal recruiters has been around for more than 50 years. There have been some marginal improvements in terms of technology – the introduction of web-based psychological or behavioral profiling, facsimile transmissions, computerized searchable databases, email, videoconferencing, and Skype, for example, but the basic candidate recruiting process and business model remain the same. Recruiting is one of only two or three industries that have not experienced a business transformation. And if clients and their recruiters need any proof that change is needed, look at the various studies that show that the "stick rate" -- the average tenure of someone recruited from outside an organization -- is unacceptable: 40 percent of senior level candidates leave, are pushed out, or are fired within 18 months, according to a Heidrick & Struggles internal review of 20,000 of their searches (Financial Times, March, 2009). This is not an anomaly at Heidrick. Other surveys show similar results at all levels, in all industries.

The time has come for the recruiting industry to seriously look at its weaknesses. Transactional recruiting models must be replaced with more accountable, outcome-oriented processes with consequences for those who provide the service.

The following statements characterize the transactional model:

Order taking orientation
Lack of understanding of the costs of failure
Divided responsibility (identification and selection)
Lack of transparency
Poor communication with candidates
Don’t rock the boat mentality
Marginal accountability
No financial fear of failure
In summary: NO PARTNERSHIP

There can be no partnership without shared risks, which includes financial responsibility. This is one key element that distinguishes transactional from transformational recruiting. While transactional recruiting is not an ideal process for the challenges we face, there will be no rush to change. Why change? There is currently no economic incentive to do so.

But the storm clouds of change are forming.

On Wednesday I will introduce you to a new approach, transformational recruiting, that will produce superior results in these challenging times.

Next: Transformational Recruiting