The Talent Equation

November 15, 2014
The Talent Equation
Big Data Lessons for Navigating the Skills Gap

and Building a Competitive Workforce
Matt Ferguson, Lorin Hitt, and Prasanna Tambe
2014 by CareerBuilder, Lorin Hitt, and Prasanna Tambe
Adapted by permission of McGraw-Hill Education
ISBN: 978-0-07-182712-6
Key Concepts
Big data can help HR departments find efficient, innovative solutions to todays most pressing recruitment and
retention problems. Empowered by newly accessible software and communication platforms, HR professionals
are also in a position to build their companies employment brands and develop talent pipelines that will give
them an edge in human capital management well into the future.

Since the end of the recession in 2009, demand for labor has increased significantly but unemployment has
remained high. This situation reveals a skills gapa structural mismatch between the skills needed by
employers and those possessed by job candidates. Big data can help close the skills gap by uncovering the
source of mismatches and pointing to appropriate recruitment and workforce planning strategies.
Data around the value of higher education in employment underscores a need to increase access to college. The
overall educational attainment of a firms workforce contributes to its success. Across organizational levels,
college degrees add value to employee performance.
Research shows that longer tenure among employees is not always associated with better performance. Companies should use data correlating employee career paths and achievements to find a balance between
rewarding tenure and performance.
Reskilling even a small number of employees can boost the value of a companys workforce well into the future.
Training can be a significant driver of both retention and productivity.
Companies should take advantage of candidate perceptual and behavioral data to help improve their employment brands. Top applicants who have a bad experience with a potential employer are unlikely to reapply
Business Book Summaries November 15, 2014 Copyright 2014 EBSCO Publishing Inc. www.ebscohost.com All Rights Reserved
The Talent Equation
in the future. Worse, they may reduce their purchases of goods or services from the company, and spread
negative word of mouth via social media.

Web-based applications and information sourcesincluding mobile-friendly sitesnow enable HR professionals to not only save time, but also reach qualified candidates more efficiently and in a more engaging way.
Platforms like Talent Network support the development of talent pipelines and continuous recruitment
strategies that can reduce time to hire and cost per hire. Labor supply and demand data make it easier to fill
highly specialized positions.
In todays challenging labor market, talent retention is more important than ever before. CareerBuilder data
shows that retention can be significantly improved through better employee engagement. This involves
actions like increasing recognition, offering flexible work schedules, and boosting training opportunities.
Introduction
A massive amount of data is routinely collected and stored by human resources departments, but rarely used
to help companies find, train, and retain the right employees. In The Talent Equation, the CEO of CareerBuilder,
Matt Ferguson, and two information sciences scholars, Lorin Hitt and Prasanna Tambe, explain how and why
HR professionals can benefit from big data analytics. In particular, they make data-based recommendations for
closing the skills gap, measuring the value of higher education, gauging the impact of tenure on performance,
and improving key recruitment and retention strategies. Overall, the authors propose ways to make the HR
function more empirical and consultative in the future.
Navigating the Skills Gap and the Shifting Labor Market

Years after the end of the recent recession, hiring remains slow. Unfilled jobs create a problem for both organizations and the economy. The apparent skills gapa structural mismatch between candidates skills and
employer needsis a key issue for the labor market at large; the longer the working-age population goes without sufficient jobs, the more difficult it becomes to break the cycle of unemployment.
Todays workforce is growing fastest in the highly-skilled and knowledge
industries like education, health care, and business services. These sectors are
doing well because every community needs them more than many goods
and other services. In the future, as a result of automation and globalization,
manufacturing positions will likely be clustered in relatively small companies
which employ just a few skilled workers.
Data from the U.S. Bureau of Labor Statistics projects a continuing skills gap.
Jobs least likely to be sent offshore or automated will involve efficiency in
decision-making and productivity. Candidates who study diverse disciplines
in college will be seen as likely innovative thinkers, making them more competitive in a knowledge-based economy than their peers.
Since the official

beginning of the economic recovery (June
2009), the labor market has been like a
freeway traffic jam:
four of the five lanes
are stalled completely, or are at best inching forward at a slow
crawl.
The skills gap can be traced to a variety of factors, including poor education, shifting technologies, lack of on-the-job training, and highly specific job requirements. Companies can
address the gap with strategies like continuous recruitment, a process of ongoing identification and contact
with candidates who may be a good match for future positions. They should collaborate with schools to encourage education in trending skill sets. Increased funding for workforce training, competitive compensation, and
investment in tools that predict future mismatches can also help American employers to better manage their
human capital resources in an era of global competition.
The Talent Equation
An Absolute Good: Educations Value to Workers and Employers

The recent economic crisis shook the publics confidence in higher education as a means of delivering individual and economic advancement. However, data confirms that college-educated employees still receive higher
wages than those without a bachelors degree. Cities with higher educations level tend to have a stronger ability
to create jobs than other municipalities.
According to the authors nationwide, cross-industry survey of more than 2,700 hiring and HR managers, better-educated workers also boost the marketplace performance of their employers. For example, a ten percent
increase in workers with college degrees is associated with the following increases in value added per employee:

$31,000 in sales
$26,000 in customer service
$63,000 in management
To obtain such benefits for their companies as well as for the economy as a whole, employers should collaborate
with colleges to ensure that in-demand skills are taught. They should take an interest in policy solutions to the
challenge of making college affordable for people of all economic backgrounds, as well as in technology-based
cost-reduction options like web-based MOOC (massive open online courses). Importantly, they should also provide an organizational environment where current employees are able to learn and utilize new skills over time.
Developing
effi- Tenures Effect on Market Performance
cacious retention According to the U.S. Bureau of Labor Statistics, the average citizen will work
for 8-10 different companies during the course of a career. It is unclear, howstrategies is an art ever, whether working for fewer firms benefits the individual employee.
desperately trying
to become science. Recent data indicate that average employee tenure is on the rise; this trend
Retention is a chal- is especially pronounced during uncertain economic times, when employees
hesitate to change jobs and seniors delay retirement. Among the population of
lenge that perplexes workers over the age of 20, women are participating in the labor force in higher
business leaders. A numbers than previous generationswhile men are doing the opposite.
survey of more than
Younger workers tend to be more willing to switch careers, and thus are more
400 global C-suite likely to have shorter tenures at their firms than older employees. For the highly
and senior execu- skilled, job hopping may be the best path to increased salaries. CareerBuilders
tives found that only analysis shows that most managers believe their most productive workers are
27 percent say their those who stay with the company for 3-7 years; tenure of at least five years
company excels at has the most positive impact on value added by workers in customer service
retaining key talent. (additional $16 million) and information technology (additional $11 million).
However, extended tenure does not add significant value in the sales, manufacturing, or management sectors. Other benefits, like reinforcement to the company brand, may accrue to
employers who retain their people over time. But eventually, longtime employees may need lateral, vertical, or
diagonal moves in order to avoid burnout.
Empowering Employment
Companies have come to believe that training employees is a risk, fearing that the beneficiaries of a training
program will take their skills to competitors. Moreover, with todays job opportunities focused on niche skills,
organizations are less likely than in the past to invest time in those who need more general training. The result
The Talent Equation
is a cycle of unemployment for individuals without technical skills and job vacancies for employers who cannot
find suitable candidates.
This problem became evident after the 2008 financial crisis, as in-demand skills differed from those offered by
many non-technical workers. Young veterans were hit especially hard as companies with blue collar positions, in
particular, made a sluggish return to hiring. Another problem is that veterans do not always identify themselves
as having served in the militaryand when they do, employers too often fail to recognize the value of that
service. On the positive side, initiatives by the U.S. Department of Defense and some private businesses have
reduced unemployment among young veterans to 9.9% from a high of 12.1%.
In addition to increased access to higher education, enlarging the role of employers in the training process would
help alleviate current skills shortages. In most organizations, training programs have been downsized or do not
exist, reflecting a common belief that skill acquisition is the employees responsibility. However, employee training has been identified as a more powerful driver of retentionand subsequent productivitythan factors
such as decreased workload or academic reimbursement. In particular, federal workforce training has proved
a boon to both dislocated workers and employers who are otherwise unable to find the candidates they need.
A Better Candidate Experience

Every company has an employment brand, based on job seekers perceptions of that organization as a place to work. Top talent will not be attracted
to companies with employment brands that project a negative culture or
other unappealing characteristics. For example, they resent being forced to
fill out overly long, complex applications, or to wait endlessly for a response.
If rejected, those candidates are likely to reduce their purchases of the companys goods or serviceswhile sharing their bad experience through
widely-disseminated forms of social media.
According to candidate behavior data, most job seekers use 15 sources of
information to learn about potential employers. This means that companies
must use a variety of mechanisms to communicate positive employment
brands. Five of the most common include:
The modern labor

market increasingly
favors niche skill sets,
so more companies
should at least consider themselves as
a potential outlet for
facilitating training.
1. Job advertisements. In addition to describing the open position, job ads can discuss the organizations mission, values, and goals.
2. Online company career center. This site should be easily navigable and feature positive company representations.
3. Current employees. Word of mouth, facilitated by employee referral programs, is an extremely effective way
to communicate an employment brand.
4. Local or national media. Press releases and other types of publicity can help call the attention of talent to
positive company attributes.
5. Social media. Social media platforms must now be a major component of every organizations recruitment
strategy.
But employment brands are driven by employers actions, not just by their image-building efforts. Data collected in the nationwide CareerBuilder Applicant Experience Study reveals what matters most to job candidates.
The Talent Equation
Overall, location is the most important constraint on which jobs people apply for. This suggests that companies
who want access to national talent pools must consider options like telecommuting or relocation packages.
Also, people are motivated to apply when a company has a good reputation in the marketplace and when its
description of a job sounds interesting or unusual.
Top candidates know roughly what pay scale they can expect in their industry, so jobs can be more effectively
differentiated by stressing career opportunity or security than by including salary estimates. To attract Millennials, it is important to stress work-life balance and skills training.
When quality applicants never hear back from a company, their perception of a black hole deters them from
applying againand may result in damaging word of mouth. So it is in a companys long-term interest to notify
job seekers about the status of their applications promptly and courteously. Additionally, company recruiters
should be trained to answer questions and provide information openly and thoroughly.
Respecting
candi- Recruiting in the Digital Era
dates time may Studies show that human resources professionals significantly increase their
seem like an optional productivity by adopting a data-driven approach. Beyond saving time, new
technologies and data analytics enable companies to engage in continuous
behavior in a weak recruitment and talent network development.
labor market, but
data suggests its The process of sourcing and connecting with job seekers even when there is
no appropriate job for them, known as continuous recruitment, is seriously
necessary. Certainly underutilized. But it can yield important benefits. In particular, employers
thats the case if youre who develop a talent pipelinea network of qualified, interested candigoing after top talent. datesexperience both reduced time to hire and lower cost per hire.
Among the new web-based tools designed to help build such pipelines is Talent Network, a user-friendly CareerBuilder platform enabling candidates to upload resumes and opt in for updates and job recommendations. By
analyzing extensive job search behavioral data, the system continually exposes recruiters to qualified applicants. Other features of this tool include:

Matching job descriptions with terms and phrases most likely to be used by candidates
Making the job search efficient and easy
Communicating the employment brand
Keeping interested candidates engaged with the company
When recruiting for positions that are especially hard to fill, companies can use labor market data. Knowing the
supply of labor, regional hubs of demand, and levels of compensation allows HR professionals to target their
spending as well as educate management about appropriate pay and relocation packages.
Long term, it is increasingly critical for employers to invest in mobile-friendly career sites and application tools.
According to the authors research, a third of all traffic on job sites like CareerBuilder now comes from mobile
devicesup from a few percent in just two years. Companies must take advantage of this technology to position themselves effectively for recruitment in the future.
Retaining Talent in Critical Functions

The majority of companies struggle to retain top talent. While retention has always been important to reduce
the costs of turnover, it has taken on added significance in an era where many employers are reluctant to offer
The Talent Equation
training or to risk an imperfect new hire. A CareerBuilder survey of more than 3,000 HR managers identified five
top reasons why talent leaves:
1. Salary/wages. Employees want bigger paychecks. However, they tend to be motivated to start searching for
another job by non-pay related factors.
2. Poor relationship with boss. When asked whether they planned to leave a job within two years, 56 percent of
survey respondents who had a poor opinion of their direct supervisor said yes.
3. Lack of advancement opportunities. Particularly among young professionals, prospects for promotion are key
to retention.
4. Overwork/work-life balance. With 59 percent of workers reporting significant stress in their jobs, employers
need to be aware of and prepared to address this issue.
5. Unhappy with organizational culture. People are much faster to quit jobs in a culture emphasizing work-task
values than in a culture emphasizing interpersonal relationship values.
There is also data indicating what actions employers can take to improve retention. These include:

Providing flexible schedules
Increasing employee recognition
Asking employees what they want and acting on that feedback
Increasing training and learning opportunities
Providing perks like free lunch and game room
Hiring additional people to ease workload
Providing academic reimbursement
Creating specific career and promotion paths
Instituting a casual dress code
Building a positive employment brand is as important to retention as it is to recruitment. Additionally, HR departments should lay a data-based foundation for continuous improvement. For example, they should routinely
field employee attitude surveys, comparing levels of satisfaction to turnover or productivity rates. Research can
also indicate what motivates various employees and how the organization can address workplace problems.
Features of the Book

Estimated Reading Time: 45 hours, 234 pages
The Talent Equation makes a strong case for the importance of collecting, analyzing, and acting on a wide
variety of data in HR decision-making. The authors explain and apply findings from large scale, multifaceted
research to offer guidance, advice, and encouragement. They also drive home the message that skilled management of human capital has become more important than ever before to marketplace performance.
The Talent Equation
The book is highly relevant to both HR professionals and managers who want to improve their talent acquisition
and retention strategies. Each chapter includes interesting real-world examples from a range of industries and
types of organizations. The chapters should be read in order, as each topic leads to the next. The Talent Equation includes notes and an index.
Contents
Acknowledgments
Introduction: Big Data and HR
CHAPTER 1: Navigating the Skills Gap and the Shifting Labor Market
CHAPTER 2: An Absolute Good: Educations Value to Workers and Employers
CHAPTER 3: Tenures Effect on Market Performance
CHAPTER 4: Empowering Employment: Training, Reskilling, and Hiring for Potential
CHAPTER 5: A Better Candidate Experience
CHAPTER 6: Recruiting in the Digital Era
CHAPTER 7: Retaining Talent in Critical Functions
CONCLUSION: Investing in the Most Important Asset
Notes
Index
Further Information
Information about the author and subject:
www.talentequationbook.com
Information about this book and other business titles:
www.mheducation.com
Click Here to Purchase the Book

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By Roberta Chinsky Matuson
Talent Intelligence
What You Need to Know to Identify and Measure Talent
By Nik Kinley & Shlomo Ben-Hur
The Talent Equation
About the Authors

Matt Ferguson is the president and CEO of CareerBuilder, the global leader in human capital solutions. Ferguson
took CareerBuilder to the number one position in the online recruitment industry within five years. Under his
direction, CareerBuilder continues to outpace competitors in traffic, revenue, and technology innovation, and is
quickly expanding its global footprint with a presence in more than 60 countries worldwide. He set into motion
an evolution that has taken CareerBuilder beyond being the largest job board in the nation to a company that
offers a wide range of talent intelligence and consulting services, targeted advertising, and recruitment support.
Lorin M. Hit is a professor of Operations and Information Management (OPIM) at the University of Pennsylvania,
Wharton School. He is currently a member of the Information Strategy and Economics Group (ISE) and senior
fellow of the Wharton Financial Institutions Center. His current research is on the relationship of organizational
and strategic factors to the value of IT investments, the design of IT outsourcing agreements, the economics of
IT labor, the nature of competition in electronic markets, the effects of online distribution on customer behavior,
and the methods for evaluating IT investments.
Prasanna Tambe is an assistant professor of Information, Operations, and Management Sciences at the New
York University Stern School of Business. His research interests include the economics of IT labor and how technological change has affected labor markets. In his recent papers, Professor Tambe has focused on the effects
of offshoring on IT skill demand in US firms and the importance of IT labor mobility for spreading IT-enabled
practices among firms. His research has been published in Management Science, Information Systems Research,
Communications of the ACM, and Information Economics and Policy, and has been mentioned in press outlets
including CNBC, The Wall Street Journal, and Forbes.
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November 15, 2014