Indiana University Corporate Lecture Program October 19, 1999

JOBTRAK Ken Ramberg, Partner Ken Ramberg, Partner Graduated from Stanford University 1987 in Economics. Worked in corporate finance at Bear Stearns &Co. Co-Founder and Chief Financial Officer of JOBTRAK. Over 400,000 recruiters have utilized JOBTRAK JOBTRAK was a semi-finalist for the prestigious National Info. & Infrastructure Award. Sits of the board of Venice Family Clinic (provider of free health care to the homeless), and College Kids (helps inner-city children get on the track to college.)

The Big Picture Problem: Skills Shortages Right now there are about 3.5 million job openings, but only 500,000 candidates in play (Source: Electronic Recruiting News, March 1999) In 1998, the US employment base grew at 1.2% according to the Bureau of Labor Statistics. Employment is expected to grow at an annual rate of only 1.3% through 2006.

We are in a skill short economy, and this is likely to endure as the following continue: Information based economy School systems fail to educate Workforce ages Job velocity is increasing in the economy. As the average job tenure has decreased to about 4.5 years (it appears to have stabilized), the number of job searches per worker has increased.

The obvious conclusion is that market power in the labor market is shifting from employer to employee. It is increasingly critical for employers to be able to compete for the best quality employees to maintain their competitive advantage. Methods that can help an employer recruit and retain talented employees should increase in relative value.

Current Labor Market is Inefficient and Unsustainable The labor market must be one of the most inefficient markets in the world. We know this because search/recruitment firms can charge up to 1/3 of a year’s compensation for making a match. Information asymmetry is quite high. From the job seeker’s standpoint, it is impossible to uncover every potential employer, and equally impossible to find a way to the proper hiring person. From the employer’s standpoint, hiring is usually based on resumes and interviews not on actual skills and work product.

How much does it cost to hire someone? The rule of thumb on hiring costs is 20% of compensation. From a flexible staffing perspective, employers are paying mark ups of 25% to 75% over what is paid to the worker. There has to be a better way. There is, and it’s called the Internet.

Needs Assessment HR Consulting Job Descriptions Pool Development Job Boards Classified Ads Evaluation Interviews Third Party Checks Hiring Processing Relocation Employing Payroll Benefits Development Training Separation Retirement Involuntary

The Internet is rapidly taking share from traditional service providers in the pool development link of the chain in the form of job boards. Over time we believe Internet applications will gain share in most of the other links as well. When hiring, employers need answers to the following: Can they do the job? - This can be determined by skills testing. Will they do the job? - This is an issue of will or discipline. Will they fit in? This requires the right interpersonal characteristics. (online psychographic and behavioral assessment tests can help).

The Job Market is Already Going to the Web Help Wanted advertising in newspapers grew at 2.4%, about twice the rate of employment growth (source: Conference Board). Jobs posted to Internet recruitment sites grew 60% last year to 963,000 and that’s only counting the top 11 job listing sites (as cited by the Industry Standard Magazine).

Why Recruit on the Web? Faster Fill Time: Some users are reporting a reduction in candidate screening time from two weeks to as little as two days. Cheaper:

Better Talent: Web sites are accessible on a global basis, so a job listing can reach the maximum audience. Access: Better access to the passive job seekers in multiple geographies and times that are more convenient to them. Quality: Most web users tend to be better educated than the average.

What’s the Internet Good For in Recruiting? Research: Background checks on candidates “Flipping” -- searching companies employee lists for potential candidates. Active Recruitment Job Posting, Resume Searches, Communicating with candidates. Passive Recruitment Marketing the employer as a “brand” Spiders/Bots to seek out candidates Taking in resumes on corporate web site.

Who Are the Players? Targeted Job Boards: JOBTRAK, Trade Association Boards Pure-Play Job Boards: HotJobs, CareerBuilder, Headhunter.Net Portals: Yahoo, Lycos, AOL, etc. Online Recruiters: Career Central Traditional Recruiters: FutureStep, Leadersonline Newspapers: CareerPath Recruitment Ad Agencies: Monster, CareerMosaic Staffing Companies: Acareer.com (Interim) Career Fairs: Westech Corporate Employers

The Future...

Resumes: The Wrong Unit of Measurement Resumes are selling documents, not skills Identical candidates have radically different resumes Resumes are job histories, not skills histories The language used is subject to a lot of interpretation Resumes can be full of fabrications

Resumes Will Become Part of a Broader Candidate Dossier Education transcripts Skills assessment tests Behavioral (psychographic) tests Background checks Works samples References Multimedia portfolios (inc. video clips) Interviews will be conducted online

Move to Performance Pricing Job boards will have to move from a media model to a transactions model, where they charge not for advertising, but for qualified candidates. Quality will matter more than quantity.

As the quality of matches improves, job tenure will increase from the current 4.5 years as people feel more fulfilled in their work. Or, more likely, job tenure will decrease as the friction costs of making a new match go down and bargaining power shifts to the worker in a skills short economy. We can envision a world where every employee will be constantly in the auction market for labor.