This the final article in my series profiling the benchmark recruiting best practices and strategies of the Valero Energy Corporation. After a lengthy study, I have found it to be the most business-like recruiting function, and one of the best overall in the world. Their comprehensive utilization of a “talent pipeline” model, which was borrowed from a business supply-chain approach, is truly revolutionary. This final part of the case study covers a profile of their leader, weaknesses that still need to be addressed, and my own conclusions.
Dan Hilbert, Manager of Recruiting
When you meet Dan Hilbert, manager of recruiting at Valero, you see right away that he is someone who thinks differently from the typical recruiting professional. Among the many things that prepared him for his current role were four years of Jesuit training, an all-male high school education, MBA training, a stint as a CEO, and Marine training (probably not coincidentally, Michael Homula, the best practice leader of the world-class recruiting department at FirstMerit bank, received West Point training to prepare him for his current role). I asked for Dan’s thoughts on a number of issues affecting his job and his recruiting organization. Here’s some of what he had to say:
What are your strengths?
“Confidence. I thrive in high-exposure, high-pressure, ultra-high-expectation projects. That’s why I love to build a department from scratch under tight timelines and high objectives, to turnaround underperforming departments, and to implement new mission-critical systems and processes. I cannot stand to finish second. I am driven to do anything it takes to help my company be first in its industry.”
What are your weaknesses?
“Patience, or lack thereof. Under-estimating the power of bureaucracies. Forgetting how often many business leaders lack respect for HR. Delegating critical projects. I am getting better here, slowly. I find myself wanting to automate just about everything, and I have worked myself out of multiple jobs by automating my processes.”
Who do you learn from?
“John Higham, one of the founders of Sun Microsystems who ended up at Tivoli. He’s one of the smartest men I ever met. He said that everything was going to supply chains, and I listened, bookmarked it mentally, and then pulled it out when I got to Valero.”
Have you outsourced, or are you planning to?
“We use RPO (recruitment process outsourcing) on an as-needed, temporary basis depending on workflow. We use RPO for assistance in candidate acquisition and screening. With our metrics, we assess our internal recruiting cost, speed, efficiency, and quality versus all other labor suppliers. If Valero ever chooses to outsource on a more permanent basis, we will know exactly what should be outsourced and will have the monthly metrics to measure SLAs (i.e. performance on service level agreements).”
Have you had any bad experiences with vendors that don’t jive with your processes and approaches? “You have touched on area ‘near’ to me. I’ve found that very few vendors have any real understanding of the needs, challenges, and problems faced by corporate recruiters. I’ve also discovered that a surprisingly high number have little technical understanding of how their products actually work. The staff augmentation and sourcing vendors come to mind quickly here. A few of the ATS vendors have savvy sales personnel, and this distinguishes them quickly. We interviewed 11 ATS vendors. The reps from HRSmart, Authoria, and Recruitmax were clearly in a separate class. “Staff augmentation and sourcing vendors’ sales personnel seldom ‘get it’ when I try to explain that we are actually using more sophisticated mining tools and posting processes than the vendor is offering. For those vendors who offer valuable services, the vendor personnel are often lacking in conversations about integration. They don’t understand that a disparate, non-integrated system is counterproductive to any supply chain — or for that matter, just about any high-production system. Vendors usually have little understanding of how difficult it is to train existing personnel in new technology. They often sell cosmic features and functions, but miss the fact that if their products are not easy to learn and use, the chance of adoption is near nil and the investment would be a waste.”
Any interesting vendor stories?
“I called one major vendor to speak to a sales rep about their ATS two years ago. After a 20-minute conversation, the sales rep decided that without getting Valero’s retail business, our company was too small for them to even consider. At the time we were Fortune 55. I was stunned. A week later I called and had the exact same conversation with a second salesperson. Ironically enough, now that we are Fortune 15, a month doesn’t go by when their salesperson doesn’t call us. In terms of staff augmentation vendors, we were referred to Novotus out of Austin. Mike Mayeux has built a superb, multi-faceted product suite. My guess is that Mike has created a standard-setting model here. The key is that they deliver.”
The Future of Recruiting According to Dan
Dan Hilbert also shared many of his views about recruiting and the future of recruiting. I find his projections to be 90% in line with my own (he underestimates the importance of brand, events, and employer referrals, in my opinion). Here are some of his profound insights on:
- The Future of HR: “I can’t see HR existing much longer in its current design. It’s going to be a flat out war, and it isn’t going to be nice. I see half to two-thirds of HR people getting wiped out in the next decade because they simply don’t have the right skills for the new generation of global business.”
- Globalization: “As a result of globalization, staffing will either become change agents or victims of change. The introduction of the new global labor pool will enable us to elevate the status of staffing to partners in providing strategic business solutions or eliminate our jobs. The choice is ours.”
- The aging workforce: “Barring a major recession or terrorist attack, the beginning of the mass retirement exodus will start to create real shortages in four or five major industries in the next year or two. The baby boomer retirement is going to cause a huge problem that can only be solved by a supply chain model, and the current model will fail the company. From a macro view of staffing, many of today’s staffing practitioners will underestimate the magnitude of the coming changes to our industry and be caught untrained and unprepared to deal with future industry demands. If companies are having difficulty staffing in labor markets with shortages of one to four percent, how are they going to cope with 20%, 30%, or 40% across an entire industry? We need to be looking at finding ways to have top performers stay as long as they can.”
- Technology: “When the war for talent is fought over the Internet, corporations will be won and lost over staffing technology. What’s going to happen to recruiters due to automation? Today, if my management said ‘do it,’ we could automate 90% of the traditional role of recruiters and run the entire department with specialist college interns. With automated workflow, automated pre-screening, online skills and behavioral testing, automated push systems for job posting, a manager self-service system, a vendor management system, and online requisition approval system, we’ve already automated over 60% of the functionality that recruiters used to do daily when I first came here. Staffing will not have the skill to deal with many of the problem we will soon face and the function may go away.”
Weaknesses and Challenges Facing Valero
Although they do many excellent things at Valero, there is always room for improvement. After completing my research and looking at my model for world-class recruiting, I have identified some areas where the Valero could still use some significant improvement. They include:
- Quality-of-hire measures. The current performance appraisal system needs to be more closely tied with actual on-the-job performance. This is essential if their currently weak quality-of-hire measure is to be improved to world-class standards. The performance appraisal system also needs to be tied to the ATS as a feedback loop for failed hires.
- Career website. Perhaps the weakest element in this technology-driven recruiting function is their current career website. Valero’s current website clearly fails to adequately portray the excitement of the amazing culture at Valero. The technology currently used on site also fails to reinforce the company’s image as a technology firm. Because the conservative culture at Valero discourages “bragging,” it will be a monumental task to build a website that adequately portrays the excitement of working at Valero.
- Employment branding. Although Valero currently has a plan for improving its external image, I have not seen sufficient evidence to convince me that their planned effort will be strong enough to overcome their senior management’s reticence to brag about the many great things that occur at Valero. Fortunately for them, no company in the energy industry has undertaken a major program to build a strong employment brand. This is an opportunity for Valero to step up and overcome the many perceptions that “non-energy” professionals have about this industry. But as the importance of technology grows in this industry, their inability to attract experts in all aspects of technology will severely hurt Valero’s ability to grow at its current rate.
- Candidate satisfaction. The current restriction on surveys at Valero will hamper recruiting management’s ability to measure the critical elements of candidate and manager satisfaction with the hiring process. Without this information, it will be difficult to measure and therefore improve the candidate experience.
- Rewards for recruiters and managers. Although Valero recruiters work hard and their managers seem to recognize the importance of recruiting and retention, nothing increases focus and effort more than instituting rewards. I recommend that they consider instituting a reward program for excellence in recruiting and retention for both recruiters and hiring managers. In fact, the Valero culture’s avoidance of significantly different rewards for individual performance may well in the long term limit their ability to attract top performers.
- Recruiting professional retention. A solution must be developed to slow the internal “poaching” of the recruiting staff. Because of their well-deserved reputation for process improvement, efficiency, process mapping, modeling, new system design, and continuous performance monitoring, staffing people are frequently pulled to other departments. This internal churn makes it difficult to maintain continuity in the recruiting department.
- Retention rates. Although current employee and manager retention rates are among the lowest in the industry, as the staggering growth rate at Valero (with its corresponding high level of challenge, growth, and promotions) inevitably slows, new methods of motivating, challenging, growing, and retaining employees will have to be developed. As there is currently no formal retention department, it is likely that the response to this challenge will be slow in coming. As their notoriety grows, Valero, as with most major firms that gained notoriety for great management practices, will become a prime poaching target for firms both within and outside of the energy industry. As a result, they need to develop a first-class retention effort that targets their best and most attractive managers and employees.
- Business case. Although Valero has done an excellent job, there still needs to be some additional quantification of the dollar impact of great recruiting, development, and retention to further convince managers to invest time and effort into recruiting and talent management.
- Prioritizing mission-critical positions. The recruiting team needs to work with senior management to further prioritize key business units, managers, and jobs, so that they can focus their limited time and resources on the most critical positions.
- Pre-need hiring. The team has done an excellent job of recruiting, but much of it is reactive to job postings. The team needs to further develop the process of pre-need hiring so that it develops sufficient talent pools to draw upon. Identifying candidates “before need” and building relationships with them can increase both the quality of candidates and their offer acceptance rates.
Some of the other possible failures and lessons to be learned (these answers came from both interviews and observation):
- Underestimating the importance of advocacy within the corporation in order to get the maximum support for the recruiting effort.
- Underestimating how difficult it is create change and implement innovation in a mega-corporation (certainly something not unique to Valero).
- Trying to roll out too many systems too quickly, which put stress on the staff and the technology.
- Thinking that all recruiters and HR professionals will embrace new technology (which could evolve their jobs to a new level) without a change management plan in place.
- Assuming that increased efficiencies would not result in the reduction in staffing resources, in a culture that is dominated by a “CPA mentality” that emphasizes cost-cutting.
- Assuming that recruiters from other major companies would understand and automatically embrace the “business of recruiting” methodology.
Conclusion: Simply the Best I’m fortunate in that I get to visit, advise, or talk to senior recruiting managers at literally hundreds of companies. I also have the honor of serving on several “best in class” HR and recruiting awards panels. All that activity exposes me to the very best, the mediocre, and the very worst in recruiting. Given that background and exposure, I do not take lightly my evaluation of the recruiting practices at Valero Energy. The Valero recruiting team is simply the best in the world at what they do, which is to treat recruiting as a business process. Dozens of authors and hundreds of consultants use the term “talent pipeline” with reckless abandon, but Valero is literally the only company that has managed the process like a true business supply chain. Perhaps it was easier for them because their business operation literally includes “oil pipelines,” but that doesn’t explain why other companies that are well known for having their own business pipelines — like Wal-Mart, Dell, FedEx, Southwest Airlines, Google, Toyota, and Starbucks — haven’t also progressed to this next level. Many areas of recruiting are highly competitive, but when it comes to operating recruiting as a business process, there are few firms to compare Valero to. Certainly both professional and college sports teams have utilized this pipeline model for years
It is important to note that what FirstMerit is planning and some aspects of Microsoft’s workforce planning are in the same league, but few others have even chosen this route. Unfortunately, I fully expect that trend to continue. In fact, most people when exposed to the “business of recruiting” methodology dismiss it out of hand. They give a variety of reasons, but it is clear to me that there is one primary reason that people reject or even fear this approach: recruiters and directors of recruiting enjoy treating recruiting as an art. They like managing based on opinions, gut reactions, and traditions, and they even seem to enjoy following the “fat of the month.” They don’t want data, facts, or business practices that are commonly accepted throughout the business world to intervene or interfere in how they manage recruiting.
That’s certainly okay with me, but given the fact that the business world has, at an amazing speed, globalized, adopted technology, and implemented metrics, Six Sigma, and business process improvement software and approaches in literally every other business function, maintaining that HR or recruiting is an “art” is likely to mean continued budget cuts, a continued lack of respect, and eventually being outsourced or even eliminated as a function. Like it or not, managing based on feelings, opinions and gut reactions is no longer acceptable in any part of any major corporation — and recruiting will be no exception. Yes, the future recruiting is right here, right now, whether you want to accept that fact or not — and it can be seen at Valero Energy.