Three reasons employers will keep hiring graduates and what you can do to make sure you find the best talent for your business

Organisations looking to hire the very best graduate talent are experiencing an unprecedented period of change.  

From government tax breaks to great strides in technology; from the UK’s productivity crisis to the rise of artificial intelligence – multiple moving tectonic plates are changing the recruitment landscape.

In this article, I’ll seek to explain the forces behind this evolving environment. I’ll also discuss why leading organisations will continue to hire graduates and what recruiters can do to make sure they maximise their return on investment when hiring graduates.

What’s happening in entry-level recruitment?

A number of key trends are fundamentally reshaping how organisations are strategically approaching entry-level graduate recruitment. These are centred on four main themes:

1. The UK productivity crisis & the Apprenticeship Levy

The UK has one of the lowest rates of productivity in the developed world. The French and Germans take just four days to do the same amount of work it takes the British five days to achieve[1]. The hardest part of the productivity crisis is that economists still can’t agree on what is causing the UK to have such low rates of productivity.

One of the potential culprits is the poor education and underinvestment in the development of our human capital. In a nutshell, bright students from low-income backgrounds are not fulfilling their potential. In response to this issue, the Government will be introducing a levy from April this year to encourage the training and development of apprentices.

The Apprenticeship Levy significantly changes the incentive to hire entry-level talent as it will require all employers operating in the UK with an annual pay bill over £3 million to pay an apprentice tax (0.5% of their payroll). However, this tax can be reclaimed in order to fund the training and development of apprentices - who are mainly school leavers, i.e. non-graduates. When organisations are looking where to invest their resources, a government tax break is highly likely to incentivise them to develop a strategy around apprentices and hiring school leavers, potentially shifting resource away from hiring graduates.

2. Technology

An increasing number of work processes (data entry, data analysis, etc.), which were historically carried out by graduates, can now be outsourced to technology-based solutions and/or offshored to cheaper overseas labour markets. And this trend is set to continue – a recent report predicted millions of jobs, including those of skilled workers, could be displaced by artificial intelligence[2]. Graduates are often an investment in a firm’s future, and if that future is increasingly technology focused then firms may questions their need for graduates.

3. Social mobility

Despite the reforms introduced by the Blair and Brown Labour governments to get 50% of 18-year-olds going to university, it’s still true that university graduates come from wealthier families than their non-university educated peers. For example, just 5% of students on Free School Meals will go to a leading university[3]. As well as the economic argument that we need more highly skilled workers entering the labour force, there is a moral imperative to do more to ensure all young people have the opportunity to fulfil their potential.

4. Research & data

Research and data breakthroughs are starting to question the long held assumption of a causal relationship between academic performance and professional ability – i.e. the belief that strong performance at university equates to a great hire. Professor James Flynn from the University of Otago has shown that intelligence isn’t static or fixed, but rather dynamic. People are not born clever or stupid – intelligence changes over time based on someone’s ability to take feedback, be persistent and their desire to continue learning. This is often defined as having a ‘growth mindset’.

In a recent BBC radio programme, Is Talent a Thing?[4], Carole Dweck explained that it’s the way people think about their talent that affects what they can achieve - if they believe they can grow, they will. Equally, if students have a ‘fixed mindset’ (e.g. believing they’re not clever), it will hold them back.

Research has also shown that testing cannot be relied on to assess the lifelong ability of an individual. In her research, Angela Duckworth from the University of Pennsylvania has demonstrated that grit is more important than IQ[5].

Based on all this evidence, as well as social trends, it’s not surprising that organisations are, rightly, re-examining their entry-level talent strategies.

So with all this happening, why are employers still seeking to hire graduates every year?

A proven model to find top talent

Hiring graduates is a proven way for organisations to find top tier talent for their labour force and create a strong and reliable pipeline of future business leaders. Many of the UK’s leading graduate schemes have been going since the 1950s and these programmes create not only the middle managers that organisations need as they grow, but in many cases their leadership teams.

There are countless examples of fresh graduates heading straight into organisations and going onto to achieve incredible things.

• Sir Stuart Rose, the much-vaunted former Chief Executive of Marks & Spencer joined the retailer in 1972, as a management trainee. Sir Stuart (or just plain Stuart back then) rose up through the ranks and as well as via roles at other retailers, ended up leading Marks & Spencer’s from 2004 to 2010.
• Paula Nickolds joined John Lewis Partnership in 1994 as a graduate trainee in London. Last year, Nikcolds become the first female MD in the chain's 152-year history and to date, she is the only female boss of a high street store group[6].

Graduate programmes have a phenomenal track record of finding the exceptional talent that leading organisations need to grow.

A strong talent pool

While data is patchy, it feels intuitive that completing a degree does prove something about a candidate and how strongly they will perform in certain roles. From demonstrating that an individual can work hard for three plus years, to assessing their ability to communicate and analyse information, skills learnt at university are applicable to the working world. Plus if someone is bright, driven and determined enough to survive three years in an academically demanding environment that requires high levels of attention to detail, then they could be a great fit for certain organisations that have a similar approach and culture.

Additionally, a 2014 report by CEB found[7]:

• a positive correlation between strength/consistency of talent and candidates that came from Tier One universities
• the cost per graduate hire reduced by 48% when recruiters focused on campuses producing high academic quality students

Far more research needs to be done on the relationship between academic performance and career performance, but it is interesting that many of the world’s leading employers, who are incredibly evidence based when it comes to making commercial decisions, do continue to actively recruit academically strong candidates.

An increasingly diverse talent pipeline

In the year I was born (1979), only 30% of young people attended university. The pool of graduates was narrow and unrepresentative of the UK as a whole – it was predominantly male, white and middle class.

Encouragingly, there have been major developments in universities successfully attracting a far more diverse and representative pool of students.

• The percentage of graduates attending university from disadvantaged backgrounds has increased significantly since 2006[8].
• The least advantaged young people in England are now 65% more likely to go to university or college than they were in 2006[9].

• The average participation rate of young people at university has risen from approximately 10% in the 1960s to approximately 40% today[10].

In a nutshell, a UK university education is no longer the preserve of the elite.

While a lot more needs to be done, particularly in the area of Black & Minority Ethnic (BME) participation, universities are now a far better hunting ground for organisations looking to attract the best and brightest from all walks for life.

How to improve your ROI from graduate recruitment

Many employers will continue to hire graduates as it makes sense for their economic needs. If you’re one of those employers, here are three things you can do improve your return on investment.

1. Focus on evidence based recruiting

Laszlo Bock, former Head of People Operations at Google, argues that normal interviews are flawed in finding the best talent. 85 years of research has shown that unstructured interviews (you know the type, “so tell me why you want to work here…”) are an awful way of predicting success for a hire. Bock argues that a ‘work sample test’ is the best way to predict if a hire will work out, along with strong alignment to company values. The more rigour and process you can apply to your graduate hiring, the better.

2. Widen the net

Too many firms are still recruiting from a narrow range of top tier universities. While this does reduce search and screening costs for the employer, there are three dangers to this approach.

The first risk is that you will create a company of clones with little diversity of thought or experience. The second is that your firm will not be representative of the clients you seek to serve. The third risk is that your firm risks missing the exceptional candidates - the needles in the haystacks - who for whatever reason (poor schooling, difficult family background, absence of careers advice, etc.) weren’t lucky enough to end up on the right campus. Cast your net wide - you never know what diamond you might find.

3. Benchmark talent

In 2015, a study by the University of Cambridge found that state school pupils are more likely to do better at university than privately educated pupils who start with similar grades[11]. It makes sense that equally bright students, who receive disproportionate amounts of investment in their education, will perform differently when it comes to exams.

So when assessing candidates potential as future employees, a job applicant from a comprehensive school with BBC at A level needs to be looked at differently than an applicant with AAA* from a top private school. The more employers can look at context in their recruitment decisions, the more accurate and effective their hiring decisions are likely to be.

Conclusion

There is no denying these are times of rapid change in the early careers recruitment market as organisations constantly evaluate the ‘where’, ‘who’ and ‘how’ of hiring future talent.

However, with a track record of identifying future business leaders and an increasing focus on diversity, UK universities will remain a key recruiting target area for leading employers. There is a danger that some employers throw the baby out with the bathwater and overreact to these changes – if they do they’ll miss the valuable, and proven, graduate pool.

The key for employers who want to continue to excel in the war for talent is to ensure they adapt their approach to reach as broad a base of talent as possible, deploy evidence based selection processes and benchmark graduate candidates to ensure fairness and accuracy in their hiring processes.