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Cathy explains how to track the recruiting process in Excel for staffing needs. She suggests creating a new blank workbook in Excel, where you can widen the columns for better visibility. The first column should be labeled "Candidate Name," followed by "Address," and a column for "Hired" status to monitor whether candidates are hired. Cathy recommends merging two cells in the title row by selecting them, going to the format cell option, choosing alignment, and enabling "wrap text" and "merge cells." This method organizes candidate information effectively and allows for embedding documents related to the recruiting process.