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How to Show You’re Working at Capacity

by
Todd Raphael
Aug 24, 2010, 2:01 pm ET

Is there anyone who could help me build a business case that we are working at capacity?

That question came in August 17. I sent it along to Richard Newsom for an answer. Richard is leading a discussion about “Managing Req Loads” at the Fall conference in Florida. He also wrote a killer article for the Journal of Corporate Recruiting Leadership a year ago (short version here).

Here’s the question about working at capacity (cut down a little), and Richard’s answer.

—-

I have subscribed to ERE for years now and have enjoyed your articles immensely. This is the first time I am reaching out to anyone and am looking for some guidance.

I manage our company’s recruiting organization. We are a 4 billion dollar company, publicly traded, and employ 4,000+ employees. I have a team of seven full-time recruiters and just recently brought on two contract recruiters. Here is my challenge.

I am being asked to show that my team is at capacity, and what it would take to complete the recruiting team to address the business needs (requisitions). When I joined the company two years ago, we had 15 recruiters. In the last two years we have had three reductions in force, hiring freezes, etc. It made sense for the company to decide that we could downsize the recruiting organization. Since December 2009, our requisition load has been a consistent 100+.

Last year with seven recruiters, we filled 774 requisitions. This included moving internal resources to fill the requirements and then backfilling them and also converting temporary employees to full-time. If I remove the latter two, then we are down to 700 external hires. This indicates an average of 100 hires per year per recruiter. Two-thirds of our hires are technical, billable, client-facing, and implementers. Some require Microsoft certifications or Cisco certifications. The last third of our hires are a combination of telesales, finance, and marketing roles.

Is there anyone who could help me build a business case that we are working at capacity?

I appreciate your assistance.

—-

Richard Newsom

Hi Linda. Great question, and one that is getting more and more attention now. It sounds as if your recruiting team has been very busy. Nearly 800 hires for a team of seven recruiters appears to be a productive group. As you mentioned, the workload your recruiters are dealing with greatly depends upon the types of roles being filled (e.g. senior technical role vs. telesales agent). It also depends upon the recruiting process at your organization, the legal and compliance aspects your company follows, the current marketplace, and dozens of other factors. As you’ve recognized, simply having a “feeling” that your team is overloaded is no longer good enough. We must be able to accurately justify their capacity and current workload.

There are many different ways to approach this, and not every solution works for every company. I’d like to discuss one particular approach. It is not a new concept, as it has been used in manufacturing industries for years. However, it hasn’t been used as much in the services industry or in recruiting. David Szary has been pushing this concept hard for while now and it has a lot of merit. The concept of Materials Release Planning is an approach that could help you in this situation.

Materials Release Planning (or just-in-time hiring) considers the required process inputs to determine the size of the workforce needed. Using your example of 774 hires (and making some broad assumptions that you’ll need to validate)…

Assumptions:

  • We need to hire 774 people in 2011
  • 90% of the offers extended result in a hire
  • 25% of the interviews conducted result in an offer
  • 80% of the candidates submitted to a hiring manager get interviewed
  • It takes 1.5 hours to source a candidate worthy of submitting to a hiring manager
  • Each recruiter has 2.5 hours per day dedicated to sourcing candidates for submission
  • There are seven recruiters dedicated to recruiting throughout 2011 — thus seven recruiters X 2.5 hours per day for sourcing = 17.5 sourcing hours per day total

Calculations:

  • 774 hires needed/90% acceptance rate = 860 offers need to be extended
  • 860 offers/25% offer rate = 3,440 candidates need to be interviewed
  • 3,440 interviews/80% interview rate = 4,300 candidates who need to be submitted to hiring managers
  • 4,300 submissions X 1.5 hours per candidate = 6,450 sourcing hours needed
  • 6,450 sourcing hours needed/17.5 hours per day = 369 business days to source all candidates (516 calendar days)

Using these assumptions, it would take your team of seven recruiters nearly a year and a half to fill all 774 positions. Keep in mind that this model assumes that all hires are spread evenly throughout the year. Any cyclicality of the hiring would increase the resources you need.

Obviously you’ll have to verify the data in these assumptions to create your own bottom-line results; however, using these assumptions, you would be understaffed by nearly 50%. While your team of seven was able to handle this volume in the past, if understaffed, they did it at the expense of other things (employee engagement, quality or work, risk and compliance, etc.)

One final thought to consider: the simplistic example above treats all positions equally. Thus, it takes the same amount of time to source a Cisco-certified person as it does to source a telesales agent. To account for this you can simply segment your hires into whatever logical buckets you have (sales vs. non-sales, technical vs. non technical, etc.) and run the model separately on each of those segments, using different assumptions for each segment.

I wish you the best of luck in your journey.

Sincerely,

Richard Newsom

Vice President of Recruiting Operations

Fifth Third Bank

This article is provided for informational purposes only and is not intended to offer specific legal advice. You should consult your legal counsel regarding any threatened or pending litigation.

  1. Darryl Clements

    This question comes up frequently. I’ve seen so many different formulae and justfications it’s almost impossible to pick one. That said I offer this advice – make it real for your key business leaders and decision-makers.

    To do this, you should pick whatever formula works for you. If you don’t have one that makes sense for your environment, use the one the Richard Newsome so kindly offered up and spelled out.

    But don’t stop there – now tie it to what needs to be done in the business. So if you run just one person behind, equate that to how much work is not being done by the people who weren’t hired or hired behind schedule. I never make a business case based on recruiting/HR activity. I make it based on actual cost to sales, operations, or known business goals.

    You can simply ask them to observe/audit your recruiting team and follow a req from opening to hire to see that there’s no wasted resources or time.

    If one recruiter short means lost $ or missed goals, that’s going to mean a lot more than how much time is lost (unless time is a key component of a goal). I would then present that reducing your recruiting staff mean handing some functions back to the business and requiring them to increase retention by X %.

  2. Keith Halperin

    A good topic for discussion.
    My first question to you would be:
    1) What tasks does your recruiting staff perform- are all recruiters performing all the tasks?
    2) Which of these tasks would you pay $50 or more/hour to do- have you “no-sourced” (eliminated), “through-sourced” (automated)or out-sourced (sent away) everything that isn’t in this category of tasks. These include:
    A. Administrivia/metrics/reports, candidate & interview scheduling/coordinating/”hand-holding”/acknowledgment & routine feedback- $2.00/hr or less to outsource.
    B. Job posting/”board scraping”- $7.00-$10.00/hr.
    C. Internet and telephone direct sourcing of candidates- $10.00-$11.00/hr
    So, for the cost of a $70k A-Z FT recruiter, you could instead hire:
    2 outsourced admin/coordinators,
    1 job poster/board scraper, and
    2 phone/internet direct sourcers.
    Instead of a $55/hr contract recruiter, you could also hire 1 additional job poster/board scraper, and
    1 additional phone/internet direct sourcer.

    What’s left to do? The high value-add stuff that can’t be dealt with this way:
    Onsite project management of the remote resources, advice and assistance to the hiring managers to improve and expedite the hirings, closing the candidates and managers.

    What’re your thoughts?

    Keith

  3. Linda Lindgren

    Keith,

    Some very good points regarding outsourcing. Not sure how we would be able to implement here. There are other factors that we have been overcoming with the hiring managers, etc.

    The recruiters are doing everything as you pointed out in your comment. Cold-calling, sourcing & networking to get to fill requirements. They also do schedule all interviews, coordinate candidate travel and debriefing. Most of my team works remote as they cover large territories. They also scale from low level requirements up to executive levels. I’ve played with segmenting my team for different types of roles, but it wouldn’t work right now with the small number of recruiters.

    I would love to talk more if you’d like. I can be reached at (507) 529-7524.

    Linda

  4. Randi Casey

    When you provide your justification, please don’t forget to use the 3 most commonly used metrics to show where you compare to benchmark: cost per hire, time to accept and 1st year turnover. This will help show what you need to give up when you decrease headcount/increase recruiter workload!

  5. Keith Halperin

    @ Linda. Happy to talk. I’m at 415.586.8265
    @ Randi: these are good metrics, because they can be defined to show whatever you need them to show to get your point across.

    Cheers,
    Keith keithsrj@sbcglobal.net

  6. Just in Time Hiring – Is It a Dream? « LEAN, Just-in-Time Recruiting!

    [...] demand throughout the ‘Staffing Supply Chain’.  Richard Newsome provides a glimpse of this in his recent article.  I have been using a more complex model with recruitment organizations for [...]

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