Recruiting’s Top 7 Bottom-line Business Impacts That Most Ignore

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Jun 3, 2019

The ultimate goal of any business function should be to have a direct and measurable impact on their company’s bottom line and corporate strategic goals. Having a direct and visible impact on bottom-line results will make your team proud. But it will also get you more executive support and funding. Even though nearly every recruiting leader strives to “be more strategic,” few talent-acquisition leaders seem to be aware of the specific recruiting areas that generally have the highest impact on bottom-line business results like revenue generation and workforce productivity.

At the same time, we know that CEOs are currently focused on recruiting. We know that because a 2019 survey of CEOs ranked the No. 1 internal business challenge to be attracting and retaining top talent. A similar survey revealed that 80 percent of CEOs worried about the availability of key skills. The strong concern still exists despite the fact that among all HR functions, BCG research has revealed that recruiting has the highest impact on revenue growth.

This article briefly highlights the seven recruiting areas that have proven to have the highest bottom-line results. Surprisingly, few corporations focus on or measure even one of them. These impact areas are split into two categories: revenue generation actions, and actions that increase productivity.

Revenue-generation Actions

Many talent-acquisition leaders focus on low-business-impact activities like reducing recruiting costs. But such efforts have little strategic impact, because the total cost of operating the recruiting function is typically less than one half of 1 percent of all corporate costs. Instead, their focus should be on increasing corporate revenue, which is a strategic area that all executives watch closely. There are two recruiting focus areas that have the highest impact on revenue.

1) Prioritize hiring in revenue-impact jobs

  • A focus on hiring top performers in revenue-generating jobs will immediately increase revenue. Spending the necessary time and resources to hire top salespeople, for example, can yield dramatic results. Top-performing salespeople sell between 4 and 10 times more than the average salesperson.
  • Although the revenue impact may be a little more indirect, great hiring in customer-facing and product-design jobs will also eventually increase revenues.

2) A poor candidate experience may cost you customers and revenue

  • If a firm has a retail product, as many as 18 percent of its customers may also be job applicants. So, losing applicants/customers as a result of a poor candidate experience or an insensitive rejection process can cost you a lot (at one firm it was over $5 million per year in lost customer revenue).

Actions for Increasing Productivity

There are five focus areas within recruiting that can dramatically increase individual worker and team productivity. Since employee costs often reach 60 percent of total variable corporate costs, increasing the return from this investment will have a significant bottom-line impact.

3) Higher-quality hires are more productive

  • With an average turnover rate of 20 percent, a significant portion of a team is replaced each year with new hires. With so many openings, a focus on using data and machine learning to improve the quality of hire over many key positions will rapidly increase team productivity. Quality of hire is defined as the on-the-job performance of new hires, compared to a standard. Rather than trying to improve quality in every job, start by prioritizing the jobs that have the highest impact on overall corporate productivity. Even a 10 percent productivity improvement across all key jobs will get everyone’s attention.
  • Prioritizing the hiring of more innovators will also dramatically improve productivity and business results. Innovators will likely produce 10 to 25 times the output of an average worker in the same job. Hiring more innovators may indirectly encourage current team members to increase their levels of innovation.
  • Several recent studies have shown a high correlation between diversity and improved business results. So, developing a data-driven program to prioritize diversity hiring in customer contact and product development will dramatically improve productivity and business results.
  • Prioritizing the hiring of those with rare in-demand technology skills can help a firm grow. Failing to have enough talent in the “must have to grow” areas of robotics, machine learning, quantum computing, cybersecurity, and advanced mathematics will be a major limiting factor. And since developing talent in these areas is risky and time-consuming, most of this developed talent will have to be obtained through recruiting.
  • Improve your quality of hire by decreasing your negatives that bring your average down, including the percentage of failed hires. About 46 percent of all new hires fail within 18 months and the “Cost of Miss-Hire Study” revealed that the costs of a mis-hire are 24 times salary. Weak hires also require much more counseling, discipline, and supervisory time.
  • Hiring those who fully meet all the job qualifications will reduce new-hire time to productivity. They need no additional training or experience in order to get up to speed.
  • Hiring those candidates who have both the required current skills and the soon-to-be-needed “future skills” will reduce the need for future layoffs when the required job skills shift. Hiring individuals that are self-directed learners and that are already developing your firm’s needed “future skills” make it possible to maintain team productivity and innovation over a longer period of time.
  • Deliberately targeting and hiring high-impact employees from your competitors will allow you to capture their best practices and new ideas. This will increase your productivity, while simultaneously your competitor’s results will decrease.

4) Hiring faster increases team productivity

  • In today’s highly competitive talent marketplace, making fast hiring decisions is more important than it has ever been. Faster hiring means you won’t lose high-quality in-demand candidates who may be gone in as few as 10 days. Losing top candidates mean that you will be forced “to settle” for second choice candidates. That will lower team productivity because in some cases, the second-choice candidates will perform 20 percent less than the No. 1 candidate. Unfortunately, when hiring managers lower the standard even further and settle for “butts in chairs,” the loss in productivity will be even more dramatic.
  • Slow hiring means that key unfilled positions are open for dozens of unnecessary days. And with no one in the job, obviously, the work remains undone. The productivity or revenue loss for some jobs may be several thousand dollars for every position vacancy day. And because many time-to-fill days are 33 percent too long, the lost productivity can be tremendous. The strain of team members having to fill-in for vacant positions may also increase team stress and turnover.

5) Hiring those who stay longer will increase team productivity

  • Surveyed executives revealed that between 10 and to 25 percent of new hires leave within the first six months. Early new-hire turnover dramatically reduces team productivity because the new hire quits before they have peaked. So, they never can reach their maximum productivity levels. Early turnover means that the position will once again be open for more vacancy days. The team must pay the tremendous costs associated with recruiting a replacement in the lost productivity because the new hire that may take months to get up to speed. Fortunately, accurately predicting the retention trajectory for candidates is possible.

6) A focus on hiring those with leadership skills

  • Having enough leaders within a business unit is critical for growth. Although some may be developed internally, a significant percentage of new hires should have leadership potential. With more leaders, fewer projects will be delayed because of a lack of leadership. And because more team members can get direct leadership guidance, team productivity will increase. A hiring process that selects a larger percentage of new hires that already possess superior leadership skills will allow the business unit to grow faster.

7) Minimize excessive manager time spent on recruiting

  • Obviously, a manager’s involvement in recruiting is important (in fact it’s the No. 1 success factor). However, every hour that hiring managers spend unnecessarily on recruiting and hiring, is an hour that they can’t spend on normal business responsibilities. So, it helps team productivity when recruiting fully supports their hiring managers so that they can still produce high-performing hires while keeping their focus on their daily duties.

Converting Recruiting Results Into Dollars Makes Executives More Aware

If one of your talent-acquisition goals is to get executives to pay more attention to recruiting, directly impacting revenue and productivity may not be enough. Because the language of business is dollars, take the next step. Convert the above business impacts into their dollar impact on overall corporate revenue. For example, revealing that better-quality hiring resulted in new-hire salespeople selling 14 percent more might get some executive attention. However, if you reported that 14 percent resulted in a $1.61 million increase in sales by new hires and that sales growth improved total corporate revenues by over 6 percent, every executive would notice recruiting’s contribution because anything that impacts 6 percent of total revenue will be noticed and applauded.

Final Thoughts

Face reality. I label almost all corporate recruiting metrics as “so what metrics” because typical recruiting metrics like time-to-fill, cost per hire, and interview-to-hire ratios drive little executive action. But I have found that executive inattention can be turned around in a matter of months when recruiting shifts to a business-impact focus.

The focus starts with working with the COO’s and the CFO’s offices to determine which of the above focus areas can be credibly linked to the bottom-line business impacts of revenue and productivity. Then recruiting must prioritize its efforts to focus its best talent and most of its resources on the approved areas that have the highest bottom-line impacts. Once success metrics are developed in each business impact area, the remaining key to success is just flawless execution and continuous improvement.

Author’s Note: If this article stimulated your thinking and provided you with actionable tips, follow or connect with me on LinkedIn, subscribe to the ERE Daily, and hear me and others speak at ERE’s October event in Washington, D.C. 

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