Roadmap for the Perfect Recruiting Process, Part 2

Nov 21, 2002

In my last article, we had developed a formal recruiting process, “recruited” other departments in the company to work with us, and learned how their decisions impact recruiting and the value of a workforce plan. In this article we want to pick up where we left off, with step four in building the perfect recruiting process. We’ll also begin discussing “the numbers” of recruiting. This will allow us to eventually understand how data can be leveraged for the addition, reallocation, or even elimination of recruitment dollars without disturbing the success ratios of your recruitment process. But getting the numbers first is the most important thing. Step Four Now that you have your process written down and diagrammed, it’s time to begin developing and assigning analytics to each step. Ultimately, this means understanding your true cost per hire. Cost Per Hire There are a lot of different ways to generate this number. Many companies have a feeling for what their cost per hire is, in general, but they tend to arrive at the number by taking their recruiting budget and dividing it by the number of hires they made that year. The problem at this point is, what do you consider to be part of your recruiting budget? It could simply be the cost of your advertising (Internet, print and third-party recruiters), but it could also include other items, such as your ATS costs, testing services, background checks, travel expenses, relocation expenses, recruiter staff salaries, and benefits, hiring manager time, the lag in time to hire and signing bonuses. Personally, I tend to want to know a true cost, which includes all of the corporate costs that go into hiring a person. But my core advice here is to be consistent and incorporate the exact same items for all open job types, realizing that some of the best ways to lower your cost per hire may not be in just advertising costs. While we will get into that area further in the next article, process improvements are an often-overlooked area for lowering your cost per hire. If you are going to include the more ethereal costs in your cost per hire, you will want to work with other departments to make sure that you are capturing the right data. Often there are dollars spent on the recruiting process that are not known or even determined by the recruiting staff. The IT department may have budget dollars for upgrades, maintenance, and development of the applications that are used by you and your recruiters such as an HRIS, ATS, posting technology, prescreening technology and others. The accounting department may get directly billed for the “above and beyond” costs that were not in the original agreement that you signed with a service provider. These could be resume-processing fees, postings over your membership level, administered tests, and more. Finally, another coworker in the HR department may handle the relocation costs for the candidate that you presented. All of these numbers can impact an effort to understand and lower the traditional recruiting cost per hire. Another shift on the traditional analytic of cost per hire is to evaluate the different costs for different candidate sources. Even with all of the external costs considered, most companies tend to look at generating a single, corporate-wide cost per hire. But if you hired executives, managers, sales, and administrative personnel and lump them all together into one number, you will get a distorted view of your true hiring costs. Once you separate the same costs out, by type of position, you might find that you are doing a great job at hiring quality managers at a low cost, but you are actually spending more to hire an administrative person that is at half the salary. At this point, to really get down to a quantitative number that allows you to effectively manage your overall recruiting budget, look at each position by the source of the candidate. But what if it takes you 90 days to fill an open job requisition? Time To Fill Time to fill can be an incredibly powerful indicator of the success of your overall recruiting process. As with cost per hire, most companies don’t evaluate time to hire by each separate job type or source. Thus, while you are tracking the number of resumes, quality of resumes, and source of resumes by job type, you also want to be sure you are tracking how long it took to fill that open requisition by those same measures. If it took over 200 days to fill a requisition, any good recruiting manager would be questioning the process. The reality is that the requisition might have been for a very unique position that you knew you were going to have to go after passive candidates on the Internet (where you only received seven resumes) and supplement with a third-party recruiter’s efforts. On the other hand, if you find that it takes you 45 days to fill an administrative position, you might have a problem with where you are posting the job and how you are evaluating the resumes. A long time to fill might also have something to do with your overall company image. It might be time to get the marketing team in on this one! Employee Performance Finally, many companies don’t take the long-term performance of an employee into consideration in evaluating their cost per hire. Sounds like these two items do not have a lot in common, right? The reality is that evaluating the eventual performance of an employee and tracking that by who recruited them and from which source can tell you a lot about your overall recruiting process and the people involved. Now that you have an understanding of the cost per hire by job type and then by source, you can now incorporate the impact the eventual hire has had on the company. While evaluating impact is something each company will have to do on its own (some HRIS systems and other new technologies and testing services are on the market today that can help in this process), if you know that you have hired 23% of your top sales performers from one Internet site, through two specific recruiters, you can make some great decisions on future spending and personnel roles. If you are a recruiter, keeping this type of information on hand can definitely make you more efficient and effective in your role. As a recruiter, your job is to bring the best candidates to the hiring managers. Even if your company does not have the ability to help you track your effectiveness, set up a spreadsheet to keep track of the basic information on your own. While it may seem like an added step in an already hectic schedule, having the knowledge of the source of your resumes, the quality of the candidates by each source, who got hired, and how they are performing can be incredibly valuable. Now that you have this kind of quantitative information, how do you further make it work for you? This is what we will discuss in the next article in the series, which will cover budgeting and technology decisions that will help you improve your recruiting process. While we touched on it briefly in this article, we will talk in more detail about why too many companies make financial and technology decisions before they look at the recruiting process, leading ultimately to higher costs.

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