Show Me The Money! Demonstrating the ROI of Recruiting Efforts

A colleague of mine recently pointed out that his organization’s executive management does not count savings in time created through process improvement unless it can be shown as a reduction in headcount. That is to say, saving a recruiter an hour a day through some kind of process improvement is not assumed to mean that the recruiter is putting that time savings into other value-added activities and doing a better job recruiting. Unless it’s quite obvious that labor costs are going down or recruiter efficiency ratios are going up, the savings is hypothetical in the eyes of senior management ó that is, the savings doesn’t exist. This is the hard-line business approach that most C-level executives take in viewing the return on investment (ROI) of their recruiting department’s operations. ROI impacts their profit and loss statements, and, though the qualitative aspects of recruiting are something that smart executives are mindful of, your efforts are often considered administrative rather than strategic. If recruiting is to become a strategic player (otherwise known as “having a chair at the big table”), it is necessary to make the case with both hard- and soft-dollar savings and a clear demonstration of ever-increasing ROI. Hard Dollars In defining what hard dollars are, the element of being tangible is the key. Savings have to be measurable and quantifiable. What some consider to be hard-dollar savings depends on whom you talk to. As stated earlier, some organizations do not consider time unless it is further converted into tangible labor costs. Clearly, dollar savings that directly reflect in recruiting budgets are considered hard-dollar savings. For example, money that was budgeted for relocation that was not used through improved measures is considered a hard-dollar savings. Soft Dollars When service levels are improved or when additional expenses are not accrued (not having to pay overtime, for example), these are considered soft costs. These are the intangible elements that comprise a great deal of most process-improvement efforts: improved customer service, reduced stress from work, fewer mistakes that have to be corrected, and all of the other benefits that cascade outward into every area of an organization. While the qualitative aspect of recruiting is very important, the challenge for recruiters is to try to translate soft-dollar savings into hard-dollar savings. For example, speeding up the time to hire of a salesperson can be translated into revenue from the quota that salesperson will generate. Those are hard dollars and what your CEO will take note of and see the value in. The Past, Present, and Future Just like the three ghosts of Past, Present, and Future in Charles Dickens’ A Christmas Carol, think about where you have been, where you are at, and where you are going. To demonstrate your case to senior management, you may need to walk them through how things have been done in the past and how you do them now. While none of us want to point out how much time and money we have wasted in the past, looking at it to build a case for change can be very evocative. Once you have shown what has happened in the past and brought things to the present, you can use this to build a case for change. Like the Ghost of Christmas Future, project what your recruiting department will look like if you don’t make certain changes now. What will the costs be in one year? Two years? Five years? This is the case that must be made to justify improvements and investment in things like improved technology. For example, how much time will be saved through a better applicant tracking system? Do you know? Can you estimate this? Can you articulate the savings? Can you show how much time was wasted using the existing methods and how that will be improved? While predicting savings in the future is guesswork to a certain degree, your predictions can be taken more seriously the better you support them with historical and current data. In addition, being fluid about time savings in the future can demonstrate your understanding of the unknown elements that can impact projected efficiency. With that in mind, future savings can be given as a range, with a conservative to optimistic scope. Conclusion Much has been said about the dangers of assumptions. Assuming that senior management clearly understands the value of the work you do is a dangerous endeavor. It is the job of your department to really sell the value that you are bringing to the organization and to demonstrate the ROI that you are creating. To demonstrate the ROI of your efforts, it is necessary to effectively collect your data, analyze it, and then prove your case. This should include involving your CFO or controller to have them help you define the scorecard they will use to judge your efforts. They can tell you what they will view as hard and soft costs and give you baselines of improvements that they will take note of or even be impressed by. Whether you are proving the quality of your current work or making a pitch for investment in the future, it is important to build a solid case with clear data that speaks to the hard-dollar needs of senior management.