The data is in and it’s clear that heavy spending on recruiting is critical if a university wants to get into the men’s NCAA tournament. This positive correlation between recruiting spending and success in sports should be noted by corporate recruiting leaders because it could help support their business case for increased corporate spending on recruiting.
The impact of heavy spending on recruiting in men’s basketball is clear and hard to refute. The eight teams that have gotten into the tournament each year over a five-year period spent an average of three-and-a-half times more on recruiting than teams that never made the tournament over those same five years. The top three schools that spent the most on recruiting each spent approximately $2 million per year (Kansas, Louisville, and Kentucky), which was more than 30 times the average recruiting budget of the schools that never made the tournament. An excellent analysis conducted by USA Today “found a correlation between schools that spend big on recruiting and schools that had success making the NCAA tournament from 2010 to 2014.”
Additional Indications of the High Impact of Recruiting
Although some may mistakenly dismiss any sports analogy, executives in sports have a long and superior track record over corporations in making the best business case for making recruiting a top priority. In sports, the impact of hiring or losing a single player like LeBron James is immediate both in winning games and on the bottom line.
In the corporate world, we already know that Google, the No. 1 employment brand, has developed a world-class business case for recruiting. And as a result it has a recruiting budget that is double that of the average firm. Even its chairman has acknowledged that “hiring is the most important thing you do” (Eric Schmidt).
Other research has demonstrated the tremendous business impacts of recruiting. For example, research by the Boston Consulting Group found that recruiting ranked No. 1 and employer branding No. 4 among the highest business impacts among all HR functions. Its research demonstrated that excellent capabilities in recruiting alone could increase corporate revenue growth by three-and-a-half times and corporate profit by two times. Even the U.S. Army has discovered the critical importance of great entry-level recruiting. In a 15-year RAND Corporation study of the Army, the study leader Beth Asch concluded that “If you want a high-quality staff sergeant, you’d better recruit him.”
Additional Ways to Build the Business Case for Higher Recruiting Budgets
Unfortunately most recruiting leaders do an extremely poor job of demonstrating the tremendous business impacts that result from great recruiting. If you are among the many that struggle to get increased recruiting resources, consider using the following business-case approaches.
- Calculate the performance differential — it doesn’t make any sense to spend the extra time and money that is required in order to hire top performers if you can’t demonstrate the percentage increase in performance that a top-performing hire will have over an average hire in the same job. Firms that have done this calculation have found the performance differential to vary between 10 times and 300 times.
- Convert your recruiting results into revenue impact — the most universally accepted business impact is increasing revenue. So, work with the CFO’s office to quantify in dollars the impact of great hiring on corporate revenue. Start by showing the percentage of on-the-job output improvement that your new hires have over previous hires (those hired under a lower-funded process). Start with revenue-generating jobs and show how that percentage performance increase results in direct measurable increases in corporate revenue.
- Show the correlation between spending and new-hire quality — demonstrate the statistical correlation between increased spending on recruiting (cost per hire) and the improved on-the-job performance and retention of new hires. At the very least show that excessively lowering cost per hire negatively impacts the quality of the hire.
- Show them how data-driven recruiting increases business impacts — you can dramatically improve your recruiting results by shifting to a data-driven recruiting approach. Demonstrate how funding a data-driven recruiting approach would improve the on-the-job performance of new hires. Follow the Google approach and statistically determine precisely which selection factors predict on-the-job success and which recruiting sources routinely produce the highest-quality hires. Also show how dropping low value sources save time and money.
- Demonstrate the costs of a weak hire — identify a group of weak hires who previously required performance management or termination. Then work with the CFO’s office to calculate the dollar costs for on-the-job errors and management/HR time and resources. Then compare those negative costs to the positive performance improvement as a result of a high-quality hire in the same job.
- Demonstrate the impact of your employer brand on the quality of applicant — show the correlation between an improved external employer brand image and the number and quality of applicants who you receive. Also show the correlation between your external image and new-hire performance on the job.
- Conduct a split sample with a control group — nothing is more convincing to cynical executives than demonstrating the impacts of recruiting by using a split sample control group test. Select a high-volume job where performance is already measured (i.e. sales or call-center positions). Then fill half the open jobs using better-funded and advanced recruiting approaches. With the remaining open jobs, change nothing and fill them using the current recruiting approach. After six months demonstrate the differential, showing the higher on-the-job output percentage and the increased dollar impact of those hired under the advanced recruiting approaches.
- Business unit turnaround — if you’re really bold, select a struggling team or business unit and assign your top recruiters to it. Then show how by using enhanced recruiting approaches alone you can turn around the business results of a struggling unit.
- Show the customer impacts of a negative candidate experience — in retail and service organizations, there are many cases where you can identify when one of your customers applies for one of your jobs. In the situations, show how rejected applicants/customers with low candidate-experience scores subsequently reduce their future product and service spending.
Final Thoughts
Even though intuitively recruiting leaders know the tremendous value of recruiting, they all too frequently do an extremely poor job of making the business case for better funding. So, if you are tired of doing more with less, improve the way that you convince corporate and HR executives by better demonstrating the business impacts of great recruiting which in turn means great hires who raise company profits.
You might start with sports analogies because executives understand them, but then shift to financial and statistical approaches that have been used successfully by marketing, finance, and sales. Most don’t realize it but it turns out that the highest ROI activity of recruiting leaders is building a compelling and powerful business case.