Gone are the days of posting recruitment ads in the Classifieds section in print media. Nowadays, digital platforms have overtaken traditional media when it comes to hiring. Online platforms have greater outreach and engagement. They target the right audience to fill job vacancies faster. Even better, job posters can get more data about how many people viewed and responded to your job advert.
Today we will look into how to get the maximum return on investment (ROI) with your recruitment efforts. That way, your company is in a better position to judge how much value a Talent Acquisition (TA) team brings to the table.
To track these efforts, some key performance metrics are essential. A survey at HR.com shows that 28% of talent acquisition teams don’t rely on metrics, 30% relied on cost-per-hire metrics, and 34% opted for applicant-per-opening as the key metric.
The data above suggests that managers and human resource departments can benefit from key metrics to measure success. But the approaches outlined above also have their drawbacks. They include:
• Applicant-Per-Opening – This approach is suitable for measuring candidate volume but not quality.
• Cost-Per-Hire – This approach assumes that all employees in a company have the same average salary, irrespective of their skills and role.
Note: Don’t forget that these key metrics do not identify the value each resource adds to the business.
Is there a better approach to calculate the ROI brought in by TA teams? Let’s dig in!
To show the business value of your TA team, let’s take a simple equation:
ROI = Return/Investment
Investment here means how much money was spent on recruiting the new hire. This figure may include costs spent on advertisements, arranging career fairs, how much time the recruiter spent at those fairs, and more.
Suppose you advertise a job for a salesperson, who is expected to bring $500 (opportunity cost) in sales per month. Let’s say you spent $100 on arranging that job fair and $50 for the hours the recruiter spent there to find the resource (investment). Your company expects this employee to bring in $30,000 per year (revenue target).
We’re going to use a new approach to find out:
• Investment – the cost of job fair + recruiter pay
• Opportunity cost – the revenue that an employee is expected to bring in
• Revenue target – the specific amount of revenue an employee is supposed to generate for a pre-determined time, i.e. a year.
This is just one way to calculate the ROI. There are other ways as well, and you should always consult with your CFO or finance department to work out the best approach that suits your company.
Not all recruitment advertisements and jobs are equal. The TA team must also consider the nature of the role you are hiring for. Some positions are time-sensitive. For example, a dental clinic might need to immediately find a new dentist because the number of patients has increased. These sorts of job roles can be classified as crucial. You need to fill them up fast or risk incurring huge opportunity costs.
For some jobs, your team can afford to take their time to find the best resource, such as job listings for chief executives. These kinds of roles can be defined as imperative roles.
You can divide the roles into different categories, such as crucial and imperative roles. You can then apply a multiplier to each category.
There’s no one-size-fits-all approach when it comes to determining the most optimum ROI for your talent acquisition team. However, with a few key metrics, your team can settle on the best approach that suits your industry and business.