It costs you over $4,700 to hire a new employee. But does the outlay justify the outcome?
With limited time on hand and funds to spare, a recruiter faces immense pressure to make each investment count. So, it’s critical to think numbers if you want to add that secret sauce to your recruitment game.
In this article, we’ll see how you can measure and manage your recruitment ROI for more successful and value-driven hiring.
What is Recruitment ROI?
Like any other business investment, your workforce is also an expense that should give positive returns unless your goal is just to increase the organization’s head count.
Calculating how much you spent on hiring the employee versus the value they have added to the company gives you the returns on your investment. It’s crucial to understand that the value here isn’t an abstract term but a metric that can be quantified and improved.
How to Calculate Recruitment ROI?
You should keep an eye on a few metrics while calculating the recruitment ROI. Some of the most important ones are:
1) Offer Acceptance Percentage
In today’s competitive market, candidates turning down the offer letter isn’t an uncommon trend. But simply moving on to the next candidate won’t help you to optimize your hiring process.
If your organization’s offer-to-joining ratio is poor or decreasing, its cost will compound manifold. So, it’s essential to dig deeper into why candidates reject the job offer and how you can tackle it.
2) Time to Hire
Each day you look for a potential employee, you spend more time and money. That’s why the time to hire is another critical metric you must focus on while calculating the ROI.
Time to hire is the number of days it took for you to select a candidate from the day they entered your talent pipeline.
Time to hire = The day candidate accepted the offer – The day candidate entered the pipeline.
3) First Year Attrition Percentage
29% of the employees leave their job in the first year only. It could be because of unrealistic expectations or a bad hire.
Either way, it will leave a big dent in your recruitment process and efficiency.
You will have to hit the restart button on the whole hiring cycle and pay additional for training the new team members. You can set aside some of your budgets for employee retention, foreseeing such situations.
4) Average Cost to Hire
It’s the average cost you spend on hiring the employees in your organization.
The simplest way to calculate this is:
The average cost to hire = Total recruiting cost / total number of hires in a particular time period
Why Should You Measure Your Recruitment ROI?
1) To Optimize Resource Allocation
To sustain an organization, one needs to play the cards right. You can’t splurge when you have funds and cut corners when not.
Accurate ROI visibility lets you optimize your resources so you can plan your recruitment well.
2) Quantify Your Efforts
Your value isn’t bound to the number of hours you spend on your desk filtering the candidates. To really prove your worth, your work should translate into adequate numbers.
Recruitment ROI lets you quantify your efforts and show the leadership your contribution to the organization.
3) Identify the Grey Areas
Visibility of the critical recruitment metrics, most importantly the recruitment ROI, gives you an honest performance picture.
You can consider these as your holy grail for planning ahead and improving the weak points of your hiring system.
How to Improve Recruitment ROI?
1) Write Up Powerful Job Descriptions
Starting with an effective job description does half your work.
Your job description should be concise, informative, and exciting to encourage the candidates to apply for the open position.
A well-written job description avoids any misunderstandings regarding the role and its responsibilities. Setting correct expectations right from the beginning will automatically filter out non-serious candidates, reducing the possibility of a bad hire.
Here are some key things to consider while drafting your upcoming job description.
1) Follow a straightforward structure to convey details. Main points like the role, requirements, benefits, and how to apply should be highlighted.
2) Don’t fluff it with unnecessary information. Keep it to the point but without making it dull.
3) Use emojis to catch the attention and break the monotony. However, avoid too much of it as it can be distracting.
4) Discuss with the respective department leads to understand the exact requirements and craft a realistic job description.
2) Tune to Online and Offline Channels
70% of the candidates are passive job seekers, which means not all star candidates are online scrolling through the job listings.
How are you planning to reach them?
To do so, incorporate offline resources with your online database.
1) Promote the vacant position through mass communication channels like newspapers, TV ads, or even billboards.
2) Use social media to raise brand awareness. Not all passive candidates use job platforms, but they are on social channels.
3) Make candidate sourcing a standard aspect of your KPIs. It will help you build a candidate database with profiles handy whenever required.
3) Leverage Internal & External Help
Delegation and seeking help are the skills that recruiters should learn at the earliest.
It will get things done faster while reducing the chances of error.
1) Outsource the candidate sourcing or screening through a third party.
2) Ask your employees for referrals.
3) Provide a share option in all your job descriptions so that it can reach the right audience quickly.
4) Engage with a recruitment agency to boost your hiring cycle.
4) Integrate an Applicant Tracking System
Automating your candidate tracking is the biggest favor you can do to your hiring process.
A well-built applicant tracking system will save you time and the hassles of manual workload.
Here are some of the reasons why investing in one is worth it.
1) Complete transparency of your candidate data
2) Advance tracking of the candidate application stage
3) Prompt notifications for on-time action to avoid missing any opportunity
4) Reduces paperwork and improves hiring compliance
It’s your best bet if you are looking for something to transform your hiring system.
5) Abide By KPIs
Key performance indicators are the evaluation metrics that let you break down your goals into comprehensive tasks. It’s a great way to bring the whole team on the same page and align their efforts for the common good.
For a recruitment team, it’s even more crucial as it’s easier to lose sight of a bigger agenda in everyday hustle. Some standard KPIs that you can take away are
1) Time to hire
2) Cost per hire
3) Candidate experience
4) Offer-to-acceptance ratio
6) Build Workflow Templates
Standardizing your daily tasks can save you a ton of time. It also makes new team members confident with the processes.
Workflow templates are a great strategy to do so. You can create elaborate documents detailing each process and the appropriate action items to handle it.
A workflow template should have the task details, purpose, stakeholders, how-to guide, and expected result.
Some of the common activities that you can manage effectively with a template are:
1) Candidate sourcing
2) Screening interview
3) Background verification
4) Welcome email and calls
7) Onboard Effectively to Retain Employees
Employees who receive proper training in the initial few months of joining stay longer in the organization.
The reasons are simple– they know why and what they are doing in the team. You shouldn’t underestimate the importance of these two factors as every employee wants to contribute meaningfully to their role.
Unless the employee is clear about how things work currently in the company, they won’t be able to find their place in it.
1) Start with a helpful orientation session where you introduce them to their team members and manager.
2) Inform them of the company hierarchy and whom to contact for department-specific concerns.
3) Ask the manager to have a one-to-one session to warm up the employee and guide him on the roles and responsibilities.
4) Assign a buddy to the new team member who can walk him through the initial days.
Stay On Your Toes With Assessment & Review
Fixing recruitment ROI isn’t a one-time activity. You need to evaluate your performance and constantly incorporate improvements to optimize it. Otherwise, a stagnant candidate pool will breed inefficiencies and revenue loss.
Successful recruitment is a stepping stone to overall productivity and company expansion. So, you can’t afford to take it lightly.
Recruitment ROI can be your single source of truth if you utilize it properly. Besides all the tips, monitor the metrics regularly and review your performance based on them for hacking long-term growth.
