Omni s 4 Simple Steps to Reduce Recruitment Costs What You Need to Know to Cut Recruitment Costs
4 Simple Steps to Reducing Recruitment Costs By Stuart Jones Stuart Jones works as a Senior Consultant within Omni, heading up the firm s consultancy & training division. As experts in recruitment transformation and owners of the Recruitment Maturity Matrix, Omni has worked with a wealth of clients across the UK since 1998, advising on recruitment strategy and best practice. Having successfully led recruitment change projects across both the public and private sector, and having trained over 500 companies in the latest social media and recruitment techniques, Stuart has become a leading authority on recruitment improvement and transformation within organisations.
Contents Introduction 1 Chapter 1 Is your recruitment costing too much? 2 Getting to grips with the figures Chapter 2 Reducing your recruitment costs: Step 1 Defining your cost-per-hire 3 Setting the standards Chapter 3 Reducing your recruitment costs: Step 2 Get control and visibility 4 Three key actions to control recruitment costs Chapter 4 Reducing your recruitment costs: Step 3 Building your recruitment engine 5 Recruiters Specialist recruitment technology Performance management Chapter 5 Reducing your recruitment costs: Step 4 Strategic and value-add recruitment initiatives 8 Minimising external hire costs Making your external recruitment more effective Performance management Chapter 6 Summary 9
Introduction Unfortunately, when the subject of recruitment makes its way on to the MD s agenda it is rarely for the right reasons. Noise from within the business about poor quality candidates, lack of available resources, or lengthy time to hire can accumulate to the point where the leadership team are forced to acknowledge the need for change. However, in addition to the noise around quality and time of hire there is always one other consistent, underlying theme: cost. Cost of recruitment is typically the number one topic on the recruitment agenda, and can either be a key constraint to, or a key driver for, changing the incumbent recruitment model. Often, the problem is one of visibility recruitment costs are known to be high, but how much and exactly what the breakdown is can t be quantified. Without full visibility of your recruitment costs you will struggle to drive efficiencies. Put simply, you can t improve what you can t measure, so if you want to reduce recruitment costs it s time to take control! This ebook outlines four key steps an organisation can follow if it wants to reduce recruitment costs, move away from a reliance on recruitment agencies, and develop a more efficient and effective direct recruitment service. Stuart Jones Consultancy & Training www.omnirms.com 1
Chapter 1 Is your recruitment costing too much? There s no avoiding it the business of recruitment can be a protracted and costly process for any company, no matter the size. But exactly how much does it cost to recruit a new employee? There is clearly some discrepancy in the market when talking about the costs of recruitment: A survey by the British Chambers of Commerce revealed unsurprisingly that 80% of companies found recruitment a major challenge. The same survey revealed that 40% of firms incurred recruitment costs of more than 2,000 per new hire which, depending on your industry sector,may at first glance appear to be either quite high or quite low. What is more consistent is that twothirds found the cost of using external agencies too high. Josh Bersin, CEO, says: To bring costs down, UK companies are starting to diversify their sourcing strategies to embrace social media tools, professional networks and candidate relationship management systems as sourcing alternatives. What is obvious is that, in looking at ways of reducing recruitment costs, companies are reviewing their use of agencies and increasingly considering innovative new solutions, such as Recruitment Process Outsourcing (RPO), as a way of providing a more effective recruitment service to the business. If you consult other sources, jobs website Monster estimates the average cost of filling a job role to be closer to 4,500. Also, Bersin & Associates a Deloitte company has put the cost of talent acquisition in the UK at 5,311 per hire, with agency costs accounting for the bulk of the overall expense. 2
Chapter 2 Reducing recruitment costs: Step 1 Defining your cost-per-hire The first thing a company needs to do when seeking to reduce its recruitment costs is to gain a detailed understanding of what its current costs are. It s not unusual for companies to have a misleading picture of their total recruitment costs, often because they re not sure which costs should be included. The problem of compiling a definitive guide to recruitment costs has been addressed recently in the United States with the creation of a cost-per-hire standard. Commissioned by the Society of Human Resource Management (SHRM), the standard is described as a tool to allow an organisation to determine accurate and comparable costs of recruitment through a standard algorithm to calculate the recruiting costs to be incorporated into cost-per-hire. The latest figures from the CIPD suggest the cost of a poor hire may be approximately 4,800 per employee level hire, and 7,000 per manager-level hire, which provides a straightforward cost model to work to. However, these figures do not take into account the wider impact on the business described above. Whatever figures you decide to use, it s clear that to have true visibility of the cost of your recruitment you must consider both the obvious, direct costs as well as the more subtle, hidden costs associated with recruitment in your business. The standard provides US firms with a comprehensive breakdown of internal and external costs associated with recruitment, to help them define both an internal cost-perhire figure as well as an external cost-per-hire figure (for comparison with the market). However, as well as the obvious costs, there are also some less obvious or hidden costs of recruitment that need to be recognised, such as the cost of unfilled vacancies, or the cost of making a poor hire. Research by online job site, Career Builder, conducted among more than 6.000 hiring managers and human resource professionals worldwide, showed that nearly 30% of companies in the UK had faced a cost of more than 50,000 as a result of a bad hire. Add this to a negative impact on their business in terms of loss in revenue, productivity and challenges with employee morale and client relations and the overall cost of a poor hire can be staggering. 3
Chapter 3 Reducing recruitment costs: Step 2 Get control and visibility In an ideal world, your organisation will have a centralised recruitment function that has complete control and visibility of all recruitment activities and associated spend across the business. If the budget for recruitment can also be centralised then any spend across the business can also be monitored effectively. But in many cases, recruitment activities and budget responsibilities sit within the business itself, often scattered across the organisation to such an extent that they cannot be gathered or collated effectively. The old adage of you can t improve what you can t measure could not be more relevant, so it is vital that steps are taken to secure control and visibility of recruitment if you hope to reduce costs effectively. The following are some of the key actions to start to develop the level of control and visibility required: Key Action One Automate the Authorisation Process: This way, every vacancy goes through a clear and robust system in order to identify where the recruitment need is within the business. In effect, this system means that any spend needs to authorised, so helping to manage and reduce recruitment costs at source, rather than chasing costs after they have been incurred. If this can also be applied to temporary recruitment spend, even better, although it can be considerably more challenging than trying to control permanent recruitment spend. Key Action Two Standardise Your Processes: Start by having a preferred supplier list of agencies with centrally-agreed terms of business. This provides clarity on which providers you are using and how much each will cost. This consolidation also means that different hiring managers across your business shouldn t be charged variable rates despite using the same agencies a surprisingly common problem. Key Action Three Implement Systems to Capture Key Data: Having identified the key data relating to your various cost-per-hire measures, it s critical to have robust systems in place to capture that data consistently. To begin with, this may simply be a spread sheet that is updated manually. However, even if you assign a single point of responsibility for ensuring the data is kept up to date, you will still have to allow for human error. If you work in a business covering multi-sites, especially in sectors such as retail, this can be a real challenge so implementing suitable technology can help (which we discuss in the next chapter). Either way, with access to the right data you can start to identify cost patterns across the business and quickly rein in areas of over-spend. 4
Chapter 4 Reducing recruitment costs: Step 3 Building your recruitment engine Once you have established clear visibility of recruitment in your organisation, you can begin a concerted drive to reduce your recruitment costs. For many, this will mean focussing on a reduction in the use of recruitment agencies which, next to specialist headhunters, are typically the most expensive source of candidates. The key to building your recruitment engine is the development of, or access to, increased resourcing capability which is going to mean investment in one form or another. In many cases, recruitment activities have traditionally been undertaken by the business itself (hiring managers), with the support of either a generalist HR function, or a central recruitment team providing largely administrative support. Unfortunately, neither of these two delivery models contains the specialist recruitment expertise capable of delivering high levels of direct hire, and will invariably fall back on recruitment agencies to source specialist, hard-to-find, or sometimes simply the majority of candidates. To access the remainder of the talent pool, you need to start tapping in to passive candidates, which very few HR generalist or administrative recruitment teams are equipped to do effectively. It s not just a matter of available resource (time) either, which is always in notoriously short supply. The passive candidate recruitment process itself is fundamentally different to the active candidate recruitment process, and requires a distinctly different skill set, especially in the early sourcing stages. Fortunately, the growth of the internet and social media sites, especially LinkedIn, have made it incredibly easy to identify a wealth of candidates in some sectors. The challenge these days is not necessarily in identifying the talent you need, but rather in the approach to these candidates and in convincing them that your opportunity is one worth considering. Simply emailing a candidate with a brief outline of your vacancy will rarely return the results you need. To develop a recruitment engine capable of delivering a high level of direct hires, you need to invest in two key areas: Recruiters These days, recruiting candidates into the business is no longer simply a case of advertising your vacancy on your careers website and using a few online job boards to advertise the role that little bit further. The only candidates applying for these roles are active candidates, recognised as anywhere between 10-20% of the total talent pool, so you re already limiting yourself to a minority of candidates applying. 5
Therefore, your existing team will need to be up-skilled through various training & development initiatives, or a new team of skilled recruiters must be hired. Either way, the process of developing a strong internal team can take time. If quicker results are required, then sometimes seeking outside help is the best answer, and the increasing trend for companies to outsource their recruitment to an RPO provider is in no short measure attributed to the fact that an increasing number of organisations have realised they can gain immediate access to their own dedicated resourcing capability through this route. Of course, developing a high performing recruitment team, or selecting and implementing a new system, can be a costly and time consuming process. If quicker results are required, then seeking outside assistance may be the best answer. The increasing trend for companies to outsource their recruitment to an RPO provider is largely attributed to the fact that organisations can now gain immediate access to their own world-class resourcing capability through this innovative route. Specialist recruitment technology Beyond a certain volume of vacancies, investing in a suitable recruitment technology becomes essential not least to allow your team of specialist recruiters to focus on the business of recruiting, and not administration. Your recruitment system should be designed to automate the bulk of recruitment processes, creating greater efficiency and eliminating administration work. This streamlines the process, reduces costs and allows the recruitment team to focus on value-add services. Without adequate technology, a company s time and money is wasted performing necessary but timeintensive administrative tasks, leaving less time for important tasks such as assessing candidate experience and using passive recruitment techniques, including social media engagement. 6
Recruitment technology Recruitment software comes in many guises, and it s important that a business can cut through the multitude of options to find the right one for them. Clearly, there are major IT companies offering enterprise solutions, but it s worth investigating smaller providers, which can provide bespoke software along with significant cost savings. It s also important to remember that HR and recruitment software solutions do distinctly different jobs and are not readily combined. Investing in a system dedicated to your recruitment processes and data requirements is the best bet right now, although the recruitment technology sector is developing rapidly. Factors you need to consider when selecting a system include: The system must be capable of removing administration, supporting processes and reporting information effectively Plan what type of data you want the system to collect Create a strong information management framework in order to measure your recruitment performance You need a system with scalability and flexibility one that will adapt and allow you to amend and expand your data as it changes over time Then choose a system with a rich selection of features that will give you the capability to post to all of your job boards, search CVs across your databases, provide online application forms, have an applicant tracking system, enable sophisticated talent pooling, offer a Candidate Management System that helps market vacancies to your database, allow for talent pipelining to nurture passive talent in folders or communities and feature online testing or partnering with a testing provider It s worth noting that any RPO provider should be able to work with your existing/chosen technology or provide access to their own process technology Performance management With a specialist resourcing capability in place, and the right technology to support that team, you can begin to harness the benefits of a dramatic reduction in agency reliance and, consequently, agency fees by driving the maximum levels of direct recruitment. To do this, the team needs to be performance managed effectively. If you have correctly identified your key recruitment data and configured your recruitment system to capture and report this effectively, then you can begin to undertake advanced performance management of your team through the use of detailed recruitment metrics and KPIs. It should be noted that, while this ebook has focussed on collecting cost-per-hire data, this represents just one aspect of recruitment efficiency and a complete performance management framework will have KPI s built around a combination of efficiency (as well as quality) metrics. This stage of the process should demonstrate dramatic direct cost reductions for your organisation, and can start to bring recruitment into the spotlight for all the right reasons! 7
Chapter 5 Reducing recruitment costs: Step 4 Strategic and value-add recruitment initiatives With a sound recruitment engine and costmanagement framework in place, it s now possible to obtain greater returns on recruitment investment by focussing on more strategic recruitment initiatives. These should be designed to ensure you re recruiting for the right roles, and recruiting the right people for those roles. Some of these strategic initiatives should include: Minimising external hire costs Using workforce planning a process at the heart of human resource management, shaped by company strategy to ensure the right people and skills are deployed where and when they re needed most and internal talent mobility, i.e. moving skilled people between roles, rather than paying for external recruitment Gaining foresight from across the business to plan internal mobility well in advance using succession planning, openly discussing skills and potential roles and developing important pools of company talent to match business requirements Reducing the need to recruit externally and, therefore, reducing external hiring costs such as job board expenses, search engine marketing, print media fees, candidate screening assessments, and other issues associated with external hires, such as time to hire, prolonged period of adapting to the company s culture and operations, potential conflict and morale problems with existing staff, etc. Making your external recruitment more effective Employer branding - effectively communicating your organisation s values, personality and culture to create the desired perceptions among potential candidates Talent mapping for your industry sector knowing where to source the people with the skills and abilities you need Building a strategic talent pipeline in other words, developing a stream of the right people to approach when it s time for the business to hire Identifying and attracting candidates to the company long before they re needed building relationships via social media and finding engaged forums of relevant people for future vacancies. 8
Chapter 6 Summary 4 simple steps to reducing recruitment costs In the context of today s increasing recruitment complexity and responsibility, it s no wonder that keeping control of costs as well as having an effective, efficient recruitment engine presents a major challenge for so many organisations. Recruitment has changed dramatically in recent years and, while the core skills of matching candidates to vacancies still applies, the skill set required by modern recruiters is ever-changing, with disciplines such as content creation, digital media, and marketing not uncommon to see on their CV s. It s no surprise then that so many companies have fallen behind in the so called war for talent, and why so many others are recognising the advantages offered by innovative new recruitment solutions like Recruitment Process Outsourcing (RPO). We hope this e-book has given you a flavour of what can be achieved in both cost reduction and driving improved recruitment performance through greater visibility and control of costs, and by empowering a business to focus efforts on strategic talent development. If you would like to speak to Omni about developing your own world-class resourcing capability, please visit our website www.omnirms.com or contact us on 0161 929 4343. 9
Who is Omni? Omni is the UK s leading Recruitment Process Outsourcing company. We have worked with a large spectrum of public and private sector organisations over the last decade helping them to analyse, develop and implement change across their recruitment lifecycle. Our focus is on helping clients recruit the right people, at the right time for the right cost. For more information, please visit www.omnirms.com Recruitment improvement consultancy Omni s Recruitment and Retention Transformation Services team consist of recruitment and retention experts who are experienced in transforming the recruitment and retention of our clients. They advise in areas as diverse as employer branding & candidate sourcing to advice on assessment & selection and graduate programme development. In addition to this, Omni is a pioneer in the development of Social Media strategies for organisations that want to use tools such as LinkedIn, Facebook & Twitter etc. to improve business performance. Recruitment Process Outsourcing Omni s Recruitment Process Outsourcing division provides organisations with their own expert resourcing function. Staffed by experienced account managers and supported by our shared service resourcing team it ensures our clients get the right talent, at the right place, at the right time in the most cost effective way. Legal notices While all attempts have been made to verify information provided in this publication, neither the Author nor the Publisher assumes any responsibility for errors, omissions, or contrary interpretation of the subject matter herein. This publication is not intended for use as a source of legal or accounting advice. The Publisher wants to stress that the information contained herein may be subject to varying state and/or local laws or regulations. All users are advised to retain competent counsel to determine what state and/or local laws or regulations may apply to the user s particular situation or application of this information. The purchaser or reader of this publication assumes complete and total responsibility for the use of these materials and information. The Author and Publisher assume no responsibility or liability whatsoever on behalf of any purchaser or reader of these materials, or the application or non-application of the information contained herein. We do not guarantee any results you may or may not experience as a result of following the recommendations or suggestions contained herein. You must test everything for yourself. Any perceived slights of specific people or organisations are unintentional. If you require any further information, please contact Stuart Jones: T: 0161 929 4343 E: stuart.jones@omnirms.com Tw: @OmniStuart In: uk.linkedin.com/in/omnistuart W: www.omnirms.com 9