When the economic cycle dips, the focus rightly turns to costs and efficiencies. You might find discussion at your workplace centred on centralisation versus decentralisation or in-sourcing versus outsourcing of some HR services and functions, particularly recruitment.
What is disappointing to observe is the number of in-house recruitment functions that are unable to produce the mandatory baseline numbers that prove their worth to the business that they recruit for.
As a baseline check, can your function produce the following numbers if asked?
1. What is your average Time to Fill – and preferably by job grade or level?
2. What is your average cost per hire?
3. What are your top five sources for candidate hire, eg online, print advertising, employee referral?
4. What are your agency costs? What are agency hires as a percentage of total hires?
5. What is the average timeframe between the recruitment steps, eg from advertising, to shortlisting, to interview, to testing, to offer?
6. What is the average number of candidates applying to your vacancies, preferably by job type of level?
When your CEO ponders the value of outsourcing your recruitment function, how will you demonstrate your value in terms of cost and efficiency without these numbers?
It may be too late for this cycle dip, but the following is a recommended blueprint approach to get your recruitment function in shape.
1. Recruitment must be centralised and mandated by your senior leadership team.
To allow individual business units to opt in and out or select different services from an end-to-end process will not produce the level of efficiency and cost control required. Nor will it produce a consistent candidate experience. A mandated approach must be endorsed at the senior level with zero tolerance for abstaining from the agreed process. May sound harsh, but a business can’t demand cost control on the one hand, yet allow your function no control on how the service is executed and what costs are incurred. The function must be run like any other cost centre, ideally as a stand-alone business whose costs are fully recovered. More on this in point 4.
2. Implement an online candidate application system.
In this age of technology, it is simply not appropriate or logical to have candidates email applications. How can you produce reports, tally, group and communicate with candidates? It may be a sizeable investment but one that pays off quickly. This also goes for a careers page.
3. Identify your KPI’s, track and report on them monthly.
Identify a minimum five key performance indicators for your function that are reported monthly and annually. How else can you know how your function is performing? How else can you develop your recruitment strategy? How else can you know where to spend your advertising dollar if you don’t know what the most popular source of candidates is?
4. Understand your costs, budget accordingly and recover those costs through charge out to your internal customers.
Budget overheads for running the department, together with individual costs for recruiting the number of roles your organisation anticipates for the year and assign a fee for recruiting roles at each job grade. For example:
Overhead Costs may include system costs (eg your online application system), general branding and advertising, consultant fees, team salaries, team travel.
Recruitment Costs may include advertising/job posts (eg SEEK), pre-employment medicals, candidate testing, candidate travel, Agency fees.
Sum both budgets to determine the total anticipated recruitment costs for your organisation. Identify the number of vacancies budgeted by the business and divide this number into the above. For example:
$3.9m recruitment budget / 670 vacancies = $5,280 per placement
This includes all costs associated with recruitment from time of receiving the vacancy until the letter of offer is sent. It is recommended that relocation costs are budgeted by the hiring manager’s department. You have the choice of charging the same average fee for every job grade/level in the business or creating a simple fee structure which recognises volume or ‘like-type’ roles as cheaper to recruit for than technical or more senior roles. In turn, this enables business units to simply identify the number of anticipated vacancies by job grade or level and multiply by the fee to determine their own budget.
The Recruitment department should be a zero sum business. In other words, what you budget and then spend should be fully recovered through charge out to the business.
5. Structure your team wisely.
Ideally, recruiters of blue collar or ‘like-type’ roles should recruit an average 20-25 roles at a time. Senior recruiters should work on no more than 20 at a time to achieve most efficient time to fill and premium candidate care. To calculate how many you require on a recruitment team, divide the number of budgeted roles (eg 670) by six (six weeks is an ideal average time to fill gauge) = 111 vacancies within the department at any point in time. Divide 111 by 20 (as the average ideal number of vacancies for any one recruiter). Thus, to recruit 670 vacancies with an average time to fill of 30 working days (or 6 weeks), you will require 5.6 FTE. For every two to three recruiters, you should have one administrative support role.
Team roles should be structured such that Recruiters manage the end to end hiring process but utilise the administrative support for candidate travel, posting advertising, coordinating medicals and testing, processing invoices and running reports.