Making the pitch for new hires: Recruitment ROI
“Human capital” means the knowledge, skills, and other personal traits that humans contribute to creating goods and services. Add to that a good “return on investment” (ROI), and you basically have the formula for a profitable business. That’s what companies are looking for: a good return on investment when hiring new people or, in other words, recruitment ROI.
If you’re trying to make the pitch to upper management — or to shareholders — that you need funding for more staff, you need to make sure you’re speaking a language that they understand. The key is to recruit with an eye on the bottom line. Here are a few tips to keep in mind.
Choose a method to demonstrate recruitment ROI
When it comes to hiring, companies do a cost-benefit analysis, says Peter Cohan, a management consultant, venture capitalist, and instructor at Babson College in Massachusetts. “If they think they will miss out on profits, they hire.” Companies may forgo those profits if they don’t have enough people to handle customer inquiries, or lack sufficient IT talent for their computer and networking needs, he adds.
If you’re a hiring manager and have to argue for more employees, show how the company will loose profits without the help. Break it down, starting with the most profitable positions, and work your way to the bottom. If you can’t get the budget for all the positions, your proposal will look more profitable even as you cut back on your lower-level positions.
Demonstrate that you’ve done the upfront work
Show that you will hire effectively. Identify the human capital you’re looking for, how you’ll find them, and why you need them. “We look at hiring as an investment in our small business, because that’s what it is,” says Nick Balletta, CEO of TalkPoint, a webcasting vendor in New York City. “With hiring, when you do a lot of work on the front end, you avoid false starts. That work includes defining roles and responsibilities, as well as pathways for advancement.”
Count all costs, obvious and hidden
When calculating the recruitment ROI, win trust by conspicuously counting all costs of recruiting, onboarding, training and ramping up new employees — even as you keep up the pressure to hold down recruiting costs. Show that you’ll curb costs wherever you can. For example, many employers call on exempt veteran employees to do much of the employee training.
Give recruiters the tools to execute efficiently
Whether your business is a global enterprise or a small startup, don’t short-shrift recruitment ROI by shortchanging investment in tools. “It’s key to empower recruitment teams with the analytics and tools to make good decisions and execute quickly,” says Jay Floersch, a recruitment process outsourcing solutions architect with Aon Hewitt in Kansas City.
For example, with the right data at hand, the total cost of recruiting can be cut by concentrating on the most productive candidate pools and sourcing channels. “Closely tracking and reporting on where top candidates come from is easy, and the effort well spent,” says Floersch.
Bear down on the ROI for back office
Granted, ROI is much easier to calculate for some functions and roles than for others. “Salespeople either make quotas or don’t,” says Balletta. “It’s people in the back office whose return may be harder to define: bookkeeping, HR, and so on.” But it’s still important to put an estimated dollar value on hires for roles that cannot directly affect revenue.
Especially at smaller companies, it’s important to demonstrate that you’re thinking creatively about how to get the back-office work done with staff that stays lean by being flexible.
When 100-employee TalkPoint needs additional back-office help, it’s not usually one person performing one discrete function. Instead, the folks doing the work take the lead in hiring, reorganizing who wears what hats, in order to serve business needs within budget. “When you let people hire to fill their own role, they get great people,” says Balletta.
Resolve not to hire B players
One sure way to make it much harder to show a positive return on investment is to engage new hires who are less than stellar. For many employers, “the problem is the ROI of B players,” sys Ibraiz Tarique, director of global human resources management programs at Pace University’s Lubin School of Business in New York City.
“With B players, employers often decide not to hire because they are risk averse.” When you’re trying to convince partners or executives to OK the next round of hiring, you don’t want to have to explain why that hire you made 6 months ago “didn’t work out.”
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