Personnel Managers, Are You Ready for a Change?
Part 2: Recruiter = Economist: Where to Find Corporate Cost Savings
In the last part, we talked about the effect of the experience of your candidates on your recruitment, or brand, as well as the performance of the entire company. Today, we will explain how you as the recruiter or personnel manager affect the financial indicators of the company, whether directly or indirectly.
Warning: If you have an unlimited budget, stop reading!
Put your hand up if you are not forced to continuously look for ways to “spend less but acquire more”, how to make the entire recruitment cheaper and yet continuously and timely deliver suitable people to the required positions. If you raised your hand, let me congratulate you as you do not need to read any further. For the rest of you, I have prepared several ideas that are completely for free and might even save you some money. You might be required to get acquainted with numbers and statistics and work with them more than in the past. But HR Controlling is not only a trend; it is finally one of the disciplines that try to find a common language with colleagues from other departments, namely the financial department.
What to focus on from the personnel manager’s/recruiter-economist’s point of view?
There are two fundamental directions from this point of view: reduction in the costs of recruitment and selection and increase in the revenues. Let’s have a look at what those two concepts mean.
Is cost reduction a good way?
Costs are often reduced by “cutting wherever and whatever you can”. The fact is that a company may find itself in a situation where it needs to cut. But it is good to make sure that the company management is aware that it is cutting into people. Ask yourselves this question: What will the losses/profits be a year or two after the abolishment of that particular expense? And find an answer that will always tell you whether your saving methods are smart or reckless. An example of a smart solution is optimisation of recruitment sources.
How to provide 35 % of candidate recruiting from “unpaid” sources
Optimise your recruitment sources and focus on those that are “unpaid”. Career pages, recommendation programmes and building a talent database may cover your recruitment needs to a large extent. It is about 30 to 35 % in developed markets. Then you only need to compare how much one recruited person from a personnel agency costs compared to an advertisement with a recruited person from the aforementioned sources.
From what sources candidates are recruited
Figure: Share of recruited people by sources in 130 medium-sized and large businesses operating on the Czech labour market
The second view of the recruitment economy focuses on increasing revenues
Now ask yourselves: Can you quantify whether or not you recruit more efficient people than before to your company? Let’s admit it: it is not that easy. If you carry out regular employee evaluations, then you just need to compare the evaluations of the newly recruited ones with your core employees. But that has its limitations. However, studies show that if you recruit a high performer, then his productivity is usually higher by 40 % to 67 % than in other employees. And that is worth making an effort; what do you reckon?!
It is obvious that this is an area that can have an impact on the performance of the entire company in the long term. If your fluctuation is 10 % in 10 years, then you theoretically replace all employees in your company (the number is smaller in practice as only a particular category of employees leaves). If you prove that the newly recruited employees are the most suitable ones with required productivity, ask for a high bonus. You deserve it!
And how to do it? First of all, focus on key positions!
People in key positions have a substantial influence on the performance of your company. They indirectly, and sometimes even directly, generate the largest revenues, or losses. Therefore you need to focus on them and always have the following questions at hand: Are the current employees in those positions motivated? Do they leave the company? Do we have backups for those positions? If not, what is the situation on the labour market? Do you know what sources such candidates are recruited from? When you suddenly lose an employee from a key position, you have to reckon with a loss of about a six-month to an annual salary. The new person does not usually become 100 % productive until six months later (defined by the indicator “Time to productivity”). If he leaves by then, the return of investment is negative (naturally, the period differs according to the position and other aspects).
Build the good name of your company from the employer’s point of view!
And here we return to the previous article. The recruitment costs decrease in proportion with the improving reputation of your company (of any size) as an employer. The logic is simple: quality candidates will come on their own or they will even be recommended.