Typically, the cost per hire is calculated by this formula:
“Cost per hire – HR budget/amount of hires”
Because of this simple formula ,HR struggle to share the real picture of hiring costs with CFOs and CEOS, and so struggle to gain investment for innovation that could reduce cost and increase revenue. With some insight HR can change the obvious formula and help the CFO gain insight into the three of the large costs of hiring talent:
“Direct cost, Attrition cost & Opportunity cost”
Direct hiring costs:
A simple time process for hiring talent is as follows:
“If HR spends this long with every hire, their focus will, by necessity and limits to their scale, remain largely operational. HR practitioners that aspire to contributing in a more strategic, impactful fashion will first need to adopt latest-generation HR systems that automate, simplify and optimize these operational HR functions, and only then will they gain the time required to commence strategically managing and optimizing the organisation’s workforce.” says John F Hansen, Oracle’s Vice President for Human Capital Management in JAPAC.
Attrition is often a hidden cost of recruitment; typically in the first 3mths, where no real return on labor has been seen, because of onboarding costs, there is often a spike, this spike is because of poor expectation management; office facilities, job requirements, managers leadership style etc. Solving attrition in the first three months is typically addressed by better expectation management, particularly with labor intensive jobs; showing potential candidates the work environment the repetitive tasks required etc, may lead to some heading for the door, but what remains will probably be more loyal.
Are typically never measured as it requires data from the workforce planning tools, that HR seldom have, in order to consider productivity shortfalls, revenue at Risk, and what if modelling on what if we had 5 more sales people could we have sold x more product? Or if we had 5 more product development people we could have created a new market of x etc.
Candidate engagement, set the right expectation, job advert at interview, if there is something not great about your job or it is cited as a reason why people leave the company then share this in detail at interview.
Shakun Khana HCM Strategy & Transformation Oracle HCM India “India has a significantly high rate of offer to no show ratio, when it comes to hiring,it is event seen at senior levels. A failing point could be attributed to the levels of candidate engagement created during the recruitment & selection process. Organizations need to leverage analytics to understand the drivers of candidate engagement; this will have a significant bearing on the joining ratios and improve the employer branding in the long run”
Build a company brand that is consistent and can be shared by word of mouth so that your employees, who are your biggest ambassador workforce can share your key messages of opportunity. Under pin this with a well-structured referral fee that is paid only upon the completion of 12 mths service by the referred employee.
“Employee branding used to create referral fees has been a dramatic saving opportunity for my customers both past and present”
Just in Time Hiring
By using a CRM toolkit in your HR delivery you can keep track of and engaged with the 2nd or 3rd choice candidates you would have hired but you only needed one on the day, by keeping in close communication with them through a structured plan you can reduce time to hire by one week, and the direct hiring costs to a relative 0.
Pramod Sadarjoshi HCM Strategy & Transformation APAC Oracle, says:
“The concept of TOTAL COST of TALENT OWNERSHIP (TCTO) is important and hence needs to be addressed head-on – with speed and granularity. Consider: LinkedIn Talent Solutions Global Recruiting Trends 2016)”:
In 2016, while the ‘Hiring Volume Increase was 62%, the corresponding ‘Hiring Budget Increase’ was only 42%. This imperative puts immense demands of the entire Hiring process to be very effective with regard to all three dimensions i.e.
a) 59% of the companies (surveyed) are investing more in their ‘Employer Brand’, than last year.
b) 39% of the employers value ‘Quality of Hire’ as the most important metric of performance of TA function.
c) 32% of the companies opined that Employee Retention’ was top priority.
d) 36% companies felt that ‘Employee Referrals’ will be a long-lasting trend.
“All this makes a compelling case for a proactive Talent Sourcing capability in HR, in order to reduce cost per hire and lower attrition rates.”
LinkedIn & Naukri are incredible aggregation of talent (boards/sites). After you build your initial catch of talent using these cost required boards transition your new catch to your own Candidate Relationship Management tool because you can then engage at a more impactful rate; as Pramod suggests using proactive sourcing capability.
It doesn’t have to be complicated, you don’t have to be an expert in excel, indeed Oracle Applications will take care of a lot of the work for you, because we work with CFOs to create models that show workforce planning associated costs and benefits to get ahead of hiring demand, so you can plan progressive engagement.
Murali Manohar HCM Transformation Country Leader India “We work closely with our HR customers to provide insights on how savings can be achieved through what if scenarios builds,”
Saving costs in recruitment requires understanding and documentation of your workflow and some data points, at Oracle we are happy to help you with this consideration and help. For more information on joining our next free of charge event please contact firstname.lastname@example.org.
This Article was co-authored by Mark Wadsley HCM APAC and all contributors.