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Emerald Group Publishing Limited
Copyright © 2009, Emerald Group Publishing Limited
Getting value out of recruitment
Article Type: HR at work From: Strategic HR Review, Volume 8, Issue 5
Short case studies that demonstrate best practice in HR
Pete FreemanPete Freeman is based at Clear Thinking Recruitment Group.
In the current economic climate, it is imperative that recruitment gives value and a return on investment. To quantify value-for-money recruitment, we must start by defining excellent recruitment. The phrase “people are our greatest asset” is widely accepted these days. Recruitment should be about driving the best, most suitable people to your company – people who thrive on what you really have to offer, who personify your corporate vision and who are so motivated to be working for you that they thrive within your environment, excel at what they do and drive your organization forward. The six key measures described in this article are designed to help HR and procurement professionals ensure such value-for-money recruitment. They have been developed from the experience within the Clear Thinking Recruitment Group and case study research among its procurement and HR customer base.
1 The differing approaches between HR and procurement
HR and procurement often clash over recruitment. HR complains that procurement tends to take a short-term view, placing too much emphasis on up-front cost, while procurement takes the view that HR does little to qualify the value of recruitment, often favoring existing arrangements over better deals.
Both have a fair point. As the Clear Thinking Recruitment Group recruits for specialists in both procurement and HR, it has an insight into the frustrations of both sets of professionals. Using input from clients on both sides of the fence, the company drilled down to six key measures with which to assess the effectiveness and value of different recruitment channels – see below. The first three are SMART and can be independently measured and verified. The second three are more subjective, but are still vitally important and worth assessing.
2 Eighteen-month retention percentages
This measure stands head and shoulders above the others in terms of importance. The recruitment industry generally works to a 90-day rebate period, so the industry “norm” for retention purposes across developed economies is someone who survives three months. However, most appointees at a reasonably senior level will try and stay with a new role for at least a year, even if they find themselves in the wrong role or in the wrong company.
Thus, a far more relevant success measurement of the recruitment channels employed is the percentage of appointees who are still with your organization eighteen months after their start date. From our analysis of known candidate movements, we estimate the industry norm to be below 50 percent. In other words, recruitment through many channels is more likely to fail than succeed. As retention percentages should be as high as possible, we recommend that, as an absolute minimum, retention should be at least 75 percent after 18 months.
Both procurement and HR can refocus to look at life-cycle recruitment costs rather than up-front costs. And to do so effectively, all of the business costs must be built in. For example, would you rather pay a 25 percent fee to recruit for a number of roles with a 100 percent retention rate or half this fee with half the retention rate? The answer is clearly the former, because in re-recruiting there are the additional costs to the business: the cost of the individual under-performing, the negative impact on others, the cost of leaving the role vacant for a period of time and the cost of bringing someone on-board and getting them productive in their role. These costs will be a multiple of their monthly salary. Estimates vary, but 75 percent × annual salary is at the lower range of figures generally quoted. This vastly outweighs the costs of recruitment, so in terms of lifetime cost, the 18-month retention rate becomes the most significant factor by a distance.
3 CV to interview ratio
If you are using a recruitment consultant then they should be doing much of the recruitment process for you and the CV to interview ratio should be at least 40 percent, i.e. you select at least two in five of all the CVs you receive from them to attend interview (and the potential applicant attends the interview). If they are not screening applicants so the ones you see are all competent, capable and motivated to work for you, then what value are they adding? Where you are recruiting through other channels, you also need to factor in an hourly rate for the time you spend sifting and selecting CVs and arranging interviews.
4 Conversion ratio
By this we mean the ratio of jobs worked on to jobs successfully filled. Each recruitment channel can be compared by looking at where your successful candidates come from. If a recruitment channel is not producing the successful candidate on at least 30 percent of the occasions on which it is employed, it probably is not worthwhile. In addition to the financial cost of each channel, each separate recruitment channel (including different recruitment consultancies) takes an investment in your time, which is too precious to spread thinly.
Furthermore, recruitment channels giving less than 30 percent conversion dilute your employer brand – and the more you are seen to be continually recruiting, the less attractive you are to the best candidates.
5 The candidate experience
When using a recruitment consultancy, it is important to interview your consultant. This is because it is the consultant – rather than a member of the business acquisition team or the MD – who gives the first impression of your company to candidates and who will largely be responsible for promoting your employer brand. If you would not hire them to work alongside you then do not pay to let them drive the best talent away from you. However, if they are intelligent and knowledgeable, they will represent and promote your brand well.
For other recruitment channels, this is harder yet to assess, but to what extent do the best candidates feel drawn towards your brand? Are you seeing only mediocre candidates? Use a post-placement interview to gain feedback from new starters on how they viewed your organization and the effectiveness of each channel to promote your brand.
6 Post-placement feedback
The successful candidates that join you are an excellent source of information on their experience of being recruited in to your organization. Were they impressed right from the first word? If not, what was lacking in the experience they received?
7 Key performance indicators
If you are using a recruitment consultant ask about their individual key performance indicators (KPIs). Most recruitment companies will set KPIs for their own consultants, such as number of calls to make per day or a minimum number of CVs to be sent per vacancy. In our opinion, the more KPIs are imposed, the less the consultant is able to use their discretion and commercial acumen and the less well they will be able to do their job. We also believe that when you are employing the services of a specialist recruiter, you should be paying them to recruit and not to spend half their time teleselling to other companies.
8 Know what success means to you
If people are your most important asset, then business success or failure starts with recruitment. Getting it right is essential and the most successful companies spend time agreeing what successful recruitment looks like and how its value over a sensible life-cycle can be evaluated using such measures. In our experience, these companies spend less on recruitment and quickly become more successful and profitable.
About the author
Pete Freeman heads up the Clear Thinking Recruitment Group. After leaving Oxford University with a degree in physics, Freeman joined a bank as a derivative trader. Eight years later, he bought and ran a recruitment agency called Agency Personnel. In 2004, an opportunity arose to buy HRHR Personnel Services, a specialist in HR recruitment. Cohera, a management recruitment specialist, was launched in 2007. Together, these three form the Clear Thinking Recruitment Group. Pete Freeman can be contacted at: email@example.com