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The Basics of Hiring ROI


Caution: you are about to enter the zone of the CFO. Tread carefully. Bring your green eyeshade and calculator. However, if you master this information, you'll be able to calculate the ROI for your current hiring processes and any new hiring initiative imaginable. Beware though, if it turns out that the ROI of your current hiring process is less than 25%, you're in big trouble. On the other hand, if any proposed new program is over 100% you'll be able to get instant CFO approval and a high-five, along with the check. But don't be seduced, any new hiring programs might not work as promised if the economy recovers anytime soon. Then you'll just be scrambling to stay even.

To see the importance of calculating hiring ROI, just multiply the number of people you're forecasting to hire in the next 12 months by their average compensation. This is probably a big number. For example, if you're planning on hiring a group consisting of college grads, experienced techies, and a bunch of customer service reps, you're probably looking at an average compensation of $65,000. If you're hiring 1,000 of these folks, this means you'll be spending $65 million on new hires in the next 12 months, and if you're going to hire 100 you'll be spending $6.5 million.

Dear (put your name here),

I'm frustrated. You've let me down too many times to let this continue. As your client, I believe your performance must improve in order to succeed in building and developing a strong team. Your role is critical, but somehow you've trivialized it. I don't want to see average candidates anymore and I don't want to see people who are obvious misfits. You need to take on a bigger role in this process, be more involved, and become more of a consultant than a vendor.

However, with that said, I am not without fault here. Since I want you to have an equal stake in the outcome, I must be more involved in the process from beginning to end. With this in mind let's describe our new partnership relationship in finding and hiring more A-level talent.

Every company wants to hire the best people, but most haven't figured out how to do it consistently and across the board. Here's a short checklist of prerequisites. Rank yourself on a 1-5 scale to see where you stand, with 5 being the best and 1 being worse than pretty bad. If you don't score at least 35-40 on this 10-factor survey, you've got your work cut out for you. After you've finished this assessment, send us an email if you'd like to find out how to get started right away on hiring A-level talent every time.

Traditionalists are those companies who will respond to this increase in hiring by aggressively seeking candidates to fill these open positions using the latest niche sites, adding Facebook pages, expanding their social networks, pushing their ads to blogs and user groups, and adding Twitter feeds to their new crop of career pages. By itself this is a reactive approach, built on using silver bullet tactics. It's a form of the classic req-driven, "needle in the haystack" sourcing model. With a well-known employer brand, it actually might work. However, when you strip away the bells and whistles, it's based on the flawed premise that top people will respond to negative, boring, and exclusionary ads if you post them in enough places.

Two people came up to me after speaking at the SHRM Staffing Management Association (SMA) Conference in Las Vegas last week (April 2009) and said this was the best tip they heard after four days at the conference. Of course, two out of 700 doesn't imply a trend. However, if you were Googling for "best sourcing tips SHRM SMA" you actually might find this article on the first page. And that's what being found first means. Its importance cannot be understated.

Back in the early ‘80s when I launched my recruiter career, I was filling senior staff positions (engineers, accountants) and mid-level managers, and quickly realized these few common truths about human nature:  

1. Most hiring managers make selection decisions based on limited information and their need to fill the job.   
2. More candidates - even the best ones - make superficial guesses about the job based on limited information and their need to change positions.  
3. Managers don't trust recruiters.
4. Candidates don't trust recruiters.
5. Knowing the job can help create trust.