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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.

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.

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.

This led to her dismissal, a highly controversial move, since she was well liked and very good at her job. The point of this article is not to debate the decision, but to simply say: we ain't seen nothing yet. The plethora of social media tools now available, from Facebook to MySpace to Twitter, has led to an extraordinary blending of personal and professional lives in a very public forum which too many people seem to think is private. The latest casualty of this trend is the unfortunate "Cisco Fatty," a candidate who left her interview at Cisco and sent out the following tweet: "Cisco just offered me a job! Now I have to weigh the utility of a fatty paycheck against the daily commute to San Jose and hating the work."

Because it's now so easy to get names, they become less valuable. Try this string to see how easy it is to get some names of the best pharmaceutical sales reps in New Jersey: "~CV (sales OR rep) awards -reply -respond -yours -jobs -find -results NJ pharma."

Once the banking crisis gets solved, the next bottleneck that needs to be addressed is the woeful state of the government hiring process. If not addressed properly, it will cripple the economic stimulus package by putting a lid on job creation in both the public and private sectors.

Despite record unemployment, there is a severe supply shortage of skilled workers at the technical and trade levels. These are the jobs that drive the economy, allow the middle class to prosper, and minimize the swings in every economic cycle. Overall, it's estimated that $200 to $300 billion of government financed programs will be short-circuited by this hiring problem.

While most companies are struggling and profoundly reducing their recruiting expenditures, there are a few who have established a below-the-radar "skunk works" to get ahead of the competition as soon as the downturn bottoms out.

Part of this difference of opinion was due to a lack of understanding of what the real job entailed, lack of any rigorous assessment process, and a desire for many to take short cuts, waiting for the "perfect" candidate to arrive. In this case, unanimity of perceptions substituted for evidence and logic. In the bargain, many great candidates were excluded for bad reasons.

When I worked in the high tech field in the 1980s and 1990s, IBM was the biggest player in the industry.  They were the 800-pound gorilla in the room.  Their sales pitch went something like this.  "Buying IBM is safe."  "No one ever got fired for buying IBM."  "You'd have to be crazy to choose anybody else!"  Even if there were better systems and software on the market (and there absolutely were), for a long time IBM won the lion's share of the business because they convinced managers that buying anything but "Big Blue" was RISKY.  Their goal was simply to sow doubt and fear about their competitors.

Guy Kawasaki, who was at the time a famous product marketer at Apple, had the job of breaking through that barrier.  He would do outrageous things to shake up his competition.  He would send very expensive custom mailings to the product managers at IBM thanking them for their support of Apple.  These mailing weren't addressed directly to the product manager, but rather they were written as if they were being sent to all of Apple's customers, when, in fact, they only went to a few selected product managers at Apple's core competitors.  This would create havoc within the competition's marketing departments as they would try to invent even more expensive campaigns to counter what was perceived as a huge attack.  IBM wasted a lot of time, money, people, and resources chasing Guy's phantom promotions.  He would then focus his energy on activities that really made a difference with his customers and, not surprisingly, he won market share. Two lessons for Guy's antics:  first, focus on activities that really make a difference with your customer; second, be positive and project that positivity into your customer, markets, and candidates.

We're now putting a new recruiter assessment tool together, and the following are some of the updated factors we're considering. Please look them over, rank yourself and/or your team and tell us what you think. Then, text the word "sourcing" to 96625 and enter your score to see where you stand.  

In Part I of this article, I made the contention that there were so many different people involved in the hiring process that consensus was impossible to reach. This included HR and OD, recruiters and sourcers, hiring managers and everyone on the hiring team, and lest we forget, the candidates themselves. In the government contractor hiring process this problem is made worse since the actual hiring manager is sometimes difficult to identify and recruiters tend to work off marginal job specs.

Recruiters who aren't partners or closely aligned with their hiring manager clients regarding real job needs send in too many unqualified candidates and have little influence with them. Collectively, this makes it difficult to close the candidate, overcome basic concerns, and to even get referrals.