Is it Possible to Measure ROI on Your Hiring Budget?

Is it Possible to Measure ROI on Your Hiring Budget?

Every company faces the same dilemma at one point or another on their path to growth –

How much specifically should we allocate toward our hiring budget, and how do we maximize the ROI?

But… what if this is the wrong question to ask? For starters, unlike other business investments that can be clearly tied back to measured results, hiring expenditures can take on many different forms (job boards, agency fees, assessment tools, candidate travel expenses, etc.) and can produce a wide array of actual results, some tangible and some quite intangible.

Traditional Evaluation

The most common hiring expenditure that will have to be evaluated later is paying an outside recruiter’s placement fee vs. owning the search in-house. There are certainly financial pros and cons to each:

ROI graphic.png

Chances are, the agency will be able to fill the role quickly and as effectively as your internal team- but at a premium.

ROI Graphic- Internal.png

While your internal hiring function can handle the hiring process, it can monopolize a hiring manager’s time for much longer than you’re prepared to wait for a new employee. One question you undoubtedly ask before engaging with a recruiter is, “will we be spinning our wheels for months trying to hire this internally, thereby creating an opportunity cost that outweighs the $25K agency fee?”

The answer almost always guides your next steps and later your ROI calculations.

More Considerations

From our perspective at 1H, this might be too narrow of an evaluation. After all, a strong recruiter is worth more than the cash value of the search. Yet this is the only result that is looked at in the above calculation.

For example, how do you measure the qualitative benefits from a recruiter like:

  • Helping build awareness among prospective talent

  • Improvements made to your internal process

  • The ability to reach passive talent who you’d otherwise miss on your own

  • Market intelligence that can help you adapt

You probably don’t. However,  external recruiters have the time and expertise to positively impact your hiring strategy in the long term.

Think about the other large-scale decisions you make day to day: You don’t look at investments in your brand through a lens of immediate top line impact. You don’t expect immediate revenue gains when you seek to hire the best people. You don’t measure short-term ROI on investments in IT Infrastructure that help your business scale.

Why? Because you know intuitively that investing in these “big picture” priorities will mean long-term success without producing immediately measurable ROI.

So, what do we propose?

Consider your partnership with outside, skilled recruiters an investment in the long-term success of your business.

You might not be able to measure quantitative returns, but you can focus on the qualitative - the intangibles – in addition to simply seeing if a role is filled or not.

We believe companies that view “recruiter fees” as simply an expense or an opportunity cost are missing the real opportunity.

Like consultants in other respective fields, great recruiters can add immeasurable value to your company. They can help you grow your reputation among prospective talent and build your employer brand. They can act as a “gatekeeper” in helping filter the best candidates to you without burying you in the 95% of “junk applications” you might receive otherwise. They can serve as a much-needed mediator as you negotiate with a potential hire, ensuring that both sides get what they want.

Much of this perspective is what informed our decision to create the hourly model. We continue to find that our partnership philosophy paired with our approachable pricing model allow us to deliver more to clients.

All of this can be complicated, and even messy, when you start thinking about such an investment. We hope that focusing on the “big picture” benefits will help you think differently about how to engage recruiters.

In the end, we all want to hire the best people we can, and on that alone, the ROI is truly immeasurable.

Good luck!




 

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