showcased an interview with Googles Vice President of People Operations, Lazlo Bock. In his book Work Rules! Insights from Inside Google That Will Transform How You Live and Lead,” Bock shares insider details and anecdotes from how Google has managed to become the number one Best Company to Work For, according to a Forbes Magazine study over the past six years.
In this interview, Bock states that [Google] spends twice as much of its people budget hiring [recruiting budget] than the average company guided by the philosophy that the better job Google does to begin with, the fewer resources will have to be spent rehabilitating underachievers or replacing people who dont work out. The WorkPlace Group shares Bocks view and has seen this to be true in many of our client companies as well. An up-front investment in good recruiting and selection avoids wasting dollars and time on corrective training, performance improvement and terminations, not to mention mishaps in serving customers and the cost to re-hire and replace employees who did not work out. To do this, requires a recruiting budget that can support this objective. Simply put, smarter recruiting and selection helps prevent the wrong candidate from being hired.
Spend Now, Save Later
Minimizing recruiting and selection costs [your recruiting budgets], intuitively, makes business sense. Great businesses keep their operating costs low to maximize their profit margins. Since Recruitment and Talent Acquisition functions are typically considered a cost center rather than a revenue driver to the business, recruiting managers are often challenged and incentivized to reduce costs [minimize their recruiting budgets] and do more with less.
In recruiting, the cost-per-hire metric has become the industry standard for evaluating recruitment costs and forecasting their recruiting budgets. The cost-per-hire metric tells us the average cost to hire an employee. Its derived by dividing the total amount spent on recruiting activities (e.g., your annual recruiting budget + recruiting costs paid out from budgets held by other departments) by the number of hires made. (The Society for Human Resource Management has published an American National Standard on how to calculate the cost-per-hire metric. Click here to download your copy)
While keeping recruiting budgets lean makes business sense, we cannot lose sight of the fact that great businesses need Great People. In fact, investors including the sharks on Shark Tank state that they invest more in the people running the business than the business itself. As Kevin OLeary states people are everything.
If people are everything, then why do we commoditize a companys efforts to identify, attract and select great talent? Shouldnt we focus more on the business value of those we hire rather than what it costs to hire them? If Mr. Bock worked as a recruitment director for most other companies, he might have received a negative appraisal on his costs per hire and recruiting budget. In fact, he would have probably been required to significantly cut his recruiting budget.
True to Lazlo Bocks work at Google, we have been an instrumental part of several success stories where our clients increased their recruiting budget in order to achieve meaningful business results and positive ROIs. One such example was documented by our client in an HRO Today article, Thirsting for a Recruitment Solution.
The Honickman Group, as a result of their recruitment partnership with The WorkPlace Group saw openings get filled quicker, vacancies that used to haunt the company during peak seasons no longer left empty, and the overall quality of the candidates markedly improved. The Senior Vice-President of Human Resources stated, Clearly, our costs are higher, but the savings from filled positions more than paid for themselves. By implementing a structured outsourced process, the company was able to hire superior employees due to more accurate job descriptions and better assessment tools, and their time to fill these positions was cut in half. The higher quality of these new hires, in turn, helped the company better retain its customers. The additional dollars spent in their recruiting budget was going to be covered by reduced turnover, higher quality candidates, and retained accounts that would have been lost by not serving them properly, said the Senior Vice-President of HR.
Investing in Recruiting Pays Dividends
Bocks principle for recruiting boils down to one thing: your more valuable recruitment metric is quality of hire-not cost-per-hire. Though it may require higher recruiting budgets to recruit quality candidates, the up-front costs are well worth it. Hiring the right talent not only saves time and dollars in fixing bad hiring decisions, more importantly, it drives business growth and revenue.
For more information on how smart recruiting can drive business value, please contact The WorkPlace Group.