Businesses are often worried about the expenses they make on recruiting and then losing an employee even as a majority confess to picking wrong candidates, reveals a new TimesJobs.com study on usage of HR metrics for gauging the Return on Investment (RoI) on hiring.
In the study, 62% organizations said they are making hiring mistakes and 53% blame it on the lack of proper tracking mechanisms and measurability.
The problem lies in the chunk of resumes recruiters receive every day and the pressure to fill a position within a deadline. The stress makes most (78%) recruiters spend less than five minutes on reviewing a resume, finds the TimesJobs study.
In the process, recruiters also make mistakes – such as unclear job descriptions (55%) and ignoring the cultural fit of a candidate (40%).
The Value of Hiring RoI
Focusing on hiring RoI is a useful way to identify these loopholes and check and modify recruitment practice based calculations and analysis of the ROI report.
Hiring RoI is set to become the benchmark to assess the success rate of hiring. However, it is still a vague statistic for many – 90% employers state it is difficult to determine the average cost of hiring an employee, the 10%, who think it can be measured, claimed in the study that it requires a lot of money/resources to measure.
“The TJinsite study reveals that there is still tremendous scope for optimizing the hiring processes in India Inc. Over 400 hiring managers have claimed a lack of tracking mechanisms to measure hiring ROI, but I feel it is rather a lack of awareness – because they haven’t been able to decode the metrics already available within their HR departments,” says Nilanjan Roy, Head of Strategy, Times Business Solutions.
Identifying the Investments
To begin with, organizations must be clear about the internal and external investments of both time and money on hiring. According to the TimesJobs study, the key internal investments in hiring include interviews, background and reference checks and on-board training.
The external investments include cost of job postings, paying for consultancy services (if opted for), employee referral pay-outs and cost of relocation (in specific cases). Once the internal and external investments are identified, it is easy to recognize and decode the key metrics to measure hiring ROI.
Top Nine Metrics to Measure Hiring RoI:
ROI of New Hires
“To determine the incremental profit contribution of a new hire, the organization should multiply the revenue per employee by the variable profit margin,” says S. Sundararajan, Director, i-exceed. “You will get the average profit contribution expected for each new employee. This can be adjusted for salary by dividing average profit per employee by the average compensation.”
To avoid reduced hiring RoI, Chaitrali Singh, Director of Human Resources at ZS India, says the talent acquisition team must ensure it understands the candidate’s career goals and recheck whether they match with the profile requirement.
Although it is difficult to determine the average cost of an employee, says 90 per cent of the surveyed organisations, the 10 per cent, who think it can be measured, say it requires a lot of money and resources.
Thus, it is wise to take a note of all of the internal and external expenses organisations have to provide for time and cost of each hiring process for a better recruiting experience.
Over the years, recruitment RoI has become a benchmark to assess hiring success rate. However, it is still a vague figure for many because many organisations have not yet been able to decode the metrics critical to hiring RoI.
To begin, one must be clear about the internal and external expenses/ investments on hiring. According to the study, the key internal investments in hiring include interviews, background and reference checks and onboarding.
External investments are cost of job posting, paying for consultancy services (if opted for), employee referral payouts and cost of relocation (in specific cases). Once the investments are identified, it is time to recognise and decode the key metrics to measure hiring ROI. Some of the top metrics, according to the study, are time to hire, sourcing/recruitment channel, cost and quality of hire and retention rate.
Faster Training and Onboarding
The quicker a firm gets the new hires up to speed, the faster they can start contributing productively — and the faster they can begin delivering RoI.
The amount of time taken to train and onboard new employees must be substantial, but firms have to speed up the process without compromising on the quality of onboarding. Proactively facilitating the learning curve will reap returns much sooner.
Knowing Employees’ Mindset
After employees have undergone training and have adjusted to the firm culture and their role, they should be hitting their stride. In an ideal scenario, for the next few years, the firm will witness growth, returned value and productivity.
Over time, employees may begin to get restless. Regular feedback sessions post projects will ensure employers are on top of what their people are thinking, whether they are satisfied, aiming for a larger role, or getting fidgety and most importantly, whether they are feeling valued.
“The candidate may be looking for stability, money, growth, excitement or even a purpose. A firm must assess whether what they say in person is in sync with the achievements and career goals listed in their resume. Above all, every new hire needs to be a perfect fit for the firm culture.” TimesJobs conducted this study across 807 pan-India employers.
It’s important to keep a note of the employees who have consistently given stellar performance so the firm can start investing more time and effort in their growth. Once a firm knows they are open to staying, they should focus on making it worthwhile for them.
Think long term and stay in touch. When people leave, it’s usually because they are looking to grow their careers and build experience.
Hence, smooth and friendly exit interviews are the key to making sure they leave on a good note. Organisations should build a database to maintain strong relationships and communicate with the alums regularly.
They become a source of positive references and it’s likely that they will return the favour by referring connections and perhaps even return themselves with skills, stronger than before. It’s far-fetched to keep the best employees at the firm forever, especially in today’s competitive job market.
However, with the right planning, firms can definitely retain them for a long tenure and can get the best value from those employees, even after they have left.
Image credit: timesjobs.com