10 years ago, none of us could have predicted that virtual hiring would become the…
Creating an annual recruiting budget can seem like an overwhelming responsibility, but it's an essential task for any well-organized recruiter or talent acquisition specialist. Failing to do means you won't be able to capture crucial metrics and identify areas for development. A well-planned recruiting budget can make or break your success in the coming year. Avoid hemorrhaging costs and get the most out of your budget by understanding it in detail. Doing so will allow you to control costs and focus on improving your hiring and retention efforts.
With 2018 coming to a close, it's time to start thinking about a budget for the coming year partially based on what you've learned this past year. Planning a comprehensive recruiting budget involves several detailed steps which may get glossed over or skipped entirely if you try to rush. Considering this, it's best to start early by doing your research and thinking about ways you can use your efforts to minimize cost-per-hire, increase retention, and hire the most skilled talent to drive a businesses' bottom line. Here are some ways you can start wisely investing the time to calculate your costs and budget for success.
1. Assess Your Past Results
A deep-dive into your recruiting metrics from the previous 12 months is an essential first step for determining your next steps. Look at how many new-hires you brought in and which channels were most useful for attracting them (for example, social media, vs. job boards, vs. employee referrals) as well as which positions you filled most of such as executive, entry-level, management, or administrative. How many of these people are still retained in the organization? How many have quit or been terminated? And finally, how many have been promoted or given additional responsibilities?
Hopefully, performance reviews for your recruiting team were conducted, so you'll also want to benchmark which ones were most successful in their role and why. See who was average, the best, and the worst, and whose performance improved by the most significant margin and why. This will help you to uncover what has been working and what hasn't on your recruiting team and determine who should be promoted, who may need additional development in their role, and who should perhaps be let go or moved into another role.
2. Calculate Your Projected Recruiting Costs
The first part of predicting your likely recruiting costs is to estimate the total number of hires you expect to take on in the coming year. Make sure you leave plenty of time to schedule the requisite meetings and calls to go over previous hiring budgets, future business objectives, and to determine the current skills-gaps in the organizations. There are many reliable quantitative methods that best-in-class talent recruiters use to calculate staffing needs. After deciding what roles leadership anticipates hiring in the coming year, you can create a chart or table to estimate how many of each role you hope to recruit in each quarter.
The next step in recruiting cost calculation is to figure out all of the essential costs associated with your recruiting initiatives. These will cover basic costs, fixed costs, technology costs, optimization costs, and other miscellaneous expenditures.
Basic recruiting costs will include:
- The cost of posting on job boards
- Recruiter's salaries and performance-based incentives
- Employer branding such as social media, events, videos, etc.
Fixed recruiting costs will include:
- Partnerships with colleges, universities, and other educational institutions
- The cost of external recruiting agencies
- The cost of recruiting events including tickets, fees, and accommodations to attend
Technology costs will include:
- Video interviewing platforms
- Assessment tools and online test platforms
- Background check service subscriptions
- Applicant tracking systems (ATS)
Optimization costs will include:
- Adding more pre-screen steps
- Rolling out an employee referral program if you don't already have one
- Anything that improves the employee experience such as hiring employee brand ambassadors, etc.
Miscellaneous costs will include:
- Travel costs for recruiters and candidates
- Relocation expenses for out-of-town recruits
- Overtime and meal expenses for recruiters, if applicable
3. Determine Your Cost-Per-Hire
This aspect of your budget is important enough to earn its own section because, as most recruiters know, cost-per-hire is one of the main KPIs that determine whether their budget projections succeed or fail. What this should look like will vary greatly depending on the size of your company and the organization you are in, but most recruiters like to aim for spending no more than $3,000-$5,000 per person. This should take into account everything we've laid out above -- fixed, basic, tech, optimization, and miscellaneous costs. One of the most popular formulas for determining CPH is as follows:
Cost per Hire ($) = [Total External Costs] + [Total Internal Costs] / Total Number of Hires
So if you plan on hiring 100 people in the next coming year, shoot for a recruiting budget of about $400,000. And remember, the more people you hire, the lower your CPH will be. Many fixed costs can be allocated more efficiently over a larger number of hires. Also, make room in your budget for certain variables. Some roles, such as executive positions will be much harder to fill. With this in mind, these numbers should be used for general planning purposes and estimates -- not as a hardline guide for exactly how much you'll spend on each person you hire. There is no such thing as a "one size fits all" solution for hiring and budgeting in any industry.
4. Get Leadership Onboard
Last year, many recruiters were expected to hire more personnel on the same budget as 2016. If you don't want to be stuck in this scenario, it's important that you are mindful of how you approach leadership with your budget proposal and how you go about making the business case if your funding needs have increased.
With the economy slowly rebounding, it's hopeful that more CEOs and business leaders will be open to increasing their recruiting spend in favor of trying new technologies and tactics that improve recruiting effectiveness and attract top talent to their ranks. To improve your chances of accessing more resources to ease your burden, strive to show leadership the value of a robust recruiting budget.
The most persuasive factor will likely be that you can demonstrate the bottom-line value that hiring new positions will add to corporate revenue or on-the-job performance for employees. Try to calculate a revenue percentage increase for each new employee and show, with numbers how that will impact profits. Show how this will also impact other strategic business goals, such as product development, production, innovation, and corporate reputation. Executives spend a good portion of their work time thinking about and discussing, so you'll want your pitch to cover any pain points that have been documented in the last year and how your recruiting efforts will address them.