Let’s talk money! In part 1 of this blog series, you gained an insight into the effectiveness of your current recruitment strategy. In part 2, you presented hiring managers with an alternative world: that of recruitment marketing. The final step in getting everyone in the organisation on board is to build a business case. This allows you to demonstrate how recruitment costs will be affected if you do invest in recruitment marketing, and what the consequences will be if you decide to do nothing. This will get even the most traditional manager on board, because the figures speak for themselves!
Return on investment (ROI)
"What does it deliver?" This is a common question among companies, large and small. An investment should be worth its money at the bottom line. With ROI, you calculate what an investment yields. You can also apply this to recruitment marketing investments, such as the use of recruitment campaigns and recruitment marketing automation.
The regular formula for calculating ROI is:
(return on investment - cost of investment) / cost of investment x 100%
Well, when we talk about an investment in recruitment marketing we are talking about a cost saving that you realise rather than (additional) revenue as a result of the investment. When making a business case for recruitment marketing, it's better to look at the reduction in total recruitment costs. That is, so to speak, 'the return on investment' and thus your actual ROI.
You can calculate the reduction in recruitment expenditure using the cost-per-hire (CPH) per recruitment channel. In part 1 of this blog series, we looked in detail at the formula for calculating the CPH. Feel free to have another read of it. Or scroll down to the calculation example in this blog.
Damage of Not Investing (DONI)
Then you are going to contrast the ROI, or cost savings, with the Damage of Not Investing. (DONI) What will happen to your recruitment spend if you keep going the same way? Chances are those will keep increasing. Indeed, many employers are seeing the conversion rate through their own recruitment drop dramatically. Whereas a few years ago this was around 5%, we now increasingly see conversion rates as low as 1%. As a result, employers are less and less able to attract talent independently and are asking recruitment agencies to help them.
Only therein lies the crux. Employees you recruit through agencies do not choose your organisation from their intrinsic motivation. They have been approached by a recruiter and persuaded based on other factors, such as salary or job content. The turnover among these hires is therefore higher. And that while CPH through agencies is also already higher than for recruitment through other channels. That hurts the wallet twice as much.
If more and more hires are made through agencies, that means rising costs and higher turnover. Because your turnover is higher, you have to recruit more often, which means even higher spending on agency fees. A negative spiral. This makes it harder and harder to respond to the needs from the business. You see the trains stop running at organisations that have fallen into this negative spiral. So that is the DONI, the scenario that employers end up in who do not invest in an alternative recruitment strategy.
An example business case
To clarify the application of ROI and DONI for an investment in recruitment marketing, we set out a sample business case.
Exit
Imagine you now recruit 50% of your new employees through agencies, 40% come through sourcing and 10% through your work-at-home site. The cost-per-hire per channel is as follows:*
- CPH through agencies = €17,250
- CPH via sourcing = €3,375
- CPH via work at site = €1,250
*For this calculation example, we used the CPH from the CPH template inpart 1 of this blog seriesUsed.
If you hire 50 employees a year, your total recruitment costs in the baseline come to €505,000 (50% x 50 x €17,250 + 40% x 50 x €3,375 + 10% x 50 x €1,250).
Damage of Not Investing
If you don't invest in recruitment marketing, it will become increasingly difficult to attract talent independently. You will then fall back on agencies more often and suffer from higher turnover in the process. After a while, your situation may look like this:
- 80% of your hires through agencies
- 10% of your hires via sourcing
- 10% of your hires through work-at-home sites
Assuming CPHs per channel remain the same, your total recruitment costs in this situation come to €713,125. (80% x 50 x €17,250 + 10% x 50 x €3,375 + 10% x 50 x €1,250) That's an increase of more than 40% compared to the baseline.
Return on investment
The picture looks very different when you start investing in recruitment marketing. By telling your employer story to your target audience, you pique their interest and become top-of-mind as an employer. Thanks to recruitment marketing automation, such as lead generation tooling, you lower the threshold to apply and, as a result, the conversion rate often increases to 5% to 10%. The result: you get many more responses through your work-at-home site and can hire more employees through in-house recruitment. The distribution in hires per channel would then look as follows:
- 20% of your hires through agencies
- 20% of your hires via sourcing
- 60% of your hires via work-at-home site
It will save you a lot of money on your recruitment costs. These now only amount to €243,750. (20% x 50 x €17,250 + 20% x 50 x €3,375 + 60% x 50 x €1,250)
The difference
The differences between doing nothing and investing in recruitment marketing are obvious. Choosing a smart recruitment marketing strategy will save you €469,375 in this calculation example. With a business case like this, the ball is quickly rolling!
Taking turnover into account
The fact that new employees you hire through in-house recruitment tend to stay with your organisation longer is not even included in this initial calculation. If you talk about the effective CPH per channel (corrected for attrition within 24 months), you will see that investing in recruitment marketing is even more interesting. Just look at the following calculation example.
We use the same figures and 3 situations as before, but now calculate with the effective cost-per-hire.*
- Effective CPH through agencies: €21,563
- Effective CPH via sourcing: €4,500
- Effective CPH via worksite: €1,389
*For this calculation example, we have taken the effective CPH from the CPH template inpart 1 of this blog seriesUsed.
The differences between the 3 scenarios are now even clearer:
- Total recruitment costs in baseline: €636,020
(50% x 50 x €21,563 + 40% x 50 x €4,500 + 10% x 50 x €1,389) - Total recruitment cost of not investing: €891,965
(80% x 50 x €21,563 + 10% x 50 x €4,500 + 10% x 50 x €1,389) - Total recruitment costs when investing in recruitment marketing: €302,300
(20% x 50 x €21,563 + 20% x 50 x €4,500 + 60% x 50 x €1,389)
The difference between continuing on the same footing and adapting your strategy and fully committing to recruitment marketing is even greater when you take into account the quality of your hires and associated attrition. More than €500,000!
Build your own business case
The three steps in the step-by-step plan make it easy to convince managers and HR of the value of recruitment marketing. After all, the figures speak for themselves. In step 1 you collect essential data, in step 2 you outline the alternative recruitment strategy and in step 3 you make clear what this yields.
Recruitment marketing software can then help you perfectly implement employer branding campaigns, quickly set up vacancy campaigns and use lead generation to increase your conversion rate. You don't have to become a tech-nerd or online marketer to do this, because the software facilitates you. With recruitment marketing automation, you build your own talent pool, shorten your time-to-hire and save a lot of money. What manager wouldn't want a vacancy in his team to be filled quickly and affordably with a candidate who consciously chooses you?
Need help creating support for a change in recruitment strategy at your organisation?We like to think along with you!
