A friend of mine recently asked me how I would set up a Talent Acquisition organization for a $4Billion, 21,000 employee company. Here was my response...
The first thing I would do is define what our revenue per employee number looks like. In this case, it is $190,476. ($4B/21,000)
I would then meet with the CFO to determine what our financial forecast is going to be for this year. Every company has a forecast of what the revenues are going to look like for the current fiscal year. For this exercise, let's use a growth of 15%. ($4B + 15% = $4.6B).
I would then look at the total number of hires we are looking to make this year, keeping the revenue per employee number the same. ($4.6B/$190,476 = 24,150). This means we need to add a total of 3,150 employees. This doesn't take into account for attrition. Let's say attrition is 10%, that would be another 2,100, (10% of 21,000). The grand total of hires would be 5,250.
Now that we know the total number of hires, we can dive into Cost per Hire. I take everything into account when we are looking at this number.
1. Total expense for Recruiter's salaries (remember the payroll/benefit burden)
2. Total expense for technology (ATS, job boards, other internet subscriptions)
3. Interviewing process (travel, interview time, loss productivity)
4. Contingency Fees
This is only a partial list but you get the idea. So let's figure that the total cost per hire is $5,000. The total budget I would ask for would be $26.25M. Now that we have the budget set up for this year, we can break it down in detail from the recruiting expense exercise we just completed.
I would then allocate a dollar amount to each stage of the recruiting process.
1. Sourcing: 20% = $5.25 Million (100,000 resumes)
2. Screening: 20% = $5.25 Million (45,000 screens)
3. Interviewing: 40% = $10.5 Million (15,000 interviews)
4. Hiring: 20% = $5.25 Million (5,250 hires)
This is how I would allocate my expenses:
1. All sourcing effort is outsourced. Find a company that can deliver the amount of resumes into the top of the recruiting funnel. Because with the amount of hires we are going to be doing (5,250) we will need approximately 100,000 candidates. Given that our sourced to hire ratio is 18:1. This will also decrease the need for recruiting technology, i.e job postings that typically return little on the investment. This would include a team that did the first level phone screens. (I call it QIA, Qualified, Interested and Available). This will save the recruiters time in the process.
2. The recruiters I hire would be more Account Managers. Taking the resumes to the hiring managers and managing the interviewing process. Getting feedback from the managers, acting as a facilitator for the interviewing process. They would also work with the candidates through the offer negotiation.
3. All other parts of the process, travel arrangements, scheduling, coordination, etc are all outsourced. This is necessary but it is easily commoditized.
In closing, the biggest change I would make with Talent Acquisition is I would have it report directly to the President of Operations. Most organizations rely on their people to deliver the necessary revenue for their forecasted growth. Being able to tie revenue directly to the employee number is a way for the leadership to understand recruiting and the impact it has on every business. Recruiting is a the backbone of every organization. It is just as important as R&D, Sales, Marketing, or Manufacturing. Some can argue that it is more important because without recruiting none of those other lines of business even exist. But that is another topic for another day.
I don't think it is too far away that a company with go to a 100% RPO model. I think companies would be surprised at what their true cost per hire is currently. There are many creative ways to reduce the overall cost while maintaining the volume needed for the appropriate number of hires.