3 Key Metrics – Find the $$ for Your Recruiting Strategy – Part 2

In the previous article (Part 1), I shared approaches to find value to support your recruiting strategy. We talked about both hard and soft values and I promised to share some more ways to calculate hard values for your talent strategy business case. In this post, “PART 2,” I am going to dig into three specific hard values and how to unpack them with supporting equations and examples.

Later in this series I’ll be sharing a value calculator that has these equations identified already embedded. For now, check out the worksheet at the bottom of this post. You can use this as a jumping off point to think about the values for your own projects and even to start plugging in any numbers you may already have.

Below are three example equations. Defining the equation will allow you to track your cost. From there you need to find the value you are targeting. These are the basic steps you will take to find value once you have an equation:

  1. Obtain current state cost
  2. Set a % improvement target
  3. Obtain future state cost –this is usually (Current State – (Current state cost x % improvement target)
  4. Calculate the Value = Current State Cost – Future State Cost

Hard Value 1: Time to Fill

Let’s start by stating the obvious; when it comes to finding the right resource, cutting corners to finding quality at the expense of time will never pay dividends. That said, if you can drive out wasted time in your process that will amount to value for the business. It’s also relatively easy to calculate. So time-to-fill can still be a very important part of a recruiting business case. For your particular business it may be something more along the lines of time-to-present or another variant. Whatever verbiage you choose, if it equates to reducing time in the cycle you can apply this equation.

Time to Fill Current State Cost Equation:  C = A x B x D

  • X = Cost
  • A = Average days to fill the position
  • B = # hires planned for the position
  • C = Cost per day of not having productive employee in the job

The costs will vary per position. When looking to find the most value, look for the positions that have the highest volume and the easiest to compute cost-per-day per unfilled position. The more black and white you can make this, the easier it will be to get buy in from peers that the math behind the value is sound.

Example: Sales roles are often the easiest to calculate. Let’s say that you plan to hire 300 Business Development Representatives (BDR) this year that will fill the top of of your sales funnel pipeline. Every week they have a target of producing $100,000 in opportunity pipeline for the business that has a 10% close rate. This means a BDR’s daily produced value in this case would be $10,000 per week or $2,000/business day. Now, not every BDR is going to hit their target and we want a number that others will buy into so let’s cut way down to 25% of that and use $500/day. Let’s say it currently takes 45 days to fill a BDR role.

This gives us a current cost X ($6,000,000) = A (40 days) x B (300 hires) x C ($500)

Let’s set our target to reduce time to fill by 10% and bring this down to 36 days. This is what we are proposing the new solution will allow us to achieve.

This puts our future cost to X (5,400,000) = A (36 days) x B (300 hires) x C ($500)

The annual value for this group alone is $600,000 = Current State ($6,000,000) – Future State ($5,400,000)

You can repeat this for every employee population where it can be defensibly applied.

Hard Value 2: Time Reduction of Y

This equation can be used for a variety of values where reduction of time by some resource will be realized as a result of the solution. The first variable is “Y” and you will get to choose what this represents. Perhaps it’s support calls, scheduling interviews, or interviews themselves. It could also be training hours, resume screening time, or a number of other things. Here’s the equation:

Time reduction equation of Y, X = A/60 x (B x C)

  • Y = The time being measured to complete the task (eg: Interview time, support calls time, etc)
  • X = Current State Cost
  • A = Minutes required per X transaction
  • B = The number of current annual transactions
  • C = The hourly cost per resource doing the task of X

Example: Let’s say that that you plan to reduce the number of interviews that need to be physically conducted. We’re not even going to calculate the manager time productivity. It can be an added bonus in the logical justification. For every interview that comes on site, a recruiter and 3 other resources will each spend 45 minutes with them 1:1 and then together in a simulation exercise that lasts an hour this brings the total man hour time for an interview to 420 minutes. The average cost per resource is $60/hour. Currently the business conducts 4,000 on site interviews annually.

Y = Interviews

Current cost X is $1,680,000 = 420 minutes/60 x (4000 x $60)

If we target a future state that reduces the number of physical on site interviews to by 20%, the number of interviews that need to be conducted would move to 3,400 on site interviews annually.

Future Cost X is $1,344,000 = 420 minutes/60 x (3200 x $60)

The annual value is $336,000 = Current State ($1,680,000) – Future State ($1,344,000)

Hard Value 3: Cost to Ramp & Train

When it comes to productivity, different hires ramp differently both in terms of time and in cost (in the case of internals). This value is important if you are looking to justify referral and/or internal mobility projects because these two groups of hires ramp more quickly than external hires. You will need to know the differential in time-to-productivity for each group (internal vs. referral vs. external) as well as the cost differential of onboarding/training a new hire vs. an internal hire.

Time to productivity Costs = X = A x D + B x E + C x F

  • X= Cost
  • A = Current # internal transfer/promotion
  • B = Current # referral hires
  • C = Current # of external hires
  • D = Cost to Ramp and Internal + Days to Ramp an Internal x
    Cost per day of not having productive employee in the job
  • E = Cost to Ramp and External + Days to Ramp a Referral x
    Cost per day of not having productive employee in the job
  • F = Cost to Ramp and External + Days to Ramp a Referral x
    Cost per day of not having productive employee in the job

Example: Let’s say you are hiring 400 senior consultants this year. For this population it takes 3 weeks (15 days) for an internal transfer to ramp into a this role from a more junior position, 5 weeks (25 days) for a referral to ramp, and 8 weeks (40 days) for an external hire to ramp. Let’s say billable senior consultants bring a bottom line profit of $300/day to the business after being paid. In addition, the cost to train an internal transfer is $500 while the cost to train referrals and externals is $1000. Currently the rate of internal transfers is at 15% for both types, and external hires making up the remaining 70%.

Current Costs X: SUM of the three lines below =$ 4,450,000

A (60 internals) * D ($500 to train + 15 ramp days x $300/day)= $300,000

B (60 referrals) E ($1000 to train + 25 ramp days x $300/day) = $510,000

C (280 externals) F ($1000 to train + 40 ramp days x $300/day) = 3,640,000

If we target a future state improving the rate of both referrals and internals by 50% (moving from 60 to 90 internal and referral hires for this group) – you do the math above for future state and it comes to: X = $4,030,000

A (90 internals) x D ($500 to train + 15 ramp days x $300/day)= $450,000

B (90 referrals) x E ($1000 to train + 25 ramp days x $300/day) = $720,000

C (220 externals) x F ($1000 to train + 40 ramp days x $300/day) = $2,860,000

The annual value for this group alone is $420,000 = Current State (4,450,000) – Future State ($4,030,000)

Value Inputs Worksheet

If I lost you with all these numbers, don’t fret! No one ever said finding value was easy, but with this Value Inputs Worksheet you can forget about these equations for now, and just think about the values you’d like to target and the data you will be able to gather. You will see there are more hard values included in the worksheet beyond the three outlined here. Start using this worksheet to think about the numbers you can identify within your business and the values that are important to your strategy.

With my last post I’ll share the Value Calculator which has calculation embedded to automate finding the value from the data you’ve gathered in the worksheet. (That means you only need to learn those calculations so you can convince others that they are valid!)

Let me know what you think. This worksheet may not have the values you want to gather; what am I missing to make this real in your world? There are some I know are missing, like turnover reduction, but I need feedback on how that could defensibly be calculated as a hard value. If you have ideas, I’m all ears.

Continue Reading, go to Part 3.

3 Key Metrics – Find the $$ for Your Recruiting Strategy – Part 2

3 thoughts on “3 Key Metrics – Find the $$ for Your Recruiting Strategy – Part 2

Leave a Reply

Scroll to top