By: Darren Bounds, CEO of Breezy HR
As workplace culture grows in importance, HR is looking at a future of important discussions about how to develop culture, change up benefits and improve the employer brand. A Deloitte survey said 70 percent of change initiatives fail due to misalignment between the executive team and staff. The best way to bridge that gap is by speaking their language: numbers.
Anyone in HR knows just how expensive recruiting can be. Costs of recruiting can be as much as $20,000 per placement. With numbers that high, it is important to know how to calculate the return on investment (ROI) of your recruiting efforts. But unlike bankers, investors or widget-makers, HR has the unenviable task of measuring humans, which is tricky. Luckily if you use an applicant tracking system (ATS), there are key metrics you can look at to calculate the ROI of an ATS. Here are 4 ways to show the value of your ATS:
1. Time Spent Recruiting
If you are handling your hiring in-house with a homegrown ATS, chances are you are wasting a ton of time and energy. To see just how much time you are spending, start by identifying the members of your team involved in the hiring process. Then you can look at how many hours each person is spending on hiring-related tasks per week. Multiply the number of people by the hours spent and you get a cost total.
A smart ATS can reduce each employee’s workload by upwards of 30 percent. Combine the potential new time spent with the cost of your ATS and get a new cost per week. Finally, compare the numbers of recruiting efforts with an ATS and without, the difference will be your potential ROI.
2. Quality Hire
Hiring is a team sport. When the entire hiring team is running like a well-oiled machine, it can help ensure you find the employee that will bring the most value to your team. Making that home-run hire saves a ton of money in onboarding and retention costs, not to mention, high performers are great for the bottom line. To determine the value in hard numbers, you have to find the revenue per employee.
This can be found in your company’s SEC report or year-end financials. Multiply that number by 40 percent and you will get an estimate of the profit margin per hire. The difference is in the profit brought in by a stellar hire. Top employees can bring in at least an extra 25 percent in profit, a difference worth thousands. To see the value of the ATS, subtract the cost of your ATS from the additional value your top tier employee brings in.
3. Bad Hire
Not all hires work out. Sometimes you bring in the wrong person. When you do, they can hinder the workplace culture, relationships with existing customers or lead to burnout in the team members picking up the slack. Even if you don’t utilize your ATS to its maximum potential, you are still saving money by simply making better hires. Avoiding a bad hire is top of mind for any hiring manager. Conservative estimates from the US Department of Labor put the cost of a bad hire at a third of the employee’s first-year salary.
Keep in mind, that number is dependent on the rank of the employee and tools used to fill the role. Through this formula, you can see just how costly a bad hire is to your business. It makes the investment in an ATS worthwhile to ensure you avoid those costs.
4. Marketing
Competition is growing steeper in the job market. The pressure is on to have the attention of candidates at all times. An ATS can be leveraged to develop pools of qualified talent that can save thousands of dollars in what would be spent to market job openings. The bigger the pool you have, the faster you can fill a role with less advertising efforts.
Determine the average amount you spend advertising per month per position. Multiply that average by the number of positions and you have the total cost. With an ATS, you can create a pool of applicants to choose from that are already pre-screened. Going back to those applicants rather than advertising the opening and finding a whole new pool of candidates can cut your recruitment marketing budget drastically. If your ATS has a reporting feature, you can even see which sources provide the best quality leads so you can better direct your job posting spend.
Proving the ROI of an ATS while difficult, is possible. Take a look at these metrics and see how you can cut costs and show the ROI to your leadership.
About Darren: Darren Bounds is the CEO and Founder of Breezy HR, the applicant tracking system that keeps hiring human. As a passionate, design-minded technologist and serial entrepreneur, Darren has over a decade’s experience building HR tech that puts people first. Darren is also the former VP of Technology at Taleo, the world’s largest provider of HR software solutions. Darren believes great design can save the world and that HR should be human. When he’s not building products or businesses, you can catch him playing Overwatch.
