Recruiting Without a Plan Can Cost Thousands

Nesso online, July 25 2008

According to a recent survey by Chandler Macleod, one of Australasia’s largest and most diverse HR outsourcing and recruitment firms, 60 per cent of companies have no documented recruitment strategy. Not surprisingly, the research findings drew a strong link between poorly defined strategies and increased recruitment costs. The report suggests companies without an effective recruitment plan in place can waste thousands in unnecessary hiring costs for every position filled.

The survey revealed that the average cost of hiring a new employee for companies was $15,000; however, the innovative recruiters were coming in well below this figure. According to Sue Healy, general manager for talent management services at Chandler Macleod, “Companies that are doing it (recruitment) well and have five or six solid channels of candidates flowing to them are saving around $7000 to $10,000 per hire”.

Despite ongoing emphasis on the need for detailed innovative recruitment strategies, the report showed that most HR departments see recruitment as a “distress purchase” and not something that requires careful preparation or to be factored into wider business planning. Because they were finding it difficult to move away from traditional recruitment methods, companies were inviting inefficiency and wasting resources.

According to Healy, recruitment carries significant tangible and intangible costs and the best companies minimise these costs with sound recruitment strategies. She also notes that while many companies claim people are their most important asset, this ideal is not necessarily reflected in their approach to recruitment and HR management.

“Ownership of and accountability for recruitment are poor, recruitment processes outdated and the decision to recruit is too often ad hoc and rushed. It is disappointing to observe how little recruitment practices have evolved in the past 10 years and how few enterprises have an integrated recruitment strategy in place today,” she said.

Traditional channels – recruitment agencies (used by 92 per cent of firms), newspapers (88 per cent) and online job boards (79 per cent) – remain the most popular means used to attract candidates. However, employee referral programs (ERPs) and company websites have emerged as increasingly effective channels. Social networking forums, such as Facebook and LinkedIn, are used by 23 per cent of respondents, though their effectiveness is still unclear. Social networking sites are certainly an evolving recruitment channel, but Healy says firms are cautious not to overstep the boundary between personal and work life.

Overall, the research indicates that employers apply diverse strategies to assess and select potential candidates, but traditional practices remain the most popular. Healy was surprised at how few employers are going beyond the simple basics of behavioural interviews and reference-checking. She noted that whereas 57 per cent of companies are using some form of psychometric and ability testing to screen candidates, even fewer companies are using innovative techniques to enhance their recruitment process.

“This may partly reflect increased numbers of appointments from within a company. However, it also suggests a lack of rigour in the recruitment process, poor accountability for hiring decisions, and perhaps a failure to adapt to new tools and strategies.”

If an efficient recruiting strategy can cost $10,000 and a poor strategy $7-10,000 more than this again, the need to get the process right and select the right candidates becomes paramount. For those companies looking to innovate, Integrities and Values (I&V) profiling is a relatively inexpensive means wringing greater value from the significant investment they make in identifying and employing their staff.

For those already progressing to utilising new technologies in their recruitment strategies by using new recruitment channels such as LinkedIN, it is more important than ever to introduce the type of “vetting function”, such as Nesso’s I&V profiling.