Hiring people and managing a competitive workforce is one of the biggest business expenses, especially for small companies. Having to cover the compensation, office facilities, training, hiring costs and much more can increase direct and indirect business costs.
How does it affect the business?
On one hand, the business gets a competitive edge to innovate and provide exceptional solutions. On the other hand, these same people have complete control of business profitability. So, if the business fails to build a quality workforce, it will hamper business revenue and growth opportunities.
Even though the employees and labour have such an impact on business, companies adopt layoffs and freeze hiring in case of recession. Recessions can harm business operations leading to shrinking margins and economic losses. However, is this enough reason to cut the hiring costs when adversities arise?
In today's blog, we will understand recruitment costs in depth and see how cutting hiring costs can prove to be beneficial without impacting business capabilities.
What are Recruitment Costs?
Recruitment costs refer to expenses related to sourcing, engaging, vetting, and hiring new employees. Companies spend enormous amounts on recruitment to get their hands on top employees and gain a competitive advantage.
- Advertising costs
- Recruiters fees
- Technology costs
- Opportunity cost
- Training costs
To hire top-qualified candidates, companies spend on a variety of activities. These comprise the types of recruitment costs, including:
- Advertising Cost- This includes the cost of posting job vacancies on portals and job boards, advertising the vacancies via Ads and social media, creating materials for job listings, etc. Companies generally adopt more than one platform to boost the efficiency of job advertisements. Moreover, they spend a lot of resources on creating perfect ads and job vacancy materials.
- Recruiter Fees- This includes the cost of third-party organizations and people that help in hiring qualified candidates. Companies often rely on headhunters and external recruiters to find the ideal candidate. Moreover, they might outsource the complete task to a third-party agency. All this comprises recruiters' fees.
- Technology Cost- This includes the cost of tools and other software HR teams use for automation and increase process efficiency. It involves tools such as an applicant tracking system (ATS), video conferencing platforms, analytics tools, and other automation tools for screening and vetting candidates. HR teams must spend on these tools to ensure operational efficiency and hire top candidates.
- Opportunity Cost- This includes the cost of managers or recruiters, who spend their basic wage hours on finding the new candidate. For instance, a manager could have done other tasks, instead of spending those working hours finding a newly qualified candidate. Hence, this lost productivity accounts for opportunity costs.
- Training Costs- This includes the training cost of the new employees, critical for extracting true value from these employees. Every employee goes through a variety of training programmes throughout their life in the company. It costs a company to maintain and provide such modules. However, these costs are generally paid off with increased productivity and commitment.
All these recruitment costs are taken together to find the cost per hire, a critical recruitment metric. Let us read in-depth about it to understand its importance and impact on business success and growth.
How Do You Analyze Cost Per Hire?
Cost per hire is a crucial hiring metric that enables recruiters to assess the hiring process efficiency.
But, what is the cost per hire?
Cost per hire is the total cost of hiring a new employee, including all the expenses such as:
- Equipment
- Travel costs
- Administrative costs
- Recruitment process expenses
- Perks and benefits offered as compensation
Cost per hire is a metric that reflects the average cost of hiring a new employee for a company over a specified period. The main aim is to get a comprehensive view of the budget spent on hiring. This includes the marketing cost of job vacancies, recruiters’ costs, and other related expenses.
The company can assess recruitment efficiency with this single metric. For instance, in case of a bad hire, the company must know how much they spend on an employee which costs more than the ROI generated. Moreover, they will be able to distribute the expenses as good, bad, and best costs.
How do you calculate the cost per hire?
Cost per hire includes all the internal and external costs, which are divided among all the new hires. This helps in calculating how much each employee costs the company.
Why Do We Need Cost Per Hire?
Recruiters emphasize cost-per-hire and dedicate hours to calculating and evaluating the cost per hire. They analyze its distribution and aim to reduce it via different strategies. But, why spend so much time on a single metric?
- Improved Decision Making- It shows a clear distribution of costs amongst various hiring channels. Moreover, recruiters get a comprehensive view of where each penny is being spent while hiring a new employee. This helps in making better decisions and identifying which channels are worth investing in. Moreover, recruiters can adopt specific strategies to exploit effective sourcing and hiring channels.
- Optimal Resource Allocation- It reflects the inefficiencies in current methodologies and highlights the area of improvement. For instance, if the recruiter is getting 5X ROI from job boards and 10X ROI from social media hiring, where will they deploy the resources? So, cost per hire helps to identify effective channels which ensure optimal resource utilization. This minimizes expenses and maximises cost efficiency.
- Cost Reduction- It highlights the distribution of recruitment costs into different channels and areas. This helps to identify all the inefficiencies, which might increase the hiring cost enormously. Recruiters can identify the areas of overspending and minimize them with proper strategy. Proper plans or corrective measures can help to reduce the cost and hire new people within the cost constraints.
Tech Stack Consolidation
HR managers and recruiters use tools to make hiring easy and efficient. It helps them to improve and expand their HR functions. With the help of automation and other technological advancements, HR tools can boost hiring operational efficiency.
But, how do recruiters deal with so many tools to exploit them fully?
Companies and HR managers generally aim to build a specific HR tech stack. These tech stacks include all the tools required to automate and improve the hiring process. Recruiters depend upon this tech stack for:
- Streamlining the recruitment process, i.e, all the parts of the hiring process are integrated and transition smoothly into each other.
- Managing the employee lifecycle, i.e., providing a career map and ensuring employee productivity and career growth.
- Ensuring data accuracy with the help of the tools to eliminate any errors or biases and make sound decisions.
- Enhancing employee engagement by building proper career plans and tracking their efforts and performance.
Recruiters spend on building a dedicated HR tech stack to bring together a variety of tools, which enhance productivity. Yet, one of the common issues with these tools is poor integration capabilities and the inability to function together smoothly.
Solution?
Tech Stack Consolidation
Tech stack consolidation is the process to simplify the existing tech stack. This involves adopting measures to eliminate complexities from the technological environment for boosting operational efficiency. It aims at reducing redundant tools and software and building a seamless HR tech stack.
Potential ROI Of HR Tech Stack Consolidation
- Reduced Recruitment Costs
- Improved Operational Efficiency
- Enhanced Data Management
- Increased Compliance
Tech stack consolidation comes at a price! Maintaining a healthy technology environment for boosting hiring efficiency demands company resources. However, the benefits extracted go beyond its costs, making it a worthwhile investment.
Why consolidate your tech stack?
- Reduced Recruitment Costs- HR teams can cut hiring costs significantly by consolidating their tech stack. Consolidation helps in eliminating the overlap and removes any redundant tools or software. Moreover, recruiters need not get multiple licences to get all the applications running smoothly. Tech stack consolidation facilitates multiple applications and licenses at a minimal maintenance cost. Additionally, a healthy tech environment implies a reduction in training costs for onboarding new hires.
- Improved Operational Efficiency- Consolidation improves operational efficiency as it streamlines the entire hiring process. It eradicates all the redundancies to improve efficiency and boost productivity. The hiring process is optimized to ensure the seamless hiring of new employees. Moreover, with an easy-to-operate technology, recruiters can fully exploit all the software and applications.
- Enhanced Data Management- Data is critical for any business operation, including HR, to analyze the performance and efficiency of business processes. Consolidating the tech stack creates a single source of truth, where all the data comes together. Recruiters find it easier to analyze and exploit the data when present on a single platform. This enables sound decision-making and enhanced data management. Moreover, the reporting becomes easier, which boosts data accuracy to provide valuable insights.
- Increased Compliance- Tech stack consolidation ensures compliance with all the required regulatory requirements with an enhanced view of recruiting data- more comprehensive and accurate. This eliminates the risk of unnecessary penalties and fines due to non-compliance. With all the tools integrated, their maintenance becomes easy.
What Are The Key Challenges In Consolidating HR Tech Stack? How Can You Overcome Them?
IMAGE: “Key challenges in consolidating your HR tech stack”; a visual to cover the following pointers:
- Identifying redundant tools
- Integrating different tools
- Resistance to change
- Data migration
- Managing transition
Working with so many tools comes at a cost, which makes the hiring process inefficient and consolidation challenging. Below are the top 5 challenges that companies face while consolidating their tech stack. We have discussed ways to overcome these so that you can consolidate your tech stack effortlessly.
- Identifying Redundant Tools- When your team uses multiple tools, with each person having a varied preferences, identifying the redundant tools is difficult. Teams must carefully analyze and eliminate the tools with overlapping functionality to save costs and boost productivity. Solution?
- Analyze the current tools to identify their strengths and weaknesses and uncover their functionality.
- Evaluate the compatibility of different tools with others, which will help to eliminate tools that disrupt consolidation.
- Integrating Different Tools- All the tools do not integrate since they come from different parent companies. Recruiters add tools based on their functionality and do not particularly focus on integration capabilities. This makes it difficult to streamline the process. Solution?
- Evaluate the compatibility of different tools and software with each other.
- Ensure that the tech stack is designed to embrace new technologies and integrate seamlessly.
- Resistance To Change- The teams might be resistant to change and do not support the consolidation. It is common to experience resistance when the teams are taken away from their comfort zones. Solution?
- Collaborate and communicate with all the stakeholders. Outline and map the entire consolidation process, while highlighting its importance at the core.
- Offer training and support to the employees in the transition period to ensure that they better understand and embrace the initiatives.
- Communicate the functionality and benefits of consolidation with the employees to ensure complete cooperation.
- Data Migration- Tech stack consolidation demands capturing data from multiple sources and bringing it together to build a single source of information in the new system. However, each tool has its compliance requirements and consolidating data can be a big challenge. Solution?
- Plan ahead of the data migration and identify all the data sources.
- Involve all the stakeholders to ensure that all the data is secure and properly backed up before migration.
- Managing Transition- Tech stack consolidation completely flips the technology stack to create a positive environment. However, it can be difficult to plan and coordinate with so many stakeholders and bring together a variety of tools. Solution?
- Develop a proper consolidation strategy with clear plans and timelines.
- Communicate the plan with stakeholders and employees for complete support.
- Monitor the transition to eliminate any inefficiencies for seamless consolidation.
Revolutionize Your Hiring Costs with NurtureBox
Implementing the HR tech stack consolidation can be beneficial for the firm and has three simple steps: identify needs, select vendors, and train staff.
Recruiters start by identifying the objectives behind the consolidation and aligning them with existing business needs. Then, they move forward to selecting specific vendors for consolidation. Finally, when all the things are in place, recruiters train the teams to understand and exploit the consolidated tech stack to its full potential. But does this ensure an effective consolidation?
What factors are necessary for effective consolidation?
- Identify redundant tools
- Evaluate compatibility
- Involve stakeholders
- Assess implementation and training needs
- Create a timeline
With all these considerations, teams can easily consolidate their HR tech stack and enjoy its benefits.
We understand that finding the right tools for building a tech stack can be challenging. Hence, we ensured NurtureBox was easy to integrate and compatible with other essential hiring tools and platforms.
But how does NurtureBox help HR teams?
Nurturebox is a talent engagement platform that helps HR teams to source and engage with qualified talent effectively. With a simple chrome extension download, you can start hiring seamlessly across different platforms without having to jump from one tab to another. Just integrate with the existing tech stack and start hiring. We make hiring your next desired candidate easier!
