The U.S. Bureau of Labor Statistics predicts that the shortage of available tech talent will grow to 1.2 million by 2026 in America alone.
As a result, hiring and retaining tech talent will only become increasingly difficult.
Hiring the right talent is self-evidently crucial, but the process can be challenging and costly for a recruitment team.
That’s where structured hiring comes into play.
By implementing structured hiring strategies, tech companies can maximize the effectiveness of their recruitment efforts and enhance their return on investment (ROI.)
This blog will cover:
- Understanding recruitment ROI in tech
- How to calculate ROI
- How to optimize ROI with structured hiring techniques
Understanding recruitment ROI in tech industries
Recruitment ROI refers to the value a company gains from its investment in hiring new employees.
In the tech industry, where talent is in high demand (but in short supply), understanding the importance of recruitment ROI is vital for successful talent acquisition and retention.
The benefits of measuring recruitment ROI are many:
- It allows organizations to evaluate their hiring practices. The data collected can be used to optimize the recruitment process.
- Knowing the value and impact of hiring efforts helps businesses justify their recruitment budgets and secure necessary resources for future talent acquisition.
- Tracking recruitment ROI helps understand the quality of hires in relation to the investment made. Companies can identify which recruitment strategies attract the best talent, leading to improved job performance.
How to calculate recruitment ROI in tech industries
Calculating recruitment ROI involves evaluating the effectiveness and efficiency of the hiring process by considering several key metrics.
These include cost per hire, time to hire, quality of hires, and the impact of new hires on business performance.
Companies can determine the value gained from their investment by analyzing these factors.
Cost per hire
Cost per hire captures all expenses associated with the hiring process. These costs can include:
- Salaries of HR personnel involved in hiring
- Advertising and job posting fees
- Costs of recruitment software
- Interview-related expenses
- Recruitment agency fees
- Background check costs
To calculate cost per hire, add all these (and other) expenses and divide by the number of hires made.
For example, if a company spends $100,000 on recruiting ten employees, the cost per hire would be:
$100,000/10 hires = $10,000
Time to hire
Time to hire measures the average time from posting a job opening to the candidate accepting the job offer.
This metric is essential as prolonged hiring processes can increase costs and cause lost productivity.
To calculate time to hire, track the number of days taken to fill each position and then find the average across all hires.
For instance, if the hiring process took 30, 45, and 50 days for three positions, the average time to hire would be:
30+45+50/3 = 41.67 days.
Quality of hires
Quality of hires assesses how well new employees meet performance expectations and contribute to the company’s success.
This metric can be measured through performance evaluations, employee retention rates, and manager feedback. High-quality hires:
- Spearhead overall business growth
- Increase productivity
- Boost innovation
To quantify the quality of hires, companies can develop a scoring system based on these performance metrics.
For example, if out of ten new hires, seven meet or exceed performance expectations, the quality of hires would be:
7/10 x 100 = 70%
Impact of new hires on business performance
The ultimate measure of recruitment ROI is the impact of new hires on business performance.
This can be evaluated by examining increased revenue, cost savings, productivity gains, and customer satisfaction.
For instance, if new hires contribute to a $500,000 increase in revenue and $100,000 in cost savings while the total recruitment cost is $150,000, the net benefit would be:
$500,000 + $100,000 – $150,000 = $450,000
To calculate ROI: $450,000/$150,0000 x 100 = 300%
7 Steps to optimize recruitment ROI with structured hiring
Structured hiring is a systematic and consistent approach to the recruitment process designed to ensure fairness, reduce bias, and improve the quality of new hires.
Properly implemented structured hiring can help a company optimize ROI. Structured hiring works in seven steps:
1. Identify your hiring needs
Identifying hiring needs begins with conducting a thorough needs analysis to understand the specific roles and skills required within the organization.
This involves consulting with department heads and team leaders to gather insights into current workforce capabilities, upcoming projects, and any existing skills gaps.
By evaluating these factors, companies can determine which positions are critical to their operations and future growth.
Additionally, aligning these hiring needs with broader business goals is crucial.
For instance, if a company’s strategic objective is to innovate and expand its product line, it might require additional software developers or product managers with specific expertise in the new areas.
Companies can prioritize positions that will significantly impact their success by ensuring that hiring efforts are directly tied to business goals.
2. Create standardized job descriptions
This involves defining the responsibilities, required skills, qualifications, and other relevant details about the position.
For instance, if a company hires a software developer, the job description might list the programming languages the candidate needs to know, the type of projects they will work on, and the required experience.
By standardizing job descriptions, employers ensure that all candidates understand what is expected of them and what they need to bring.
3. Develop a consistent application process
Once the job descriptions are set, the next step is to create a uniform application process. This typically includes using an applicant tracking system (ATS) to collect and manage applications.
The ATS helps organize resumes, cover letters, and other application materials. It ensures that every candidate is asked the same questions and undergoes the same initial screening process.
This consistency helps in comparing candidates fairly and objectively.
4. Implement a structured interview framework
Structured hiring also involves standardizing the job interview process. This means creating a set of predetermined interview questions for every candidate. These questions assess the specific skills and qualifications outlined in the job description.
For example, if problem-solving skills are crucial for the role, all candidates might be asked to describe when they faced a challenging problem and how they resolved it.
Once again, asking every candidate the same question contributes to a fair recruitment process.
5. Use objective evaluation criteria
Structured hiring incorporates objective evaluation criteria to ensure fairness and reduce bias. This means developing a scoring system or rubric to evaluate each candidate’s responses and qualifications.
Each interview question might have a set of ideal answers, and candidates’ responses are scored based on how closely they match these ideal answers.
This objective scoring helps to ensure that decisions are based on merit rather than subjective impressions.
6. Train your interviewers
An essential part of structured hiring is training interviewers to follow the standardized process.
Interviewers are taught how to ask standardized questions, use the scoring rubrics, and avoid biases that can creep into the hiring process.
Training helps to ensure that all interviewers are on the same page and that the process is carried out consistently across different candidates.
7. Collect and analyze hiring data
Throughout the hiring process, data is collected on various aspects, such as how long it takes to fill the position, how many candidates a