The Real Cost of Recruiting

It’s rare that a week goes by when this conversation doesn’t come up. It’s really a nebulous idea because so much of the answer depends on context and circumstance. It’s worth some effort to reduce the answer(s) into a reasonable conciseness, if nothing else for my own understanding, lest I continue to have marathon conversations winding through miles of debatable territory only to arrive at the “it depends” generality.

Let’s start with what recruiting is, because that too requires some context. We can likely agree that recruiting is the effort to  enroll (someone) as a worker in an organization. That should be a fundamental understanding to which most people will give the nod. And yet, that’s where the trouble begins. It’s the big before and after that is most oft forgotten. There is a saying in this business… that talent acquisition is not recruiting. Recruiting is but a single component of what is a much greater endeavor. Recruiting doesn’t begin until a much larger table is set. And when recruiting ends, there is still work to do to ensure the investment is fully-rewarded.

If your mind works anything like mine, it sometimes helps to thinking in terms of analogy. If I compare recruiting to, let’s say fishing, maybe I can illustrate better. Fishing is not just reeling a fish in once it bites the hook. In the most basic breakdown, I first have to have the right equipment to fish. This might include proper tackle, the right kind of fishing pole, applicable clothing, maybe a boat and electronics, etc. Oh, and I need to know how to use the gear. Simply having it surely isn’t enough.

Now I need to know where to fish. If I have any hope of actually landing the big one, much less getting a bite, I might take into consideration season, climate, and fishing reports from others – i.e. data. So I have the right equipment, I know where I’m going and maybe when it’s best to go there. Next, I should know the optimal bait to use. Fish usually don’t bite hooks unless there is something tasty attached to it. Is that a worm, a minnow, a lure? Oddly enough, just because the bait is tasty is no guarantee the fish will bite it, at least not the one you hope to catch. And, that brings me to another point – if you spend all of your time throwing back the fish you don’t want, it leaves little time to catch the fish you dream of bringing home in your cooler. Here’s an additional consideration. Statistically speaking, most fish are lost at the side of the boat when an unskilled fisherman tries to land the fish. Getting it on the hook is one thing, but if you don’t know how to bring it in the boat or you’ll be very disappointed in seeing the big one get away.

I know – long analogy. I could go on but I think you have the idea by now as to why recruiting isn’t just recruiting. There’s more to fishing than getting a fish on the hook just as there is much more to recruiting than the effort to enroll (someone) as a worker in an organization as defined above. So, how is any of that relevant to the “real” cost of recruiting? Plenty relevant. It’s short-sighted, at best, for growing companies to hallucinate that hiring a recruiter (sometimes in name only) to stand in the gap when they need to make critical upcoming hires in order to meet the growth plans of the business. Yet, that is the knee-jerk solution many growing companies, especially young companies that need to grow quickly, make. In many cases, the motivation comes from being financially fatigued from paying 15-25% fees to staffing companies for most hires. In some instances, they simply believe they can leverage a strong referral network to make the critical hires and end up missing targets because that model doesn’t scale and then rush to hire a recruiter to recruit, or so they think. That bold move to hire a recruiter of their own – one who will focus on their needs, understand their business and be available to meet the aggressive new headcount initiative – is where most get in trouble. This half-baked solution rarely comes to fruition or even meets basic expectations because it’s the big before and after that is rarely considered.

In a fundamental breakdown, here are costs to consider when building a talent acquisition function and doing things the right way:

Technology Ecosystem

Enrollment in a solid recruitment platform for managing workflow. These come in many forms. Some are good, some are not. Over the years, cost has come down and most cloud-based recruiting software is sold on a per-seat basis with a possible membership overhead cost. Within that basic cost may be add-ons like search, job-board/HR/finance integration, maybe on-boarding tools, interface with background checks, etc. You get the idea, and the sky is the limit. Unless you have an enterprise recruiting team and the resources to manage a larger implementation, I would caution against an end-to-end system, initially. Bite off small chunks until you fully-define a workflow that produces. In other words, don’t let the technology get in the way of doing the work, because the technology will not make a bad process better. See a few recommendations below.

Recruiter(s)

Here’s where most companies get in trouble. Recruiting, for some reason, has become an any-person’s game. Staffing companies created this dilemma by hiring ANYONE who can sit upright to come in and give it a go. With the high demand for talent, staffing companies just need people on phones and job boards scouring the world for prospects – no skill or previous experience required. They eat what they kill and most do not last long enough in one place to kill enough to eat sufficiently. They use up any “draw” compensation that was afforded them upfront, and move on, now armed with “experience. This is not a knock against staffing companies or staffing company recruiters. There are legitimately-skilled experts in good staffing companies who serve their customers well. You know who you are. But all of them would agree that there is a subsentence of less or no-skilled people trying to do this job that generally give the real recruiters a bad name.

Back to my original point. Recruiters do not grow on trees, so good ones will cost a reasonable amount of money in compensation. In a corporate setting, a senior W-2 recruiter is a six-figure role, and easily worth it. Senior contract recruiters are earning $75+ per hour. This is where you need to vet carefully and pay appropriately, unless you are prepared to build a mediocre team and waste money on a function that is not adding value to the organization.

Buy-In From the Existing Team

While this is not a directly monetary investment, it is a significant investment in time and possible impactful to your organizational culture. While you might assume that your team would want to do anything and everything to find, properly vet, and hire the best talent available, the reality is often much different – for numerous reasons. If your team is not prepared to commit to a functional talent acquisition strategy that requires their participation and willingness, all bets are off. While a great recruiter can define the right process for your company, that recruiter rarely has the authority and latitude to enforce adherence. That can be problematic and is an entirely different discussion however.

The bottom line is that the entire team has to buy in to the entire talent acquisition process. This may require some alignment, some education, and even some enticement. But it’s necessary. One loose spoke in the wheel can impact an otherwise good plan in a very negative way.

Time

This is often the most overlooked aspect when determining total cost of hiring. Time is not a single-cost factor here. It can be measured as a cost whether too much time is used, and certainly if not enough time is invested. So having a solid talent acquisition plan should measure and qualify the cost of hire in terms of time and it should also optimize the process so that the right amount of time is invested in each hire. That will most definitely vary depending on the role being hired, but it is an important aspect of total cost.

The Short Conclusion

This is one of those posts that could go on and on, but I digress. The overarching point at hand is that the cost of hiring is more than the cost of a recruiter (or two, or three). It is more than the cost of a job board or a LinkedIn Recruiter seat. And, it is typically more than the cost of the sum of all of the parts described above, because making a bad hire can add a magnitude in cost that simply can’t be budgeted.

When considering an investment in talent acquisition for your company, take a step back and understand that it most often requires diligent planning and expertise to make sure that your spend, time and money, is duly rewarded. And, remember, it takes great talent to recruit top talent.

August 19, 2019