Using data to change the idea of recruitment as a cost center

Acquiring top talent has always been a delicate dance, requiring strategic planning, resources, and a keen eye for potential. But in today's uncertain economic times, talent leaders must contend with a new opponent: significant cuts to their recruitment budgets. 

A recent study from CFO.com surveyed 500 company executives to discover that 99% plan to cut costs this year due to the projected recession—and 61% plan to decrease their recruiting and hiring. 

One reason recruitment budgets are the first to go in difficult economic times is that many executives have a hard time finding the talent acquisition ROI—that is, connecting hiring to an increase in revenue. Instead, they see their recruitment budget as a necessary line item during hiring booms but expendable during downturns. As a talent leader, it’s up to you to change this assumption.  

In this article, we’ll explain how to use data to show that investing in recruiting is just as critical to a business’s success during downturns as it is during growth phases. 

Connect recruitment to your business’s strategic goals

To establish the strategic value of talent acquisition, you first have to show how recruitment is a critical part of your business’s overall success. Start with a few of the most commonly-tracked recruitment metrics, and look for ways this data connects to business initiatives, like increasing revenue and customer satisfaction while reducing costs. 

• Time-to-hire (TTH) and revenue growth: Analyze your historical data to discover how reducing time-to-fill impacts your company’s revenue growth. For example, a shorter hiring cycle means faster access to skilled talent, which enables your company to seize business opportunities and accelerate growth. By comparing revenue data against time-to-fill metrics (and by doing all you can to shorten time-to-fill), you can demonstrate the positive correlation between efficient hiring and increased revenue generation.

• Quality-of-hire and customer satisfaction: Linking quality-of-hire with customer satisfaction metrics can provide a compelling argument for the strategic impact of hiring. By examining data on customer feedback, ratings, or retention rates, talent leaders can draw connections between the caliber of employees brought in through the hiring process and customer satisfaction levels. Stronger employee skills, expertise, and alignment with organizational values can contribute to enhanced customer experiences, leading to higher satisfaction levels and improved customer loyalty.

• Turnover rates and cost savings: High turnover rates can be detrimental to an organization's financial health. By examining data on turnover rates, talent leaders can assess the impact of hiring on cost savings. Lower turnover rates indicate stronger employee retention and reduced recruitment and onboarding costs. By quantifying the financial implications of turnover reduction, talent leaders can showcase the cost savings achieved through effective hiring practices and the subsequent positive impact on strategic KPIs.

While time-to-fill, customer satisfaction, and employee turnover are all fairly common metrics, this data-driven approach does require intentional collection, either by an employee or using a modern recruitment CRM like Gem. Gem’s metrics dashboard, for example, can share the average time to hire overall, TTH for particular roles, or time between recruitment stages. 

Demonstrate how recruitment leads to indirect cost savings and ROI 

Quantifying the financial impact of successful recruitment strategies makes a compelling case for how recruitment departments bring value to your company. This is especially true when the most common argument for cutting recruitment budgets during downturns is to save money.  

• Recruiter cost ratio: Recruiter cost ratios measure how much money is spent on recruiting compared to the returned value of the investment. It’s a more accurate metric to prove departmental ROI than the more common cost-per-hire because it takes into consideration that higher-value candidates (like executives) will likely take more initial investment to win over. A well-resourced recruitment team will always have a better ratio than one with a small budget, so it’s the perfect way to show how investing in recruitment leads to long-term financial benefits. 

• Employee retention savings: A 2023 study found that the average cost for a new hire in the U.S. is $4,700. That means any employees you retain by moving them internally to a different role saves your company nearly $5,000. Make sure you keep a record of these moves for cost savings proof. 

• Opportunity costs: Reframe the cost discussion by focusing on the negative impact of not investing in recruitment and the cost of that open seat (otherwise known as cost of vacancy). Without a recruitment budget, time-to-hire is highly likely to increase. Consider the business impact of not filling a critical role—like not hitting revenue goals without that extra salesperson or not hitting production goals without another line worker.

Recruitment departments have other valuable wins that don’t necessarily translate to dollar amounts, like perfect-fit hires who were immediate successes or hires whose professional connections yielded other valuable hires. Keep a record of these non-monetary wins because they still count as data that increases your departmental ROI. 

Prove your team’s efficiency with KPI benchmarks 

There are so many factors that contribute to the success or failure of a recruitment strategy that simply measuring KPIs doesn’t really help your execs understand the value. To show your team’s efficiency, you need benchmarks to compare your KPIs against. 

• Pipeline data: Compare your current team’s effectiveness against historical data from years past to demonstrate improvements in KPIs like time-to-hire, cost per application, or offer-acceptance rate. 

• Benchmark reports: Many companies put out annual benchmark reports by industry that you can use to compare the recruitment performances of companies like yours to your team’s performance. Gem’s Recruiting Benchmarks Report, for example, gives you data on average open rates for candidate outreach emails, the number of qualified candidates needed for one hire, and recruitment funnel conversion rates. 

• Gem’s peer benchmarks: Current Gem customers have an even better way to compare their KPIs. All Talent Compass customers have access to recruitment benchmarks for their industry, so they can see how metrics like time-to-hire, offer-acceptance rate, and pipeline diversity stack up to industry averages. 

Regardless of what kind of benchmark you use, remember that with senior leadership, context is king. To truly show the performance of your current recruitment staff, you need to give execs something to compare them to – whether it’s market competitors or your team from years past. 

Increase team value with data-driven software

Convincing company leadership to invest in new recruitment tech during a downturn when they’re considering shrinking your budget may seem counterintuitive. But actually, using modern hiring solutions like Gem is one of the best ways to optimize your recruitment department in the long run. 

• Maintain leads effortlessly with talent pool management: Even during hiring freezes, recruiters have work to do. You must maintain relationships with top candidates through nurture campaigns and continue to track candidate status and interest so when hiring resumes, you have a well-stocked talent pool to pull from. Gem’s recruiting CRM lets you automate outreach campaigns and auto-refreshes talent data, so you can keep up-to-date records effortlessly.   

• Proactively prepare your team with capacity planning: A sophisticated capacity planning process will tell you how many employees are needed to support your company’s short- and long-term growth strategies, and how long and what resources it’ll take to find these new employees. Depending on your business goals, capacity planning may actually reveal you need more recruiters to support the prospective new hires—and downturns are the perfect time to onboard them. 

• Improve your candidate experience and employee efficiencies: Gem’s Pipeline Analytics helps you eliminate unproductive sourcing channels to better spend your money, while automations free up employee capacity for more personal tasks. Meanwhile, the variety of personalizations, workflows, and outreach options give candidates a customized, personalized experience where they feel valued from their first interaction with your company. 

• Measure performance with data: Gem gives you everything you need to protect your recruitment team using data. Our solution collects, stores, and interprets your evidence for you. Use our hiring dashboard and Pipeline Analytics to see your team’s performance through data, and continue to justify your impact and value.  

When speaking to leaders—perhaps CFOs especially, whether or not you are hiring—it’s best to use the language they understand: data. Tie your team’s efforts to your company’s strategic goals, show how you’re saving money, and use industry benchmarks to prove performance. Once you have executives’ attention, share the benefits of using a modern recruitment CRM to further automate hiring processes. You’ll be well on your way to protecting your budget for years to come. 

Ready to see firsthand how a modern CRM like Gem can help? Sign up for a free trial today.