Measuring ROI of human capital is often difficult, but this is not the case with recruitment software solutions. Teresa Russell talks with two companies that have realised significant savings and built their employment brands after introducing electronic hiring management systems
Measuring ROI of human capital is often difficult, but this is not the case with recruitment software solutions. Teresa Russell talks with two companies that have realised significant savings and built their employment brands after introducing electronic hiring management systems
In 2004, international research was conducted by the Aberdeen Group in the US and UK among companies that had used electronic hiring systems for at least one year. Among the findings, hard cost savings (see box) of up to US$15 million ($19.3 million) were reported, depending on the size of the company and how much hiring activity it had during the year. Savings in a company that hires 10,000 applicants in a year averaged US$900 ($1,160) per new hire.
Few Australian companies operate on the scale of those in the research group, however both Australian businesses of Kellogg’s and ING Direct can boast significant cost savings and many other benefits following the introduction of their respective web-based recruitment software solutions.
ING Direct
The cost of recruiting staff at ING Direct has dropped from $6,600 per hire in 2003 to just $2,800 per hire in 2005. In 2001, 90 per cent of its recruitment was conducted by agencies, compared to just 11 per cent this year.
ING Direct is a branchless bank that does all its business via brokers, over the telephone or via the internet. Most of its 680 staff operate in Sydney and on the NSW Central Coast, but 40 work in other states. Roles include call centre and processing staff, IT, sales, marketing as well as the usual central support functions.
Leigh Toohey, ING Direct’s recruitment and selection manager, says there has been a major change in the way the growing company has recruited in the past four to five years. The company now employs a recruitment team of five people who focus on filling vacant positions direct from the market in order to further improve recruitment efficiencies. Five years ago, all the line managers had relationships with different employment agencies, then four years ago, preferred supplier agreements were struck and recruitment was centralised through HR.
“It took time to change some managers’ mindsets about filling a position from within, as they were used to going external,” says Toohey, who rolled out recruitment training for all managers to help explain both the rationale behind it and the new process. Initially, they started recruiting all call centre staff directly via job boards, with all applications sent to the HR inbox. These were printed, sorted and screened by HR, then sent to the line managers, who made a shortlist of applicants, who then underwent telephone and face-to face interviews as well as background checks. These checks included criminal, credit, residency and employment history, as well as reference checking and verification of educational qualifications.
“Because we have a strong brand name, we found it difficult to handle the large numbers of applicants in a timely and professional manner. We were also unable to identify people who had applied previously and been rejected for a similar position,” Toohey says. Realising she needed to develop an efficient, cost effective and timely recruitment process, Toohey attended an online recruitment seminar and found her current supplier through her professional network.
When calculating costs per hire, Toohey includes the salaries of recruitment staff, the cost of outsourced background checks, advertising, agency costs, psych testing, licensing agreement for software, training costs on the recruitment system and testing costs. “We smashed our target this year because we have recruited some senior roles as well as interstate roles ourselves, instead of using agencies. With just a few senior hires, the annual cost of the system is paid for,” she says.
Toohey quotes a long list of benefits from using the recruitment management software. Apart from the cost savings, which are substantial, they can now portray a very professional, branded image to candidates and communicate with them in a timely manner. Managing a large volume for screening, culling and reporting is now easy. Also, because the careers centre is on its website, ING Direct have actually had customers apply for jobs when they have gone online to do their banking.
The system it uses has a questionnaire builder that can rank how well a candidate’s personal values align with the brand values, and tracks the history of candidates so that ‘serial candidates’ can be flagged. All of ING Direct’s internal job applications can be channelled through the same process.
Toohey recommends early consultation with both marketing and IT departments to ensure a smooth transition once a decision is made. She advises writing down what you want out of a system before speaking with suppliers. “If you go with a system that is hosted externally, there are no maintenance concerns and you get the benefit of any upgrades. If you buy an off-the-shelf product, make sure you know the costs of any changes or enhancements before you buy. Also speak to other users of the system and check with them about the speed of the system, planned and unscheduled downtime, service level agreements and whether user group meetings are organised,” she advises. Her last tip is to check the supplier’s relationship with job boards, that is, who has to pay the link out fee.
“This system has made the process easier, but it does not replace the skill of the hiring manager and recruiters – you still have to do the work!” Toohey concludes.
Kellogg’s
This iconic brand FMCG food manufacturer employs about 700 people in Australia. Most are employed in two manufacturing plants, with support from a cross-functional team at the Sydney head office and sales offices in each state.
Catrina Delgorge, Kellogg’s recruitment and HR advisor, says the company relied on using agencies in the past, because the Kellogg’s brand attracts large volumes of candidates when they advertised directly. “Since the emergence of the job boards, it is difficult to justify a 17-19 per cent placement fee when it only costs $150 to place an ad and get a similar response to what the agency might. The issue again is managing the volume,” she explains.
Like many companies, Kellogg’s recruited using a combination of local advertising for lower level jobs, display ads for hard to fill jobs, and boutique and search agencies for specialist and senior positions as well as temporary clerical roles. They also had an email address for employment applications on Lotus Notes.
Delgorge completed a short contract with a large FMCG company that had introduced recruitment management software in an effort to reduce its recruitment costs and its 30 per cent staff turnover. “I had never seen anything so powerful as this web-based tool that delivered a seamless and personal response to candidates, while dealing with the volume that the internet ads generated. It also ranked their applications, based on experience and a number of other factors, against the job description,” says Delgorge. On returning to Kellogg’s, she introduced the system, which has been fully operational for two months.
“The expected cost saving is the agency fee, which ranges from 16-23 per cent of the annual salary of the successful applicant – therefore, anywhere from $7,200–$27,600 per hire,” she predicts.
Delgorge says that because the product they chose is almost unique, supplier service, support and backup were very important to them. “The fact that it is web-hosted and doesn’t occupy any of our server space was very attractive too,” she adds.
Bill Rowland, Kellogg’s IT services manager says that he had “no worries with infrastructure, resources or training, so it was quite straightforward to implement from an IT point of view”. The only problems they faced were from third party web developers who were not able to deliver the front-end (what the candidate sees) of the website in a timely or satisfactory manner. “That should not have been as difficult as it became,” Rowland says.
He was involved in the software solution search from the beginning, then throughout the whole process. “Make sure it is put in a development environment and tested before it is implemented,” he advises.
Delgorge agrees with ING Direct’s Toohey about the advantages of bringing recruitment back in-house. “Apart from the cost savings, we can finetune the cultural fit and have consistency in the organisation’s external representation. We can brand ourselves as an employer of choice, rather than paying an agency to showcase its own brand,” says Delgorge.
Delgorge urges all HR professionals to embrace this new technology or be left behind. “Your company will be judged on how technically savvy it is, especially by the Gen X and Y candidates. If you seem old-fashioned, they may be put off and feel they aren’t culturally matched to your organisation,” she concludes.
Streamlined staffing: The hard cost categories
Internal cost areas
Requisition creation, approvals management
Resume scanning (if internal)
Print cost for paper applications
Candidate screening (reviewing resumes)
Interviewing T&E
External Cost Areas
External job posting (job board fees)
Resume scanning (if external)
Classified Ads
Candidate screening (reviewing resumes)
Agency fees
Background search
