Recruitment software has often been heralded as a cost saviour for many HR departments, but is it all it’s cracked up to be? Jacqueline Burns looks at a number of developments in the market, exposes some of the common pitfalls and provides some valuable tips for organisations looking at such solutions
Recruitment software has often been heralded as a cost saviour for many HR departments, but is it all it’s cracked up to be? Jacqueline Burns looks at a number of developments in the market, exposes some of the common pitfalls and provides some valuable tips for organisations looking at such solutions
Australian organisations have been slow to take up recruitment software, otherwise known as Applicant Tracking Systems (ATS). In the wake of the tech wreck, many companies arrested their IT spend, particularly on web-based applications which were perceived to be unstable and high risk. By the time confidence in IT returned, long shopping lists of delayed acquisitions and upgrades necessitated businesses prioritise their spending and project resources. At the time, most relegated recruitment systems to the bottom of the list.
However, recruitment consultant TalentZone says Australian companies are starting to develop and implement more sophisticated internet recruitment strategies. According to its Australasian top 500 internet recruiting study (October 2003), the outsourcing of internet recruiting tools increased by over 50 per cent from 2002 to 2003. The popularity of in-house solutions increased by 37 per cent over the same period.
Currently, only 35 per cent of Australia’s top 500 employers have recruitment software in place, compared with around 90 per cent of the top 500 US employers.
Competition is certainly heating up for the largely untapped top end of town. The scramble for this lucrative segment has driven down the price of these systems in Australia. As a result, those organisations that have not yet taken the plunge can snag themselves an ATS at a relative bargain.
The question is, how many suppliers will fall victim to predatory pricing in the process?
“In my opinion, prices are suppressed as a result of the fact that there’s a market grab attitude at the moment,” says Craig Aunger, principal of TalentZone. “Once the penetration of those large employers reaches 80 to 90 per cent, the prices will increase. Unfortunately, a few vendors will probably fall over before then because they won’t be able to operate at the prices they’re charging.”
You have to spend money to make money
The cost of recruitment software depends on the size of the organisation and the range of functionality required. A simple system might set a small company back $10,000, whereas a large organisation with complex needs could easily say goodbye to a cool million.
Large corporates are also more willing to invest money in customising the solution because the cost of configuration is much less than would be the change management impact of introducing an incompatible system.
While individual vendors are hesitant to disclose the returns their clients are enjoying, TalentZone reports effectively implemented software is consistently generating a 30 per cent saving on total recruitment costs within the first twelve months.
The bulk of the hard dollar savings stem from the diminished need to engage recruitment agents or advertise in the print media. Companies can drive candidates to their website and build talent pools rather than going out to the market each time.
For Coles Myer, one of Australia’s biggest employers, the return on investment in its ATS was both rapid and large because it started from a completely manual base.
“The number of candidates and jobs they put through the system is mind boggling compared with other organisations,” says Karen Cariss, managing director of the retailer’s chosen outsourced provider, PageUp. “With Coles Myer you think retail but their head office alone is huge and they literally do employ every type of job role from butchers and bakers to property managers to finance and IT people.”
Paul Callander, managing director of Taleo, says Australian companies are not effectively measuring the return on investment in these systems. “I’m not seeing clear benchmarks articulated in business terms of what was the productivity impact of skills being deployed properly or labour being used as efficiently as possible,” says Callander. Any company would be satisfied with a 30 per cent return on its technology investment. Some are recording even more impressive results.
The Auckland District Health Board (ADHB), New Zealand’s largest public healthcare provider, recorded a 40 per cent first year return on its investment in a Taleo system. In addition to reducing agency and media costs, CEO Gary Smith says the ADHB has improved communication with external candidates and internal employees.
“We are able to measure and report on many of our workforce initiatives for the first time using solid metrics and results,” says Smith. For example, since the implementation, the ADHB has made approximately 1,200 internal transfers and 500 external hires.
One of the most obvious advantages of recruitment software is that it enables companies to handle a far greater volume of applications than they could previously. Being inundated with applications is no longer a concern as 1,000 candidates can be managed just as easily as 100.
Does that mean to say an e-recruitment strategy will also have a positive impact on the quality of hire? Anecdotal feedback suggests it does. HR practitioners can track where their candidates are coming from – and, importantly, the origin of the people they’re ultimately hiring.
“After six to 12 months you can start getting some pretty powerful metrics that show you for each role where your sourcing strategy is delivering the best value for money. You can then tie that back to the person you hired and how they’re performing in the role. By tracking where you get the people and where you get the quality people, you can work toward developing a sourcing strategy that delivers a higher quality candidate,” states Aunger.
Switched on and off
Many of today’s electronic recruitment offerings are delivered via an Application Service Provider or ASP. This makes them relatively easy to implement and maintain from a technical standpoint. The applications are hosted by the vendor so companies are, in effect, licensing the use of a browser. There is no internal cost of capital and no internal IT involvement.
A downside of the ease of delivery is that it could be relatively easy for companies to change vendors. On the surface, the switching costs appear not to be a barrier.
“You have to be continually adding value with new features, functionality and services or you risk companies turning you off,” Callander acknowledges.
Certainly, a vendor is better protected in larger organisations where potentially thousands of managers might be interacting with the system. Once the product becomes entrenched – staff having been trained and engaged to use the system – the organisation’s preparedness to switch will significantly decrease.
Customisation is another mechanism to protect against switching behaviour. It requires companies to invest time in deciding how the system is going to work, how they want it configured and so on. At its most sophisticated, customisation allows the system to be integrated with other HR systems including induction, online learning and psychometric and behavioural testing. It can also integrate with voice recognition systems to allow candidates to use the telephone as part of the process. That process does not stop after the system has gone live; it continues throughout the contract.
Cariss observes customised requests tend to be either industry driven or process-oriented. Retail clients such as Coles Myer will incorporate sector-specific questions, such as the days and timeslots a candidate is available to work. In contrast, a finance sector client such as a Macquarie Bank might require the system to integrate with reference checking systems, as well as police and ASIC background checks, in order for the bank to comply with its obligations under the Financial Services Reform Act.
If you’re gonna do it, do it right
Though this corner of the industry has been protected from high profile implementation disasters, it is not without its casualties.
Insufficient funds and inadequate planning are to blame for recruitment software occasionally not meeting organisational expectations.
“Typically, recruitment departments are a poor cousin to HR which is a poor cousin to operations, sales and finance in a business. With meagre resources, some companies are having a go at using this type of software without going through the proper process of selecting and implementing the technology,” Aunger believes.
Every so often a company will build a recruitment system in-house, believing a purpose-built product to be superior to an off-the-shelf alternative. Indeed, these fully customised systems can achieve short-term success but they quickly become obsolete because companies neglect to commit resources to upgrading them.
No Fortune 500 company uses an in-house solution according to TalentZone.
“Companies look at the upfront costs and running costs but don’t factor in the significant maintenance costs – certainly, nothing that’s anywhere near big enough to keep up with all the systems on the market. We’re all moving at a million miles an hour to add new functionality to our systems so it’s easy for in-house systems get left behind,” says Cariss.
The Australian Taxation Office has tried both options. It outsourced its graduate recruitment to PageUp for a several years before electing to transfer to an in-house system. Twelve months later, the ATO returned the program to PageUp.
