The balance sheet is king

by 12 Mar 2009

Recruitment leaders must think of the bigger picture and look at how they can remove and reduce recruitment costs in a downturn, write Tim Way and Gareth Flynn

Cleanse your candidate database; build talent profiles; train your team and hiring managers; develop sourcing strategies; provide market intelligence; review supply chain; provide career management services; update your internet and intranet pages, and so on and so forth.

Sound familiar? These are some of the suggestions pro posed in a number of recent articles that discuss how to best utilise existing capacity in internal recruitment teams as a result of the current economic climate. These same arti cles advocate this as the ideal time to continue investment in your corporate recruitment function to position your organisation to be first out of the blocks when the market picks up.

The rationale for this “invest now, benefit later” strategy is generally sound and it is arguably one of the considerations executives make when considering where to reduce, or suspend, expenditure and where to continue with investment.

However, the consistent theme running through many such articles is that they review and advocate the value of one par ticular business function – recruitment – in isolation from the remainder of the organisation. The reality is that no business will review the value of a certain function in isolation, so lead ers need to exercise caution in borrowing and/or delivering these value statements and alternative activity ideas as a defen sive mechanism against pending change.

While these suggested tasks may result in short-term pressure release and demonstrate activity; they may be the wrong thing for the organisation longer term and may simply delay the inevitable and rational decision to reduce investment. Cost-to-income ratios are an important metric for companies and can influence share price and market confidence. If revenues are falling, costs will have to follow.

Recruitment’s bottom line

A credible corporate recruitment function has the ability to influence the bottom line in two key areas. The first of these is revenue (by attracting and hiring the best talent in the market) and the second is cost control/reduction (by removing and reducing recruitment and associated costs from the business).

During a downturn the ability of a corporate recruitment function to positively influence revenue falls considerably, with hiring in the short-to-mid-term likely to be suspended or scaled back. However, there remains a real opportunity to remove and reduce recruitment costs and associated overheads from the business and it is here that recruitment leaders have a great opportunity to contribute.

Business and HR executives will make decisions on how – and where – within the business to reduce cost. Some continued investment in R&D and product develop ment, retention of key sales people/chan nels and growth in emerging markets, for example, will feature highly above any credible case for retaining the corporate recruitment function in its current form.

Only by taking action now to create a lean and highly efficient corporate recruit ment function will you truly position it to deliver mid-to-long-term value when mar ket confidence recovers. Even with future growth your costs should remain much lower than the “as is” model. This means that in future more revenue, when gener ated, will make its way to the bottom line.

Real recruitment value

Were you to approach your boss and say “I believe there are ways we can reduce corporate overheads in the recruitment function whilst retaining access to a cred ible, cost-effective service” I guarantee he/she will say “I’m listening”; and they might also add “and I’m glad you’ve come to me before I came to you”.

It is human nature to want to protect yourself and your team, especially after you have invested so much in its devel opment. However if you are able to review your function’s real value during a downturn, in relation to the broader organisational objectives, you will demon strate that you really understand, and are thinking about, some of the wider busi ness challenges your company faces.

It also promotes you as the type of leader who can identify the need for, and potentially manage, difficult change which is a capability and attribute far more likely to be retained and deployed elsewhere in your organisation.

Tim Way and Gareth Flynn aredirectors of TalentQuest