Reprinted from the October 22, 2007 issue of PERSONNEL LEGAL ALERT , a widely read employment law newsletter that communicates legal guidelines to managers through real-life dialogue and concrete examples. Click here to view a sample issue, get more information or sign up for a risk-free subscription.

Cut Recruiting Costs Down To Size

If you don’t understand where your recruiting dollars are being spent and if you don’t measure the effectiveness of those dollars, you could be pouring those dollars down the drain. Donald M. Herrmann, Jr., VP of HR for Pendum, Inc. (Denver, CO), shared how he cut recruiting costs almost in half.

PINPOINT CURRENT COSTS & METHODS

Imagine looking at a record of your annual recruiting expenses and realizing that you just spent over $2 million on recruiting advertising in the last 12 months. Now imagine that your company has 2,800 employees and you recruited 800 separate people in those 12 months. That averages out to approximately $2,500 per employee in advertising costs alone. That was the situation I walked into.

We actually calculated our cost per hire in excess of $4,700. We added the costs of advertising, recruiting, interviewing, background investigations, drug tests, physical exams, and related factors. Then we divided that by the number of hires.

Not only was the cost per hire excessive, but we had no idea what was the best advertising source for recruitment. The $2 million in advertising was spent on 300 different newspapers, four different fee-based Internet job boards, flyers, and other periodicals. No one knew which of these gave us the best “bang for our buck.” In many instances, advertising was done “because.” Further, we advertised every time we had a job opening because we had no searchable database of applicants.

GO TO THE SOURCE

Our first goal was to track our advertising efforts. To that end, we asked applicants: “How did you hear about this opening?” We made this a mandatory field on our online applications. If the individual comes to our site from a job board or online newspaper, the field is auto-populated by the source.

We learned that the vast majority of our advertising efforts were ineffective. One of the most significant outcomes was the elimination of a certain “big box” Internet job board. Management had felt that we needed a presence there because “that is what everyone else used.” We learned that fewer than 2% of our hires came from that board, yet a major competitor accounted for over 48% of our hires.

This resulted in our using a single Internet job board for the majority of our advertising, and newspapers for targeted areas. We also found that in some communities CraigsList is both free and heavily used for recruiting purposes. The result was a reduction in advertising costs by almost $1.8 million, assuming our advertising expenses stay on track for the rest of the year.

KEEP IT ON SITE

Our next goal was to create a searchable job database, which would assist us in reducing the need to advertise in outside sources each time we had a position open. We contracted with another company to do this as a part of a web-based recruiting management system (also known as an applicant tracking system). These systems run anywhere from under $8,000 to well into six figures.

Our criteria for selecting a system was that it create a seamless transition into our website career page and ensure that we owned the names and personal data of applicants. We wanted to be able to tie each applicant to a job opening and be able to search applications based upon keywords or jobs for which they’ve applied. We sought a reputable company that would do all of this for us, provide 24/7 assistance to recruiters and applicants via a help desk, provide upgrades as the product improved, and share best practices as they were learned.

In the five months since the implementation of the web-based recruiting management system, we have reduced our cost per hire to $2,400, and, more importantly, our time to hire has been reduced by over 60% thanks to recruiters having to spend less time manually searching through e-mail and paper applications to find qualified applicants; having the ability to more quickly share candidate information with geographically dispersed hiring managers, verify receipt of documents, and ensure follow up; and more effective results-oriented advertising.

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