Cost per Hire....the 20 year debate continues...

Since I got into the industry in 1991, the debate has raged on as to what consistutes Cost per Hire.

I know this was a key element of the emergence of the Applicant Tracking Sysems (ATS) back in the 90's. Industry pioneers, such as Hank Stringer (Hire.com) and Derek Mercer (RecruitMax) worked dilligently to get some sort of an industry standard metrix as to CPH, so they could justify or at least 'sell' the reduction feature of CPH as it related to their ATS software.

And no one could agree....today we are still debating the CPH metric, and it will continue for some time, I can assure you.

Here is one crazy metric that I know two Fortune 500 firms utilize.

And, it scares the heck out of their corporate recruiters. Again, this may sound Crazy, but they use it.... and its effective.

Management takes the total revenue of the company, divides it by the total number of employees, then divide that by work days in a year. (250) Then take the 'Time to Fill' metric, i.e. 25 work days or whatever it is, and multiply it out. Sounds crazy, but it really gets the recruiters attention.

For example, one company I know has a gross revenue of $400,000 for each employee on staff, in this example, 1000 employees equals a gross revenue for the company of $400Million.

They divide the $400,000 by number of workdays (250) and come up with a 'lost revenue' of $1600.00 per day for everyday a req is open..then multiply the $1600 x's number of days the position is open. It may not be entirely accurate, but they want recruiters to know exactly how much it means to limit the days it takes to fill a position. So, if it takes 25 workdays to fill a position, ($1600 x's 25) they call that cost per hire $40,000. Sounds crazy, but its one way to create an innovative metric that is consistent. I dont recommend it, but it obviously makes a huge statement to the recruiters etc....

Other cost per hire metrics are exact costs of the department, i.e. salaries, benefits, etc...plus job board costs and other departmental overhead, all divided by number of hires made in a given month. This does not calculate lost revenue, but gives a true dollar figure as it relates to the department.

Interesting differences of metrics and business opinions.

The bottom line is, establish your metric, apply it to all personnel, and stick to it. Any type of measurement is better than No type of measurement....and a metric that fits your company best is always the best metric.

A good combination of lost revenue, plus expenses, seems to make the most sense. But does an open 'sales position' warrant more attention than an open 'admin position' as it leads to more lost revenue? Probably....but it all works out in the end.

CPH....is whatever you want it to be, as long as you remain consistent with your metrics.

Partners, Co-horts, and Third Party Agencies

I am noticing more and more 'fake resumes' on the job boards....resumes that are intended to get a recruiter to make a phone call or to email a third party firm in order for them to market additional candidates that they have available.



Most of these guys, if not all, are H1b visa holders....the employer who holds the Visa on behalf of temporary workers, usually from India.



At first, this seems to upset many recruiters as they feel it's unethical and a waste of time.



I disagree.



Here's why...



These employers are (at least right now) a valuable commodity, as they have many consultants who are not posted directly on the boards, who may be finishing a project, and they are in dire need of finding them another project asap. They must continue to make payroll, according to the immigration standards, even if these guys are not engaged on a project and creating revenue.



So, they have a huge vested interest in getting them new Gigs, even at reduced rates in some cases.



They will generally negotiate their hourly rate, especially if the consultant is 'on the bench' and not creating revenue.



So, my opinion is, think of these third parties as true partners, unless they prove out to be a poor resource. They also know most everyone in their community, so they will refer you to their own partners who may have the resource that you need.

Using LinkedIn effectively as a Recruiter

LinkedIn is cool.

So are several of the other Networking website, they are more or less the MySpace's of the business world.

Since I know and understand LinkedIn a bit more than the other's, I will just concentrate my thoughts on using LinkedIn as a recruiting tool.

There is not a day that goes by whereby I don't receive at least tw0 invitations to join someones network on LinkedIn. I am not sure how many direct connections I have, I stopped counting after 500, but how did I get so many, and how does it help me?

First, for some reason, and don't ask me why, but when you contact someone on or through LinkedIN, there is some sort of automatic credibility that comes with the contact attempt. Maybe because you are now a real person, not just a recruiter or sales guy making a cold call. As with all things, LinkedIn can be whatever you intend it to be, and with some simple guidance, LinkedIN is perhaps the best place to find Passive Candidates, Candidates who have resumes on Monster or Careerbuilder etc..that are not easily searchable, etc...

Here are some tips on LinkedIn as a tool for recruiting.

• Create a full and creative profile for your LinkedIn audience. Be sure and add all of your experience, going back ten years at least. (Unless you were working at McDonalds or Burger King ten years ago, please do leave that out. :) Write more than just Recruiter at EDS, or Recruiting Manager at Southwest Airlines....put in What you do, How you do it, and how you can be a valued member of the network. (my LinkedIn address is www.linkedin.com/in/donnylauderback I think it's a decent example)
• BUILD YOUR NETWORK. I spent several hours early on doing searches and finding people who included their email address within their profile. These people are generally good about accepting your invitation...find five or six a day, grow your network, and you will start to see how valuable a large network can be, at least in our industry. Don't get upset and get your feelings hurt if someone turns you down. I have only had two people turn me down in the past, and I didn't like them much anyway.
• SPEND THE $50.00. LinkedIn is cheap. $50.00 a month lets you use INmail, and you are featured as a LInkedIn premium member. It's worth the money.....
• GIVE RECOMMENDATIONS: Give people you know, and have worked with, recommendations on their profile. Be honest of course, but if they are a good person, and do well at what they do, commend them for it. You'll be surprised how much people appreciate a good recommendation.
• CONTINUOUSLY RE-DO YOUR PROFILE. Every day, I see that several people in my network have re-done their profile...every time I login, I notice who is moving on, who is promoted etc....I always send these people a short email note, congratulating them on whatever it is that has happened to them. Even if they have been laid off, send them an email letting them know you are thinking about them, and to let you know if you can help.
• REMEMBER, TODAY'S UNEMPLOYED GUY IS TOMORROW'S CUSTOMER OR CANDIDATE!! Always remember this one point. Anyone who is looking for a job will remember how you treated them, no matter if you can help or not...
• AND FINALLY....No one is a bad contact....I have been fired by a person before, and hired him later on in my career. Don't hold grudges, just keep your network fresh, and open.

More later.....

Big Foot, the Loch Ness Monster and the Purple Squirrell

In the recruiting industry, there is a phenomenon called ....

THE PURPLE SQUIRREL

A purple squirrel is coined after the thought that finding a candidate that is almost impossible to find is as difficult to locate as a Purple Squirrel would be.

Just some additional thoughts on locating the purple squirrel candidate.

• Don't rely on your day to day recruiting practices...Monster et al is probably not going to be where you locate your Purple Squirrel
• DO use Monster, et al, to locate Others candidates who might have worked with the Squirrel candidate. Identify what companies 'a squirrel' might have worked at, then call those candidates for referrals
• USE H3, or another referral program, offer finding fees...people try to help as much as they can, and more so if you are offering the big bucks as a finders fee.
• Use LinkedIn, ZoomInfo, and any other networking site you can locate. See my additional Blog on LinkedIn
• Make sure you let your internal customer know how difficult the search will be, and inform them that they shouldnt hold their breath for a candidate. This way, when you Do find the squirrel, you'll be even more of the hero.

More later!!

D

Recruiting 101

I have been very fortunate in my career.

I have worked with, along side, and for, some of the most innovative individuals in the recruiting and staffing industry. Many of these guys are still around, some are retired, other's are off on another adventure, but one things is for sure, they are the people who have moved our industry from the 'Kelly Girls' into what the IT staffing and consulting world has become.

I was trained by a twenty year veteran of the industry, Steve Odell. Steve founded Odell & Associates over forty years ago. Steve knew the business, Steve loved the business and the business loved him right back. The methods he taught me, are the same methods I teach recruiters today...nothing has changed much, except how we source talent. In those days, we used big industry books listing employees by position, combing through those books looking for candidates was a huge pain...today, with the Internet, Monster, Careerbuilder, DICE, LinkedIn, ZoomInfo etc,...the industry has changed, for the better obviously.

I have been so fortunate to work with people like Hank Stringer, one of the pioneers of the HR technology space...I have worked with John Riley, the founder of Transworld staffing, later acquired by Corestaff. John also founded one of the most innovative companies in our industry, ZeroChaos. Now run by CEO Harold Mills, ZeroChaos has grown from a start up to almost a Billion dollar firm in less than ten years....Martin Glick, CEO of The Albany Group, based in London, and the largest international workforce management firm in the world...Craig Silverman of Hireability, a pioneer in many aspects of our business today....these guys, and more, have built what we call the recruiting industry today.

Recruiting hasn't changed much in twenty years. The principals are the same, the Rule of 3's, passive candidates, sourcing, etc...is much the same when you learn the basics. I still use the same methodology today as it was taught to me almost twenty years ago.

I saw that one of the HR technology firms was purchased recently for $128Million.

That's just crazy! Crazy that I didn't work there... MORE LATER, Of course.

The Economy as it relates to the Staffing Business

I am surprised that so many people are screaming recession due to two primary factors. 1. Gas Prices, cost of oil and 2. The credit crunch, home foreclosures and bad loans.

I was a victim of the bad loan crisis early on. I didn't realize how bad it was going to be, until I saw actual 'Foreclosure Tours' taking place by Realtors across the country.

The banks made high risk loans. Period. Allowing people to borrow betting on the fact that their adjustable rate mortgages would not Adjust So Much that they couldn't afford their payments.

So, what did we expect? You make risky loans, you risk your money. You risk your money, your risk your stability. You risk your stability, and everything just goes to heck in a hand basket.

The question is...How will this affect the IT staffing, IT consulting and overall IT business as a whole.

It won't.

Here is why.

When the economy is good, and booming, companies are engaging new customer, new initiatives, new programs, new products....R&D is flourishing with lots of cash to build out the best new generation this and that....IT staffing is a key element of this growth, providing much needed talent to grow the business, to build the applications, to help companies do what they want to do next. It's a great time to be in the industry when the economy is good,

When the economy is bad, and recession is looming, companies are reluctant to hire new employees. Layoff's may take place, hiring freezes are put into effect, and everyone gets very nervous about what is about to happen next. It seems as if the staffing industry would suffer as well.

That's not accurate at all.

Bad economies generally mean good times for staffing firms. Well, at least staffing firms who have good sales practices.

Companies still need to support their IT projects and programs. It projects lend to ROI, cost savings, cost containment or even revenue for companies who sell software products. These initiatives must continue, and although there is no money for additional hiring of perm employees, flexible staffing solutions are the answer for talented resources who keep the company wheel turning. Utilizing contractors, contract labor, contingent labor...whatever you want to call it....is the answer. Flexibility in staffing, short term, long term, etc...makes a bad economy good for the staffing world.

More later!