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Recruitment : Return on Investment
Human Resources » Recruitment & Staffing

Chrm Message From: rajeshroy Total Posts: 55 Join Date: 29/01/2007
Rank: Manager Post Date: 06/07/2007 12:01:44 Points: 275 Location: United States

When considering whether or not to invest, most of us ask perfectly sensible questions like: "What will the return be?", "What's the risk?" and "How quickly will I get the returns?" Would you put your hard-earned money into high-risk investment schemes without knowing about their past performance? Would you invest with professionals who are very thorough, but who can't prove that their methods deliver business results?

As organisations, one of the biggest investments we will ever make is in recruitment. Conservative estimates put the figure at over Rs: 20,000 per position - and it is often a lot higher. Fortunately, as HR professionals, we can all prove that the business is getting outstanding returns on this investment. We can point at the money spent, and put intelligent estimates on the financial and human benefits accrued. We can show that our recruitment processes deliver outstanding performance, control costs, increase sales, maintain efficiency and develop the organisation. We do not employ poor performers. The confidence of the business in what we do is exceptional, and we are perceived as being directly pivotal to the performance of the whole organisation. Our credibility is beyond doubt.

That would be a wonderful position to be in, wouldn't it?

How many organisations expect sensible questions about the return on recruitment investment to be answered? The truth is that very few really do. Recruitment is evaluated on the basis of the speed with which positions are filled, the feedback from participants and the percentages of candidates who end up being employed. Very few organisations expect that the true impact on business performance can ever be proven, or recruitment processes fine-tuned to deliver precisely the business benefits required. Instead, recruitment is allowed to carry on without anyone ever knowing if it is delivering the goods, or if opportunities are being missed.

Because recruitment is not an exact science, it is allowed to continue (often very thoroughly) without proving its true value.

But is it really so unrealistic to believe that we can measure the business impact of different approaches to recruitment? More and more organisations are asking these questions, and the ones who can respond effectively are achieving surprising business results through their HR functions. A wide range of organisations, from British Airways to Greggs, have invested in examining the business success of their recruitment practices, and achieved clear returns.

Organisations are starting to find that, with some skill, it is possible to assess the return on investment. It is possible to define the business benefits required, and track the results. This is not just a bean-counting exercise aimed at proving that we are right - it points the way to improve results, and deliver business performance through HR.
At ASE, we work with many of our clients to deliver business benefits from recruitment. Because every organisation is trying to achieve different things, each project is different. However, it is clear from our experience that some approaches tend to lead to tangible business benefits from recruitment:

• Start off with a clear analysis of the organisational and commercial outcomes required from recruitment. What is the business trying to achieve, and what part will successful candidates need to play?

• Develop clear ways of tracking and measuring these outcomes

• Carry out an objective and open-minded analysis of the qualities people need to perform. Ruthlessly avoid your judgement being coloured by past practice or "knowing what works from experience". if doing this well seems expensive in the short run, it's never as expensive as doing it badly in the long run!

• Ensure that you assess the full range of qualities needed for success - include personality, motivation and aptitude as well as experience

• Ensure that everyone involved in recruitment is trained to the highest possible standards

• Carefully connect recruitment to induction, training, management and performance management - to ensure that the business does not just get the right people, but nurtures and capitalises in them as well

These appraoches deliver returns of investment because they identify people who perform, reduce the risk of employing people who cannot (or will not) perform, cut the costs of recruitment and development, and play a major part in driving forwards organisational change.

In common with all people processes, recruitment is there to deliver tangible human and business benefits. Devoting a little time to considering the return on investment is not a nebulous luxury - it is essential to delivering the results the organisation needs. It is also a powerful way of positioning HR at the heart of the business. You will not regret it!

Chrm Message From: ruchi@hr Total Posts: 41 Join Date: 29/01/2007  
Rank: Executive Post Date: 06/07/2007 12:03:38 Points: 205 Location: United States

Hi Rajesh,


1. Companies keep a track of adding people to the sales/marketing/ product management etc. by developing an indicator for improvement to sales performance,
which in turn reflects on the GROSS PROFIT.

2. Companies keep a track of adding people to manufacturing etc by developing an indicator for improving the cost of goods, which in turn reflects on the GROSS PROFIT.

2. Companies keep a track of adding people to operations etc by developing an indicator for improving the operation productivity, which in turn reflects on the NET PROFIT.

IN ADDITION, companies also monitor the cost of recruitment by monitoring

-cost of recruitment per person

-loss incurred, when a person leaves in one month or sacked

-loss incurred, when a person leaves in three months or sacked

-loss incurred, when a person leaves in six months or sacked

-loss incurred, when a person leaves in 12 months or sacked.




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