March 25 , 2019

News Flash – Recruiting Has the Highest Impact on a Firm’s Shareholder Value

Ever wonder why recruiting gets so little respect by top management? In my work (regardless of the size of the company or no matter what industry) I find that the reason that recruiting gets no respect is because it fails to quantify its impact (in dollars) on the bottom line! Recruiters regularly use relatively silly metrics to describe their successes. Examples:

    • Cost per hire

 

  • Number of requisitions filled
  • Number of requisitions per recruiter
  • Time to fill

Unfortunately, recruiters seldom use the kind of terminology that a CFO or a CEO would understand. The question that all top managers want answered is “what is the impact of great recruiting on the monetary value of the firm?” It sounds like a daunting task to prove such a premise, but in reality is easier than you think. Does the value of a company increase if it excels at recruiting top talent? TALENT MATTERS:

If we were talking about sports teams, the answer would seem obvious.

  • How did the Bulls do the season after the loss of Michael Jordan? The answer of course, is they went from first place to last place in a one-year period.
  • If you are a football fan, you might ask what happened to the Denver, Atlanta, and San Francisco football teams this year? The answer is… they all went from first-place to the cellar in one season as a result of the loss of two key players (their quarterback and running back) on each team.

How great would a sports team be if there were no salary cap and no restrictions on recruiting players? Can you imagine the winning percentage of a basketball team that had Michael Jordan, Scotty Pippin, Shaquille O’Neal, Kobe Bryant and Tim Duncan, along with Phil Jackson as the coach? And how great would an opera company be that had each of the three tenors as lead singers? Well the answer is simple. They would be nearly unbeatable. NO EXCUSES: Because business has no salary cap and no restrictions on how much talent you can acquire, there are no excuses for not recruiting all of the best. In business, you could easily form a single team with all of the superstars and become number one in any industry, if you had the recruiting strategies and programs in place to attract top talent. Unfortunately, what really happens is that most companies stop recruiting when they get a single star. Managers often fail to realize that the top firms recruit all of the top talent, if for no other reason than to keep them away from the competitors. How valuable would a team full of the best talent be? Well the answer is it could be… billions of dollars! THE WATSON WYATT STUDY ON HUMAN CAPITAL: I’ve done ROI assessments for individual firms for many years and I have always found recruitment to be one of the HR functions with the highest impact (second only to retention). Recently, the consulting firm of Watson Wyatt completed an extensive Human Capital study of 405 firms (in a variety of industries) in order to identify which human capital related functions have the most impact on the market value of a firm. The results were clear and unambiguous. If the company has an excellent recruiting function, it will increase the total market value of the firm by over 10 percent. Think about it. The market value (the $ value of all the stock of a company) will increase by a dramatic 10 percent simply as a result of great recruitment. That’s a WOW in any book! Recruiting has the highest impact of any HR function on the planet. (By the way, firms with strong general training and 360 degree feedback programs actually reduced the market value of their firms by nearly 10 percent, so if you are in these areas it’s time to rethink what you do.)WHAT DOES IT MEAN TO RECRUITERS?

  1. Have a party.
  2. Ask for raise.
  3. Do an internal ROI study on the impact of recruitment in order to show the same effect at your particular firm.
  4. Call your local Watson Wyatt office and ask them how you can obtain more information about the study.
  5. Quantify the business impact of recruiting at your firm and present it to top management and anyone else who will listen.
  6. Since clear rewards and accountability came in second (with a 9.2 percent impact) develop a program to measure and reward both your managers and your recruiters for great recruiting.
  7. Stop celebrating and begin improving your own recruiting strategy to the point that it is world-class. The impact on the bottom line will be dramatic.

Any questions?

About Dr John Sullivan

Dr John Sullivan is an internationally known HR thought-leader from the Silicon Valley who specializes in providing bold and high business impact; strategic Talent Management solutions to large corporations.

Check Also

Serving is skilled labor – by Gavin Jenkins

Jokes aside, service industry professionals should finesse their resumes when switching careers, according to John Sullivan, a human resources expert who Fast Company called “The Michael Jordan of hiring.”