Recruiting is hard work – you typically spend very little time forming opinions of people you’d like to hire for a long period of time. As Alan Carniol, founder of InterviewSuccessFormula.com explains in this Forbes post by Jacquelyn Smith, “a hiring manager must make a decision that can cost a company thousands or tens of thousands of dollars [in that short time]”.
For that reason, it’s important to understand what you can do to make your hiring process successful, cost-efficient and time-effective.
Once you have your hiring process in order, you need to optimize it for:
- Quality of hire.
Your goal is to devise a structure which can be used repetitively so you can test it to achieve best results.
Let’s look at these three qualities in detail.
It’s often repeated that tech talent is hard to find and that it is taking increasingly long to fill a position, but how long exactly?
Here are the stats you should know:
- According to a 2015 Dice report December 2015: Special Report, Hiring Survey, 49% of hiring managers say it now takes longer to fill open positions in comparison to last year.
- Research from Bersin by Deloitte Talent Acquisition Factbook 2015 reports that it takes “an average of 52 days to fill an open position, up from 48 days in 2011”.
According to a study by Dr. Andrew Chamblerlain, Chief Economist at Glassdoor “Why is hiring taking longer? New Insights from Glassdoor Data” filling tech positions is taking longer than before, especially in the U.S, Europe and Australia. Here’s Chamberlain’s list of average time to hire for tech-jobs, with Senior Engineer and Senior Applications Developer topping the list:
How to optimize for speed?
- Start tracking Time to Hire.
You can’t optimize the process if you don’t keep an eye on your metrics. You need to know what your Time to Hire is before you try to change it to know if you’re actually changing it for better or worse.
- Hurry up.
Top candidates will be long gone after the average five to six weeks it takes to recruit in tech – according to Recruiter Sentiment study by MRINetwork, “47% of declined offers in 2015 were due to candidates accepting other jobs, up 10% from first half of the year”. If you find someone promising, don’t make them wait, especially in the scarcity situation we currently observe in tech.
- Look for bottlenecks in the process.
You’re probably thinking you shouldn’t spend so much time analyzing resumes.
Well, think again – according to an eyetracking study by the Ladders “Keeping an eye on recruiter behavior”, on average recruiters spend 6 seconds looking at a resume. Interestingly, self-reports from recruiters suggest that they “spend 4-5 minutes per resume”.
- Split test your job descriptions.
A good job description should encourage matching candidates to apply and simultaneously discourage others from doing so. Try various distribution channels and test copy variants for optimal results.
- Screen candidates early on.
Avoid interviewing people who don’t meet the requirements of the position to speed things up. One of the biggest gripes for recruiters is spending time on the wrong candidates.
Smart recruiting needs tools to steer away from this tendency, and code challenges are a surefire way to eliminate the candidates who won’t be able to perform in this particular job.
Don’t use your senior developers to verify programming skills of your candidates.
Not only are you using their VERY expensive time on tasks which can be carried out by means of dedicated screening software, you’re also slowing down daily operations they’re usually engaged in.
Here are two key stats regarding the “ransom”:
- According to Bersin by Deloitte research Talent Acquisition Factbook 2015, it costs on average $4,000 for U.S. companies to to fill an open position.
- CIPD reports these cost increase to “£6,125 when the associated labour turnover costs are included. (…) If if things fail to work out first time around you can expect to double these for the cost of rehiring once again.”
These amounts show what it takes on average to hire for any position. The question is, what does it actually take to lure top tech talent?
The cost of recruiting developers
Volgens PayScale, the average annual salary for senior developers is approximately $94.083. If you use PayScale’s data and combine it with Wanted Analytics stats on time to hire devs, which is 43 days, you can calculate how much it costs you to recruit depending on how you choose to proceed:
Bear in mind that these quotes are by no means final as you need to add productivity loss cost, contractor cover and management costs. Sounds terrifying? There’s more.
In “Human Resource Management – Text and Cases”, Dr. S. S. Khanka lists the costs incurred in the recruitment process:
- “Salary of recruiters,
- Cost of time spent for preparing job analysis, advertisement,
- Administrative expenses,
- Cost of outsourcing or overtime while vacancies remain unfilled,
- Cost incurred in recruiting unsuitable candidates”.
Considering that 47% of small businesses have trouble finding qualified applicants for open positions, a lot of money goes into expanding tech talent pool (based on data of the National Federation of Independent Businesses).
We’ve looked at the cost of hiring, but what does it cost you NOT to hire?
The cost of unfilled jobs
Here’s how much money goes into keeping positions open in the U.S.:
The cost of mis-hiring
In a Business Insider interview Tony Hsieh, CEO of Zappos estimates that bad hires cost him more than $100 million in the last 11 years. Hsieh mentions the domino effect of bad hires hiring more bad hires whose bad decisions cost the company so much money.
“If you add up the cost of our bad hires and the bad decisions they made and then they in turn also hired more bad hires, the whole domino effect over the past 11 years it probably cost the company well over $100 million.”- says Hsieh in the interview.
How to optimize for cost?
- Calculate & track your CPH (Cost-per-Hire indicator).
First of all, you need to be measuring your CPH so you can see how it changes over time. Here’s where you should start:
To calculate CPH, you need to add external and internal costs and divide the amount you get by the number of hires completed.
- Audit your current process.
Know how much you’re spending on internal and external costs to see if the methods you’re using to cut down CPH are actually working.
Internal costs include:
- In-house recruiting staff,
- Office work,
- Temporary staffing costs.
External costs comprise:
- Relocation fees,
- Immigration expenses,
- Technology fees,
- Travel expenses,
- Third-party fees,
- Consulting services,
- Advertising costs.
- Leverage recruitment tech.
There are a number of ways you can use technology to make your recruitment process more cost-effective. The most significant ones include video interviews and code challenges.
Developers are busy people, so the easier it is to communicate with you, the more likely they are to see your company as attractive. Offer video interviews to get a feeling of who they are during pre-screening. Make sure to test programming skills early on to avoid spending too much time on a candidate who doesn’t meet your predefined requirements (I’d recommend for these to be documented to stay away from personal bias as much as possible).
- Build a strong career site.
There are a number of factors at play here: first of all, you need to make sure your brand message is delivered on your careers site. Secondly, you should consider HOW it’s delivered: I advise using engaging visuals such as videos and images. Finally, make sure your application process is candidate- and mobile-friendly.
- Reduce turnover.
Low retention rates cost businesses time, money, and productivity. Make your company a good place to be to retain your staff. To do so, find out what makes people leave (i.e. by means of exit-interviews). Is it pay, poor management, or lack of flexibility? Look for issues which are brought up repetitively and attend to them on the spot.
Quality of hire
In the paper “Measuring Quality of Hire – The Ultimate Recruiting Metric“, Dr. John Sullivan & Master Burnett discuss QoH. In their opinion, it’s debatable whether QoH measures the effectiveness of the recruitment process or the quality of a particular hire. This may be a result of the fact that various fractions of a given organization may perceive QoH based on their role and experience, which they call a perspective dilemma.
Volgens Sullivan and Burnett, “recruiting professionals typically define quality of hire as a grouping of metrics that measure the degree to which candidates recruited and hired satisfy the requirements as defined. The defining characteristic here is that the evaluation is done post hire, therefore reporting on historical performance. Line managers on the other hand see quality of hire as a series of indicator metrics that reasonably predict how well a candidate will perform on the job if hired”.
This means QoH needs to predict how well a person will do in the future, as well as grade performance post-hire. This dual nature of QoH makes it so controversial and problematic.
If you’re interested in QoH, I wholeheartedly recommend watching Lou Adler’s Talent Connect 2014 speech.
Lou Adler, CEO of The Adler Group argues that you need to measure, maximize, and quantify Quality of Hire.
Adler divides the performance of people hired into three groups – top candidates (upper-third), middle (mid-third), and least performing ones (lower-third).
Adler states that the problem of modern companies stems from the fact that they assume there’s a surplus of talent, while there’s actually scarcity of talent. He also argues that of the top third, 75%- 80% are passive candidates.
Increasing Quality of Hire is synonymous to increasing the percentage of hired people from the upper third. Adler argues that in order to do so, you must go out of the usual “skills, experience and academics” job descriptions.
Adler calculates the ROI of getting people who are 15% better. His calculations are based on hiring 100 employees with an annual salary of $100K.
If you hire 100 people from the middle-third, they will generate $24mm per year. However, hiring 100 people from the top third will bring you 15% more profit – $3.6mm more, or $14mm extra variable profit over 4 years.
Adler argues that the ROI of hiring top-third ranges from 200% to 700%.
How to optimize for QoH?
- Attract in vs. filter strategy.
Depending on whether candidates are active or passive, you need to adjust your strategy. Passive candidates need to be attracted, and this is exactly how most upper-third candidates are hired.
- Shift your sourcing mix.
According to Adler, if you’re in a scarcity situation, you must shift your sourcing mix towards more passive candidates (which is also how you’ll find most upper-third candidates).
- Needs analysis vs. job description.
Adler argues that the first person who talks to the candidate on the phone is key to great hires. They need to conduct a needs analysis rather than flood the person they are talking to with details of the job.
- Find engaged managers.
Employ managers who can attract and retain the top third. Remember that even the most motivated person in the world won’t perform very well if they are badly managed or don’t like their manager.
- Focus on what the person can become.
In the surplus situation, the hiring process looks like this:
Surplus: Weed out the weak -> Active -> Best who apply
However, as we’ve established 75% to 80% of top third are passive candidates. Moreover, the quest for the best in tech is on and there’s definitely scarcity in the world of tech recruiters.
Your hiring process should therefore look like this:
Scarcity: Attract the best -> Passive -> Raise the talent bar
According to Adler, the focus of hiring managers should be on the doing and not the having. Of course you need to make sure the person has the right skills, but this can easily be done with skill testing software. You need to train your hiring managers to communicate what the person can become while doing the job, which strikes a chord with upper-third candidates. Their accomplishments are what makes them unique and they are most likely to be interested in what they can do in the position.
- Start listening.
When you talk to candidates, ask them if they would be open to explore a position clearly more superior to their current ones (as Adler argues, 93% of people say “yes” to this question). Once they say yes, don’t dive into what skills they need to have or required academic background. Talk about what the job is, what they get to do at work and what they can become. This changes the conversation and gets your upper-third interested. Like marketing, hiring needs a sound value proposition it can rely on.
- Measure before you hire.
Sullivan and Burnett argue you should measure the quality of applicants pre-hire based on a number of indicators (i.e. whether your top performers know them, if they have at least one counter-offer, if they are currently employed, if they have been referred by another top performer etc. A full list of issues worth-considering pre-hire can be find in Sullivan and Burnett’s paper.
- Test skills.
According to Sullivan and Burnett, skill screening allows to make sure candidates have the right skillset. If you combine that knowledge with Adler’s point of view, your aim should be to focus on what the job is and use skill tests to determine whether the candidate can achieve what is expected of them, and not the other way round.
- Know where your best hires are coming from.
Look at your hires and single out top performers. Go back to and look for a candidate source which seems to convert best for your company. If possible, experiment with paid promotion of your job postings in that channel or consider spending more time looking for people in this particular place.
Hiring is a stumbling block for many companies – after all, people you hire make thousands of decisions on behalf of your organization day in, day out. Therefore, they can easily jump start your development or hold you back.
Optimizing the hiring process is essential for employing top performers. Although it’s a long and complicated journey, it definitely deserves attention, especially given the scarcity of qualified candidates on the market.