As a Senior Content Marketing Manager, I know all too well the challenges of creating and adhering to a budget that generates the most qualified leads at the lowest cost for us.
If something doesn't work, we quickly adjust course and reconcile our spend and expected results for the month.
Developing a recruiting budget is largely determined by the following:
- Overall lead (hiring) goals
- How difficult a challenge the goals are
- How expensive each (recruitment) channel is
Here are my steps to executing a budget for a company looking to grow quickly and spend within reason:
1. Determine how many people the organization will hire
To accurately determine how many people an organization needs to hire, you must also estimate your attrition. For example, if your attrition rate is 15-20%, multiply that by the number of employees and include them in your hiring goals. This is the total number of employees needed just for backfills for the organization to maintain its current size.
A caveat: With high growth comes the possibility that some hires simply won't cut it, forcing you to re-hire for their positions-additional costs to include in your hiring numbers.
Secondly, estimate the amount of incremental hires needed for the organization to grow revenue. There is a two-step way to determine this:
- Calculate last year's total cost of recruiting (all people, systems, programs) divided by the number of hires made to get a high-level cost-per-hire (CPH). Also estimate unaccounted costs, such as rogue budget hiring managers may have spent on their own.
- Identify how competitive and costly it will be to hire. Categorize your hires into high, medium and easy-to-hire buckets to understand what percentage your hires will fall into. For example, software engineers may be hard-to-hire, interns easy. After you categorize the hiring climate at your headquarters and hiring locations, identify whether you expect the location to make hiring easier or harder. Then categorize your hiring growth from the previous year. For example, if you're hiring twice as many positions this year, chances are you'll face additional challenges.
2. Determine your sourcing strategy
Now that you know the hiring numbers and goals, determine your sourcing strategy to get there. First, try to figure what percentage of hires you can make internally through your career site and employee referral program, then estimate the cost of these two sources. Lastly, determine the gap and how you'll fill it. Here is our four-step process.
- Estimate the number of internal, full-time recruiters your org will need. A good rule of thumb is an internal recruiter should be able to fill five to seven positions per month.
- Estimate the number of positions third party recruiters will need to fill, factoring in recruiting fees at 15-20% of first-year salary. This is likely to be your most expensive channel on a cost-per-hire basis. If this is a core strategy, you'll want to budget appropriately to avoid being blindsided later.
- Estimate job posting and advertising costs plus time-to-fill metrics to determine your budget. For example, if your organization needs to hire 50 people and it typically takes three months per hire, you may want to have budget for 150 (50x3) job postings, assuming a one-month-per-post formula.
- Estimate career fairs expense, summarizing both the cost of the actual event as well as travel for participants.
3. Determine the "level of service" you want the recruiting team to deliver to hiring managers
Once you have your sourcing strategy in place and noted all channels that you will be factoring into your spend, determine if you are providing full-service recruiting (posting, sourcing, screening, scheduling, negotiating) or opting for minimal service (posting, scheduling).
Depending on the outcome, you may need to budget for sourcers, recruiting coordinators/interview schedulers and recruiting systems/operations specialists. Including all of these costs and setting expectations early will help you refine your strategy within your organization.
4. Estimate the cost of "lights on" systems and tools needed for your team to function
Lastly, the cost to maintain your career site with systems tools and update it with compelling content (e.g., Why work for us! video and infographics) should be factored into your overall recruitment budget and strategy. This bucket may include costs for mobile optimization, running an Applicant Tracking System (ATS) or career community, and leveraging passive recruiting tools.
We all know that it takes a village. In the case of bringing on the right people to maintain your company culture and set your organization up for success, it takes developing a recruiting budget that addresses not only real-world realities (e.g., attrition) today but the high-growth personnel, tools and systems you'll need over the next 12 months to set your organization up for success and weather any resource bumps along the way.
Scared you might miss a step? Download our recruitment budget template to help you through the process.