HR is all about feelings and emotional stuff…
If you work in HR, you may have heard comments like this before. Prejudicial as such comments may be, is there any truth to them?
There is, of course, much more to HR than subjective emotions. As a discipline, HR has deep professional roots in psychological studies and extensive research conducted by universities and business schools. When comparing HR to other departments in terms of performance, other departments are measured on their contribution to the commercial success of the business, while HR is often measured on employee well-being and job satisfaction. This means that it’s not possible to substantiate whether or not HR creates business value.
And that is HR’s biggest problem. When it comes to strategy and decision-making, if you can’t substantiate your business value, nobody will take you seriously.
People Test Systems has therefore developed a calculation model that, based on your own figures, manifests the value HR creates in terms of recruitment success rates. The figures can then be used to set new goals and evaluate your efforts.
Christian Bech Korshøj, Head of Customer Success at People Test Systems, is one of the driving forces behind the development of this model. A former HR manager himself, he explains why the model was developed:
“We have created the tool that I wanted most when I was an HR manager. I had nothing in the way of objective figures to show the impact my department created.”
The calculation model
By using actual figures from your own workplace, the model allows you to make a conservative calculation of the cost of a failed recruitment, thus demonstrating the effect of reducing the number of failed recruitments.
A select group of People Test Systems’ clients have already adopted the model. These customers have given it their wholehearted support, so we are now rolling it out to a wider audience.
Download the calculation model here.
At first glance, the model may seem complicated. Take time to familiarise yourself with it. Try entering some figures. Play around with them, adjusting them up and down to get an idea of the impact of each parameter on the financial savings.
Contact us here if you would like an introduction to using the tool. You are also welcome to contact Christian Bech Korshøj directly at cbk@peopletestsystems.com.
Overview of figures that can be plotted into the model
The model consists of a set of constants and calculations that must not be changed. Note that some figures in the model have a yellow background. These are the variables, i.e. the figures you replace with your own figures to calculate the effects of reducing the number of failed recruitments. The calculations are adjusted live when you enter new variables. Therefore, you can immediately see the effect of the figures you enter.
The variables are as follows:
Cost per hire
- Mean (average) monthly salary for employees (DKK)
- Mean (average) employee onboarding period (months).
- Hourly salary for an HR employee (DKK)
- Time spent by HR on a recruitment process (hours)
- Billable hourly rate for the employee involved (e.g. consultant, project manager, line manager) (DKK)
- (Total) time spent by the employees involved in the recruitment process (hours).
Employee turnover (12-month period)
- Total no. of employees (FTE)
- No. of employee resignations during the period (FTE).
New hires/failed recruitments (12-month period)
- Number of new hires during the period (FTE)
- Failed recruitments, defined as new hires who quit within the first 12 months (FTE).
Employee growth target
- Strategic target for percentage growth in the number of employees over a 12-month period.
Failed recruitment target
- Set a target for failed recruitments in the upcoming period (e.g. if you hired the wrong person for the job ten times in the past 12 months, you could aim to halve the failure rate, i.e. a maximum of five unsuccessful recruitments in the next 12 months).
Target for other resignations
In addition to freeing up financial resources, when you reduce the number of failed recruitments, you also free up precious time that you could usefully spend on retention, i.e. reducing the number of other employees resigning.
- Set a target for next year’s other resignations (i.e. resignations after more than 12 months of employment).
