When it comes to establishing and maintaining a profitable business, everything boils down to the bottom line. In order to stay above water, business owners are responsible for making strategic decisions on a number of different fronts to minimize costs and amplify profits. From implementing more efficient workflows for increased output to reducing dollars allocated towards brand-name supplies to handling hiring costs, successful companies are the ones consistently searching for cost-effective solutions that maximize ROI.
Among the many decisions business owners make to ensure their business is run successfully and profitably, is forging a partnership with a staffing agency. Here are the benefits of establishing a collaborative relationship between your company and a recruitment agency.
The Financial Benefits of Using a Recruitment Agency
Leveraging in-house resources for the recruiting and hiring process is incredibly costly. In 2018 alone, employers struggled to navigate the tight labor market, eagerly seeking innovative ways to attract candidates to the 7 million unfilled jobs across the U.S. This trend has seeped over into the 2019 year. Internal recruitment models are extremely costly due to direct advertising costs, time and resource allocation, the long-term implications of unforeseen turnover, making bad hiring decisions, and training requirements.
For many companies, especially small to mid-cap sized businesses, recruitment initiatives fall into the hands of a small internal team or even a single employee. Oftentimes, these individuals have a comprehensive list of human resource-related responsibilities, requiring their time to be divided among many different tasks. In these scenarios, recruitment plans are often thrown together hastily and due to time restraints, hiring decisions are made with little strategic thought.
Even for organizations with a dedicated recruitment team, there’s a distinct and negative impact associated with having unfilled seats. These include:
Customer Impact – When there are vacancies in your staff, it not only creates a negative perception of your company among customers, vendors, and suppliers, but it also interrupts workflow and diminishes your employees’ ability to deliver the highest level of service possible to your clients.
Decreased Employee Morale - An understaffed organization means your current employees must do some heavy lifting in order to compensate for the lack of extra hands. With the added workload, staff members will begin feeling overworked and burned out, leading to poor productivity, a higher degree of absences, and an increased turnover rate.
Inefficient Use of Manager Time – When there are openings on your team, it calls for more time allocation from management to ensure workflow remains consistent and all projects are getting completed as scheduled. This time – on both the management and employee side - can be better utilized on high-value, revenue-generating activities rather than shouldering the burden of the extra workload.
Product/Service Development – An interruption in your production chain or development team can disrupt your speed to market and adversely affect revenue and customer retention.
Loss of Competitive Standing – Should your organization encounter multiple vacancies, it communicates to your competitors that your company is in a vulnerable spot. Not only can they use this to their advantage by poaching employees and customers, but it poses the threat of disrupting public perception of your brand – coming off as if your company is headed downhill.
Calculating the Impact of Unfilled Seats
There’s a simple equation you can use to calculate the impact of unfilled seats.
Step #1: To calculate the average annual revenue generated per employee, simply divide your annual company revenue by the number of revenue generating employees.
Step #2: To calculate the daily revenue per employee, divide the annual revenue generated by employee by the average number of annual working days (approx. 240 days)
Step #3: To calculate revenue loss per unfilled job, take the daily revenue per employee and multiply it by the average number of days positions go unfilled.
Step #4: To calculate the total revenue loss for all open jobs, multiply the revenue lost per unfilled job by the number of open jobs.
To make this loss revenue formula more digestible, here’s an example: ABC Company is a medical supply distributor with an annual revenue of $3 Billion. The organization currently employs 12,000 workers and has 140 open jobs. According to recent research provided by Workable, the average time to fill in the U.S. is 43 days. Inserting this data into the above equation would result in the following:
Average Annual Revenue Generated per Employee = $3 Billion/12,000 employees = $250,000
Daily Revenue per Employee = $250,000/240 days = $1,041
Revenue Lost per Unfilled Job = $1,041 x 43 days = $44,791
Total Revenue Lost for All Open Jobs = $44,791 x 140 =$6,270,833
By calculating this information, the subsequent data can be used the justify the importance of implementing a strong recruitment strategy.
Collaborating with a Recruitment Agency
Recruiting firms provide a myriad of resource-saving, cost-reducing benefits over in-house efforts.
Access to Expertise & Quality Talent Pool
Calling upon market-driven strategies, staffing agencies have the breadth of experience and expertise that far exceeds that of an internal human resources team. Recruiting specialists are not only well-versed in employment trends and laws, but they have access to cutting-edge technology to implement innovative and strategic recruitment strategies.
For small to mid-cap businesses, it is extremely difficult to compete with the large corporations out there in terms of attracting talent and allocating budget towards advertising open positions. By partnering with a staffing firm, you will be able to effectively bridge that gap by leveraging the agency’s pre-vetted talent pool, reputation, and established brand equity. You can save your recruitment advertising dollars for other endeavors, as staffing agencies already have access to these tools and resources.
Speed & Efficiency
The process of sourcing, screening, interviewing, and ultimately extending an offer to a prospective candidate is incredibly time-consuming. By delegating these responsibilities to a recruiting expert, it’ll greatly minimize the expenses and time you spend engaged in the hiring process. You’ll enjoy a pipeline of quality candidates for unexpected openings, so you can fill seats quicker and address new business growth as your organization grows. Plus, you will reduce overhead and minimize risk as staffing firms provide worker’s compensation, unemployment claims, and payroll taxes.
By partnering with a staffing agency, business owners and managers can enjoy workforce flexibility, cost-saving benefits, access to a pool of quality talent, minimize administrative burden, and reap the rewards of a better engaged workforce.