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The 2 metrics that should matter the most to any recruiter

BY Barbara Hyman

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The Talent Business Model

Any leader with P&L accountability knows that tracking margin (ie the difference between your revenue and what it cost you to earn that revenue) is pretty damn important to your economics. Margins of 60%+ for tech companies is what gives them insane valuations because the cost of adding the 10,000th customer is not much greater than adding the 1000th customer. If you believe that the economics and ROI of your talent business model are as important as your core business model, then you may find applying these two business metrics a useful lens to analyse the ROI of your talent business model.

Business Metrics for Recruiting

Someone who is starting a business, an entrepreneur, uses metrics like ‘CAC’ (customer acquisition cost) and LTV (lifetime value of that customer).  The entrepreneur thinks about much does it take to get a customer and what return do they give you before they churn. Then she transitions to a measure of acquisition and a measure of value for those retained.

Applying these metrics to your talent business model can help identify where to invest your HR budget to drive better ROI.

  • Think of your CAC as your candidate and talent acquisition cost. How much does it cost your business to hire one person, taking into account direct and indirect costs of hiring?
  • Think of your LTV  as the long term value of your talent. How long do your new hires stay in the business? How many of your leadership roles are filled by internal talent which is a lower acquisition cost than external recruitment?
  • How many of your new hires are promoted early? For professional service firms, time to promote may be a performance differentiator.

How does AI drive down your Candidate Acquisition Costs?

3 factors drive your CAC:

1. Direct recruitment costs  i.e. how many recruiters do you have on the tools

2. The productivity and speed of your recruitment team (that is, it’s scaleability) i.e. how many candidates can they screen in an hour, day, week, month

3. The layers of assessment in your recruitment and their costs i.e. are you doing CV screening, phone screening, video screens, 1:1 interviews, panel interviews, group assessments, coffee chats?

All of these layers of assessment, some with some science behind them, most with no science, add to your CAC.

We analysed CAC for our customers comparing their ‘old’ recruitment process and the impact of using our AI to do their screening and assessment.

The results are stunning.

PHAI (PredictiveHire AI) can screen 100,000 applicants in around 6 hours,  what it would take a team of 5 recruiters 476 working days to do. A massive 600 x faster. This is based on conservative assumptions like every recruiter screening 7 hours a day, CV screening of 10 minutes per applicant, and 10%  of those CV screened with phone screens of 30 minutes in duration, which is the time required to do the planning, doing and actioning. Those speed differentials compound when the numbers grow because humans can’t scale but technology can.

You can see what the scale of impact is when you look at the cost and time differential for 1000 applicants and 100,000 applicants.

The case for AI in recruitment is a no brainer for enterprise and government, and compelling even for smaller businesses with more modest volumes.

Time to speak to one of our team about using Phai? 

 

 

 

 

 

 

 

 

 

 

 


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