Economic down turn drives sales recruitment fees down by 25% as companies attempt to cut costs
Recent research shows the economic down turn has caused companies to drive sales recruitment fees down by at least 25% in an attempt to cut costs. This has an immediate effect on expenditure and therefore the favoured choice of executives who hold the company’s purse strings. The results on the bottom line can be seen almost immediately; demonstrating the success of the exercise to the board memebers and senior management. However, I am not convinced this will work and concerned it could increase costs and reduce sales.
Attrition (employee churn as most people call it) costs companies far more than their recruitment spend. The example below demonstrates that a company with just a 6% attrition rate; the cost for just three months salaries of people who don’t work out are 40% higher than their recruitment spend for the same people and this doesn’t take into account the costs of training, management time spent interviewing etc.
Cost of Attrition
| Attrition rate | 6% | 10% | 15% |
|---|---|---|---|
| New recruits | 100 | 100 | 100 |
| Average recruitment fee | £12,000 | £12,000 | £12,000 |
| Total recruitment cost of leavers | £72,000 | £72,000 | £72,000 |
| Time taken to ramp up in weeks | 13 | 13 | 13 |
| Average salary | £60,000 | £60,000 | £60,000 |
| Salary cost just of people who leave | £101,739 | £169,565 | £254,438 |
| Actual average recruitment fee | £12,765 | £13,333 | £414,117 |
If you compare this cost with the loss of sales especially in the event when a candidate has outlasted the rebate period given by the recruiter the need to replace the candidate can incur another cost. The examples below show, in a role with a three month ramp up period, that there is no difference between 6 and 9 months service, you get 2 Ramp up periods, 2 Recruitment Fees and only 6 Months at full quota either way.
When you compare these with 12 months service you receive 9 months at full quota with only 1 ramp up period and more importantly for only 1 recruitment fee.
At the end of the day you get what you pay for. RECRUIT THE RIGHT PEOPLE in the first place and your business will prosper as will the agencies that have the right candidates. Candidates who can trade in any climate will become a very valuable asset to any business and recruiters who have access to these candidates will not be giving them away to the lowest bidder.
If companies want to increase sales revenue and reduce costs at the same time there are other alternatives to merely reducing cost per hire, especially as this may produce lower sales performance and increase actual cost per hire.
In: Business Information, Enterprise Software, IT Hardware and Services, IT Security, Marketing Services, Telecoms · Tagged with: "cutting cost", "economic down turn", "increase sales", "recruitment cost", "recruitment fees", "recruitment spend", "reduce cost per hire", "reduce costs", "reducing cost per hire", attrition, churn, prosper, recruitment, reduce attrition, reduce churn