Advertising Technology

Do the Math: The Case for Recruiters

EllieWindle_260x225After my last 3 articles (LinkedInCrucial Sales SkillsRolodex) you may be saying, “I hear you, I already knew hiring was hard!” The next challenge:  It’s also really expensive. Since staffing fees are easily quantified, often Ad Tech start-ups rely on their sales leadership to fill open sales positions in order to avoid these fees.

Some Back-of the-Envelope Math Reveals Just How Bad This Decision Can Be:

It will take on average 80 hours to find a candidate for an open position, or roughly 2 weeks of full time work. This is based on the fact that even a high performing recruiter will rarely place more than two Ad Tech sales reps per month. Prospecting relevant candidates on Linked-In, outreach to these candidates, initial phone screens, interview preparation, scheduling and finally, offer negotiation…all take time.

Let’s pretend you are hiring a Sr. Account Executive position, and will be offering 100k base salary.

In this example, let’s say the recruiter is charging 25% of the base salary, so it will cost you around $25,000 to fill the open position through a 3rd party company.

Yikes! That seems outrageous! 

Next, let’s say your SVP of Sales makes $300k (at goal) per year, which is around $143 per hour. Multiplied by the 80 hours it will take them to find a candidate, you will be paying around $11,500 for your SVP to fill this position.

$11,500 seems a bit better than $25,000, but that’s prior to taking into account the opportunity costs of having your SVP purely focused on recruiting and not driving revenue.

If this SVP of Sales has a 20 million dollar annual goal, he or she needs to ensure that their team is closing around $10,000 in business per business hour.

80 hours of neglecting the pipeline could result in $800,000 in lost revenue.

Suddenly that $25,000 fee doesn’t seem so outrageous. 

Given the quota demands on an SVP, it is unrealistic that he or she will spend two full weeks focused on recruiting.  What will likely end up happening is that he or she will spend around 5 hours per week on recruiting, and at that rate… will end up making the hire….in around 16 weeks.

One last assumption- If you plan to give this Sr. Account Executive a $1M quarterly goal, having an empty seat for an extra quarter will cost, you guessed it, $1M in revenue.

NET NET-  In the example from above:

  • If you don’t use recruiters and your SVP is focused on recruiting full time, you lose around $1M in revenue
  • OR  If you don’t use recruiters and your SVP is focused on recruiting part time, you also lose around $1M in revenue.
  • OR  You suck it up and pay the $25,000 fee

A Blended Approach is Best:

All that said, no company can rely on a single method of recruiting. Top companies utilize an ‘all the above’ approach to hiring:

1. Partner with quality recruiters and pay them what they are worth.If you are happy with the fee you have negotiated, you are probably not happy with your recruiters. If recruiters make more money sending talent to another company, they are either not going to work on your position, or they aren’t going to send you their top candidates.

2. Build trust and respect with your staffing partners. Lack these, and recruiters will likely be poor ambassadors for your company.  If you treat your recruiters as disposable, they will treat your open position in the same way.

3.  Set fair expectations with your sales leadership- While relying solely on sales leadership for all hiring needs doesn’t make sense, that doesn’t mean that they shouldn’t be doing a portion of the hiring heavy lifting:

  • Recruiter Management- This means keeping recruiters excited about the open positions and engaged in the job order.  Most recruiters are not paid on a retainer, so they will spend their time on job orders where they feel they can make a placement. Sales VP’s that don’t spend time providing helpful feedback to recruiters will find themselves without a candidate pipeline. 
  • Strategic Linked-In outreach
  • Consistent referral outreach to industry contacts
  • Maintain relationships with top candidates even if they aren’t currently looking
  • Partner with HR to ensure job descriptions are competitive and compelling. 
  • Attend networking events for hiring purposes.  Sales folks often complain that conferences are not full of buyers, but are full of other sales reps. For a VP of Sales looking to hire, this should be like shooting fish in a barrel.

4. Employee Referral Bonuses- Most companies pay employees around $2,500 dollars for referrals that result in a hire. What a steal!  This is probably the best way to find talented candidates, and is also the least expensive.  It is also the least scalable. Build a solid referral program, but don’t rely on it for all your hiring needs.  Especially if you are looking to scale out a sales team quickly.

As always, Good Luck and Happy Hiring!

Ellie

 

Ellie Windle is a contributor at The Makegood and Sales Director at MediaMath. MediaMath is the leading provider of digital media trading technology and services, and invented the demand side platform (DSP).

  • http://nicholasmeyler.brandyourself.com/ Nicholas Meyler

    Good work!

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