The business case for Applied

Andy Babbage

13

October

2020

|

17

min read

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Talent acquisition is one of the most important functions of a business, after-all you can't deliver on your organisation's vision without great people to do it.

The importance of hiring great people is something that is often spoken about but surprisingly (or perhaps unsurprisingly, depending on how cynical you are), it rarely makes its way to the top of the CEO's priority list, often shouldered aside by other glamorous sales, marketing or finance projects which have a direct (albeit modest in comparison) impact on revenues, costs and profits.

At Applied, we're often asked about the business case for better hiring.

People intuitively get it; the connection between a team who are really good at their jobs (and more) and business impact. However, the questions remain about the magnitude of value a 'better' hire brings to an organisation.

More specifically, if I invest my time and resources into improving my process, how much value will that bring the organisation down the line? The answer is (spoiler alert) a lot.

So, here is our blow-by-blow account of all of the ways a hiring platform like Applied will create value for your company. We've used the research available to quantify the impact of making positive changes to a hiring process.

These numbers and relationships are not set in stone, they are sometimes directional, they are always conservative but they act as a quantified starting point for a conversation with your management team,  that can be tuned back more if necessary but can ultimately convince the rational, commercially focused part of the mind.

A note on business cases

Not all decisions need or should have a business case. They are usually just one aspect of convincing an organisation to take a better path. In this article, we've tried to quantify all of our value drivers should you need that but we are in no way suggesting that EDI improvements get their sole value from these. Progress here has so much more potential and much larger positive ramifications than numbers in a spreadsheet or business dollars.

Applied has 10 value drivers, spread across 3 main groupings. We've listed them out below so that you can jump to the one that interests you the most:

Contents

A) Attracting and hiring better talent

This should be the raison d'etre of talent functions, however it usually just isn't, with the focus on speed shouldering this out. The name of the game should be getting great people to work with you and when you do, the value created is huge.

  1. Hiring the best talent through making better decisions
  2. Reducing non-hire events by finding more talent
  3. Reduction in early churn by using more predictive assessment methods
  4. Getting better results from recruiters by using a name-blind process

B) Building diverse and inclusive teams

This is a moral and business imperative and if this is not your focus then you'll be left behind and lose your competitive advantage. Again, the potential value here is massive.

  1. Building more diverse teams by removing bias from your process
  2. Attracting the best talent through becoming an inclusive organisation
  3. Protecting your brand through a truly inclusive process

C) Creating an efficient hiring process

Sadly this is the main focus of most hiring teams and standard hiring software, however it is just one way to create value. Creating an efficient process is still important however and is a foundational step towards recruitment transcendence.

  1. Reduce the time spent supporting the hiring process by building an efficient process
  2. Reduce the number of interviews by using the most predictive methods
  3. Reduce the need to give feedback by giving personalised feedback automatically

A note on 'Applicant Tracking Systems'

The vast majority of recruitment software on the market is part of a category called 'Applicant Tracking Systems' (ATS). Applied firmly refuses to be a part of this category and we work hard to shake off any association with this outdated grouping.

Here are the 10 value drivers in detail, each one is broken down into the benefits to your organisation (as backed up by research), the method (how you can achieve this) and the business impact (what you can expect).

To help you quantify all of the above into a ballpark business case that fits your organisation, we've created this ROI calculator.

Simply enter the parameters of your organisation and hiring process and play with the magnitude of value to get to a level that you feel is conservative but an accurate depiction (don't worry if you don't know the answers to certain questions, we provide some guidance and default values for you).

Our ROI calculator

A note on 'business value'

The ROI calculator uses dollars to illustrate the cost savings and revenue additions which will result in an overall increased profit.

If your organisation is a not-for-profit, the same rationale can be used but instead of revenues or profits, these can be interchanged with terms relevant to you.

For example, fund-raising may replace revenue and profit might be your net social impact. Again, building the business case is to provide directional information to form the basis of a conversation with your organisation about change. Our calculator can be used by any organisation if the terms are tweaked to be relevant.

Breakdown: Applied value drivers

A) Attracting and hiring better talent

1. Hiring the best talent through making better decisions

Benefits to your organisation:

  • The productivity gap between average and high performers in complex jobs is 800% (source)
  • For complex jobs, one person in the top 1% is worth 12 in the bottom 1% (source)
  • 1 in 7 employees are stars - the best companies cluster them together (source)
  • A poor hire at mid-manager level with a salary of £42,000 can cost a business more than £132,000 (source)

How you can achieve this:

  • Use forms of assessment that are predictive of job performance and remove those that aren't. Put simply this means toss the CV and use a combination of work samples and structured interviews as the fact is, if a candidate scores highly at these assessments they are much more likely to perform better on the job. Here's a blog on what we recommend.
  • Remove bias from your process at every opportunity. This does not mean train away the bias, as things like unconscious bias training just don't work. Instead design a system that prevents bias from infiltrating in the first place. Bias acts as noise in complex decisions, effectively making it harder to make the right decision. Remove the bias, make better decisions, hire better.

Results you can expect:

  • 66% of the hires through this method would never have been considered on the merit of their CV alone. This means you are interviewing people who are not part of the typical hiring pool and tested them on the role up-front, meaning you'll find great people who you wouldn't have normally considered.
  • Increase interview to offer rate by 3x as you are meeting more candidates at the interview stage who would excel in the role (as you have already tested them on it from the very start).

2. Reducing non-hire events by finding more talent

Benefits to your organisation:

  • The attraction and selection costs of a role are £3,350 on average (source)
  • On average businesses spend £5,433 on logistical costs for each role (source)
  • Typical mid-level managers require 6.2 months to reach their break-even point (source)

How you can achieve this:

  • Removing the CV as the first filter, greatly increases the pool of potential candidates for a role and makes it easier for people with the right skills learnt from non-traditional routes or in adjacent roles, to show up at interview and impress you.
  • Removing the requirement to have '5 years of experience from another top company in this industry' is also something that is not predictive of experience, so simply removing it means you consider a wider group of candidates and are less likely to feel like there is a pipeline problem.

Results you can expect:

  • 66% of the hires through this method would never have been considered on the merit of their CV alone. This means you are interviewing people who are not part of the typical hiring pool and tested them on the role up-front, meaning you'll find great people who you wouldn't have normally considered.

3. Reduction in early churn by using more predictive assessment methods

Benefits to your organisation:

  • Nearly 33% of new hires look for a new job within their first six months on the job (source)
  • The loss of a £25k/year employee has an average financial impact of £30k (source)
  • The cost of an entry-level position turning over is 50% of salary; mid-level at 125% of salary; and senior executive over 200% of salary (source)

How you can achieve this:

  • Early churn can be reduced by being transparent about what the job involves so that there are no surprises when the new starter shows up. The best way to do this is to use work sample questions which actually use real examples or problems that the organisation is trying to solve. Do this and you get to see how a candidate would approach or think through a problem in the role and the candidate gets to see what they are going to do, warts n all.
  • Values alignment is also very important, so ensuring that candidates are asked about these during the process is also important. We prefer this method over cultural fit, as this term can sometimes be used as a catch-all for biases creeping in ("they just wouldn't fit in").

Results you can expect:

  • Move to a 90%+ first year retention rate because you are giving candidates a true insight into what the job will involve up-front.

4. Getting better results from recruiters by using a name-blind process

Benefits to your organisation:

  • In the United States, most of the $20bn spent on human resource spending goes towards hiring. A large part of that is sourcing candidates (source)
  • Recruiter commissions range from 12-33% depending on the industry and the seniority of the role. 1 or 2 hires a year through recruiters can often cost more than your whole HR tech stack.

How you can achieve this:

  • By asking recruiters to refer their candidates into the same name-blind process as everyone else, these candidates are judged fairly as all other candidates are. This removes the opportunity for recruiters to 'sell' you their candidate and enables you to judge these candidates on how they performed in the assessments.
  • Other benefits for recruiters is that they can actually start to refer people from their pool who have different experience, opening up their potential pool.
  • The data collected on recruiter recommendations over time can be collated and you can actually work out which recruiters are bringing you really great candidates versus those that don't.

Results you can expect:

  • Be able to rank your recruiters based on the scores of the candidates that they put forward. Stick with those that consistently bring you good candidates and ditch those who are overselling their candidates. The end result is you'll need to rely on recruiters a lot less.

B) Building diverse and inclusive teams

5. Building more diverse teams by removing bias from your process

Benefits to your organisation:

  • Companies in the top quartile for racial and ethnic diversity are 35%% more likely to have financial returns above their respective national industry medians (source)
  • Companies in the top quartile for gender diversity are 15% more likely to have financial returns above their respective national industry medians (source)
  • In the USA, for every 10% increase in racial and ethnic diversity on the senior-executive team, earnings before interest and taxes (EBIT) rise 0.8% (source)
  • In the UK, for every 10% increase in gender diversity on senior exec team, EBIT rose by 3.5% (source)

How you can achieve this:

  • Bias is noise in decision making. It not only degrades the quality of decision making but also tends to act most harshly against minority groups, contributing to inequality. Removing as much of it as you can from your process is hugely beneficial for your quality of hire.
  • Don't rely on unconscious bias training, research has shown that this type of training is at best ineffective and at worst counterproductive. Instead design systems which prevent bias from worming its way in in the first place.
  • Tackle bias at all stages of the recruitment process, starting with the sift:
  1. Remove identifying information from applications, review them in chunks, in a randomised order, with at least 3 people reviewing each answer. These methods combat the most common recruitment biases: affinity, stereotype, confirmation, halo etc. Read more here
  2. At the interview stages, it's all about structure and marking rubrics to ensure a consistent process. Couple this with diverse interview panels and submitting your scores before discussing them to avoid groupthink are key.

Results you can expect:

  • 2-4x attraction and selection of ethnically diverse candidates versus the UK labour market make-up. The same holds for gender and disability.
  • 66% of the candidates selected through Applied would never have been considered based on the merit of their CV alone. You are truly meeting people from diverse backgrounds.

6. Attracting the best talent through becoming an inclusive organisation

Benefits to your organisation:

  • 55% of men and 58% of women say that a D&I strategy is important to them working for an employer (source)
  • 70% of female participants working in Financial Services looked at the diversity of the leadership team when deciding to accept a position with their most recent employer (source)
  • 80% of participants said that an employer’s policy on diversity, equality and workforce inclusion is an important factor when deciding whether or not to work for them (source)
  • 72% of Working Americans surveyed would or may Consider leaving an organisation for one they think is more inclusive (source)
  • 30% of millennials surveyed say they have already left a job for one with a more inclusive culture (source)

How you can achieve this:

  • Let candidates know that your process is transparent and inclusive, they will love you for it and start talking about it with their networks.
  • Create an experience where even if the candidate is unsuccessful, they still talk about their process and remember your organisation.
  • Couple your transparent, inclusive recruitment process with other similar initiatives upstream and downstream in your recruitment and on to onboarding and future success at your organisation.

Results you can expect:

  • 2-4x attraction and selection of ethnically diverse candidates versus the UK labour market make-up. The same holds for gender and disability.
  • 66% of the candidates selected through Applied would never have been considered based on the merit of their CV alone. You are truly meeting people from diverse backgrounds.

7. Protecting your brand through a truly inclusive process

Benefits to your organisation:

  • Your business is being judged on its record on diversity and inclusion, then this is a reputational risk (source)
  • Less than a fifth (19%) would remain a customer of a company if they had a bad experience as a candidate (source)
  • 48% of the 422 people surveyed said that they would urge friends and family to avoid a brand if they felt they'd been treated poorly in the recruitment process (source)
  • B2B companies with strong brands outperform weak ones by 20% (source)
  • Strong brands outperformed the market by 73% (source)

How you can achieve this:

  • Create a transparent, inclusive process and let your candidates know exactly what you are doing at each step, providing personalised, useful feedback at the end of the process.

Results you can expect:

  • You will have a process that candidates appreciate and will actually commend publicly on social media.

C) Creating an efficient hiring process

8. Reduce the time spent supporting the hiring process by building an efficient process

Benefits to your organisation:

  • The average time-to-hire for white-collar positions is now a whopping 68 business days. The most common impasse occurs when candidates’ resumes sit untouched in a hiring manager’s inbox (source)

How you can achieve this:

  • Automate or enable 1-click actions to help candidates move through the pipeline and receive updates on where they are within your process

Results you can expect:

  • Reduce sift times by 66% by using our efficient sift mechanism rather than paper CVs.

9. Reduce the number of interviews by using the most predictive methods

Benefits to your organisation:

  • On average businesses spend £5,433 on logistical costs for each role (including interviewing) (source)

How you can achieve this:

  • Stop using un-predictive assessment methods such as a phone screen, or unstructured fireside chats. These rounds cost time and money but will not tell you much about how well the candidate could do the job and are opportunities for bias to creep back in.
  • Measure the effectiveness of your interviews against who actually got the job and excelled in it. Was it the highest scoring candidate? In which case you can trust in your interview round much more and know that you might need fewer rounds in total.

Results you can expect:

  • Increase your interview to offer rate by 3x meaning you'll need to do fewer interviews to find the right person for the job.

10. Reduce the need to give feedback by giving personalised feedback automatically

Benefits to your organisation:

  • On average businesses spend £5,433 on logistical costs for each role (including interviewing) (source)

How you can achieve this:

  • Provide automated, personalised feedback by ensuring first that candidates are assessed in a quantitative way against a marking rubric and then simply provide their scores for each stage back to the candidate to let them know how they did.

Results you can expect:

  • Remove all of the time that you used to spend giving feedback to candidates as you can give feedback to everyone automatically.

Phew, that's the long list. However, it's not all of the possible sources of value. Ones we haven't included are:

  1. People stay at companies that value people and work toward inclusive workforces, decreasing overall churn.
  2. Unconscious bias training has been shown to be ineffective or even counter productive. You can save this money.

Here’s what the breakdown of value typically looks like

What we usually find is that even small positive changes to a recruitment process can bring massive benefits to an organisation. Hiring truly is one of the most important things your organisation will do and when you start to join the dots between great people and the outcomes they bring, your organisation will start to truly realise this too.

The Applied platform was designed using behavioural science to make blind hiring as easy as possible. We baked bias removal into every step of the process so that you hire the best person for the job, no guesswork, no 'gut instinct'. You can now see how our platform works with a free trial, or browse or resource library.