Guaranteed payments make life simpler.
We sign a long-term contract (six months, 12 months, 5 years, 30 years, etc.) and know exactly the payments to expect during the term of the contract. We purchase a car and have a consistent loan payment for the next 60-72 months. We purchase a house and have a consistent loan payment for the next 15 or 30 years.
With recruitment spend on the job boards, that contract strategy has been very popular in recent years. A staffing agency or company guarantees its rate for a 12-month period with a national job board. Depending on the job board or platform, it provides the staffing agency with a monthly rate and number of jobs to promote or job slots available.
That makes life simple, especially when you have a pre-determined recruiting budget Your staffing agency knows it has a recruitment budget of $7,500/month. You’re spending $2,500/month on Job Board A for 20 jobs or $5,000 on Job Board B for 30 slots. Applications are coming in and the recruiters are pleased with the results.
What if I told you that’s not the best way to handle your recruitment spend? What if I said there’s a different way to manage the recruitment budget, and the $7,500/month recruitment budget might be correct, or it might be too low or too high?
Welcome to performance-based recruitment spend.
Wait, I Don’t Need a Long-Term Commitment?
I get it. The long-term commitment is simple. It’s easy. It provides peace of mind. It’s how companies and staffing agencies have purchased job board advertisements for several years.
It doesn’t mean it’s the best solution.
Companies aren’t required to purchase long-term contracts from job boards. It’s an option but it’s not a hard-and-fast rule. The job boards love guaranteed revenue (who doesn’t) because if they can guarantee $7,500 for 12 months, that’s more beneficial to them than a variable spend during the ensuing 12 months.
It might be a bit dramatic to say “take the power back” but keep in mind that it’s your company’s recruitment spend. A month-to-month spend is becoming more popular in the industry. Changing the mindset could be difficult, but it could lead to improved results for your staffing agency.
Why Wouldn’t I Want a Long-Term Commitment? (RE-WORD)
Reason 1 – Restricting Reach
If a staffing agency is only purchasing job board advertisements on one or two job boards, they are only reaching the audience on those platforms. That could be enough, especially if they are the most popular job boards at the moment.
However, there are thousands of job boards in the marketplace where job seekers are searching for jobs – other national job boards, regional job boards, niche job boards, etc. There is no guarantee your target candidates are going to the one or two national job boards you are spending money with. Maybe they are going to a variety of job boards. Maybe they are going to Google first and doing a search. Having your jobs on multiple boards expands the reach and gives you a better chance to have your job postings reach your target audience.
Reason 2 – Not Making Performance-Based Decisions
Let’s go back to the example from above of spending money on two job boards. After six months, Job Board A (remember we are spending $2,500/month here) is providing GREAT results. Job Board B (remember we are spending $5,000/month here) is providing TERRIBLE results. The best decision would be to shift recruitment spend from Job Board B to Job Board A because your staffing agency is getting quality candidates from this source.
However, we are stuck with that 12-month contract and locked in spending MORE money on the job board that is providing worse results.
This is where flexibility becomes an enormous advantage.
Having that month-to-month flexibility really allows your company to make more informed decisions that are based on performance. If Job Board A is converting at 20%, why not put more money here? It’s been six months. The sample size is big enough. We know we are losing money with Job Board B.
Having the flexibility to move your money to where the better candidates are finding your jobs leads to better return on investment.
Reason 3 – Job Orders Aren’t Consistent
Think about recent job orders or seasonal demand from your clients. Let’s say in October, you have an order coming for 50 warehouse openings. However, in November, that order will go away.
If you have a fixed spend in those months, your staffing agency could be missing out on opportunity to fill positions in October because the $7,500 budget isn’t big enough. In November, you could be wasting money since you only have a small number of openings, but the $7,500 budget is excessive for the number of openings your staffing agency has.
Maintaining flexibility with the recruitment spend allows you to shift that spend when your job orders require it to be shifted. In October, you can increase that budget to $10,000 and in November, you can decrease the budget to $2,500.
Your staffing agency filled the 50 job orders in October and cut costs in November. Combining the two months, you spent $2,500 less on the job boards but still filled all of the orders. With a fixed spend of $15,000 during the two months, the job orders went unfilled in October and the November recruitment spend was wasted on nonexistent job orders.
Reason 4 – Setting a True Recruitment Budget
Why did I choose the $7,500/month recruitment budget at the beginning of this blog post? Honestly, it was easy math and seemed to make sense.
How do staffing agencies determine their recruitment budgets for the month or on an annual basis? It could be just as random or it could be based on historical data.
The best formula focuses on cost per application, cost per hire and number of job orders. Let’s say you know it costs $75 per hire and you will have 100 job orders per month. That’s an easy way to get to $7,500/month.
With a flexible recruitment spend, creating a true recruitment budget becomes much easier.
Let’s say you maintain that average of 100 job orders per month, but later in the year, the cost per hire decreases to $60. Now, your monthly recruitment spend only needs to be $6,000. We aren’t spending the extra $1,500/month just because it’s locked into your contract.
On the flip side, maybe business is going great and new business increases your job orders to 150 job orders per month. Your cost per hire is still at $75. If we are at $7,500, we have a recruitment spend gap of $3,750. The open jobs are going unfilled just because of locked-in contracts. Spending that extra $3,750 will bring in more revenue than
(Yes, we could the job boards will probably let you increase, but they may pressure you into a new long-term contract of $10,000-$12,000/month when you don’t need it.
Control Your Recruitment Spend and Stay Flexible
I’m sure there are other reasons we could brainstorm to keep your recruitment spend flexible. Those are only four of numerous reasons.
And I understand, it might be better to lock in to a year-long contract for peace of mind and the way your staffing agency works.
Consider maintaining flexibility with your recruitment spend. Making performance-based decisions will help you make better decisions and get better ROI for your staffing agency.