With the advent of new-technology and changing HR landscape, talent acquisition has become all about how can each hire impact revenues. Hiring the best talent has become an integral part of any successful business, and it’s becoming even more crucial for CXOs to hire the right employees for their team. But if you peel back the layers at the vast majority of companies, you find CEOs who are looking for all their direct reports to contribute to the top line. And here it boils down to how traditionally bottom line functions like the HR and Chief Human Resources Officers (CHROs) specifically impact the top line .
That said, every hire in an organization is done with the aim of either improving top line or bottom line. With organizations having attrition (20%+) and growth (10-20%) every year, HR leaders have the opportunity to rehire one third of the workforce, change the organization culture and make deeper impact on the top line.
To understand the right way to maximize the top line impact, it is important to understand the key metric that defines the existence of HR, and its impact on the organization. In Talent economy, employees are the new customers, and main objective of a CHRO is to quantify the economic value of an employee delivers in the form of future cash-in-flows to the business during their association with the company, which is referred as Employee LifeTime Value. Understanding the lifetime value also makes it ridiculously easy to showcase ROI and get budgets.
Graph showing the ELTV, the key metric that defines length of time, culture fit and helps calculate the impact on the revenues. Time frame, spanning from the start date to the day the employee leaves is plotted on X axis, and the employee output is marked on Y axis.
Employee Lifetime Value represents the total value that an employee brings to an organization over their lifecycle. The HR Team’s job is to drive the organization to maximize ELTV by developing and executing programs that impact the inputs that drive ELTV.
In today’s fast-changing HR landscape, Peoples’ Leaders project Employee Value Proposition as one of the leading strategic initiatives to show the impact on top-line. However, most of the ELTVs are rarely understood and even more uncommonly adequately implemented. Teams with great hiring practices impact organizations Top-line and bottom-line functions by helping its managers shorten employee’s ramptime, increase their growth in hierarchy and thus., lengthening their stay with the company.
Based on the industry acumen and best practices followed , HR-tech companies have seen that the increased Life time value finds the good cultural fit and drives revenues.
It is rightly said, that “a known cost with an unknown return,” in that executives have traditionally struggled to measure the financial impact this area has.
The four factors that help in maximising ELTV are:
- Hiring Practices are an excellent way to contribute to more than 3x revenue growth and 2x profit margins. An excellent hire has a higher maximum output from the beginning, plus has the added network effect of attracting and elevating other top performers.
- Good Onboarding Program that decreases the time it takes an employee to become a fully contributing member, and significantly increases the likelihood that the employee will stay with the company long-term.
- Management & Development: Excellent management and development practices increase the value an employee brings to an organization over time.
- Culture: To retain the hires, it is equally important to inculcate strong and positive management practices from day one of hiring, in order to increase the ELTV. In turn, this helps in shortening the employee’s ramp time to become a contributing member, improve their chances to promote to higher hierarchy levels.
This in turn, shortens an employee’s ramp time to become a fully contributing member of the team, increase how high they can go (in terms of output), increase how much higher they go over time and lengthen the time they stay with the company.
Increasing ELTV through Quality of Hire
A well-planned hiring process is well-structured to capture more data and use that data to continuously improve your systems will increase the cumulative ELTV of your employees. Being transparent by being open and honest about the role to ensure a mutually strong fit and a new hire who truly wants the role they’re in. It helps prevent mis-hires by allowing people to self-select out of the role or company if it’s not what they’re looking for.
Metrics to Fill: Time to Fill, Cost per Hire
With the spurt in cloud hiring platforms, HR managers can now deep dive into their recruitment practices, make data-backed decisions for managing hiring approach. The two important metrics that will help in impacting the hiring process are: Time to fill and Cost per hire.
Time to fill is the number of days between when a job requisition is approved and the day a candidate joins. While, most of the HR fraternity considers it as a metric that helps in measuring efficiency of the entire recruiting process. On the other side, cost per hire is a key metric that helps in identifying the areas of improvement and aids CHROs in taking informed decisions. In brief., cost per hire is the average amount of money you spent on making a hire., this helps while planning your recruiting budget.
The new world of recruiting unveils new challenges and opportunities - global talent shortages and new technologies for taking informed decisions. In short, we are sliding into an era where HR practices are becoming more & more innovative which means, you can constantly benchmark the recruiting channels through advanced cloud-tech hiring platform.
With technology and broader trends reshaping talent economy, talent strategy has become a critical issue for boards. It is important for CHRO’s to lead the change and drive significant impact to their organization top line.