Is it a luxury to continue investing in quality recruiting in times of budget cuts? Should companies refrain from innovative recruiting strategies in economically challenging times? Or are there ways to achieve high-quality results and attract talent despite limited recruiting budgets?
Below, we present five methods that you can use to recruit successfully despite financial constraints.
Employee Referral Programmes
We put employee referral programmes at the top of our list of cost-effective recruiting solutions. By activating the network of your current employees, you not only increase the quality of applications, but also expand your talent pool with completely new resources and often accelerate the recruiting process.
Advantages of employee referral programmes at a glance:
- Cost efficiency: Compared to traditional recruitment methods, employee referrals are always cheaper. Your company saves on expensive job advertisements and external recruitment agencies.
- Faster filling of vacancies: Recommendations from your own employees often lead to faster filling of vacancies – potential candidates are approached directly (and personally) and they get an authentic insight into your company from an employee's point of view.
- Higher ‘cultural fit’: Employees know the corporate culture and can assess whether a recommended person fits into the team. This greatly increases the likelihood of long-term collaboration.
- Increased employee retention: Recommended employees often have higher employee retention because they already have a relationship with at least one person in the company. This makes it easier for them to integrate and they know what to expect from personal experience.
Proof of increased employee retention:
A study by economist Prof. Guido Friebel examined the introduction of an employee referral programme in a grocery store chain. The result: staff turnover fell by 15 per cent, leading to significant cost savings. The reason: employees appreciate being involved in the hiring process of new colleagues and thus feel valued by the company.
Tips for implementation:
- Set clear conditions: Define which positions are open to referrals and what bonuses will be paid if the referral is successfully hired.
- Communicate transparently: Keep your employees regularly informed about the programme and motivate them to actively participate.
- Offer attractive incentives: In addition to financial bonuses, extra vacation days or other benefits can also serve as incentives.
- Gather feedback: Collect feedback from employees and recommended candidates to continuously improve the programme.
Implementing a well-structured employee referral programme has several advantages: companies save costs in the first instance, while improving the quality of their new hires and strengthening employee retention (which can significantly reduce recruiting costs).
Analyse Recruiting Metrics
In our last insight, we addressed the question of whether companies today can still afford not to recruit on a data-driven basis. The clear answer is no. Every company is encouraged to continuously optimise its recruiting processes. By analysing specific KPIs, you will identify weaknesses, deploy resources more efficiently and ultimately improve the quality of your new hires. There are a number of key figures, but the most important ones can be narrowed down considerably.
Important recruiting metrics:
- Time-to-fill/time-to-hire: This key figure measures the time between receiving an application and signing the contract. A short time-to-hire indicates an efficient process and increases the chances of attracting top talent.
- Cost-per-hire: This is calculated by taking the total internal and external costs of a hire and dividing them by the number of new hires. This key figure helps to identify costly process steps and reveal potential savings.
- Quality of Hire: This key figure assesses the quality of hired employees based on performance, retention and satisfaction. It provides insights into how successful the recruitment process is in the long term.
- Sourcing Channel Effectiveness: By analysing which channels generate the most successful applications, you can focus your budget on the most effective recruitment channels.
- Offer Acceptance Rate: This key figure indicates the extent to which a job offer is accepted by candidates. A high acceptance rate suggests that the job ad is attractive and the recruitment process is effective. A value of over 80% is considered desirable.
- Candidate Experience Score: This value measures how satisfied applicants are with the recruitment process, i.e. how good the candidate experience is. A positive value strengthens the employer brand and increases the likelihood that candidates will recommend the company.
Another tip regarding KPIs: in general, they should be relevant to your business goals, as well as measurable (completely and ideally automated) and benchmarkable (are there comparative values from the industry?).
Practical example:
A medium-sized company found that the time-to-fill for technical positions was above the industry average (benchmarking). By introducing a structured interview process and using applicant management software, the time-to-fill was reduced by 30%, which led to faster filling of critical positions.
Tips for implementation:
- Regular data collection: Use standardised systems to collect relevant data throughout the entire recruitment process.
- Continuous analysis: Regularly review your KPIs to identify trends or weaknesses and to be able to react to changes at an early stage.
- Derive measures: Based on the analysis results, targeted optimisation measures should be taken and their effectiveness monitored.
Strengthen Employee Retention
High employee retention is valuable in many ways – it reduces expensive turnover costs, promotes a stable and productive work environment and to ensure the corporate brand. Employer branding is a very strong aspect – in other words – the way a company positions itself as an attractive workplace. Our experience is consistent with recent studies – employer branding ranks top on employees' wish lists, along with salary and the desire for flexibility.
The good news is that you don't have to pamper your employees with expensive benefits à la Google or Facebook. Organisations can achieve a lot with just a few resources, such as a feedback culture or how people interact with each other (positive work environment).
Cost-conscious strategies to improve employee retention:
- Establish a feedback culture: An open and constructive feedback culture enables employees to reach their full potential and grow continuously. Regular feedback not only promotes individual development but also strengthens trust in the management level. In addition, employees feel valued and taken seriously, which increases their loyalty to the company. And at the same time, it also creates a more positive working environment.
- Creating a positive working environment: In addition to a feedback culture, a supportive and appreciative working environment is critical to employee satisfaction. The keyword here is ‘mental health’ – currently, we as a society are struggling with this more than ever before. A positive workplace includes transparent communication, recognition of achievements and the promotion of respectful interaction. Such an environment increases mental and physical well-being, as well as the motivation and loyalty of the workforce.
- Enabling flexibility for employees: The possibility of flexible working, whether through home office, flexitime or part-time models, is often the key to work-life balance. Flexibility shows appreciation for the individual needs of employees, increases their satisfaction and thus their loyalty to the company.
Practical example:
A medium-sized IT company in the Mediterranean region introduces regular feedback rounds and flexible working hours. Within a year, employee satisfaction rose by % and the fluctuation rate dropped significantly.
By implementing these strategies, companies can sustainably strengthen their employee retention and simultaneously improve their employer branding. These two factors not only lead to a reduction in recruiting costs, but are also the most valuable indicators of productivity, resilience and also innovative ability.
Highly optimised job ads
We see it every day. Companies spend a lot on recruiting – but they tend to neglect one of the simplest levers for performance: their job ads. And these are often the first point of contact with new applicants. The right talent is simply not attracted by job ads. Or excluded (taking about: inclusive recruiting). A modern and effective approach is skills-based job ads, which focus on the actual skills and abilities of applicants, rather than on formal qualifications or rigid qualification requirements.
The advantages of skills-based job ads:
- Expansion of the talent pool: By avoiding unnecessary formal requirements, candidates with unconventional career paths who nevertheless have the required skills are also addressed.
- Promoting diversity: A focus on skills makes it possible to reach diverse applicant groups and thus increase diversity within the company. The many benefits of a diverse workforce have been proven many times.
Best practices for skills-based and inclusive job ads
Clarity about required skills:
- Define the essential hard and soft skills that are critical for the position. Distinguish between must-have and nice-to-have skills.
- Use common terminology and job descriptions to be picked up by keywords and search engines.
Prioritise responsibilities over requirements:
- Highlight the main tasks and responsibilities of the position.
- Reduce the list of requirements to the essentials so as not to deter potential applicants. In our experience, there should be a maximum of 8 to 10 skills per position.
Present the corporate culture:
- Describe your company's culture and values to give candidates insight and appeal to those who identify with them.
- Show the working environment and let team members have their say.
Use inclusive and personal language:
- Be sure to use gender-neutral and inclusive language to appeal to a broad and diverse talent base.
- Avoid empty phrases or passive language that makes you unattractive
Optimising your job ads to take an inclusive and skills-based approach increases the quality of incoming applications and broadens the range of available talent.
Our colleagues at Paltron and alphacoders provide further valuable insights:
Skills Based Hiring: How to write competency-based job ads
Inclusion in recruiting: how accessibility can give you a competitive edge
Data-driven recruiting and the use of HR software
We reported on data-driven recruiting in the last insight. A brief recap: Data-driven recruiting involves measuring, analysing and evaluating the entire recruiting process based on data.
A data-driven approach enables companies to make informed decisions and make the recruitment process more cost-effective. And this is done by using the appropriate HR software.
Advantages of data-driven recruiting:
- Increased efficiency: By analysing relevant data, bottlenecks in the recruitment process can be identified and eliminated, leading to faster filling of vacancies. At the same time, inefficient or expensive processes can be uncovered.
- Cost reduction: targeted data analyses help to identify the most effective recruitment channels and thus to optimise budget allocation (KPI: sourcing channel effectiveness).
- Objectivity in decision-making: objective data supports the selection of suitable candidates and reduces subjective influences.
Data-driven recruiting HR software
The most common systems in the field of HR software fall into five categories:
- Applicant tracking systems (ATS): By automating applicant management, ATSs significantly reduce the manual effort involved, resulting in faster filling of vacancies and thus lower costs.
- Recruitment marketing software: These tools optimise the way potential candidates are approached by enabling targeted campaigns, thus increasing the efficiency of recruitment measures, which in turn reduces spending on external service providers.
- Analytics tools: By analysing recruitment data, these tools identify the most effective channels, strategies and measures, enabling budgets to be targeted and wastage to be minimised.
- AI-based matching tools: Artificial intelligence helps to pre-select suitable candidates, which speeds up the selection process and reduces the costs of lengthy interview phases.
- Onboarding tools with data analysis: Efficient onboarding software shortens the induction period for new employees, reduces the training/induction that goes with it and gets newcomers up to speed faster.
Significant cost savings can be realised by implementing HR software solutions, and the initial costs for such systems are quickly amortised. More details on the topics you can read here: Data-driven recruiting – the key strategy for reducing HR costs
The question of whether qualitative recruiting is a luxury in difficult economic times can be clearly answered in the negative. With the cost-efficient HR strategies presented here, you as a company have an overview of your expenses and at the same time ensure that you continue to bring suitable talent on board. And as it turns out, sometimes it takes methods that are quite easy to implement to be effective here.
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