What Most Companies Get Wrong About Employer Branding ROI

What Most Companies Get Wrong About Employer Branding ROI Employer branding is top of mind for most forward thinking talent acquisition and HR teams these days.   There is a plethora of articles and resources around how to build your brand, the importance of employee generated content, etc. However, there are scant resources that share how to measure the dollars and cents impact of your employer branding activities.   And, this is one of the key areas the rest of the organization will expect you to have a grasp on when it comes to evaluating the effectiveness of your efforts.   In many ways, it’s the key to gaining more resources to pursue the initiatives you want to explore. High level employer branding ROI I want to point something out.   There are LOTS of articles about employer branding’s value.   And, I agree with most of them.   For example, LinkedIn’s research shows organizations with strong employer brands see 50% lower cost/hire and retention that is nearly a third higher. This makes a lot of sense â€" better employer brands help you attract and convert more of the right people.   However, this isn’t a stat you can quote your boss at the end of the year when they ask how the new culture video performed. You may be thinking these stats shouldn’t be too hard to translate to dollars and cents for your organization, right?   If I spend $1,000,000 on talent acquisition each year, then I can save $500k/yr by having a “great employer brand.” Not really.   We all know that most initiatives are more complicated than “let’s make the employer brand better.”   More likely, you’re going to say something like “let’s build a talent community” or “let’s update our careers site.” There are many other high level value statements that get made about employer branding and how it affects time to fill, quality of hire, etc.   These are all great, and I agree with most of them.   But, I think where most HR leaders fall down is when they can’t say “we did X and it led to Z.” Think about how great it’d feel to go into your CFO’s office next year and say “we rebuilt the career site for $15k and it led to a cost savings of $43,000.” Translating value into dollars The above statements are all about value, which is close to what goes into the PL, but not quite there.   Let’s walk through two examples to show how we can actually get to the dollars and cents ROI from employer branding activities. A talent community Let’s say we built out a talent community in order to decrease time to fill for sales jobs at our company.   Time to fill is now 50 days.   Let’s say after a year of using our talent community, time to fill has dropped to 40 days.   Pretty awesome!   Ok, so how does that translate into value for the business? Let’s say our sales person gets paid $100k/yr, with an annual quota of $500k.   We’ll make a few simplifying assumptions for the business nerds out there, like revenue = gross profit, no ramp time, etc. Ok, so the sales person brings in $500k $100k = $400k of value per year.   If they work 250 days, that’s $1,600/day.   So, if we get them in the door 10 days faster, we just brought our business $1,600 * 10 = $16k of value per sales rep hired.   Not bad! There are of course other ways to get to value of a talent community.   Namely, it can capture candidates that otherwise would have disappeared. Another example, career pages Another employer branding/recruitment marketing tactic that many organizations consider is an overhaul of their careers site.   The main metric to track here is conversion rate of visitor to applicant. Let’s say we are at 5% currently.   This is pretty average.   1,000 visitors gets us 50 applicants.   Let’s say we redo the site with a better UI/UX, more content, and microsites.   Now our conversion rate is 15%.   Ok, so now we get 150 applicants instead of 50 for every 1,000 visitors.   That’s an extra 100 applicants! Ok, so what is 100 applicants worth?   Well, we have to look at our hiring funnel.   If you interview 10% of the people who apply, that means you need 10 applicants for every interviewee.   And, if you hire 10% of people who interview, that means you need 10 interviews for every hire.   So, 100 applicants gets to 10 interviewees and 1 hire. How much is a hire worth to you?   Well, you know that from your cost/hire.   Let’s assume it’s $5k. Ok, so we just enhanced the careers site so that we now get 100 more applicants for every 1,000 visitors.   And, we know that 100 applicants is worth $5k (a new hire) to us.   If we have 3k visitors/mo, then we have 3 * $5k = $15k in incremental value per month. Yup, I’m a business geek As you can tell, I’m a business geek and love thinking through the ROI scenarios for any and all problems.   But, beyond the intellectual interest, I actually think that these sorts of calculations are so important in understanding whether or not the business decisions you’re making are making an impact or not. Feel free to leave your initiative in the comments and I’ll do my best to use my MBA skills to dive into how I’d think about the ROI calculation. About the author:  Phil Strazzulla is the founder of NextWave Hire, an employer branding software solution that uses employee stories to enhance career sites, build talent communities, and spread the word on social.   Phil has his MBA from Harvard Business School and was previously a VC at Bessemer Venture Partners.