Looking at the future ahead; efficiency in recruitment is more needed than ever. Post-corona is a different playing field where we will be looking at a whole new level of cost cutting and time saving in all areas.
A new playing field
The average number of applications for any given job is 118. LinkedIn reports that they have over a 100 million job applications every month through their job page. In April 2020 the Swedish Public Employment Service reports an increase of new job seekers by 137% and a decrease in available jobs by 38,7% compared to April 2019. Hiring across the US also showed a significant drop in April, down 30% over the last year and 24% the last month.
We’re seeing a development where we’re having more applicants distributed over fewer jobs. Getting too many unqualified junk resumes from job boards is already listed as one of the main barriers to identifying qualified talent according to recruiters. This calls for new levels of efficiency in our recruitment efforts.
Efficiency in employee referrals
Referrals have been deemed 5x as efficient than all other sourcing alternatives. Time is essential and referrals have a 55% faster time-to-hire compared to hires through career sites. Referrals has also proven to be more accurate than other sourcing alternatives. Employee referrals only make up for 7% of the overall job applicants but about 40% of them gets hired.
With irecommend the average number of employee referrals for white collar roles, where a referral has been hired, is 7,5 candidates. This can be compared to the average number of 118 applicants for any given job. Having a structured and well-developed employee referral program allows you to save time and direct your efforts to a qualified (not quantified) set of candidates.
The general studies on the effects of employee referrals also gets support from the aggregated data in the irecommend platform. Our data helps us validate a few of the previous statements:
- 1 of 5 referrals that shows interest for the role they’ve been referred to goes on to a first interview. That’s a 20% conversion rate.
- 1 of 4 interviewed referrals then goes on to get hired. Which gives a 25% conversion rate.
For any given job there’s typically between 6-10 candidates that gets interviewed. With 118 applicants that’s a conversion rate of 5-8% going on to a first interview. Interviewing 10 of these candidates and hiring one of them results in a conversion rate of 10%. This concludes candidates from different kinds of sources, but the conversion rate from the irecommend data shows that employee referrals are significantly more accurate than the general applicant.
Cutting the cost
Moving forward the emphasis on cost cutting will be bigger than ever. Having a well-functioning employee referral program provides opportunities to reduce cost for both external partners and advertising.
External agencies are something that companies will try to find less expensive alternatives to. The cost for search services is typically between 20-30% of the employee’s annual salary so it can differ a lot, but the average cost per hire through an external search agency is around $15.000. When it comes to job advertising there are a lot of different ways to go but the average cost for posting a single job position for 30 days on a single job board is $300. Employers will usually use multiple job boards and if the position isn’t filled within the 30 days, they will need to renew the job ad.
Calculating the potential cost and time savings makes a solid business case. Say a company makes 50 hires a year and advertises for all roles and uses external agencies for 10% of the roles. By replacing 40% of these hires with employee referral hires they are able to save over $330.000 in cost for internal resources, advertising and agencies over three years. Increasing employee referrals to 60% will save the company almost $500.000.