The primary goal of almost any business function is to coordinate activities in an effort to increase revenue or profit. If you look at business functions like sales or product development, it’s obvious that what they do directly impacts the company’s revenue, and as a result, these functions are held in high regard and are typically well-funded.
In contrast, most individuals who work in recruiting fail to realize that their work also has a direct and measurable impact on revenue, provided that they focus their resources and efforts on recruiting for “revenue-generating” jobs.
A revenue-generating job is one that when vacant, no revenue is generated. Obviously, this category includes sales jobs, but it also includes a large number of jobs that can potentially halt the revenue stream if left vacant, like pilots or surgeons.
It should be obvious to everyone that whenever you have a “vacancy” or opening in a revenue-generating position, the total revenue that your firm generates will go down. For example, if you operate a bank branch, a significant portion of the revenue you generate will come from the loans made by your loan officers.
To calculate the average revenue lost as a result of a vacant position “day” for a loan officer, take the average yearly revenue generated by a person in this job and divide it by the number of working days in a year.
Incidentally, for some positions like loan officers, the revenue losses might equal $5,000 per day. With a 60-day time-to-hire, that’s $300,000 in lost revenue.
Another method to identify the differential in the dollar loss between revenue-generating positions and “average” positions: compare the firm’s revenue per employee per day (the total revenue of the firm divided by the number of employees and that resulting number is divided by the number of work days) with the direct revenue loss from a vacancy in a revenue-generating position.
Fortunately, most of this revenue loss can be minimized with effective HR actions, including:
Of these four approaches, the last one, minimizing vacancy in revenue-generating positions, is the approach that receives the least attention within HR and recruiting. I’m unsure why most in recruiting don’t see this impact in the importance of focusing on revenue-generating positions.
For example, it’s fairly obvious that if an airline has a shortage of pilots as a result of turnover or slow hiring, a smaller number of planes will fly, fewer passengers will be served, and as a result, less revenue will be generated.
A single day’s vacancy in a revenue-generating position impacts revenue, but a long-term vacancy will invariably mean a dramatic lowering in the revenue that the business will generate. Of course, every vacancy has some impact on revenue, but the impact is not only larger for revenue-generating positions, it is also more immediate and obvious.
There are two basic categories of solutions to the cost of a vacancy in a revenue-generating position. The first is to hire everyone faster (fewer “vacancy days”) and the second is to prioritize hiring so that it focuses on these critical revenue-generating positions.
This might seem like a good idea on the surface, but hiring fast and minimizing vacancies throughout the organization is expensive, hard work that is sometimes unnecessary. For example, replacing a PR person rapidly at an insurance company wouldn’t have the same impact on revenue as minimizing the vacancy days for your insurance sales positions.
In addition, because hiring “fast” might have a detrimental impact on the quality of individuals, changing the speed of hire alone will not automatically increase revenue. As a result, a superior approach to increasing the overall speed of hire within an organization is to prioritize revenue-generating positions and then to fill them both rapidly and with high-quality hires.
Because revenue generating jobs have an immediate impact on revenue, it only makes sense that you focus your recruiting time and resources on these positions in order to ensure that 1) these positions remain open for only a short period of time and 2) that they are filled with highly skilled individuals that will become top performers on the job.
Prioritization is a common practice of business because every problem that an organization faces does not have equal importance or equal consequences. Decision-makers and people who control budgets have limited resources, and as a result, they must learn to allocate resources based on the severity of the problems that they are facing.
The best solution to this dilemma of limited resources and time is to develop some logical process of allocating resources so that the largest amount of resources goes to the “right” problems (in this case, the right jobs) .
It’s not unusual for individuals in recruiting and HR to actively resist any attempts to prioritize positions. Perhaps this is because so many HR people have a “social work mentality” that leads them to believe that it’s important to treat everyone equal.
Unfortunately, any attempt to treat all jobs equally when it comes to reducing vacancy days automatically limits the recruiting team’s ability to be successful.
What recruiting must do is to stop recruiting jobs based solely on the requisition date. Instead, focus on these critical revenue-generating positions and begin hiring immediately after a revenue-generating position becomes vacant, or better yet, as soon as there is a realistic probability that one may soon become vacant.
Some of the actions that you should consider when you are trying to reduce the number of days that revenue-generating positions are vacant include:
HR professionals are constantly saying they want to be business partners. To me, the best way to be a business partner is to act in a “business-like” manner. That means calculating the dollar impact an individual position has on the revenue of your firm and focusing your recruiting and retention efforts on those positions with the highest revenue impact.
Report to senior managers the total annual increase in revenue that resulted from prioritizing recruiting on revenue-generating positions. By focusing on revenue-generating positions, you’re not saying that “revenue influencing” or non-revenue jobs are not important, because they are.
All prioritization means is that when you are faced with limited resources and a differential in impact, you must focus your recruiting time and budget where it can have the most direct and measurable business impact, which is the same way that every other business unit acts.
