What's Your Revenue Per Hire?
David Earle

What is your average revenue per employee? We went to Hoover’s and spent a few minutes to find out that..

Microsoft’s is about $628,000
GE’s is about $565,000
WalMart’s is about $193,000
Exxon Mobile’s is $5,974,455 (and that’s not a misprint)

We did this after talking last week with Tom McGuire, Director of Global Talent Acquisition at Coca-Cola. Tom is the rare staffing director with both CFO and operations experience who views his current responsibilities from those blended perspectives.

Tom views each of his new hires as a $7 million proposition, meaning that over time each one will be associated with that much additional revenue. He isn’t so much concerned with time, cost and other efficiency metrics. Instead he focuses intently on quality because the corporate impact of getting quality right – the right people performing at a high level in the right jobs – is vastly more consequential to Coke than shaving a few days off time-to-hire or a few dollars off a job board contract.

Which is not to say that Coke ignores efficiency. They know exactly how much is going where and what the results are. But they have figured out that the traditional wide mouth funnel that produces lots of applicants is not efficient for them. They get better results hunting for talent with a rifle than with a shotgun.

(Source: Staffing.org’s 2009 Recruiting Metrics & Performance Benchmark Report)

In our view, Coke has a number of things exactly right: a) They have a Director who can talk financials with anyone in the company; b) He works from a strategic perspective, understanding the link between talent and enterprise performance; c) He works at the highest level of the company, with full corporate understanding and support; d) Having held operational positions as well as financial ones, he understands what types of people Coke needs to hire to remain successful; and e) He has thoroughly analyzed the efficiency of his recruiting channels and optimized their efficiency. 

If 20th century staffing was built on two key relationship formats – those with candidates and those with hiring managers, 21st century staffing will require one more: the relationship with senior management. As we have explained before, senior managers operate according to the law of large numbers. Small numbers, such as department budgets, are not where they can afford to spend very much time. Mid-level managers need to manage those, with senior managers becoming involved only when problems are identified.

The practical impact of this law on staffing managers is that, to catch the attention of senior management, they have to, as Tom has, connect their efforts to the largest possible corporate line item. Doing so is not all that difficult. All corporate endeavors, even non-profit ones, have a revenue line which, divided by the total number of employees, yields a revenue-per-hire number. You can use FTEs or part-timers or, as the Federal Government does, both.

Comparisons to individual companies can be calculated using Hoover’s (www.Hoovers.com) and the U.S. Government can provide the data for groups of companies organized by NAICS code (www.census.gov/econ.census).  For example, the average revenue/employee ratio for 6,293 oil and gas extraction companies is about  $1.4 million. The average for 16,349 hardware stores is $140,275. (Both stats based on 2007 data.) The average for the Fortune 500 is about $300,000.

So first look at your retention and productivity numbers, both the actuals and what you wish they were. Now start playing around with the impact of good hires vs. bad hires. You can frame this by comparing the performance of your strongest and weakest performers. Coke, for example, can compare the performance of local brand managers who perform similar functions in various, distinct geographic markets. What jumps out quickly are the revenue consequences over time of a poorly managed territory vs. a well-managed one.
 
If diving into these calculations doesn’t come easily, ask for help. Enlist your CFO in the cause. Just asking will demonstrate your business acumen. And if you are fortunate enough to actually develop meaningful data and use it to guide staffing policy, you will have developed an exceedingly marketable skill.

Of the three relationships that will be key to 21st century staffing, the senior management relationship is currently the weakest and thus needs the biggest makeover. As the chart shows, we often believe it to be quite adequate, but that’s because we have been satisfied with an influencer role rather than a driver role. The driver role is descriptive, that is, one drives business results. While influencers are certainly respected, it is the true drivers who are indispensable.

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Quality of Hire: The Missing Link in Calculating ROI (Part I of a Series)