A Boston Technical Recruiters Blog

Copyright Gene Leshinsky, distribute freely with proper crediting

Organizational Background

Techruiter, Inc. (TECHINC) is a consulting firm specializing in providing IT solutions to a wide range of industries and clients. TECHINC has a Staffing Division that operates as a staffing agency performing individual Staff Augmentation projects.

TECHINC competes with other systems integrators as well as staffing agencies by providing solutions and staff augmentation services.  Solutions are project based work when a TECHINC sales team approaches a client and bids to resolve a certain issue the client is having with its systems. If the bid is successful, TECHINC produces the plans as well as the talent to solve the problem. When TECHINC participates in staff augmentation projects it is often for one resource to augment a project team already onsite and not managed by TECHINC.

TECHINC is a very small company compared to its rivals such as Accenture, Ajilon, and Keane, amongst thousands of other companies in the industry.  TECHINC has a very simple technological footprint that is anchored in Microsoft Office with Outlook and Yahoo messenger anchoring on a base of laptops, PC’s, and phones.

TECHINC has two important asset and competitive advantages: 1) its people and the ability to find and recruit these people, 2) its clients and the ability to sell effectively to these clients.

The sales organization at TECHINC will have the same benefits as the recruiting. Substituting sales for recruiting as it pertains to the Staffing and solutions business is equitable since each side succeeds by building strong relationships.

Technology Introduction

Applicant Tracking System (ATS) that is geared toward recruiting and is often bundled with a sales CRM. The system enables the user to create a database that stores all the information about a candidate and a client and allows detailed search functions. Currently there is no ATS system installed at TECHINC and all candidate relationships are manages haphazardly through email and old service order agreements. The ATS database enables the recruiters to search for candidates based on skill sets and various parameters. The system can be web based or server based and can support multiple users simultaneously. The ATS also has integration functionalities and can integrate into legacy email and browsing applications. [Dmoz]

The ATS provides reporting services to recruiters and managers that are displayed on a dashboard and allow the users to know exactly what is happening in real time including active candidates, open positions, upcoming opportunities, terminations, “hot sheets” recent contact lists, gross profit, and Revenue. Additional information may be configured on an as needed basis, such as birthdays, company events, and news items.

The ATS system will also enable TECHINC to follow government discrimination and information collection policies through automated questionnaire distribution and collection.

Use and Benefits

Adopting an ATS will have the effect of enabling TECHINC recruiters and managers to recruit and evaluate the talent pool effectively. Currently there is no process of candidate review and if one recruiter finds a candidate that may be good for a project another recruiter is working on, the two recruiters have no way of coordinating their knowledge to identify the opportunity. TECHINC recently lost an opportunity due to this communication inefficiency potentially as large as $21,000 in revenue.[i] Currently a recruiting meeting to discuss 5 open jobs takes 30 minutes; an organized ATS would reduce this time to less then 5 minutes, likely eliminating the meeting since the manager would have a dashboard with all current activity and the ability to delegate from this dashboard with a  drag and drop approach. The less time recruiters spend in meetings the more time they have on the phones recruiting.

Furthermore, an effective ATS will enable TECHINC to track its applicants and comply with Federal reporting guidelines.[ii] Failure to comply can lead to heavy fines and duress when an implementation is no longer optional.

Competitive Uses and Benefits.

An ATS will increase TECHINC competitive advantage over time by aggregating a large database of qualified candidates that will not be available to other recruiting or solutions companies and that will add value to every TECHINC sales presentation whether on the staffing or the solutions side of the business.  A TECHINC recruiter can enter 250(8 per day) candidate entries in a month, or about 3000 candidates per year.[iii] Given its 30 year history, TECHINC should have 90,000 candidates in their database all specializing in database design and development within information technology. The actual number of candidates in the TECHINC database is 0(since there is no database). Since staffing firms all have some version of an ATS and more then one recruiter, TECHINC is competing at a large historical disadvantage. For example, searching for a fringe skill on the public job boards is elusively difficult, while a well maintained database can yield excellent candidates in seconds.

The competitive advantage of data mining passive candidates and those who have worked on TECHINC projects in the past cannot be valued since the effectiveness of a database depends on the skill of the recruiter using the database as will as the efficiency of the search mechanism within the database. However, the ATS would enable TECHINC recruiters to quickly access a known pool of candidates forgoing the public job portals and making use of their historic data to staff both projects and staff augmentation opportunities in significantly less time then is possible without an ATS database. TECHINC would have candidates ready to go faster then the competition, getting the candidates to the projects and client sites faster and achieving a “first to market” advantage.

The ATS must be implemented immediately at TECHINC. Further hesitation only leads to a continued disadvantage in the face of highly skilled recruiting engines of the competition.  Implementation of the ATS/CRM will build the foundation for the future growth of the company by building the infrastructure to support new sales and recruiting staff and facilitating communication within the company.

Technology Analysis

The technology of an ATS/CRM is a natural extension of the human capabilities of individual recruiters and sales managers. An individual recruiter cannot memorize 3000 names and recall in an instant the candidate with a specific skill set that was submitted to particular opportunity 7.5 months ago. Nor can a sales manager remember the birthdays of all the client managers or when to congratulate them with a graduation and take the opportunity to build the relationship. The ATS/CRM does this and all the user has to do is remember a very general skill set or look at a dashboard and realize that it may be a good time to reach out to a prospect.

Without these technological advances that are readily available on the market and that will continue to evolve in the next 5 to 10 years, recruiting and sales cannot compete with everyone else who uses these systems to augment relationship building acumen. The risks of losing data associated with a large repository are insignificant to the risk of losing competitive advantage through not having an ATS. While there are alternatives to the ATS such as Outlook and Excel, these are so standard in the market that not having them would drive you out of business, while having them gives no advantage at all since they are ubiquitous.

ATS/CRM are evolving constantly and adding capabilities. Integrated search engines, contact managers, tools that automate recruiting to the nth degree are emerging in the market. However, these innovations cannot have a drastic effect on the current systems unless they completely take the human element out of recruiting and that is science fiction for the present time. The individual recruiter will always be the relationship builder even if he only has to think to put in motion the IT functions of his tools.

Addressing Operational and Competitive Risks

The cost of adoption depends on whether the software is ASP based or out of the box.  Out of the box software can cost $500 - $1000 per license, while an ASP or SaaS package may cost $1000 to $2000 annually. Since there is no legacy system to integrate with at TECHINC nor is there a server that acts as the central database for collaborative software to be installed on the server, TECHINC will have to select the ASP. The initial cost is that of purchasing the license for the number of users who will have access to the system.  TECHINC currently has 20 employees, with an estimate of $1000 per seat, which is $20,000 per year.

The ROI will come in 3 months as $20,000 is less then what 1 TECHINC contractor brings in gross profit in 3 months.  This is just the payback since the true benefit of having a comprehensive business intelligence tool and database is essential for the company to stay competitive.

Furthermore, a careful analysis of a recruiters[iv] output in 1 year clearly illustrates the tremendous value of having a database. The recruiter contacted, spoke with, and submitted close to 900 candidates in 1 year. This means that if the recruiter were to call these 900 and ask for 3( conservative) referrals or references, that would put him in contact with an additional 1800 viable prospects/ candidates, assuming a very conservative 10% lead generation from the 1800 prospects, that’s 180 new potential clients, assuming a further 10% conversion rate of 18 new clients per year, with every client having at least 5 requirements that are filled by TECHINC recruiting at an average gross profit of $30,000, that’s $2.7 million in gross profit per year just from prospecting. Assume further, that TECHINC entered its client data from the last 100 engagements and had a sales manager call these companies systematically inquiring about opportunities, suppose 20 companies had active requisitions and knew TECHINC for a good company, and further assume that each company gave TECHINC 5 reqs that year; that would be another $3 million in gross profit. Thus in a single year, TECHINC could make nearly $6 million in gross profit simply by having an effective ATS/CRM coupled by a lead oriented recruiting process.[v]

The ATS will also enable managers to measure sales and recruiters metrics in a more organized methodical nature.  The tracking functions will tell managers which recruiter contacted how many candidates and the results of those contacts. The manager will also have a dashboard that will enable him to see all the current activity without spending countless hours in meetings.

The most significant risk associated with having a central database with thousands of candidates is that an employee may decide to steal it and start their own company. The best way to defend against this is to restrict export and download capabilities within the ATS and this threat is eliminated.  Not even the administrator of the ATS systems should have total access to the database export and download controls. Only the owner of the company should hold the key to the database. If the data leak occurs then the company can rely on non disclosure and non confidentiality agreements to sustain proprietary information, however to rely solely on an NDA will probably mean that the company will eventually lose its database. Regardless of this risk, the company will not lose its competitive advantage while allowing a consideration such as this to stop an ATS/CRM implementation is unwise.

The company can do nothing and follow its present course leaning heavily on the sales side to bring business and scrambling to find qualified candidates on the public job boards and outsourcing recruiting to other companies. The cost of doing nothing is equal to the lost opportunity ROI. Not adopting the new technology is like closing your eyes to the obvious and suffering the consequences of your competition having the technology as a standard operating procedure while you wonder why your organization is being out recruited.

At this time, the adoption is urgent because it is 30 years overdue. Due to the small size of the company, TECHINC does not need an extensive network infrastructure or other IT applications. However, if TECHINC grows as they intend to do these upgrades will be come necessary and the ATS implementation will be necessary if more recruiters are added to the team.

The organization is a laggard. Most recruiting organization have an ATS or some database of candidates they have recruited in the past.[vi] However, since there are only 2 recruiters, both of whom have such different styles of recruiting as not to interfere with each other, the ATS is only necessary because one of the recruiters can start building the database for the company. Since there is no database, the recruiter will not have the tools to build it.  The company can wait until it grows to several recruiters who will begin to step on each other by calling candidates who have already been called but there is no way to track that in the non existent ATS. When this becomes a problem then implementation will be absolutely necessary to avoid the recruiting team from imploding in a political battle.[vii]

Adoption Consideration Process

The process for implementing an ATS is simple. First TECHINC will need to engage all stakeholders and sell them on the idea. Then a software package needs is selected and installed. [Hr-Guide] After the users are trained in the new system the business is ready. The entire process should not take longer then a few weeks.

The business process would not change much as the same processes will have to be followed by sales and recruiting but they will need to be documented using the new system. The adoption of the ATS will also mean immediate payback for managers who will have activity and performance metrics in front of them the same day the system goes into effect.

The benefits of implementing the ATS/CRM far outweigh any risk, and the ROI is excellent, both in monetary terms and those of business process.

 

 

 

References:

 

[Dmoz]

http://dmoz.org/Computers/Software/Human_Resources/Recruitment_Management/

[Hr-Guide]

http://www.hr-guide.com/data/206.htm

 

 

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[i] A recruiter was working on one opportunity and did not realize the candidate was good for a different opportunity. If the candidate had placed at the missed opportunity the resulting revenue would have been $21,000.

[ii] Federal guidelines require the accurate collection and storage of information pertaining to applicant and applicant diversity. Companies’ larger then 15 employees are mandated by EEOC to perform this tracking. See http://www.eeoc.gov/

 

[iii] I have developed ways of measuring my own metrics without an ATS.

[iv] I submitted 250 candidates, generated 100 leads in 9 months, and the total conversion gave the company probably around 20-25 reqs. Of which we filled around 50%.

[v] In reality, one of these companies could give TECHINC 50 reqs per year. I tried to be conservative, but strong relationships in this business can mean millions to the bottom line.

[vi] Smaller shops and individual recruiters can make due with Excel spread sheets and Outlook, however once a company gets beyond the 2-3 recruiters, it is extremely poor planning not to have an ATS and will cost the company its competitive edge.

[vii] I have seen this happen, “candidate ownership” is a thorny issue in agencies. Recruiters guard their candidates with extreme jealousy and management usually takes great pains to make sure the ownership is respected though out the organization. If not the “recruiting pit” becomes a nightmarish place to work and the “recruiting engine” loses efficiency.

[1] A recruiter was working on one opportunity and did not realize the candidate was good for a different opportunity. If the candidate had placed at the missed opportunity the resulting revenue would have been $21,000.

[1] Federal guidelines require the accurate collection and storage of information pertaining to applicant and applicant diversity. Companies’ larger then 15 employees are mandated by EEOC to perform this tracking. See http://www.eeoc.gov/

 

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