As a company grows, hiring the right people at the right time and cost is critical. However, this is much more challenging than it sounds, especially as it relates to planning and forecasting.
Recruitment budgets set the stage for a sustainable and accountable talent acquisition process. With the right budget that allows your team to achieve its goals on time, you can significantly increase the strategic value of the talent acquisition function to your company. But how do you create the right budget? Of the dozens of talent acquisition teams I’ve worked with, the most successful ones follow a similar budgeting blueprint, which I will share with you in this article.
Before revealing the best practices, though, it’s important to first define a recruitment budget and the most common challenges associated with managing it.
What is a recruitment budget?
A recruitment budget specifies how much a company will spend on acquiring and onboarding new talent. Also known as a talent acquisition budget, a recruitment budget includes:
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Recruiter capacity, including internal and external resources
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Advertising, such as online job boards
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Events, such as campus job fairs
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Software and tools, like an applicant tracking system (ATS) and headcount management platform
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Onboarding, training, or relocation expenses
These budgets can vary widely depending on company size, industry, hiring locations, needs, compensation philosophy, and advertising channels.
Common recruitment budget challenges
In growing companies, talent acquisition teams understandably are moving fast. They hold big responsibilities to keep the company on its growth trajectory, and doing that costs money.
Reliable data is critical to setting the recruitment budget. Yet, one of the biggest challenges that talent acquisition leaders face is getting visibility into this data. This is especially true during the headcount planning phase when different departments and teams collaborate to build a headcount plan. Without visibility into the plan, planning recruiter capacity or any other budget line item is very difficult.
Another challenge to recruitment budget management is aligning the goals of all key stakeholders, including finance, HR, frontline managers, and executives. Each stakeholder needs and wants very different things, so aligning them around a realistic plan that serves everyone’s interests isn’t easy.
However, once accomplished, keeping everyone on the same page as the plan progresses is critical. Any budgeting change should be clearly communicated to all stakeholders so they are not operating on outdated information. This is a challenge because changes are often defined through communication channels that are hard to audit, such as Slack, email, or Zoom.
The fourth common challenge to recruitment budget management is accommodating unplanned requests while minimizing variance. Every talent acquisition leader has experienced the emergency fire drill when mission-critical backfills get added to the plan. In these cases, the goal isn’t to be inflexible but to manage change in a strategic and thoughtful way. While it is important to hit hiring goals, today’s market requires that companies run efficiently and predictably. Talent acquisition leaders who can minimize variance in recruitment budgets will go far.
Best practices for recruitment budget management
Successful teams do dozens of things that help them win. In my experience, when it comes to recruitment budgets, there are three overarching best practices that I see show up time and again.
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Track time-to-hire closely, using it to continuously inform recruiter capacity plans.
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Align finance and talent leadership on an ongoing basis.
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Move hiring plans from manual spreadsheets to a real-time, connected system.
Track time-to-hire
Time-to-hire measures how long it takes for a qualified candidate to move through your hiring pipeline. It is a good measure of pipeline efficiency and candidate experience, and it should vary depending on the role, seniority, and location of the position.
According to Zippia.com, it generally takes 36 to 42 days to fill a position in the US. The longer your hiring process – with multiple interview stages, take-home assignments, aptitude tests, and more – the more expensive it gets. However, in today’s environment, making the “right” hire is as important as ever, so prioritizing speed over quality is not always recommended.
We see the best talent teams using time-to-hire not just to measure efficiency and candidate experience, but also to help plan and forecast recruiter capacity. Ratcheting capacity up or down naturally has a direct impact on the recruitment budget. The most advanced teams get highly specific with their time-to-hire metrics (i.e. different metrics for level 1 versus level 5 engineer). This enables them to get even more accurate with capacity forecasts and develop a budget that will allow them to hit goals on time.
Align talent with finance regularly
Talent and finance teams should be attached at the hip when it comes to the recruitment budget. The collaboration begins in the early headcount planning stages and continues throughout the entire hiring process, all the way until the next planning season.
The most effective teams ask pointed questions about the recruitment budget, such as:
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Should any teams be prioritized based on their revenue rates? Does revenue determine how teams are staffed?
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How does time-to-hire factor into forecasts and recruiter needs?
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When will the hiring plan be delivered and executed?
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What does a fully burdened (or fully loaded) cost mean, and is it included?
It’s also important that talent leaders help connect the dots for their finance counterparts, who may be less familiar with people systems like the ATS or HCM and rely on the talent team to deliver accurate, just-in-time reporting. Keeping finance informed about talent operations helps create the open line of communication that’s needed to track plans and budgets effectively.
The goal is to avoid surprises. With better alignment, the best teams are always prepared.
Eliminate spreadsheets and use a connected headcount management system
Recruitment budget management is especially difficult when you track the hiring plan in spreadsheets. The plan is always changing, which makes accuracy a significant challenge. Not to mention, it’s nearly impossible to audit the changes to a given position.
Companies like Docker, Postman, 23andme, and Spiff have found great success with a connected headcount management system. They have eliminated manual headcount spreadsheets and can now track hiring plans in real-time. They’ve driven budget adherence even as their workforce grows rapidly because they have a single source of truth for the hiring plan that’s always up to date.
Recruitment budget management is critical for growing companies
In today’s market, budget adherence is as important as ever, even for companies on high growth trajectories. By addressing the top challenges in recruitment budget management and implementing the same best practices that top talent teams use, you can hire the right people at the right time and right cost, thereby improving the strategic value of your talent acquisition function.
