Before investing in a new ATS (Applicant Tracking System), it is important to estimate your ROI and use that measure to help you determine your budget for the new software and the implementation project. Having an estimated ROI written down and ready to show may help with building a business case for the purchase and can provide the grounds for determining the actual ROI after the purchase has been made. The following are a few steps that may help you to compile an ROI estimate that is as accurate as possible.
Determine Your Hiring Costs
First determine your number of hires by multiplying your current number of employees by your average turnover rate. It is important to adjust this for new positions if you anticipate adding new positions. Figure out your average cost per hire by figuring out the mean salary, and then multiply these numbers to determine your current hiring costs.
Track Labor Hours Spent on Recruitment
Whether recruitment is done in house or by a third party, there are bound to be at least some employee hours spent on interviews, job postings, and other activities relevant to hiring. Track these labor hours for a period of a few weeks or a month and then multiply to determine the average labor dollars spent on hiring per year.
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Assess Recruitment Agency Costs
If your company uses a recruitment agency, it can become costly. To determine recruitment agency costs, multiply the number of hires placed per year by a recruitment agency by the average placement fee given for each. On average, companies that acquire an ATS are able to reduce their reliance on a recruitment agency by about 50 percent, which can make for huge savings.
Do Market Research
Since it is difficult to accurately estimate how much an ATS will save on each aspect of recruitment, it is necessary to do market research for this part of ROI estimation. Look at companies that are very similar in size and scope that have attained an ATS and use their recruitment costs to determine what your costs will be after implementation. Be sure to take any major differences in hiring processes into consideration when coming up with figures.
Estimate Direct Savings
Add the figures attained from evaluating hiring costs, tracking recruitment labor hours, and assessing recruitment agency costs and deduct the figures attained from your market research to come up with a preliminary ROI figure. This figure should not be looked at as a profit, but rather as a tool to determine how much to spend on the ATS. An estimated ROI is most likely not going to be exactly the same as the actual ROI, but can serve as a rough estimate to get the ball rolling.
Evaluate Indirect or Intangible Benefits
While the direct ROI should be used for budgeting purposes, there are other benefits to acquiring an ATS that should be considered. An ATS may help to raise hiring standards, which may improve retention, elevate the perception of the company, and possibly increase productivity. An ATS will also free up labor hours being used for hiring tasks so that these skilled employees are able to focus on revenue generating tasks.