6 Simple Ways to Calculate the ROI on Your ATS
Congrats! You just found the ATS of your dreams.
It's intuitive, easy to use and makes all your hiring headaches disappear. You know with 100% certainty this baby will save you a ton of time and money. But can you prove it?
For better or worse, your executive team speaks just one language: ROI.
And numbers have a way of saying more than words ever could. Here are some simple formulas to help you calculate the ROI on your ATS and win the eternal love (and buy-in!) of your C-suite stakeholders.
Cost of an agency vs. efficient in-house hiring
With recruiting fees averaging around $18,571 per year, it's easy to make a case for using an efficient ATS to help bring hiring home and save a bundle in agency fees.
First, you'll need to pin down the monthly and yearly amount your company is currently paying in recruitment fees. For the sake of easy math, let's go low and say it's $12,000 per year or $1,000 per month.
If you pay $149 per month for a smart ATS that lets you instantly post open positions, engage with leads, create talent pools and track candidates yourself — that's a monthly savings of $851 (or $10,212 per year!).
What CFO in their right mind would say no to that?
Of course, you still need the internal bandwidth to manage and track your applicants, but we're guessing you're already spending quite a bit of time briefing recruiters.
You might be surprised to find that with the right tool, you can hire more efficiently without having to create a whole new position.
Time cost savings of automated applicant tracking
Already hiring in-house? If you're one of the many companies using a homegrown applicant tracking system consisting of messy Excel spreadsheets and email chains, you're wasting a ton of time and energy.
How much you ask? Let's take a look.
Start by identifying how many members are on your hiring team. Let's say you have 1 departmental head, 2 members of your HR staff and 1 CEO who are involved in every hire.
Next, determine how many hours per week each person spends on hiring-related tasks. For example, a member of your HR team might spend 30 hours of their week on recruitment and hiring activities. Now all you have to do is multiply that number by their hourly rate and voila!
A smart ATS could easily reduce the HR employee's workload by at least 30% and depending on which one you choose, could cost as little as $37 per week. (Did we mention it's completely free to get started with Breezy ).
Now all you have to do is a little basic math.
That's a weekly savings of $163 ($652 per month!) or 440% ROI just for one member of your hiring team who is now using an ATS.
Calculating the value of a quality hire
That brings us to our next metric. And it's a BIGGIE.
Great hiring is truly a team sport and when your entire hiring team is working like a well-oiled machine, the quality of hire is just SO much better.
And quality talent = MASSIVE ROI.
Home-run hires can save you a TON of money in onboarding and retention costs and of course, high performers are always great for the business's bottom line.
But how can you break that down into hard numbers?
First, check your company's SEC report (or year-end financial report if you're outside the US) for the revenue per employee. Multiply that number by 40% to get an estimate of the profit margin per hire.
Let's say your revenue per employee is $200,000. With the average profit contribution of 40%, each employee brings in approximately $80,000. But employees in the top 25% of the talent pool bring in at least an extra 25% in profit.
Where an average hire will bring you $80,000 in profit, a stellar hire will bring in a minimum of $130,000.
To get the ROI all you have to do is subtract the cost of the ATS from the additional value of the top tier employee you hired with it:
If you make 20 hires per year, the remaining 19 can be calculated at full QE because the cost of the ATS is set. That's $2,598,212 per year on an investment of $1,788. Or an ROI of 1,453%
Cost of a bad hire
Admittedly, there's A LOT that goes into hiring the top 25%.
Your ATS is one core piece of the puzzle that can help you quickly create and execute the type of job descriptions, employer branding and active and passive sourcing techniques that consistently bring in top talent.
But let's play devil's advocate and say you don't manage to use your ATS to its maximum potential. You're STILL saving a ton of money simply by making better hires than you would have under a siloed, ad hoc system.
Among the most conservative estimates of the cost of a bad hire is the oft-cited US Department of Labor's formula. According to the DoL, the price of a bad hire is at least 30% of the employee's first-year earnings. But this number can vary based on the rank and seniority of the position and the cost of the recruitment tools a company is currently using to fill it.
So let's say you were under pressure and made a bad call. Your new hire is in a position that pays $50,000 per year. At a minimum of 30%, that 1 bad hire is costing you at least $15,000.
If you had spent the $1,788 ($149 per month x 12 months) on an ATS to help you make hiring calls in a cool, calm, collected kind of way, you could have saved $13,212.
That's about 7.4% in ROI on every solid hire made with an ATS.
And these are extremely conservative estimates. If you use the previous value-based ROI formula to calculate the profit losses of a bad hire, it's not hard to see just how much one bad apple can cost you.
Especially, considering the contagious nature of a toxic employee.
An efficient ATS will enable you and your team to review candidates together, help you get an accurate read on the candidate's true personality and allow you to check their references quickly and thoroughly to make sure they are who they say they are.
Cost of recruitment marketing and job advertising
We're in a job seeker's market and competition is getting steeper by the minute.
And with social media in the mix, the pressure to be in front of all the candidates all the time is very real. Using an ATS to build targeted pools of qualified talent can save you thousands in recruitment marketing and job advertising.
A larger pool of awesome candidates means you can fill roles faster with fewer ads on the job boards. Plus, your open positions can be easily shared on social media by your applicants and employees, leading to an increase in high-quality references and a decrease in paid job ads.
Now for the math.
Let's say you're spending an average of $300 per month on advertising each open position. If you have 10 open positions per month, that's a total of $3,000 per month on job advertising.
But let's say you advertised for five similar positions just two months ago. Because your ATS automatically pre-screened each applicant, you already have a pool of awesome options to choose from.
Well done. You just saved 50% of your recruitment marketing budget or $1,500 per month.
With the cost of your ATS at $1,788 per year that's an annual ROI of more than 9% just because you used an ATS to capture and keep your leads instead of heading back over to the job boards for every new position.
And if you use an ATS with an awesome reporting feature, you can also see exactly which sources give you the best quality leads so you can stop wasting money sourcing candidates in the wrong places.
Employee turnover rates
Rockstar recruiters are all about retention.
And a standardized system for screening in quality candidates (as opposed to merely weeding out the not-so-quality ones) can help you save some serious cheddar in the cost of employee turnover.
The right ATS will enable your team to easily review candidates together in one central location. Hires made through a team effort are always better quality and a better fit. They're also exactly the kind of loyal employees who are great for a company's bottom line.
To determine just how great, there are two main metrics you'll need:
Let's say you're a 100 person company with a 10% annual turnover rate.
ND = 10
You spend $20,000 per person on hiring, $10,000 on each for onboarding, learning, and development, and lose $40,000 in average lost productivity due to the time it takes to refill a role.
C = $70,000
Your annual cost of turnover would be approximately $700,000 (ND x C).
Using an ATS to bring this number down even by just 20% would save you $140,000.
Not to mention reducing the hit you take on overall employee engagement and productivity every time a beloved team member leaves.
No bones about it. With an airtight ATS, you can bring insane value to the business. Now go forth and snag those future rockstars!
Start optimizing your recruiting process today.
Breezy HR is end-to-end recruiting software to help you attract & hire great employees with less effort. We believe HR should be fun, easy, and most of all, human.