It is refreshing to come across companies that understand the real value of the ancillary departments within their business. Even more so when a company invests the proper resources into support functions. This typically includes HR, recruiting, even IT. However, it can be very tempting for a business to run lean in these areas of the company that are not viewed as real revenue drivers. For many businesses keeping costs down in support areas and dumping money into operations appears to be P&L responsible. In reality, this is a very short-sighted approach that will negatively affect overall revenues.
Although many, if not all, support departments are negatively impacted by this misunderstanding of revenue drivers, this piece will focus on the example of recruiting. If you work in recruiting chances are you feel extremely limited by the company in your ability to do the things necessary to attract the right talent, fill positions in a timely manner, and staff new projects. The recruiting team is not nearly robust enough, lacking the right amount of recruiters, reach, and technology required to truly be effective within the marketplace. The reason that this deficit in resources exists is that the company views investing in the recruiting department as a dead money expense. That has to be because the recruiting department doesn’t produce the product that creates revenue, right? This couldn’t be more wrong.
Inefficiencies are the true dead money expense that a business needs to manage, and in turn, gain a full understanding of. Attrition for instance is an inefficiency that some businesses struggle to properly quantify. But simply put, it can cost a business 30% more to find a new employee versus retaining an existing employee. Attrition is often more about the person your business lets walk through the door, and less about the experience that employee has after they walk through the door.
Proper allocation of resources within the support areas of a business can greatly decrease business inefficiencies and offset the negative impacts they have on profits. In the example of recruiting, inefficiencies like attrition, capacity shortages, and a lack of business acumen can be mitigated by properly supporting the department and increasing their ability to source the right people for the jobs they are trying to fill. Spending on the right technology needed to create awareness and reach for recruiting, as well as targeting the right pool of candidates can ensure that the positions are filled by people with the right skill set to do the job, as well as the right attitude. Employees with the right skill set and mindset tend to perform better in their roles and enjoy their workday. People who enjoy the work that they do tend to stay with the company. You have just created more revenue by reducing attrition, increasing capacity, and increasing production, all by empowering your recruiting department.
The best, or in this case worst example of a business not understand the true value of their ancillary departments is any BPO that isn’t running at capacity and is not investing resources in recruiting. At the risk of sounding crass, BPO’s are literally selling people’s time and expertise. Many BPO’s don’t have enough time and expertise to sell, and yet still do not put the proper value on a recruiting team.
All of this is opportunity missed as a result of decision makers not educating themselves on what is truly cutting into profits, and how to best solve these issues. Looking at P&L’s and forcing any area of the company to run lean in an effort to create margin is not the answer. Instead, spend the time needed to understand your business inefficiencies and what drives revenue, outside of mere production. Embrace the spend on the support areas of the company knowing that they are there for a reason, and that reason is that they are vital pieces to the organization. If you do so you will build sound support of your operation, which creates a sustainable model for maximizing your business’s earning potential.