• Engaged Associates

How do you find the budget for EVP?

One of the most frustrating catch-22s for any TA or HR leader: you’re flat-out delivering attraction, engagement and retention outcomes and know EVP would transform both your own life and that of the entire organisation – but you don’t have the time to work out how to construct a business case that will convince the bean-counters and commercially-minded leaders.

And there’s almost never a budget already set aside for this. Somehow, the money must be re-purposed from something else.

I want to share my experience on how to efficiently do this - from both being one of those commercial business leaders - to what worked well as the first employer brand consultant in Australia 20 years ago and right up until now. From creating those first business-cases with client partners 20 years ago - when EVP was even newer and more unknown than it is today, and through all the market twists and turns since - not much has changed in how to do this efficiently.

Create a crisis

I know this sounds irresponsible but probably upwards of 80% of CEOs, CFOs and MDs will respond to a commercial crisis more than they will to doing the strategically right thing when it comes to people. Unfortunately, “people” still sit on the “cost/liability” side of the balance sheet, not the “income/asset” side. There is typically a huge mind-shift required to convince many leaders that investments in people have tangible commercial outcomes. At least enough to move beyond talking about it and finding the money to actually invest.

If this still makes you feel uncomfortable, you’ll be happy to know that you really don’t need to create this crisis. It very likely already exists within your organisation, but nobody has really defined and quantified it enough or in the right way yet, so that commercially-minded leaders will recognise it as a crisis – and act.

This is a good way to think about what a business case here really is: defining and quantifying the commercial cost of a crisis and how a particular course of action will overcome the cost of this crisis, and maybe even add quite a bit to the right side of the balance sheet along the way. Over 25-years of research consistently proves EVP or employer brand programs actually do both and if done well, always have a significant ROI.

Pick your crisis

Forget the people for a moment and focus on what is really keeping your executive leadership team awake at night. It might be an increase in exposure to a global competitor; a change in legislation or regulatory compliance requirements; implementing an emerging or disruptive technology or responding to its implementation by a competitor; cost control to compete with price-cuts among competitors; maintaining market-share and revenue in the face of a new and aggressively expanding competitor; declining customer satisfaction or loyalty; the growth of one of your existing product/service lines or the launch of a new one; an expansion into a new market or product/service line; an underperforming business unit. While there are national and global trends, there will be specifically critical ones for your organisation’s leaders.

Pick that critical thing (or things – but not too many to start with!) and focus on understanding how people impact that issue commercially.

Attracting, developing or retaining talent in some or many of your business units or workforce groups may well be what’s keeping your leaders up at night. But still – forget the people just for the moment – and identify what the impact of this attraction, development and retention issue is on the organisation commercially.

There really are enough unique situations to focus on here – but I’ll outline just a few so you can hopefully adapt these to your situation.

Opportunity cost

This is a huge issue that even most business leaders don’t seriously think about. But they – and you – certainly should because there are a number of ways hidden lost opportunities are costing organisations big money:

1. In TA and HR, we all talk about “the right candidates” but then don’t calculate the cost to an organisation of not being able to hire them. How many offer declines do you have? What percentage of those are from the best candidate in any given requisition? How many requisitions do you have where the applicants available force you to compromise just to fill the seat? Count them.

Research into the area shows high performers are 300% to 400% more productive than average performers. Good managers achieve 27% higher revenue per employee than average managers. So, the next step is to quantify how much revenue on average each of your employees – or managers - in the related Department or Division or the entire organisation enables.

Say a Department with 100 employees delivers $20m in revenue annually: that’s an average of $200,000 each. Your high performer is responsible for $600,000 (being conservative and keeping it simple by not working out the actual split between your current high, average and poor performers). Let’s say half of the 15 requisitions due to turnover failed to hire a high performer. Last year, you left $3m of additional revenue on the recruitment table. If your net profit margin is an average 10% (or $2m), you unknowingly stopped your organisation more than doubling its profit margin.

If just one of those requisitions was for a manager responsible for 10 “average” employees, you’re looking at missing out on an additional $540,000 in revenue.

If you are in one of those situations facing market or price competition from other organisations, it will also be these top performers who come up with the ideas to save you.

An even better approach here is to look for specific examples of where particular employees have saved the organisation a lot of money, generated a lot of money, saved a key customer from leaving you, etc. Here is your own home-grown evidence of the tangible, commercial difference of high performers. And the cost of not attracting other high performers because something they believe is driving them elsewhere, and your employer brand is not tackling this.

Apply the same types of metrics to cost out the value of the opportunity cost related to the specific issue keeping your leaders up at night.

2. Open positions cost you much more in lost opportunity than savings in salary. Particularly if you are expanding into a new area or new market. Someone will already have crunched the numbers on fixed asset and people costs versus revenue to have made that decision. Even if they planned for a scaled build up, it’s likely they made an assumption of a full headcount from day one.

But if you currently have a time-to-hire of 60 days+, or 50% decline rates, or again find it difficult to hire the best, you can extrapolate the current to make a simple calculation for the future. What percentage of headcount will you be down the first month, two months or three months+? Depending on the types of roles, you can comfortably take at least that percentage off projected revenue figures – and it will very likely be much more than that: potential first-time customers will likely give you just one chance to deliver or fail and impact medium- to long-term revenues. Just imagine the impact of having only 50% of your expected new business team in place on day one.

Of course, you can rely on recruitment agencies to help you out but if the fees are $15,000-$20,000 per hire, it only takes one or two fees before you’re paying more than an employer brand program would cost!

Even for business as usual situations, having open positions will inevitably reduce revenues, somehow. If you calculate the average revenue per employee, and the percentage of revenues that open position would have generated in a given week, month or longer, I guarantee it will be a lot more than you are saving in salaries.

And that’s not taking into account the negative impact on employee stress, disengagement and retention that shouldering the burden of an open position in the team that this results in. A recent study by Bonusly showed up to 50% of employee turnover is caused by employee burnout. And replacing employees is commonly understood to cost 200% or more of an employee’s salary in lost productivity as replacements get up top speed. Add these to your calculations.

Use brand psychology to present your crisis and solution

Only when you’ve identified the costs associated with the crisis you’ve identified, should you start working out how to fix the crisis and how much that fix will cost. This really puts things into perspective – rather than worrying about where you’re going to find a non-existent budget to do what you already know is right.

To do that, contact a few employer brand agencies or consultancies. Get them to tell you what they feel to be the best approaches and components to planning and implementing a program, and the general costs involved. Even better, get them to sign an NDA and be as open as you can to get even better, more specific advice. There is a big variety in the experience the people you talk to will have, and their approaches can be very different because of this. So, to, can their cost-models!

Any good employer brand consultant should be able to help you with these calculations and this business model.

The critical next step is to stop and look back at how your particular leaders make decisions: do they like data; do they like to understand patterns or scenarios; do they respond to storytelling? Just as you need to understand the mind of candidates and employees to change their job, employer and career decisions in employer branding, you need to understand your leaders’ minds. Construct your business case in the way you know they like to make decisions.

Your employer brand consultant should be able to help you with this too.

And, before you present to your leaders the proposed approach and costs associated with any one employer brand partner, make sure the consultant potentially working on your project is the one with the experience on the case studies you’re shown: many unfortunately still employ the “royal we” when they say “we” did it when in reality the actual consultant, creative director or other key people, actually left the agency or consultancy a few years back!

James Wiggins

Managing Partner, Engaged Associates

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