The year’s now well underway, and, with every passing day, the focus moves further towards execution and results – time for budgeting is running out.
That said, we’re under no illusion that, for many of you, plenty of your 2020 budget remains unallocated. You might still be asking yourself the same questions as you were when you first saw your budget written down.
Your first question might be:
“Where’s the rest of it?”
… swiftly followed by a panicked:
“How do I spend it?”
And with that, you’ve arrived. Welcome to the February budget fluster!
Effectiveness, or efficiency?
HR budgets have decreased in the past two years, and cuts are accelerating. Today, just one in two HR professionals believe they can still improve effectiveness while also reducing costs. It’s clear that spending well is now more important than ever.
In this context, it’s easy to see why some might shift their priorities from effectiveness to a slightly colder metric when budget planning rolls around: efficiency.
A common measure of efficiency is cost-to-hire. Although this has its merits, it could be something of a short-term view. Ineffective appointments can incur the long-term cost of retraining or replacement, actually hampering efficiency in the long run. A better metric might therefore be: cost-to-good-hire!
The keen observers among you might say:
“Arctic Shores touts reductions in cost-to-hire on its website! Surely that’s a justification of the metric you’ve just criticised?”
Well, not exactly. You’ll have also seen that our assessment improves quality of candidate selection by up to 40%, increasing the chances of a better hire first time round. This inevitably impacts cost-to-good-hire. So, is it time to rethink how you define efficiency in recruitment?
While overall budgets are coming down, allocations to L&D are increasing. HR teams are spending more on existing personnel, as strong digital and soft skills become integral.
These are obviously important investments. But have you hit the right balance between recruitment and development? If initial hires are poor, L&D budgets will need to rise just to get new hires up to speed. Clearly, your recruitment and development budgets can only exist independently for so long before becoming interlinked.
This is an area where technology, especially our behaviour-based assessments, can help. By understanding candidates’ natural preferences, you can gauge their strengths, weaknesses, and appetite for new learnings. Not only can you use this data to predict job readiness from the get-go, but you can also improve the effectiveness of your development strategy.
Two budget birds, one techy stone.
So, here are Arctic Shores’ top tips for overcoming budget fluster:
- Prioritise long-term value (effectiveness) over short-term cost (efficiency)
- Consider the interdependency of initial recruitment and development
- Don’t lose your head!
When it comes to budgeting, we know it’s never cut-and-try. Plans change, as do your resources and day-to-day challenges. There’s no shame in not having it together in February.
What matters most is making the right decisions – not just the quickest ones. If this means re-assessing how you define the success of your HR strategy, so be it!
Looking to learn more about future-proofing your HR investments? Register for Arctic Shores’ HR Pioneers Summit!