What is an ATS and How Can It Transform Your Recruitment Process?
An Applicant Tracking System (ATS) is software that helps companies manage hiring by organizing CVs and candidate information. It also tracks candidates through each stage of recruitment, automates tasks, and uses algorithms to match candidates with job descriptions. An ATS streamlines the entire recruitment process, from posting job openings to making final hires, increasing efficiency, and improving the Quality of Hires.
Why identifying ROIs is crucial when proposing new solutions
Identifying and presenting its ROI is essential When introducing a new tool like an ATS to your team. ROI is a critical metric that helps stakeholders understand the financial benefits of an investment relative to its cost. Demonstrating the potential savings and efficiencies gained from an ATS makes a compelling case to decision-makers, increasing the likelihood of approval for the new solution.
How to calculate ATS ROI with 5 simple steps
Calculating an ATS's ROI doesn't have to be complicated. By focusing on a few areas where an ATS brings value, one can easily quantify the benefits to form a very sustainable and solid business case.
1. Calculate how much your business saved from avoiding bad hires
Bad hires can be costly, not just in terms of salary but also in the time and resources spent on training and onboarding.
The formula to calculate potential savings from reduced bad hires is:
For example, Hireforce plans to hire 50 employees this year with an average salary of $60,000; historically, 10% of new hires leave within the first year.
- Cost of bad hires: $60,000 * 30% = $18,000 per bad hire
- Total bad hires: 50 * 10% = 5 bad hires
- Total cost of bad hires: $18,000 * 5 = $90,000
If Hireforce reduces bad hires by 20% by improving process and interview methods through ATS.
- The savings would be $90,000 * 20% = $18,000
2. Savings from reduced external costs
An ATS can reduce the need for expensive external recruitment tools and agencies by centralizing and automating much of the sourcing process. Calculate the savings as follows:
If Hireforce spends $100,000 annually on job boards and agencies, switching to an ATS with extensive capabilities, such as automating job posts to job boards and building the company's career website, would reduce spending to 25%.
- Saving from reduced external costs: $100,000 * 25% = $25,000
3. Savings from Increased productivity from your hiring team
Recruiter productivity can be greatly improved by automating time-consuming tasks such as scheduling interviews and tracking applicants, especially if they handle multiple job openings. By freeing up your recruiters to focus on more strategic tasks, ATS can drive substantial efficiency gains.
Here's how to calculate the savings:
With 3 recruiters earning an average of $70,000 each and a 15% productivity increase, the savings are:
- $70,000 * 3 * 15% = $31,500
4. Cost saved by decreased Time to Fill
Reducing the time it takes to fill a position saves money and minimizes the impact of vacancies on your business. For Hireforce:
If Hireforce has an annual revenue of $10 million, 80 employees, and reduces the time to fill by 10 days for 50 hires, the savings are:
- Revenue per employee: $10 million / 80 = $125,000
- Cost of vacancy per day: $125,000 / 220 = $568
- Total savings: 10 days * $568 * 50 = $28,400
5. Total ROI of an ATS
Finally, to get the total ROI, simply sum up the savings from each of the above categories:
In this case, Hireforce has the potential saving of:
ROI = $102,900 = $18,000 + $25,000 + $31,500 + $28,400
Quantifying these savings puts you in a good position to make a clear, compelling business case for investing in an ATS that can drive cost savings and significantly improve the efficiency of the recruitment process.
About Hireforce
Hireforce Applicant Tracking System is a modern, simple, and powerful software that aims to assist your hiring process. We equip excellent teams with robust tools to manage candidates effectively, encourage teamwork, and simplify decision-making for a better, optimal hiring experience.
Ready to level up your hiring? We're currently in Beta and offering a 6 months free trial with full features and dedicated support. Sign up now and experience the future of recruitment!
