How to calculate return on investment (ROI) through headhunting in Mexico

26, Junio 2024

The Return on Investment (ROI) through headhunting in Mexico does not have a fixed or standard value, as it depends on various specific factors in each situation. However, key aspects can be considered to understand how headhunting can influence ROI, such as reducing turnover costs, talent quality, and long-term efficiency.

Let's start by mentioning that headhunting is a specialized recruitment process focused on identifying and persuading qualified professionals, especially for senior or specialized roles. These individuals are often employed elsewhere and not actively seeking job changes.

The relationship between headhunting and ROI: Codifin's perspective 

At Codifin, we understand that ROI (Return on Investment) goes beyond numbers. It's about finding the perfect fit that enhances your company. How do we know this? Because we've seen the positive impact on our clients time and time again. Our approach focuses not only on technical skills but also on how integrating new talent can transform teams and strategies.

The competitive advantage provided by professionals attracted through our headhunters is crucial, as they bring unique skills and experiences that drive innovation and efficiency.

How to calculate ROI in recruitment? 

The basic formula for calculating ROI in recruitment processes is:

ROI= [(Benefit obtained - Cost of investment) / Cost of investment]×100

Steps to calculate ROI in recruitment

  1. Identify the cost of investment: This includes all expenses associated with the recruitment process, such as: some text

  1. Recruitment agency fees or headhunters.
  2. Advertising costs for vacancies.
  3. Salaries of the HR team involved.
  4. Operational costs related to recruitment, including interview and assessment expenses.
  5. Investments in recruitment technologies, such as applicant tracking software.

  1. Determine the benefit obtained: This is the most challenging part, as it involves quantifying the value the new employee brings to the company. It may include: some text

  1. Increased revenue or sales directly attributable to the new employee.
  2. Improvements in productivity or efficiency.
  3. Estimated value of the unique skills and experiences the employee brings.
  4. Cost savings due to increased efficiency or reduced errors and rework.

Once you have both values (benefit obtained and cost of investment), you can apply the formula to obtain the ROI percentage.

However, as mentioned, our approach to calculating ROI in headhunting services combines quantitative and qualitative analysis. It's not just about applying the above formula; we consider the added value in terms of innovation, corporate culture, and long-term growth. The formula is just the beginning; the true value lies in what the numbers represent over the medium to long term with specialized talent retention.

When is the ROI of headhunting observed? 

In our experience, clients begin to see positive changes within the first 6 to 12 months after a successful hire. However, the full impact often unfolds over a period of 1 to 2 years, depending on the nature of the role and how it integrates into the company.

In the first 6 to 12 months after a successful hire, clients typically start to notice positive changes. These changes can include:

  • Improved productivity: The new employee's direct contribution in terms of efficiency and effectiveness in their tasks.
  • Innovation and creativity: New ideas or processes introduced by the employee that can begin to influence the company's operations.
  • Team dynamics: Improvements in teamwork and collaboration, especially if the role involves leadership or team-based work.
  • Cultural impact: Positive influence on corporate culture and team morale.

The full impact of a successful headhunting process is usually more evident over a period of 1 to 2 years. This longer period allows for a better appreciation of long-term benefits, including:

  • Strategic contributions: The new employee's ability to influence the company's strategic direction, often more noticeable as they fully integrate into the organization.
  • Long-term development and growth: Contributions to long-term capability development within the company, such as mentoring other employees or developing new business lines.
  • Sustainable financial return: Sustained increases in revenue or profitability directly or indirectly attributable to the new employee.
  • Long-term cost reduction: Ongoing savings due to increased efficiency, better resource management, or reduced employee turnover.

Factors influencing ROI observation At Codifin, we are aware that the time required to observe ROI can vary significantly, depending on multiple factors such as:

  • Role nature: Some roles, especially those strategic or high-level, may have a slower but deeper impact.
  • Integration into the company: How the employee integrates into the company culture and aligns with its goals.
  • Industry and market: Some industries may experience faster or slower changes due to the nature of their market.

In the end, we are convinced that headhunting is not just about finding a moderately acceptable profile, but about finding the right talent that matches the company culture. This translates into increased operational efficiency, lower turnover, and ultimately, better financial performance.

How much does headhunting cost in Mexico? 

The average cost of a headhunting process in Mexico varies depending on various factors, but a large majority of agencies or headhunters charge a percentage of the total annual salary for the vacancy. This percentage can range from 8.3% (equivalent to 1 month's salary) up to 25% (equivalent to 3 months' salary), and in some cases, even up to 30% or 35% of the annual salary.

While the initial investment in headhunting services may seem like an expense, its long-term positive impact on productivity, employee retention, and revenue can result in a significant ROI that far exceeds the initial cost.

With Codifin, you can rest assured that you will only pay upon completing the recruitment process for the profiles your company needs, not before or for unsuccessful searches.

If you're looking to elevate your team to a new level of excellence, let us be your strategic partner in finding the talent that will transform your company. Together, we can unlock the true potential of your investment in human capital and see a significant return that goes beyond mere figures.

Contact us today to start a conversation about how our headhunting service can help you achieve your business goals and maximize your ROI.