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The ROI of Talent: Why Candidate Lifetime Value Could Transform Staffing Strategy
25 Plays19 days ago
Most businesses focus heavily on customer lifetime value. Companies like Amazon analyze years of purchasing data to predict how profitable a customer will be long before the next transaction occurs. They know who to invest in, who to keep, and where to direct their resources. However, in staffing, where the product is people, and relationships generate revenue, few organizations apply the same level of analysis to the individuals who actually produce their profit: the candidates they place.
In this episode of Avionté: Digital Edge, host Chris Ryan interviews David Folwell, President of Staffing Referrals and Founder of Staffing Hub. David has dedicated years to studying referral-driven sourcing and the long-term value candidates provide to agencies. Together, they discuss the idea of talent lifetime value, why different sourcing channels yield vastly different profit results, and how agencies can start leveraging talent data to make smarter decisions about recruiting, redeployment, and long-term growth.
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Transcript
Introduction to Lifetime Value Concepts
00:00:00
Speaker
When you buy something on Amazon, they already know a lot about you. They know what you spent last year, what you bought, where you bought it. And behind the scenes, they're running models to predict how profitable you will be, not just this year, not next year, but even 10 years from now.
00:00:16
Speaker
And this type of analysis isn't unique to Amazon. It's called lifetime value, and it tells you the total profit a customer will generate over the entire relationship. It tells a business with real clarity how valuable each customer is and where to invest time, money, and attention.
Applying Lifetime Value in Staffing
00:00:34
Speaker
But here's a twist for the staffing industry. Have you ever wondered about the lifetime value of each individual candidate at your agency? We are talking about the return on investment in talent.
00:00:45
Speaker
How much profit does each individual talent generate? Most agencies can't answer this question, but maybe they should. According to our featured guest, David Falwell, the ah ROI of talent may be one of the most valuable tools you have to grow your business.
00:01:07
Speaker
Welcome to the Aviante Digital Edge. I'm Chris Ryan.
David Falwell on Candidate Lifetime Value
00:01:10
Speaker
Today, we're talking about something that should be foundational to every staffing agency strategy, but almost nobody is actually measuring, the lifetime value of a candidate.
00:01:21
Speaker
My guest today is David Falwell, president of Staffing Referrals and founder of Staffing Hub. For anyone who doesn't know David, he spent the better part of a decade building tools and intelligence around referral-based sourcing in staffing through staffing referrals, and Staffing Hub has become one of the go-to industry resources for operational insight.
00:01:42
Speaker
David has been a strong, consistent advocate for understanding and measuring candidate lifetime value. And more recently, David conducted research on how sourcing channels drive dramatically different outcomes in gross profit, retention, and redeployment. And David's results suggest that staffing agencies have a major opportunity to use talent data as a competitive weapon.
Underutilization and Formula of Candidate Lifetime Value
00:02:06
Speaker
So David, welcome, and let's get into it. Awesome. Thanks so much, Chris. David, here's the thing that keeps nagging at me. A lot of staffing agencies use lifetime value and LTV to CAC ratios to evaluate their sales teams and their client relationships, so they already know the math, but almost nobody applies the same logic to their talent.
00:02:28
Speaker
If I asked 100 agency owners what a candidate is worth over their lifetime, not a placement, a candidate, how many could give me a real answer? And why is this gap so persistent?
00:02:40
Speaker
The why is it so persistent? I'm not exactly sure, but I do know that well over 90% of agencies are getting the sourcing ROI math wrong. but They're not really looking at how to approach it and thinking about it in a way where they could be driving a significantly better ROI on their approach to sourcing by simply using a Canada lifetime valued metric across their talent pool.
00:03:09
Speaker
Yeah. So to make sure we're all on the same page, let's talk about how you actually define this concept. I mean, when we say candidate lifetime value or talent lifetime value, what are we actually talking about?
Comparing Referral Sources to Job Boards
00:03:23
Speaker
How do you define it in straight dollars and cents? Yeah. So candidate lifetime value equals the bill rate times hour times margin times the redeployment rate minus the acquisition cost.
00:03:35
Speaker
And this will give you the gross profit over the lifetime of a candidate. And a lot of agencies think about how much they make on the first placement for a candidate.
00:03:48
Speaker
What they're forgetting to factor in is the redeployment. and or the change in time on contract based off of the source of the talent and where they got that talent from.
00:04:02
Speaker
i think that lot of agency owners look at a placement as a placement and that simply isn't true. Yeah, now that's interesting because when I think of lifetime value of talent and the way you've defined it, there are so many virtuous things that go into that number.
00:04:18
Speaker
I mean, to have a high lifetime value per candidate, the employer has to like the talent that you're providing. The talent has to like the employer and the placed opportunity.
00:04:29
Speaker
You have to have defined an effective pay rate and margin with both the employer and the talent. It means whole bunch of different things go into making a really high quality lifetime value. And redeployment, of course, drives it way up. And talent sourcing costs go way down. So I would think lifetime value is a hugely valuable metric. I mean, it really measures quality, I think, is what you're saying.
00:04:53
Speaker
Quality, profitability, and it's something that when you're looking at Canada lifetime value and thinking about the value of the talent you put on contract, you need to break it up by source. So you need to look at what does it look like from a job board? What does it look like from a referral?
00:05:10
Speaker
What does it look like directly from your ATS? If you're doing direct sourcing website, there's a few different channels that consistently outperform job boards when it comes to the profitability of the talent.
00:05:22
Speaker
There's some pretty easy ways to think about this. When you think about why does candidate lifetime value change by the source? With the referral, you're literally going to work with a friend or at a place that a friend suggested you work.
00:05:37
Speaker
So the likelihood of them staying on contract is significantly higher.
Strategic Talent Sourcing for Profitability
00:05:42
Speaker
The likelihood of the redeploying is significantly higher. And there's some other caveats that kind of drive the overall value of the talent based off of the source.
00:05:52
Speaker
Yeah. But ultimately, it sounds like gross margin generated per talent and gross margin lifetime per candidate really is a gold standard. So, David, let's talk a little bit about some of your recent research. As i understand it, you were looking at candidate lifetime value by sourcing channel, and you were doing this across multiple Aviante customers.
00:06:14
Speaker
Without naming names, what did your data actually show when you compared referrals against job boards on gross profit, on time on contract and redeployment?
00:06:25
Speaker
And how big are these differences? Are these small differences or is this a meaningful difference that a staffing agency should be aware of? It's actually like pretty astounding. So we looked at 146,000 placements across a segment of our customers and looked at the time on contract. How many days did they work? For the healthcare care industry, the construction industry and the light industrial industry, we found for healthcare that a referral versus a non-referred candidate was working on average 48 additional days.
00:06:58
Speaker
In construction, we had an additional 11 days and in light industrial nine days. So if you're a staffing agency and you're thinking about how do I increase profitability and how do I increase my revenue this year?
00:07:12
Speaker
Most people are thinking I need more job orders and more job orders is always going to help. That is not a bad thing to go out and push for and drive. If you cannot get more job orders, one of the ways to start thinking strategically about how to drive profit is thinking about where are you sourcing the talent from to maximize the revenue and the gross profit and gross margin they are driving from every single candidate you put on contract.
00:07:40
Speaker
And that is one of the reasons that we started looking at this. And you know referrals are typically the number one in terms of profitability. But I will also add that direct sourcing from your ATS is typically a higher value than a job board.
00:07:56
Speaker
What we've also seen is that can't come directly through your website because they know your brand. They're coming to you. they are using your job board are also typically quite a bit more profitable and stay on contract longer.
00:08:11
Speaker
So it starts to show you that like your brand matters, where you find the talent matters. And this is one of the levers that agencies can pull to drive revenue up. So being able to demonstrate that your candidates are on site longer is a demonstrable advantage over competitors.
00:08:29
Speaker
But stepping back, what your data clearly shows is that source of candidate matters and drives quality, quality and profitability in a very clear, direct way.
00:08:40
Speaker
And what you also mentioned is that referrals clearly do better. I'm just curious, why do you think referrals do better than job boards? I suppose it's intuitive, but what is it about a referral that's different?
00:08:51
Speaker
I mentioned this a minute earlier, the key thing, and it is somewhat intuitive, but when you are referred to work with a staffing firm, the person referring you either thinks this is a good job for you and they think you're a good fit for it and they're happy to put you in touch with that agency.
00:09:09
Speaker
Or in many cases, you're going to work with your friend. And when you're going to work with your friend, The odds of you staying on that contract increase drastically. Also work satisfaction increases.
00:09:21
Speaker
And typically the quality of work also increases along with that. And I think the future of staffing is going to be more about quality and more about What are you doing that you can't do from a job board? What talent can you bring me that is better than the talent I could find on a job board? So I think there's a couple of benefits that go beyond even just the time on contract.
00:09:46
Speaker
So, David, one of the examples that grabbed me was a specific case study you had
Referrals as a Path to Higher Profitability
00:09:51
Speaker
for a CLI staffing agency from the upper Midwest. And in that particular case, it was kind of a paradoxical result.
00:09:59
Speaker
They were able to increase their revenues by 9% even while their placements declined by 8%. And that seemed very counterintuitive to me. So I'm curious if you could walk us through what was actually happening with that staffing agency, how they got their results and why it matters.
00:10:18
Speaker
Yeah, it's pretty incredible. And it's not a math error. That is what candidate lifetime value can do to your revenue and your profits. What they did is they focused on referral quality over volume.
00:10:32
Speaker
Candidates stayed longer. They got more GP per placement. and their revenue grew with fewer placements. One of the incredible things about focusing on talent that stays on contract longer is you don't have to make as many placements and you can still have growth within your organization.
00:10:50
Speaker
And it's one of the reasons in a tight market like we've seen the last couple of years, this is a lever that most agencies can pull to start focusing on growth and start driving profitability.
00:11:03
Speaker
mean, there's quite a few benefits that come along with this, not just time on contract, but you're getting the redeploy rates, you're reducing your spend on job boards. And I know Chris, you and I have talked about this a few times. The future of staffing is tied to what are you doing that's different than what I can do as a company. And when you go to a customer and say, hey, we're goingnna give you access to our referral network.
00:11:27
Speaker
And it is a unique network that only we have access to. That's something that's hard to push away. You say, well, we don't actually have access to that. And the company and that we're talking about here, it's one of my favorite case studies is WSI.
00:11:41
Speaker
And it was, I think three years ago that they recognize that this was a opportunity for them when they started looking at their own data. So they kind of got ahead of it and said, where are we driving revenue?
00:11:53
Speaker
Where are most profitable placements coming from? And when they looked at their referrals, they really put a strategic initiative in and they have, gosh, I think they'd more than two and a half X their percent of placements from referrals since we started working with them.
00:12:07
Speaker
It's been kind of like a rocket ship and it's been really impactful to their business. Wow. So their revenues are going up, but their talent acquisition costs are going down simultaneously. And presumably their turnover is lower or undesired turnover is lower.
Technology and Strategic Sourcing Alignment
00:12:23
Speaker
Yes. I mean, that's that's huge. yeah That's absolutely huge. Less work, more money. So let's tie this in with some research that Aviante did and something that I recently published in a blog, which was how staffing agencies actually source talent in 2026.
00:12:39
Speaker
And one of the numbers that jumped out in our study was we were looking at gross margin contribution from candidates by source across a large swath of our clients. And what we noticed was that candidates that came through referrals were driving almost 34% of total gross margin.
00:12:57
Speaker
And job boards were only generating about 25% of gross margin by talent. And yet the typical staffing agency does about 70% of their placements with a job board.
00:13:09
Speaker
So what that is, the power of the approach, given our study and what you saw, what does that say to an agency owner? And I think it's important to point out that we weren't just looking at referrals. We also looked at company websites. We were also looking at local community development activities, for example, with local commerce job boards, with local community colleges and community outreach.
00:13:31
Speaker
And really what we saw is that more than 50% of the gross margin was coming from what we would call gumshoe relational activities, not from digital sources. So I'm kind of curious your take on that and what that says, along with the data that you've seen in your own research.
00:13:48
Speaker
Yeah, I mean, think it directly backs up our research. When I saw your report, I was like, this is incredible to see it from your guys' side too. And it is astounding to me to think about the time, the effort, the money that is spent on job boards, despite the actual gross profit that's being driven from the kind of word of mouth and referral side of things.
00:14:13
Speaker
And it seems that there's just an incongruence in the approach and a big opportunity, I believe for most agencies, when they start thinking about, well, what levers can we pull in this market to start driving revenue and where should we allocate our funds, our resources, our approach. And it's just, I think, non-obvious sometimes to think about that, but it has a significant impact. And I think your data is just another kind of point that shows exactly what we're seeing from our side as well.
Measuring and Leveraging Candidate Lifetime Value
00:14:44
Speaker
Yeah. And I think it brings up an interesting question about what is the right way to use technology to support a staffing agency, whether you're using job boards or you're doing referrals or local community outreach.
00:14:55
Speaker
Technology can play a critical role, but you really have to be very intentional about how you apply it and what you're trying to accomplish. So one thing I wanted to ask, if any agencies are sitting and listening to this, the first question they might ask is, how do I start measuring candidate lifetime value by source at my agency?
00:15:16
Speaker
How can I do it? And what's the minimum viable version? What does an agency actually need to track? And how much precision do they need? A simple starting point without overcomplicating it is just to pull all of your placements by source and compare the gross profit on a candidate level. So you could say, what is the gross profit for each of these sources?
00:15:37
Speaker
If you take it a step further, add the time worked, you start to get a little bit better, more accurate math. And then if you have that redeploy number, you really start to see the real impact. And the redeploy number is the one that I think frequently gets missed in the formula.
00:15:53
Speaker
But the initial date on this for a lot of customers, when they look at where are we allocating resources and where is our actual gross profit coming from? Just on that base level with kind of the math that you did, it can be really impactful in terms of thinking about, are we allocating our resources in alignment with where our revenue is being driven?
00:16:16
Speaker
So if you've actually sat down with a customer, taken them through their numbers for the first time, what's the first reaction that an agency has when they're looking at this data for the first time? One of the more fun moments is when people get stuck on paying a referral bonus. it's like, why would I pay $100 referral bonus if I can get them for less?
00:16:35
Speaker
There's two things about that. One, if the candidate is making you an extra $500 on average, it's worth $100. The math works out there quite well. Secondarily,
00:16:45
Speaker
You only pay the bonuses when you're profitable. You set the time work, the hours, you set the constraints around the referral bonuses. And i think agencies sometimes forget that it's a guaranteed profitable placement if you construct the program correctly.
00:17:04
Speaker
So one of the aha moments that we've seen is a branch manager at a light industrial agency who was saying, I don't really want to pay referral bonuses. I don't know if we need to do this. And then when we showed the math, was like, oh gosh, I would happily pay a referral bonus. I was like, you should.
00:17:20
Speaker
Because every time you pay a referral bonus out, you're on average making an extra $400 compared to the Indeed placement. And on the hires that don't make it to the hours, that was a free placement.
00:17:31
Speaker
So there's kind of an aha moment that can happen when you start to think about it from that perspective. And I will add one other really unique thing that is unexpected from everything I know about referral programs, but it also ties back to the underlying reason why people refer referrals.
00:17:47
Speaker
is typically because they like your agency, they've had a good experience. There's a human connection. It's why reputations matter. We have a customer of ours last year who did say, I don't want to pay referral bonuses in this market.
00:18:00
Speaker
Their warehouse workers were easier to find in place. and decided to run a program with help of friend out. So they've removed the referral bonus and they've still had a significant number of placements from referrals in this market where they're a hundred percent free to source, no bonus to pay out and still getting higher quality referrals.
00:18:22
Speaker
And one unique thing about that market is we've actually seen, they have one of the highest referrals per ambassador. So the engagement is actually top-notch because the people who are engaging it are truly doing it to help their friends out and not for the monetary reward.
00:18:37
Speaker
So something to think about in a market like this is there's actually opportunity for free placements that do not come from a job board.
Impact of Culture on Referral Programs
00:18:46
Speaker
Got it. So culture and communication are a huge part of this about making a program work successfully. That's really neat.
00:18:53
Speaker
So David, this is exactly the kind of foundation I wanted to lay for a first episode. And next time I'm looking forward to talking with you about talent loyalty.
00:19:03
Speaker
and how to treat candidates as recurring assets instead of as a one-time transaction. And I think there's a very interesting loyalty program angle that I think is going to surprise people a lot.
00:19:17
Speaker
So David, thanks for doing this. And we look forward to follow up conversations with you around the lifetime value of talent and how to drive growth and profitability with staffing agencies. So thank you so much. Thanks for having me on, Chris. Enjoyed the conversation.
00:19:32
Speaker
This has been another episode of Aviante Digital Edge. Thanks to David Falwell and thank you to our listeners for joining us. If you enjoyed this episode, please like and subscribe on all major podcasting platforms.
Conclusion and Call to Action
00:19:45
Speaker
And if you'd like to learn more about Aviante and how our all-in-one staffing platform can help your business grow, visit aviante.com. I'm Chris Ryan. Until next time.