When it comes to reviewing your hiring activities, understanding your company’s cost per hire is an important metric. However, it is only useful if it is both accurate and complete. Many businesses fail to include all of the factors that actually go into the calculation, making it a challenge to get the full benefit from monitoring the amount.
To help you make sure you know your actual cost per hire and are able to use the information properly, here are some points that must be considered.
Get All of the Data
Many organizations cut corners when it comes to identifying and gathering information on all of the costs involved in hiring. Hard costs, like advertising fees and candidate assessments, are fairly easy to track, but soft costs, like HR employee salaries and applicant tracking system (ATS) costs, aren’t always accounted for in their entirety.
Some other costs in both categories that are more commonly missed include employee referral payouts, career fair costs, travel expenses, and screening time (such as the hours members of management spend interviewing candidates).
To determine the cost per hire, it is important to get data on all of the hard and soft costs involved in every hire over the time period being analyzed. Then, you can total your expenses, divide it by the number of hires, and come up with a more accurate metric.
Use Other Supporting Metrics
While the cost per hire is an important number to monitor, it is best used in conjunction with other measures of success. For example, the average number of days required to fill a position, retention rates, and interview-to-offer ratio all fill in the larger picture and provide a larger perspective.
For example, if your cost per hire is fairly low, but your time-to-fill is high, you might not be investing enough in recruitment activities to keep operations running smoothly. However, if you examined the cost per hire alone, the potential issue may not be discovered.
The cost per hire isn’t an ideal point to compare one business to another. It does not account for variables like the types of positions being sought, the skill level required, or difference in local candidate pools. Instead of seeing how your company’s cost per hire compares to other organizations, concentrate on improving the metric internally period over period.
If you can keep your time-to-fill steady or lower while bringing down your cost per hire, it shows any changes in your hiring practices have been generally positive. In contrast, savings in cost per hire that results in positions remaining vacant longer or lower retention rates implies something needs to be adjusted to create a more successful system.
In many cases, working with a skilled staffing firm can lower your cost per hire and may even improve your time-to-hire. If you are interested in seeing how professional recruiters can help your business, contact CPS Recruitment and see what we have to offer.