Hiring? What's your ROI?- Part 2

Cost per Hire

Every dollar spent in the recruitment process counts. So, understanding your 'Cost per Hire' is a crucial metric. This includes all expenses — from advertising to recruiter fees and the administrative costs of onboarding. A comprehensive view of these costs helps in identifying areas where you can optimize and reduce expenses without compromising the quality of candidates.

You can measure Cost per Hire using this formula:
 
Cost per Hire (CPH) = Total External Costs + Total Internal Costs/Total Number of Hires

Total External Costs include expenses such as advertising, job fairs, agency fees, and any other expenses paid to external vendors or third parties.

Total Internal Costs are costs related to the internal recruitment process, such as the salaries of HR staff and hiring managers, referral bonuses, and recruiting technology or tools.

*At this point some businesses also include cost of the position not being filled, where the cost of projects not meeting deadlines, lost business or the cost of the extra man hours people put in to cover the unfilled roles are added in.  

The Total Number of Hires refers to the total number of positions filled during the period you're measuring.

Speed and Efficiency Matter – Understanding time to hire and what to do about it.

Time to Fill

The 'Time to Fill' metric is a double-edged sword; while you don’t want to rush decisions and compromise on quality, but efficiency is key. Unfilled extended vacancies can hamper productivity and morale, as well as the bottom line. Streamlining your recruitment process to reduce time to fill, without sacrificing candidate vetting, can significantly improve your ROI by minimizing productivity loss.

The formula to use for this metric is as follows:

Time to Fill: Measures the number of days from when a job requisition is opened until an offer is accepted by the candidate. It helps in understanding the speed of the recruiting process.

Time to Fill = Day Offer Accepted − Day Job Role Opened

As you change processes and interview effectiveness techniques are brought in you should see this metric improve.

​Leverage the Right Sources – Understanding "source of hire"

Source of Hire

Not all recruitment channels are created equal. Identifying your most effective 'Source of Hire' allows you to allocate your budget more effectively, ensuring you’re investing in channels that attract high-calibre candidates. Whether it's job boards, social media, or employee referrals, focusing on high-yield sources can enhance both the efficiency and effectiveness of your recruitment efforts.

Capture the source of where candidates found and applied for your role, work out the yearly cost of the source and divide it by the number of hires. Measure the quantity and cost each source yields.

Next up Candidate Journey......