Recruitment is not as an easy option as it may appear to be. If you are working with an organization in the recruitment department, you are aware of the constant pressure that the department is subjected from the cost point of view. One of the basic metrics from that perspective is the cost per hire. How would you optimize the cost per hire? Here are a few ways that you can use this concept in the right way.
How to make Optimized Use of Cost per Hire?
Recruitment agencies have a constant Damocle’s sword lurking over their head. They need to justify the costs and recruitments methods that they employ during their daily endeavours. Cost per hire is one of the most important metrics in the realm of streamlining the recruitment process.
If you are able to calculate the cost per hire in an effective manner, you would be able to combine together all the costs associated with filling up a position in the organization. This value would help you arrive at the total cost incurred in hiring an employee.
How to Calculate Cost per Hire?
Though it may appear to be much easy to calculate the cost per hire, it isn’t in practice. There are a number of factors that determine the costs involved in the hiring process. In fact, there are two basic constituents you need to consider when calculating the cost of hiring.
The Internal Costs –The internal spending associated with a hiring process would constitute the internal costs. The complete breakup of internal costs can include
- Salaries, benefits, and other career benefits that form part of the employee development program.
- Costs of talent acquisition system. This can include the software requirements and the hardware used for the purpose
- Other overhead like compliance (statutory employee benefits), referrals and other additional tasks.
The External Costs –This would constitute the total cost involved in hiring and would be spent outside the organization. The major elements of the external costs would involve
- Fees for recruitment agencies – including the staff, hardware and software licensing
- Advertising costs – social media, job boards and newspaper ads.
- Travelling expenditures
- Other tests conducted on the candidate
Gather these costs over a specific period of time. Add up the total number of hires over this particular time period. Consider all types of employment including part time, full time, temporary or permanent.
Once that done, use the following formula to calculate the cost per hire –
Cost per Hire ($) = [Total External Costs] + [Total Internal Costs] / Total Number of Hires
How to Reduce the Cost per Hire and Optimize your Hiring Process?
Reducing the cost per hire would help you streamline and optimize your recruitment process in a better way. Opt for the tips to improve your planning and investment when it comes to the strategic recruitment process.
#1 Keep a check on your Cost per Hire
Keep an eye on the cost per hire at regular intervals. In fact, recruitment and training is a constant and ongoing activity in an organization. Constantly analyze the costs and look for the improvements. However, a higher cost of hiring need not necessarily mean you are doing something wrong. That is exactly why it needs constant monitoring.
#2 Check out performance by Department or position
Of course, the complete cost per hire is indeed important. However, analyzing it based on individual departments or positions can help you find out the areas that can be considered for improvement. If you are conducting multiple interviews, you can consider reducing them if possible. But ensure that cost reduction alone should not be deciding factor.
#3 Analyze cost of hire with other recruitment metrics
Compare and analyze the cost of hire with other metrics involved in the recruitment process. Some strategic factors can be the time taken to fill the position and the quality of the hiring process. These are qualitative metrics as compared to the quantitative ones like the cost of hire.
That is how you can make use of the cost of hire for a thoughtful recruitment process. If you consider it a little difficult concept to understand, Greenhouse Cost Per Hire can help you get to know the concept in a better manner. Proper analysis of the cost of hire can aid you constantly monitor the quality of your recruitment process.
You can analyze the data to bring in positive improvements in the realm of the recruiting process. Investing in good recruitment software, using unique and innovative advertising avenues and focusing on social media marketing can be a few ways you can use to improve the cost of hire.