{"id":156,"date":"2007-06-04T06:53:45","date_gmt":"2007-06-04T11:53:45","guid":{"rendered":"http:\/\/www.cecsearch.com\/WordPress\/2007\/06\/04\/monitoring-cost-per-hire-%e2%80%93-cost-metrics-in-recruiting\/"},"modified":"2022-08-08T03:59:46","modified_gmt":"2022-08-08T07:59:46","slug":"monitoring-cost-per-hire-cost-metrics-in-recruiting","status":"publish","type":"post","link":"https:\/\/cecsearch.com\/wordpress\/2007\/06\/04\/monitoring-cost-per-hire-cost-metrics-in-recruiting\/","title":{"rendered":"Monitoring &#8220;Cost per Hire&#8221; \u00e2\u20ac\u201c Cost Metrics in Recruiting"},"content":{"rendered":"<p><strong>Author:<\/strong>  Doug Fuehne, Co-Founder and Vice President &#8211; Services, Scalability and Strategy<\/p>\n<div>Measuring success is critical <span name=\"st\">in<\/span> <span name=\"st\">recruiting<\/span>. There are four general types of <span name=\"st\">metrics<\/span> on which to concentrate \u00e2\u20ac\u201c <span name=\"st\">cost<\/span>, quality, quantity and time. This blog focuses on the costs of <span name=\"st\">recruiting<\/span>.<\/p>\n<p>Possibly the most overused and least-understood metric <span name=\"st\">in recruiting<\/span> is &quot;<span name=\"st\">cost<\/span> per hire&quot; (CPH). At its core, CPH should be very simple, right? Identifying CPH can be as simple as noting how much an agency <span name=\"st\">cost<\/span> you for a hire \u00e2\u20ac\u201c agency fee multiplied by the candidate&#8217;s salary &#8212; most likely one of the highest <span name=\"st\">cost<\/span> per hires your organization pays. <\/p>\n<p>However, as with many simple things, the complexity lies <span name=\"st\">in<\/span> the details of the metric and its implementation. For example, Recruiters Network has a CPH calculator that concentrates on six factors while Tek Systems has a 33-factor CPH calculator. Which one is more accurate? Hopefully, this variation allows you to realize that &quot; <span name=\"st\">Cost<\/span> per hire might just be the great unknown and misunderstood aspect of staffing (\t<a title=\"http:\/\/monster.com\/\" onclick=\"return top.js.OpenExtLink(window,event,this)\" target=\"_blank\" href=\"http:\/\/monster.com\/\" rel=\"noopener\"> Monster.com<\/a> ).&quot;<\/p>\n<p><b>When you are calculating CPH, there are several things to remember:<br \/>&nbsp;<\/b><br \/>First, what is the purpose of this data? It is nice to know that at one time <span name=\"st\">in<\/span> history, your CPH was X, but remember, it is a metric, and <span name=\"st\">metrics<\/span> are designed to be tracked over time. This means, whatever method you use to calculate CPH should be repeatable and should always measure a &quot;before&quot; and &quot;after&quot; <span name=\"st\">cost<\/span>, or a series of costs over time.<\/p>\n<p>Second, your CPH should integrate with your overall <span name=\"st\">recruiting<\/span> strategy. What should your CPH be? You can spend too little. Keeping CPH extremely low minimizes the opportunity to interview great candidates and maximizes the likelihood of turnover. However, of course, you can pay too much by exclusively utilizing staffing agencies. <\/p>\n<p>Finally, any measure of CPH should include three elements of &quot;costs.&quot;<\/p>\n<ul>\n<li>DIRECT costs<\/li>\n<li>INDIRECT costs<\/li>\n<li>RISKS \u00e2\u20ac\u201c noticeably absent from the <span name=\"st\">recruiting<\/span> literature<\/li>\n<\/ul>\n<p>Please check back tomorrow for a breakdown of these elements and how to put the CPH metric to work for you.<\/p>\n<p><b>Numerator and Denominator of <span name=\"st\">Cost <\/span>Per Hire (CPH)<br \/><\/b><br \/>Measuring an accurate &quot;<span name=\"st\">cost<\/span>&quot; <span name=\"st\">in<\/span> the <span name=\"st\">cost<\/span> per hire (CPH) metric must include three separate elements; direct costs, indirect costs and risk costs. Once the<span name=\"st\"> cost<\/span> is established, the denominator of the metric, number of hires, is equally important, and how you define this number will affect the metric.<\/p>\n<p><b>Direct Costs of <span name=\"st\">Recruiting<\/span><br \/><\/b>These costs are relatively easy to quantify, but it&#8217;s often hard to find all of the elements, as they may be distributed throughout your organization&#8217;s accounting structure. <\/p>\n<ul>\n<li>People \u00e2\u20ac\u201c Elements of direct costs include the <span name=\"st\">cost<\/span> of your internal <span name=\"st\">recruiting<\/span> staff, your contract recruiters and any outside assistance you may have from other<span name=\"st\"> recruiting<\/span> providers.  Also included<span name=\"st\"> in<\/span> this category are <span name=\"st\">recruiting<\/span> leadership costs, such as the director of <span name=\"st\">recruiting<\/span> and whatever management you may have.\n<\/li>\n<li>Process \u00e2\u20ac\u201c Analysis of your <span name=\"st\">recruiting<\/span> process will provide other direct costs. Look at sourcing, screening and selection as sub-processes with costs. For example, agencies are a direct process <span name=\"st\">cost<\/span> <span name=\"st\">in<\/span> the &quot;sourcing&quot; area. Other &quot;sourcing&quot; costs are employee referral bonuses, networking events, advertising costs, etc.<\/li>\n<\/ul>\n<p>Screening costs can include any interview travel and entertainment, and don&#8217;t forget about screening tests or guides (Myers-Briggs, Lominger, etc).<\/p>\n<p>Selection costs are background checks, drug screens, relocation, printing welcome packets, etc. H1B Visa costs can be included here, or<span name=\"st\"> in<\/span> the sourcing category.<\/p>\n<ul>\n<li>Tools \u00e2\u20ac\u201cThese are items like your applicant tracking system, any job board subscriptions you may have and the <span name=\"st\">cost<\/span> of creating and monitoring <span name=\"st\">metrics<\/span>. Don&#8217;t forget about document management costs and your telecommunications costs \u00e2\u20ac\u201c both of these can become pretty big with the amount of resumes and phone calls that are part of <span name=\"st\">recruiting<\/span>.<\/li>\n<\/ul>\n<p><b>Indirect Costs of <span name=\"st\">Recruiting<\/span><br \/><\/b>Indirect costs can be divided into sub-categories, too. Personally, I use process costs, opportunity costs and intangible costs. <\/p>\n<ul>\n<li>Process costs include hiring managers that spend too much time reviewing resumes instead of performing their &quot;managing&quot; job. Again, remember to track &quot;before&quot; and &quot;after&quot; costs, as there will always be some indirect costs spent.\n<\/li>\n<li>Opportunity costs can be huge. How much did it <span name=\"st\">cost<\/span> your organization NOT to have that person performing that job? <span name=\"st\">In<\/span> high-value sales, the opportunity <span name=\"st\">cost<\/span> for an un-filled sales position can reach into the millions. However, the trick with all indirect costs, but especially opportunity costs, is to make sure you are comparing similar numbers. You cannot compare a dollar of lost revenue to a wasted hour of time \u00e2\u20ac\u201c one is revenue, while the other is operating expense. It is always better to drop all costs down to the &quot;profit&quot; line when making comparisons.\n<p> <\/li>\n<li>Intangible costs include costs related to employee efficiency and cultural fit, among others. How much does it <span name=\"st\">cost<\/span> your organization to have a poor cultural fit? Did that manager really spend that long counseling that employee? How much can the organization gain from a more productive employee? Tough questions, but ones you should consider. <\/li>\n<\/ul>\n<p>Finally, the indirect costs of <span name=\"st\">recruiting<\/span> should be separated out from the direct costs simply because someone could argue that &quot;they are not real&quot; (even though they most certainly are). <span name=\"st\">In<\/span> this manner, you can add or subtract costs depending on your audience. After all, it is very important that your numbers be credible.<\/p>\n<p><b>Risks of <span name=\"st\">Recruiting <\/span><br \/><\/b>Risks are not necessarily costs, but can greatly contribute to the &quot;<span name=\"st\">cost<\/span> of hiring.&quot; Risks cannot be compared with direct or indirect costs because they are probabilistic \u00e2\u20ac\u201c they may or may not occur. While you will spend money on a job board and your managers will spend too much time reviewing resumes, you may or may not incur a penalty for EEOC or OFCCP violations. However, if that does happen, it typically dwarfs other costs. You would be foolish to ignore risk costs. <\/p>\n<p>We won&#8217;t focus on risks, except to note that you should make every effort to identify and control them, as they are a very real potential <span name=\"st\">cost<\/span> of <span name=\"st\">recruiting<\/span>, especially if you ignore the &quot;process&quot; part above. <\/p>\n<p><b>The Denominator \u00e2\u20ac\u201c Number of Hires<br \/><\/b>Finally, once you have figured out your &quot;<span name=\"st\">cost<\/span>,&quot; you need to know how many &quot;hires&quot; you actually made. This seems simple, but I have seen many clients that don&#8217;t know the answer to this question. Make it a point to diligently track this number \u00e2\u20ac\u201c it is critical. <\/p>\n<p>You can split the number of hires into specific groups <span name=\"st\">in<\/span> order to calculate and track different CPH. For example, costs for different position tiers (executive, professional or hourly staff) or for different position profiles (remember the CPH of that un-filled high-value sales position). It all depends on what is important to your organization, and what integrates with your recruitment strategy the best. <\/p>\n<p>You may also want to consider if the number of hires is the right denominator. Should you consider the work your <span name=\"st\">recruiting<\/span> team was forced to do on requisitions that closed prior to a hire being made as part of the costs? Some cutting-edge <span name=\"st\">recruiting<\/span> providers are measuring the &quot;<span name=\"st\">cost<\/span> to submit the candidate that eventually gets hired.&quot; You get the point \u00e2\u20ac\u201c there are many ways to peel this onion. <\/p>\n<p><b>Final Note<br \/><\/b>If you care about the costs of <span name=\"st\">recruiting<\/span>, and you should, you ought to give how and what you measure around costs some serious thought. Think about getting some professional assistance with your analysis. It will pay for itself many times over. <\/p>\n<p>After all of this analyzing, I&#8217;m going to invest <span name=\"st\">in<\/span> the <span name=\"st\">cost<\/span> of a cold one at my local networking establishment!<\/p>\n<p><\/div>\n<div>This article is courtesy of<font title=\"http:\/\/www.recruitingblogswap.com\/\" color=\"#5A91C7\"> <\/font><a title=\"http:\/\/www.recruitingblogswap.com\/\" href=\"http:\/\/www.recruitingblogswap.com\/\"><font title=\"http:\/\/www.recruitingblogswap.com\/\" color=\"#5a91c7\">Recruiting Blogswap,<\/font><\/a> a content exchange service sponsored by<font title=\"http:\/\/www.collegerecruiter.com\/\" color=\"#5A91C7\"> <\/font><a title=\"http:\/\/www.collegerecruiter.com\/\" href=\"http:\/\/www.collegerecruiter.com\/\"><font title=\"http:\/\/www.collegerecruiter.com\/\" color=\"#5a91c7\"> CollegeRecruiter.com,<\/font><\/a> a leading site for college students looking for internships and recent graduates searching entry level jobs and other career opportunities, and<font title=\"http:\/\/recruiting.com\/\" color=\"#0171E0\"> <\/font><a title=\"http:\/\/recruiting.com\/\" href=\"http:\/\/recruiting.com\/\"><font title=\"http:\/\/recruiting.com\/\" color=\"#0171e0\">Recruiting.com.<\/font><\/a><\/div>\n","protected":false},"excerpt":{"rendered":"<p>Author: Doug Fuehne, Co-Founder and Vice President &#8211; Services, Scalability and Strategy Measuring success is critical in recruiting. There are four general types of metrics on which to concentrate \u00e2\u20ac\u201c cost, quality, quantity and time. This blog focuses on the costs of recruiting. Possibly the most overused and least-understood metric in recruiting is &quot;cost per [&hellip;]<\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"wds_primary_category":0,"footnotes":""},"categories":[16,3,2],"tags":[],"class_list":["post-156","post","type-post","status-publish","format-standard","hentry","category-blogswap","category-other-blogs","category-restaurant-recruiters-viewpoint","post-wrapper","thrv_wrapper"],"_links":{"self":[{"href":"https:\/\/cecsearch.com\/wordpress\/wp-json\/wp\/v2\/posts\/156","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/cecsearch.com\/wordpress\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/cecsearch.com\/wordpress\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/cecsearch.com\/wordpress\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/cecsearch.com\/wordpress\/wp-json\/wp\/v2\/comments?post=156"}],"version-history":[{"count":0,"href":"https:\/\/cecsearch.com\/wordpress\/wp-json\/wp\/v2\/posts\/156\/revisions"}],"wp:attachment":[{"href":"https:\/\/cecsearch.com\/wordpress\/wp-json\/wp\/v2\/media?parent=156"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/cecsearch.com\/wordpress\/wp-json\/wp\/v2\/categories?post=156"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/cecsearch.com\/wordpress\/wp-json\/wp\/v2\/tags?post=156"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}