Measuring success is critical in recruiting. There are four general types of metrics on which to concentrate – cost, quality, quantity and time.
Possibly the most overused and least-understood metric in recruiting is “cost per hire” (CPH). At its core, CPH should be very simple, right? Identifying CPH can be as simple as noting how much an agency cost you for a hire – agency fee multiplied by the candidate’s salary -- most likely one of the highest cost per hires your organization pays.
However, as with many simple things, the complexity lies in 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 “Cost per hire might just be the great unknown and misunderstood aspect of staffing (Monster.com).”
When you are calculating CPH, there are several things to remember:
First, what is the purpose of this data? It is nice to know that at one time in history, your CPH was X, but remember, it is a metric, and metrics are designed to be tracked over time. This means, whatever method you use to calculate CPH should be repeatable and should always measure a “before” and “after” cost, or a series of costs over time.
Second, your CPH should integrate with your overall recruiting 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.
Finally, any measure of CPH should include three elements of “costs.”
• DIRECT costs
• INDIRECT costs
• RISKS – noticeably absent from the recruiting literature
Please check back tomorrow for a breakdown of these elements and how to put the CPH metric to work for you.
by Doug Fuehne, Co-founder, Vice President – Client Services, Scalability and Strategy of Q4B.
