You may have heard certain recruiting experts say that cost per hire is irrelevant, and in most cases they are absolutely correct. When cost per hire is not calculated correctly, its value is minimal.
The value of
calculating cost per hire is only relevant if it includes the right elements. There are six different elements most commonly taken into consideration when finding the cost per hire: Advertising expenses, Agency and Search Firm fees, Referral bonuses paid to employees, Relocation costs paid to hired candidates, and Company recruiter costs. These elements seem to cover most costs related to hiring, but there are sometimes costs related to an individual hire that can be overlooked by companies.
These additional elements can double the
cost per hire, especially when you factor in that not all employees are created equal. Hiring high-producing, high value employees may be worth a very high cost per hire acquisition cost. Still, for most workforces, having a properly calculated cost per hire is still an informative metric that bears consideration, even if just to validate certain hiring decisions.
Even fast food restaurants that have steep changes in compensation between a manager and a cashier can see value in cost per hire metrics when they provide a rough estimate of hiring costs.
Consider averaging comparable positions together when calculating cost per hire. If the cost per hire of an executive is drastically different from that of a customer service representative, you don’t want to use one to evaluate the other. Cost per hire may not play a large role in determining whether a company should hire an executive when their work product will justify the costs. Yet, in most other cases, cost per hire allows companies to focus on the means by which they go about the hiring process and whether tools like job postings or agency fees are truly necessary.
If you forgo looking at
cost per hire metrics entirely, you may see your hiring process become increasingly costly. Put another way, if consumers lost sight of the price of a cheeseburger at McDonalds versus Wendys, there would no longer be a dollar menu. Thus, it is essential to use cost per hire as an instrument that gives insight into the cost of the hiring process.
