Optimizing Cost-Per-Hire to Drive Quality

Cost-per-hire is just one part of the equation for talent acquisition ROI.Cost-per-hire is a loaded topic. It seems many organizations want it to be as low as possible without examining the impact it has on the quality of talent. This oversight can actually increase costs over time.

In a recent webinar, Andrew Manning explained how you can put cost-per-hire in context as part of an overall discussion on value, as well as how to examine its impact on Quality of Hire.

Additional takeaways from the webinar include:

  • The formula and components you should use to calculate cost-per-hire.
  • Why low cost-per-hire rates can be more expensive in the long run.
  • How to examine the impact a high-performing talent acquisition function can have on the business.

As it turns out, cost-per-hire is not an “end-all-be-all” figure to determine cost savings. Other factors such as turnover and time-to-fill have a huge impact on overall talent costs.

Using sources ranging from a recent Oxford economics study to PwC Saratoga, Manning showed that the average cost of replacing a departing employee is nearly $49,000. For new hires, the average turnover cost is approximately one to one and a half times that employee’s annual pay. Those figures can eliminate any front end savings on cost-per-hire and actually result in a deficit. Spending more up front per hire is proven to reduce new-hire attrition.

Optimizing Your Recruiting Function
2x spend per hire = 40% less new-hire attrition and 20% faster time-to-fill

Figures from Bersin by Deloitte

Manning’s recommendation is to measure cost-per-hire as just one part of the overall equation for talent acquisition ROI. In his experience and from the research completed by other parties, it pays to have a balanced recruiting strategy with an optimized blend of cost, agility and quality. How you balance these elements will depend on the talent you need for your organization.

If you choose to measure cost-per-hire, make sure to include all relevant internal and external components in your calculations. It is clear that in the end, spending more per hire can save your organization a substantial amount over time.

For more in-depth information on Cost-Per-Hire, see the webinar replay and slide deck here: Optimizing Cost-Per-Hire to Drive Quality.