Understanding Recruitment Metrics: Costs

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This is it, we’ve reached the last piece of the puzzle. Over the last two articles we have discussed and gone over the Time and Quality Metrics that recruiters need to keep an eye on in order to evaluate how effective their practices are.

Just as any other business, it all boils down to money, and recruitment is no exception. Measuring costs lets recruiters know where their funds are going. It also lets them evaluate if there is a leak or something that is unnecessarily expensive. However, measuring only costs does not create a clear picture of the recruitment process; costs have to be measured against time and quality.

The actual formula used to calculate Cost per Hire (CPH) is Internal Costs, plus External Costs, divided by the number of hires. Internal costs refers to all the expenses that occur inside the company, such as salaries of the recruitment team and referral programs. External costs include expenses that are outside of the company itself, such as job platforms, fees, and even background checks.

If one is to accurately measure CPH, some variables need to be taken into consideration, including:

Cost to Acquire (CTA): This metric is perhaps the broadest one of the list. It refers to the amount of money it takes to fill a position within a company. For the calculation, the annual budget that the recruitment team receives has to be taken into consideration against the estimated number of hires during that same year. For example, if a company has a recruitment budget of $1,000 and they hire 4 people during that year, it means that the CTA is $250. CTA can be further divided into the amount of money that goes into each specific part of the recruitment process; including sourcing candidates, screening, interviewing, training, and onboarding.

Source of Application (SOA): This metric determines the origin of each individual application for a certain job ad in order to determine which channel is the one that is reaching the most potential candidates—in other words, which platform is the most effective. Most ATS’s divide sources as job boards, referrals, the company’s career site, and job fairs, among others. Understanding which source is the most effective allows recruiters to know where to invest time and money and where not to.

Source of Hire (SOH): This metric is a more detailed and specific version of SOA. SOH tracks only candidates that manage to go all the way through the recruitment process and actually get hired. It provides a more insightful vision of which source is most effective.

There are many other factors that come into play when calculating an accurate CPH. It is vital to write a list of every single expense that goes into recruiting, no matter how small it is, including referral program costs and Applicant Tracking Systems (ATS) costs. Some other common things are:

Job Board Fees: This includes the money that goes into job boards used for advertising your job opportunities. Keep in mind that some job boards have different configurations regarding their costs; some are Pay per Click (PPC), meaning you’ll pay for every person that clicks on your ad; while others are Pay per Application (PPA), in which you pay for each person that clicks to apply. Knowing which format is more effective can help you reduce costs.

Candidate assessment and screening costs: It involves any money that goes into interviewing candidates, as well as things like background checks.

Career page costs: Many companies have a special career or employment section on their website. Yours probably does, as it is common practice nowadays. How much does it cost to keep that website up and running smoothly? This also includes social media costs and online advertising.

Employer branding costs: This involves everything you and your company do in order to cultivate their branding and image, as well as your Employee Value Proposition (EVP). When it comes to EVP, it’s more than just salary, it includes all the benefits you offer to your employees, such as insurance, holidays, further education, and retirement.

And with this, we finally have all three pieces of the metrics puzzle: Time, Quality, and Cost. Remember that it is useless to only look at one without the others. In order to get a clear and accurate image of how things are working out, you need all three.

Edu Rojas
Content Marketing Editor // NEUVOO