The acquisition of the right talent in a candidate-centric recruitment market is the prime agenda of any recruitment agency. The process of finding the right candidate is adhered to in a competitive landscape comes at a cost. Companies nowadays are very mindful of the return on investment and have implemented many recruitment metrics to have visibility into the performance of their job advertisement and the cost associated with recruiting a resource. The insights provided by these metrics are the bedrock for HR executives to make informed data-driven decisions and formulate a successful recruitment marketing strategy.
The two most widely used metrics which are effectively being used to optimize the recruiting process and managing the recruiting budget are the cost per hire and cost per applicant. Although they are known to be “cousins” they have quite a few dissimilarities, understanding them is imperative to design an effective hiring strategy.
Cost per hire is an all-inclusive cost calculation metric which includes all the expenses incurred from the job listing, use of online recruiting tools to onboarding and salary of the new hire. It basically calculates the cost of an end to end recruiting process. Cost per hire is very useful in an end to end data analytics as it covers every touch point from job clicks on the job portal to the number of recruitment channels like websites and social media used by the company to ascertain the services of the candidate. The generic formula for a cost per hire is:
Cost per hire = (external cost + Internal cost/ Total number of hires)
The internal cost will be an investment in the HRIS system and the external cost might be outsourced recruiting agencies, paid sources and recruiting events.
Although understanding cost per hire matters to make smart investment decisions, the critics often debate the efficacy of the metrics as its focus on to reduce cost can undermine the quality of the hire.
Cost per applicant metric measures the spend on recruiting a resource ranging from online resourcing tools to job writing to listing to filter spam and overheads. The formulae for this metric is quite simple as it calculates the spend on each advertised role by adding up the recruiting cost incurred divided by the number of qualified applicants received. This metric is comparatively new compared to the cost per hire but it provides actionable insights into how each of your chosen resourcing platforms is performing with application generation and which candidate database is generating more success. Through pertinent data on applicant engagement and traffic generation from each source, the stakeholders are empowered to redesign their hiring strategy and recalculate the budget.
Both the metrics have their salient features, each providing fillip to the company’s recruitment and retention strategies and budget. The metrics should be aligned with your business requirements and goals, only then it would improve the recruiting and its cost. Therefore, it’s important to understand what parameters need measuring as measuring too many things could be quite daunting and would not provide actionable insights in line with your business goals.