by Robin Throckmorton, M.A., SPHR
With the role of human resources shifting from
service and administration to strategic planning partner, we need to
take on more accountability for how we impact the success of the
business. The biggest
impact we can make is on the "human" resources the organization
employs to maintain the business. Therefore, we must assess the quality and cost of recruiting and
retaining these resources.
In the 2002 SHRM/EMA
Staffing Metrics Study, SHRM found that 84% of the respondents felt
that a metric that measures the cost to hire a new employee was high or
extremely high in importance to their job.
Unfortunately, there is not a universal formula for calculating
the recruitment costs associated with a hire.
The cost varies from organization to organization and depends on
the factors an organization chooses to include.
Nevertheless, the general rule of thumb is that the cost to
replace an employee is 100 150% of their annual salary.
Depending on the number of individuals the organization needs to
hire/replace, this cost could have a big impact on the bottom-line.
Any impact on the
bottom-line will get the attention of senior management if you can show
the metrics. Since there
isn’t a universal formula for calculating recruitment costs, you will
need to determine what costs you want to track and attribute to your
hiring. There are many
direct and indirect costs that you may consider including in the
calculation. Below are
some of the basic costs that you need to consider:
Not every hire will
incur all of these expenses. And,
your organization may choose not to track some of these costs but this
list is a starting point to help you identify your recruitment costs
per hire. The key is to identify what recruitment costs you are going
to track and then consistently track them for all your hires to have an
internal comparison from one hire to the next.
- These are any costs that you incur to source for candidates,
which may include print ads, online job posting boards, and/or resume
- Be sure you divide the cost of these sources by the number of
positions you are filling, using that source to have a true cost for a
- How much time and expense does your administrative staff expend
to open, respond, and route resumes to the hiring team?
The best way to do this is to figure out an average cost per
resume and track how many resumes you receive for each job to be able
to calculate the administrative cost per job.
- How much time does your hiring team / recruiter spend screening
through resumes? This may
also be an average cost per resume received for the job.
- If your organization conducts preliminary phone interviews, how
many were conducted and how much time was spent by the recruiter to
prepare, conduct, summarize and communicate the results of those
- Do you have an automated applicant tracking program?
This is an indirect cost that you may choose to pro-rate across
your hires for a specific period of time, somewhat like depreciating a
new computer on your taxes.
- Did your hiring team or the interviewee incur any travel
expenses that were reimbursed by the company?
- How much time was spent scheduling interviews?
- How many staff members were involved in the interviews?
How long per interview? How
many interviews? What is
the average cost of the interviewers’ time?
- How much time and what was the cost for follow-up with
candidates during negotiations and to notify those that were not hired?
- What was the cost of referral fees from a recruiting agency or
an employee referral?
- What costs will the company be paying for the new hire to
relocate? Some costs may include moving company, airplane tickets,
hotel accommodations, temp housing, house hunting visits, assistance
with sell/buy, or spouse/dependent assistance.
- What was the cost for background investigations and/or reference
checks? Drug screens?
- If there was a signing bonus, how much was it?
- What costs does the company typically incur to bring someone
onboard – orientation, mentor, benefits enrollment, computers, cell
phones, uniforms, etc.?
However, just like when you hire someone, you
don’t make your decision based on one criteria but rather many
combined tools. Measuring
the success of your recruitment cannot rest solely on the cost.
There are other measures you need to consider as you evaluate
the overall success of your recruiting and what you can do better next
The key to any analysis is to reflect on what
worked and what could have been done better or different the next time.
So, don’t just track the costs and set them aside.
But rather, be sure you review your cost analysis and each of
these other measures to identify what you can capitalize on next time
and what you need to do different.
For example, what was the success of your recruitment sources?
Which ones provided the most candidates and more importantly the
quality candidates? Which
ones did not? This type of
evaluation will help you to streamline your next hire, improve the
quality, and reduce costs.
- How long did it take to fill the position from start to hire
date? What could you have
done to reduce the time to hire and not have impacted the quality of
- What was the impact on productivity while the position was left
vacant? This is a very
difficult calculation to conduct especially depending on the position. However, it does have an impact on the hiring manager and the
organization as a whole. If
it can’t be quantified, at least keep it in mind.
How satisfied was the hiring manager / organization with the
hire? This assessment can
be done following the hiring but should be repeated again 3 – 6
months after the employee has been on the job to get a real sense of
how successful the hire was. There
is an excellent tool on Staffing.org that you can use to assess the
hiring manager’s satisfaction: http://www.staffing.org/metrics/hiring.asp.
Employees are the “human” resources of the
employee is critical to the success of the company or you wouldn’t
hire them. Be sure you are
hiring the best in the most efficient time frame while maintaining your
Robin Throckmorton, MA, SPHR, a Senior Human
Resources Management Consultant is President of Strategic
Human Resources, Inc. and Partner of e-HResources.com.
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