Metrics You Should Know – Cost-Per-Hire And Cost-Of-Attrition

March 5, 2020 at 9:57 AM Grace Newman

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As any data-driven recruitment team knows, if you aren’t tracking key hiring metrics then you have little power to improve them. From time-to-hire, to engagement metrics and candidate satisfaction scores, to funnel conversions and drop-off metrics, the data you collect can tell you a lot about the areas of your hiring process in need of some attention. Today, we are breaking down two big picture metrics that can help you prove the value of recruitment at your organization: Cost-Per-Hire and Cost-of-Attrition.

Cost-per-Hire: What it is, what it means, and how to calculate

Your cost-of-hire metric is exactly what it sounds like: the total costs you incur to make one hire. However, there are a lot of possible expenditures that can be calculated into your CPH which are not always black and white. These costs can include recruitment marketing efforts (both online and offline), job board fees, interview travel costs, sourcer and recruiter payroll, referral programs and bonuses, agency fees, and more. 

Cost-per-hire definition

So how can you attribute these costs to one individual hire? Calculating your CPH takes the total recruitment expenditures and divides it by the total number of hires made. That gives you an average CPH that you can use as your guiding metric.

 

Cost of Attrition: What it is, what it means, and how to calculate

Cost-Of-Attrition is the cost your organization incurs when an employee quits or is fired. Many of these costs are projections and therefore can be more of a challenge to calculate than cost-per-hire. For example, when a key member of a team leaves, you are not just losing their unique knowledge of the company or role - you’ll also face a loss of productivity from the rest of the team as they scramble to fill in the holes, a potential hit to employee morale depending on the reason for departure, and the expense of training your current employees or hiring a replacement. 

Cost-0f-attrition definition

Because COA is such a complex calculation, we recommend using a pre-built online calculator that can guide you through the potential costs you will need to include. Check out Linkedin’s free attrition calculator here. 

 

Cost per Hire Vs Cost of Attrition

While these two metrics give you insight into different ends of the employee lifecycle, they are highly related and often conversely affect one another. A recent Harvard Business Review study indicates there are three key predictors of employee longevity which probably won’t surprise you – job enjoyment, skill set utilization, and development of the skills needed for career advancement. Simply put, employees want to be able to do the job they were hired for.

Therefore, by investing in a smart recruitment strategy that gets the right people through the door, you can actually lower your attrition rate and the costs that come with it. Here are steps you can take at each stage of the recruitment process to ensure strong hires:

 

    • Sourcing. The best way to build a high-quality candidate pipeline is to Do. Your. Research. Technical and creative candidates in particular often go out of their way to showcase the projects they are working on and the types of problems they are passionate about solving. This tells you a lot about how closely their passions align with the job opportunity you’re approaching them with and signals how likely they are to be engaged and enjoy the work ahead of them.
    • Screening. Whether your screening process consists of a phone call or on-demand digital interviews, this step should really get to the core of why a candidate is interested in your company and the role. If they have trouble articulating an answer or come up with something vague - take note. You want your future hires to have a sincere interest in your company, not just a desire to hop aboard a new ship.
    • Interviewing. Here is where you can really dig deep to understand a candidate’s career goals. The right mix of experience isn’t enough – if a candidate’s plans for the future do not match the reality of the role, there’s an inevitable expiration date on their employment. Your hiring team should leave interviews with a clear vision of a candidate’s career aspirations and whether that aligns with the opportunity on their team.
    • Surveying. Another step you can take to better optimize your hiring process is collecting candidate feedback. The interview process is often a preview of what it is like to work at your company, so you want to make sure it’s an accurate representation. Candidate satisfaction surveys can give you insight into the leading factors for offer letter rejection - and if one of these reasons is miscommunication or a lack of transparency about the role or company, it’s time to course correct your hiring process. You want to make sure your new hires know exactly what they are signing up for and are excited by the true prospects of the role. 

 

Cost-Per-Hire and Cost-Of-Attrition can tell you a lot about the success of your recruitment process and the true value of strategic Talent Acquisition at your organization. On a smaller scale, there are tons of candidate engagement metrics you can track day-to-day in order to quality check your recruitment efforts - check out our article on using open, click, and reply rates to tailor your outreach strategy to learn more.

 

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