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.
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.
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 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.
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.
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:
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.