Cost Per Hire: Measuring Your Top HR Metrics

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The process of hiring and retaining your top performers has a strategic impact on your organization. Every organization is on continuous search for high talent – people who have the skills, expertise and experience which are in line with the company’s vision, strategy and operations.

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In addition the company culture as a very important part of high performance in your organization requires certain fit with the new and existing employees.

While the complexity and success of the hiring process will certainly depend on the industry, location and the particular organization however the main factors such as skills, experience, expertise and culture fit are always important drivers in the process.

It is no surprise that because of the importance of this issue, cost per hire is among the top HR metrics used by HR management in any industry.

This HR ratio measures the financial impact of your hiring process on your organization. In order to calculate the cost per hire ratio for your company you need to estimate all the costs associated with the hiring new employees.

Typical costs will include any cost related to using third party services such as job portals and headhunters. In addition, any career fairs, advertising expenses, orientation costs, training new hires, travel expenses of new applicants for interviews and of course the moving and relocation cost should be included. When you add all hiring related costs for a given period like 12 months and divide the costs per number of new hires you can get your value of the cost per hire ratio.

Why is cost per hire ratio important?

There are many benefits for tracking, measuring and monitoring your HR metrics including this ratio. You can track this ratio over time and compare your performance over time – by doing that you can measure whether your company has improved over time. Another important point is that you can compare your numbers with industry published cost-per-hire ratio and evaluate your HR management against others.

Finally by measuring your ratios and using some sort of HR scorecard you can always review and evaluate your performance and find new ways for improvement.

As an example, you can also break down the total costs of hiring into categories and identify the largest portions of the expenses. Next you can evaluate if all these cost types are necessary and if they add value which outweigh the costs or investments in the process.

Today there are so many alternatives like online services and outsourcing services which you can consider and maybe replace some of your existing approaches to advertising, finding new hires and the application and orientation processes.

Tip 1: When you benchmark your HR metrics especially this ratio you have to make sure you compare your organization with organizations in your industry and geography because the numbers will vary drastically from industry to industry and from one location to another.

Tip 2: The costs will vary also based on the skills of the hires so if you hire different type of employees you might want to break down the costs based on type of employee like full time vs. part time and based on the education required.

Finally use some sort of HR dashboard or HR scorecard report template to organize your numbers and track your HR metrics without wasting time over and over again.

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