The Cost of Recruiting: Ensuring the ROI of Hiring Practices through Analytics

The best way to determine the Return on Investment (ROI) of recruiting efforts is to use metrics that are measurable and concrete, and that help organizations assess their position regarding goal attainment. Well, it sounds simply like common sense. Still, most organizations need justifications to increase investment in recruitment to realize more tangible benefits.

Let us relate to this with a hypothesis. Assume that your company is offering a pretty solid referral bonus program worth $400 thousand, and the hires coming through that bonus program are performing better, staying longer, and, say, 30% more productive than the hires who don’t come through it. Now, if the average incremental profit margin per new hire is $180 thousand, and you are hiring 40 new people each year, then the total variable profit contribution per new hire would be $ 7.2 million per year. Since the investment to achieve this improvement is one-time and the profits are annual, you can conclude that the ROI is well over 1000%.

Realizing this, you would think of devising even better referral bonuses, and if the scenario is otherwise, you would withdraw the scheme to save fund wastage. Perhaps your HR team can also cast an investment-based business story with the help of a hypothesis, test it by obtaining answers to plenty of questions associated with hiring practices:

• How much are you convinced that HR is a worthy investment?
• How will you assess the impact of recruitment analytics?
• What are the best hiring strategies?
• And, how fair are your ongoing recruitment practices? etc.

Often, recruiters struggle to gauge the ROI of recruitment practices. Tracking Return on Investment (RO) on recruitment has never been this easy for recruiters before the advent of advanced application tracking systems (ATS) and data science. It enables the HR Team to start with data in mind, make inferences, and derive analytics to build almost everything, including the ROI of hiring. Read more about the metrics below to check whether your recruiting drive exceeds your expectations or stays lackluster. Let’s have a look.

Time and Cost Involved per Hire

According to a study, 52% of hiring managers take more than three weeks to fill an open position, and the cost per hire is $ 3,000 or less on average. Lowering the time taken per hire is directly proportional to lower cost per hire. Besides, increased time taken in hiring can repel the top talent and make them unlikely to continue with the hiring process. Importantly, the hiring manager must clearly communicate the requirements and positions to HR. Failing to do so, the ROI of recruiting will fall poor.

Research studies have found that 60% of HR time is spent on interview scheduling, and 55% of interviews must be rescheduled. Around 74% of recruiters feel that rescheduling is the biggest challenge they face in their work. Perhaps it justifies why 60% of companies have employees staying ahead of their interviewing needs. Here is the catch! Moving quickly is possible with an efficient Application Tracking System (ATS) that automates and streamlines the recruitment process, reducing time and improving the experience.

Number of Interviews Taken per Hire

Naturally, the lower the interview number, the less the time and hence, the cost. But to hire the best talent, you need to optimize the number. Ideally, there shall be four interviews per hire. But before assessing, you must learn where your organization is rightfully from the starting point, and then, what is the number of positions to be filled.

Essentially, you shall not waste time on underqualified, unwilling, or unsuitable candidates. Another way is to adopt Interview Management Software to establish coordination among departments, streamline the interview process, and hire quickly and conveniently.

New Hire’s Performance Analysis and Retention Rate

Well, measuring performance is highly subjective; still, it can be observed through managers’ productivity. The ability to hire a ‘good employee’ can be an effective way to measure the effectiveness of your recruiters and their ability to meet the organization’s needs. Business owners can also tally the number of promotions to see the ability of new hires to grow professionally.

Another thing to check is how long the new hires are staying in the organization. If employee turnover stays higher for longer, then it can cost your company heavily. Check whether the current turnover rate is higher than the usual turnover rate of your organization to find problems with your recruiting efforts. Identify them to narrow down areas for improvement and show up in future efforts.

Considering the candidates’ overall satisfaction and ability to innovate will pave the way for achieving desirable results. Of course, no one would like to invest in recruiting, just to evaporate it again and again.

Questions driven by purpose, when asked, can bring out meaningful answers and hence, direction followed by results. Companies shall thoughtfully devise their formula-based metrics or buy one when devising ways to measure the ROI of Hiring.