The best way to determine the Return of Investment (ROI) of recruiting efforts is to use metrics that are measurable, concrete and help organizations determine their position concerning goals attainment. Well, it sounds simply like common sense. Still, most organizations need justifications to enhance investment in recruitments 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 see this improvement is one time and the profits are annual, you can conclude ROI 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 recruitment practices ongoing? etc.
Often, recruiters struggle to figure out ways to gauge ROI on 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 keeping data in mind, make derivations and arrive at analytics to build almost everything including the ROI of hiring. Read more about the metrics below to check whether your recruiting drive exceeds your expectation or stays lackluster. Let’s have a look.
Time and Cost Involved per Hire
As per a study, 52% of hiring managers take more than three weeks to close an open hiring position and the cost per hire is $3000 or less, on average. Lower the time taken per hire is directly proportional to lower cost per hire. Besides, increased time taken in hiring can repulse 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 of which the ROI of recruiting will fall poor.
Research studies revealed that 60% of HR time is involved in interview scheduling, and 55% of the interviews have to be rescheduled. Around 74% of the recruiter feel that rescheduling is the biggest challenge they face in their work. Perhaps, it justified 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) which will automate and streamline the recruitment process to reduce time and improve the experience.
Number of Interviews Taken per Hire
Naturally, the lesser the interview number, the less will be the time and hence, the cost. But to get the best talent hired, 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 the managers’ productivity and performance. 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 the 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 to improve performance and show up for future efforts.
Further, taking the candidates’ overall satisfaction, and ability to innovate will also pave the way for obtaining 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.