In the modern business world, you have access to more metrics than ever as the increased use of technology for most tasks makes it easy to track new metrics. Recruiting new staff to your company is no exception to this rule, and there are many metrics you can use to better understand how your hiring and onboarding process is working.
These metrics help you to make informed decisions and improve performance in the future. One of the key metrics to understand is your cost per hire, and how it relates to the quality of your hirings. Here is everything you need to know to get the most out of your metrics.
Other popular metrics
Before diving into the importance of cost per hire as a metric during your employee hunts, there are other metrics you should also be aware of. The more accurate data you have underlying your metrics the more information you have to make a decision and, in turn, the better choices you can make. This allows you to save time and money whenever you have a position to fill, both of which have the effect of helping the bottom line at your company. Here are some of the other key metrics to be aware of.
- Timetable stats
Understanding how long the various stages of the hiring process usually take at your company. This is important when planning out a new recruitment plan. In addition to tracking the overall length of the hiring process, other important metrics include the time it takes to move through each phase of the process from posting, to offering, accepting, and finally the new employee’s first day.
- Applicants per job
One of the most important metrics for your job postings is the number of applicants you are fielding. If the number of applicants for each job is too low, that’s a sign that your recruitment efforts are insufficient and you are either failing to get your opening in front of enough potential applicants or failing to showcase the value of the positions you are listing.
- Viable candidates per posting
A key metric that works in conjunction with Applicants Per Job is the number of viable candidates you are getting per posting. If your posting brings in a high number of overall applicants, but the number of viable candidates who move on to the second round of the hiring process is low, or many applicants are getting through early interviews but not holding up to the advanced scrutiny of later rounds, this is a sign that there are inefficiencies in your current hiring strategy and you need to adjust to reduce the number of unqualified applicants you’re seeing.
- Dropoff rates
If you have an online application process, then you have the ability to get granular data on the ways people apply to your positions, including the percentage of applicants who start the process but do not finish, as well as where they’re dropping out. If you are struggling to find applicants and have a high drop off rate, that may be a sign that there is a flaw in your process that needs to be addressed to avoid losing more viable candidates in the future.
- Candidate experience
While it once would have been difficult if not impossible to get an accurate reflection of the hiring process from your applicants’ perspective, it’s now more common to have brief surveys with individuals who progress in the search. By seeing what applicants found intuitive and what put them off, you gain valuable insight to apply on future candidate searches.
- Hiring sources
A minimum requirement for metrics to track should be the source of the candidates you ultimately hire or offer to. Knowing where your best candidates are coming from is the best way to know where to find candidates the next time you’re in need.
- Social media performance
Taking advantage of your social media presence is an excellent way to get more eyes on your open jobs without increasing your spending. Most social media sites offer in-depth analytics on post-performance, meaning you can track the success or struggles of any posts related to recruitment.
- Ad performance
When looking for employee prospects in a competitive industry, it’s not uncommon for companies to turn to paid or promoted postings for their open jobs. As with social media posts, you are often granted in-depth analytics when you sign up for paid postings like this, and tracking that data can play a crucial role in determining your spending the next time you have a position to fill.
- Employee retention
It’s a well-known adage that it costs more to find a customer than to keep one, and the same goes for staff. While employee retention data may not be strictly a part of your cost per hire calculation, it should be assessed and considered at the same time as it ties into the same goal of reducing your hiring costs. By putting in place policies and initiatives that help you maintain your current staff you reduce the need for recruiting and, as a result, free up more budget to spend on the positions you do need to fill, or keep it in your accounts and improve the company’s financial standing.
While you may not have detailed information to start assessing each of these metrics right now, you can begin to generate that data by tracking them going forward. As you make additional hires to the team, you’ll develop more comprehensive datasets to help you make the right decisions in the future.
The importance of cost per hire and quality hires
The cost per hire definition is what it sounds like — how much money you spend on each new employee hired. The cost of a new hire is a key piece of financial data to have at your company along with the underlying metrics that affect it. There are many different approaches to recruiting and posting job listings, and each has situations and industries where they are beneficial as well as others where they are less effective. By paying attention to your recruiting metrics you can begin to identify the most and least effective elements in your recruiting process in order to optimize your recruiting strategy. The more effectively you optimize spending, the lower your cost per hire can go.
The cost per hire changes enacted must also be done with another key consideration in mind in the form of the quality of your hires. While saving money on your hiring process is a good thing in a vacuum, it’s important to ensure that you are not doing so at a sacrifice to the overall quality of employees you are hiring, otherwise you may be losing more money in decreased performance than you save in recruiting. While there is no way to directly measure the exact value being added or lost in hiring when you adjust the cost of each new hire, by tracking the results and longevity of your new hires you can determine if you are hitting your targets for employee quality and can continue to work on lowering cost per hire, or if you feel you are now missing out and it’s time to invest more in recruiting again.
Making the right hire is a crucial act if a business is to succeed, and doing so at minimum cost is an effective way to improve a company’s bottom line. Once you know how to calculate cost per hire you’re ready to work towards lowering it. By analyzing metrics and optimizing your recruiting process you get the best of both worlds by reducing the cost of a new hire without settling for hiring less-reliable candidates.