Cost-per-hire is defined as the sum total of all costs associated with acquiring new employees over a given time period, divided by the number of hires made within that same time period. The basic components aren't the only factors that should be considered, however. According to SHRM:
"Since industry, staff size, profitability and geographic region influence recruiting costs, benchmarking is most effective when organizations compare their cost-per-hire against similar organizations' metrics, making for a meaningful comparison. The organization's overall business strategy can affect cost-per-hire. An organization whose business strategy is to compete on price focuses on low margins and high unit sales. By keeping costs down in all areas of its business, including cost-per-hire, an organization ensures that its profitability is high. Conversely, an organization whose strategy is to lead its market with innovative products that are often more expensive than the competition may have higher business costs. Recruiting costs may also be high because as the organization seeks highly creative, innovative talent, it will need to increase its sourcing strategies and costs to scan the country for top talent."
While all factors need to be considered and all associated costs accounted for, in the end cost-per-hire can be a valuable metric by which to evaluate recruitment efficiency. It allows organizations to remain budget-conscious, while pinpointing flaws in recruitment processes in order to improve efficiency and lower costs. Effective processes can positively affect time to hire and quality of hire metrics, as well.
Traci Kingery, PHR is an HR Professional and freelance writer based in the Midwest, specializing in immigration and talent management. When she's not improving unemployment, she keeps busy with her husband and four children.
About the Author, Jimmy Hurff
Jimmy is a seasoned technology executive & entrepreneur noted for leading business transformations. Over his 25+ year career, Jimmy has developed multi-platform expertise in the domains of engineering, data analytics, security, compliance & business transformation. Starting in 1995, Jimmy worked with his best friend, David Webb, to develop one of the world's first Internet job board and resume bank applications. From then to now, Jimmy has been consistently helping his customers to build great teams, using best practices and world-class technology.