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How can I improve my cost per hire?

How can I improve my cost per hire?

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For everyone involved in recruitment, finding ways to reduce your cost per hire is up there in importance with ensuring you find the right candidates.

Hiring costs take up a large wedge of the overall HR budget and there are many factors that can be tweaked to ensure this money is used as effectively as possible. Unlike many aspects of the business world, metrics for hiring costs are easily accessible, but not always easy to analyse.

Making the calculation
Without knowing your current cost per hire, it's going to be very difficult to reduce it. There is not a set way to judge a cost per hire. However, no matter how you come to your final figure make sure you are consistent to help you establish benchmarks and goals.

Hiring costs are made up of:

  • External costs – including employment agency fees, direct recruitment advertising, job fairs, head-hunter costs, employee referrals, etc.
  • Internal costs – including internal salaries, facilities costs, travel, entertainment, relocation expenses, etc

One thing you should not include is the salary of the people being hired. This cost is absorbed by the department where the employees work. However, you should look to separately analyse how much it has cost to hire for each department. Does it cost more to find a new sales person than it does to find someone for the IT helpdesk? Is one form of advertising working for one type of role but not another?

In order to reduce your costs and set targets, you first need to know whether your costs are high. There's no point making unachievable promises to the management team if you're already running a tight ship.

To do this, take a look back through the figures from previous years to establish a time when you feel recruitment was at its most effective. This is not necessarily the cheapest, but the time when the return on investment was best. If you spent a lot of money but found individuals who brought in big revenues for the company, that's often better than not spending any money at all.

Methods of reduction
Every industry, occupation, location and company is different and each needs to use a certain amount of trial and error when working out the most effective methods for making the most of the recruitment budget.

Some of the main techniques include:

  • Moving online – The costs of placing job adverts online are dramatically lower than traditional methods of recruiting such as newspapers. You can tailor your job adverts to exact audiences and also update and adapt advertising campaigns whenever you need to.
  • Utilising general marketing efforts – If your company runs any form of ongoing marketing campaign, see where you can try and spread the word that your company is hiring. This could be something as simple as increasing the visibility of the ‘work for us' link on your website, or adding a message on TV advertising. Often the people you want to hire are the ones who are using your products, so this way you can kill two birds with one stone.
  • Change your agency – Recruitment agencies all have their own advantages and disadvantages, but in general you get what you pay for. If you feel the 20% commission you're paying is too much, look to negotiate this down or switch to a company offering a lower rate.
  • Bring responsibility in house – Things like design costs for recruitment campaigns often take up a sizable chunk of the costs so see what you can do on your own. Remember that a flashy campaign isn't always going to achieve the best results – a subtle and professional look can be just as effective.
  • Use your existing employees – Offering your current employees an incentive to find potential candidates is an increasingly popular method, especially considering the potential that online social networks such as MySpace, Bebo and Facebook can bring.

There is no right and wrong way to recruit and it's up to you to get inventive with your recruitment campaigns. You never know, dressing up as a giant chicken and hanging out at a graduate fair could just be the secret method you were looking for!

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