Online recruitment: Evaluating success

Cost per hire

Cost per hire (CPH) is, perhaps, an outmoded concept in many discussions about recruitment metrics. In fact, some analysts and experts in recent articles have gone so far as to say that CPH is a useless measure, as it implies hiring less qualified people or 'warm bodies' just to get the CPH down to an acceptable level. While I wholeheartedly agree that quality of hire is the most important measure, both for recruiters and line managers, we have to start somewhere. CPH is relatively easy to calculate and enables us to educate our line of business clients and financial management, as well as our colleagues in HR. Time to hire is an integral part of CPH, particularly if we begin to analyse 'lost opportunity' or 'empty chair' costs as part of the overall CPH.

And, as we will see, going out to the web for candidate attraction and automating the drudgery of the back office with web-based tools will provide a significant saving in time to hire and the overall cost per hire. Once an organisation has taken these steps, more significant analysis of quality of hire and individual recruiter (and line manager) performance will be possible.

Each model takes into account factors such as the costs of recruiter salaries and benefits, travel and other expenses, entertainment, advertising, job fairs, agency fees, referral fees, and even add-ons such as sign-on bonuses.

The simple formula to calculate cost per hire is to take all expenses, other than fixed costs (permanent hiring staff salary/benefits cost, office budget costs, utilities) and divide that number by total hires during that period. So if you ran one ad (£5,000), paid agency fees (£20,000), went to a job fair (£4,000) and utilised a third party website (£6,000), you would have spent £35,000 above your line costs. If you had recruited 10 staff, you would have a £3,500 cost per hire. If your organisation is more complete in calculating a total cost per hire, then your line budget expenses of, for example, £250,000 would be factored in (£25,000 per hire for 10 recruits) and your true total cost per hire would now be £28,500.

Things get even more complicated when you consider training, cost of 'empty chair' time, the impact of recruitment delays on turnover, the cost of losing embedded knowledge, lost promotion potential and other business impacts of not filling a key position. The initial cost per hire is but the tip of the iceberg. Numerous other issues which could be measured are:

How to determine the cost per hire

Given the above, it is good business practice to examine your cost per hire. It will begin to give you an insight into your recruitment practices and ensure you have the data you need to promote your success to your executive team in a language that they understand. The questions chart is a simple approach to identifying the key data you need to determine your basic cost per hire today.

Workshop examples of time to hire and cost per hire

The data below is the result of some hands-on workshops that I have run to examine cost per hire and return on investment of automating recruitment processes using the internet and web-based tools. The workshop attendees were set the task of defining how long various steps in the recruitment process for a typical white collar hire would take, using non-automated or basic automated processes. The groups then determined some typical costs for key areas of the recruitment process, including staff costs and the budget to hire 50 people. I assumed a minimum "lost opportunity cost" value of £1,000 per day. We than computed a cost per hire and lost opportunity cost for each main type of recruiting, assuming that all 50 hires would be made using only one method.

What did we learn? That it took 65 days from having a requisition approved to a candidate accepting a position. Savings from using the Internet and automation of the front end of the process, from advertising the role through to setting the first interview was about 20 work days. Using the Internet would cost substantially less and be at least 30 per cent faster than more traditional methods of recruiting.

Implementation guidelines

You are now convinced that converting to become a successful internet recruitment company is the only way to go for you and your company. The next step is to pick technology and advertising solutions partners and then implement the changes. How do you do this? Here are a few guidelines to keep in mind as you embark on this journey.

Project initiation

A strong steering group will be required, including members of the executive and board, as business ownership is the key to keeping all those involved interested.

Clear roles and responsibilities need to be identified along with the key requirements that will be expected of any suppliers - they must have HR knowledge, not just technical capability and you will need to develop a close working relationship/partnership that can be maintained throughout the project.

Pilot and product enhancement

Implementation

Overall

How to choose a supplier

All suppliers claim to have robust 'end-to-end' solutions. In reality, no single supplier has all the functionality to cover all recruiting aspects from marketing an organisation as an employer of choice, through CV management to optimising hiring process and cycles. By the same token, you should not expect the vendor to guess at what you really need and how they might address your needs. Before you go into the market for your candidate management system and internet recruiting partners, there are some questions that you need to answer about your business. Use this checklist before you invite those first vendors in and you will have a more productive process and, ultimately, a faster implementation.

Questions to ask the supplier

Once you have the answers to the recruitment needs checklist (right), you are ready to bring in your shortlist of vendors. There are some key questions to ask them in the initial screening stages which can shorten the qualification process.

What technical support does the supplier offer?

Many suppliers are new and have unproven viability. Look at venture capital funding, revenue, sales, references.

Avoid long term commitments or being locked into one product - ASP solutions can be utilised on a monthly or quarterly basis.

Per transaction

Per user

Flat fee for organisation-wide use

Ascertain a guaranteed delivery date for 'futures'.

Concluding remarks

You made it through this section of the guide and you are recruiting online. Congratulations!

There are a couple of points that I would like to bring out here. Although we have spent a great deal of time talking about the technology and how much it will help you, I cannot stress enough that the most important element of any recruitment strategy, online or offline is the people involved. As Hank Stringer, the founder of Hire.com is often quoted as saying "Recruitment is a hiring experience, not a hiring process".

Checklists for success

Four simple steps to online recruitment success:

Step 1 - Attract the candidates

Use your company's reputation, product image, online technology, marketing and other methods to bring as many candidates as possible to your recruitment web site.

Reinforce the human resources brand and provide in-depth information about jobs, working conditions and careers.

Step 2 - Sort the candidates

Utilise sophisticated, standardised online tests and selection tools to screen candidates.

Limit the applicant pool to a manageable number

Step 3 - Make contact quickly

Work aggressively

Utilise the functionality of the automated hiring management systems to contact the most desirable candidates very quickly, before they have been contacted by other employers

Step 4 - Close the deal

Minimum requirements for the ideal recruitment experience

Respond within 24 hours

Managing expectations on all sides and delivering to those expectations

Personal Issues

Standard functions on a recruitment website

A reminder of some of the key elements your recruitment web site should have:

How much does it cost per recruitment channel?

How much does It cost in total?

The candidate experience