Are You Still Only Measuring Cost-per-Hire?

How many of you staffers and recruiters have read through the nearly 40 page document from ANSI/SHRM defining, once and for all, what the Cost-per-Hire (CPH) metric is and how it should be used? Ok, now how many of you have fundamentally changed anything about the way you run your business due to this? Probably not many of you, because the metric isn’t very actionable or very telling.

It’s nice of the American National Standards Institute and the Society for Human Resource Management to provide guidelines for an industry-wide metric, but if the metric is ultimately unhelpful, then it is a wasted exercise. This sentiment is not uncommon. The Recruiters Network has a host of qualifying statements on the page that helps you calculate this metric, saying this metric “does not take into account the length of time it takes to fill the position and the quality of the hire.” ERE.net has a particularly scathing article about this metric as well.

Is This the Best Way to Measure Cost Efficiency?

Universal metrics are tough to nail down, no matter how many pages the ANSI write about it, because companies operate differently. A CPH at one company this is acceptable might be completely unacceptable at another company. So what is the end goal of a metric like CPH? Well, if you’re just concerned with cost, then the metric you should probably track is Recruiting Cost Ratio (RCR) instead as it tells more of a complete story. Here’s an example:

RCR vs. CPH

This is from a JobVite research paper and it shows the difference between the two metrics. CPH rates Recruiter B lower in cost efficiency, but RCR takes into account the idea that higher salaries usually require higher costs to place since it looks at total salary cost. If your business is obsessed with cost metrics, RCR is something you should at least track concurrently with CPH.

What Insight Are You Really Looking For?

But even RCR, though a better metric, is only looking at cost efficiency. What about quality of hire? What about efficiency of your activities? What about the length of your sales cycle, and the conversion rate at each step in your funnel? Unfortunately, no one metric is the silver bullet to make sure your business is performing at its best. Analytics isn’t a one-time exercise; it’s something to be actively engaged in to make sure you’re ahead of the pack.

But that doesn’t mean it has to be difficult.

Employee Booking

Automated tools like ours can provide a 360 degree view of your important metrics with a fraction of the time, but even if you’re not willing to pay for a solution, you can start to make strides by choosing just five Key Performance Indicators (KPIs) of your business to actively monitor and improve. Here’s our take on the top 5 recruiting KPIs which should help you prioritize what you want to benchmark. Even if it takes you an hour a day in Excel, analytics is proven to show huge ROI that makes any work you put into it worthwhile. Having historical data to track will show you not only how you’re performing now, but in which direction you’re trending.

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Samuel Clemens
Samuel Clemens
Sam is founder and chief of product & marketing for InsightSquared. Previously, Sam was VP Product at HubSpot, VP Product at BzzAgent, and on the founding team at Elance.com. His background also includes venture capital with Greylock Partners, the Algorithms group at Amazon.com, and management consulting with Booz Allen Hamilton. Sam has an MBA from Harvard Business School and a B.S. in Applied Math from Yale. In his off time he dives shipwrecks in the New England area.
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