Cost-per-hire: Definition and importance
Cost-per-hire is one of the most important hiring and recruiting metrics used by HR professionals. If a company wants to fill its open positions, it has to spend a certain amount of financial resources in order to find and hire the ideal job candidate. Cost-per-hire is the metric created to measure the total cost of acquiring new employees.
The Society for Human Resource Management (SHRM) American National Standard defines cost-per-hire as the sum of all internal recruiting expenses (such as HR salaries, office expenses etc.) and external recruiting expenses (such as third-party recruitment agency fees, job board expenses etc.) divided by the total number of hires in a certain period of time.
Measuring, calculating and tracking your cost-per-hire is important because it provides you withvaluable insights on the cost effectiveness of your recruiting process. These insights will help you to spend your recruiting budget more wisely by making smarter, more informed investment decisions.
That way you can achieve better results with less money, which is the ultimate goal of every HR department and the bottom line of every successful business.
How to reduce your cost-per-hire
Here are the five most effective ways to reduce your cost-per-hire:
1. Embrace an analytical mindset
If you want to reduce your cost-per-hire, the first thing you need to do is to embrace is an analytical mindset. Trust me, if you want results, you need to religiously track, measure and analyze your data. It’s the only way to gain valuable insight into what works for your company.
There is no universal magic formula that can guarantee a lower cost-per-hire for every company in every industry. This is why you need to dive deep into data and find out the secret to your own recruiting process. By analyzing your recruiting expenses, you can get a clear view of what provides the best return on investment. That way you can stop wasting your money and use your recruiting budget more wisely.
2. Take advantage of the free job boards
Posting your job ads on some of the most popular job boards is expensive these days. For example, to post a job on Monster you need to spend $275 per month. To post one job per month on Career Builder you’ll need $219. And a single post on Dice will cost you $395 per month.
What most employers don’t know though, is that the two of the first three most popular job boards with the highest traffic offer employers a possibility to post their jobs for free.
There are many other free job boards you can take advantage of to reduce your cost-per-hire. One of them is Jora, where you can post your jobs by filling in a short form (no registration required).
Then there is Post Job For Free, where employers can post jobs, search through a resume database and send messages to resume posters free of charge.
If you’re working for a startup, you can post your jobs for free on Angel List, and if you’re an employer hiring for freelance work, part-time jobs or flexible jobs, FlexJobs is your perfect (free) choice.
3. Leverage employee referral programs
Employee referral programs are your best best for reducing your cost-per-hire. According to research, employee referral programs can save companies $3,000 or more per hire. Research also proves that employee referral programs improve not only cost-per-hire, but also time-to-hire and quality-of-hire.
Data confirms that referred candidates make the best employees in many ways. Besides being the least expensive to hire, they also they take the least amount of time to hire and they stay longer with companies than candidates that come through other channels.
If you want to introduce an employee referral program to your company, a great way to do that is to organize a so called “referral-a-thons”. Referral-a-thons are informal company gatherings where you aim to collect as many referrals as you can in just one hour. To make this process fun and engaging for your employees, consider serving pizza and beer, or smoothies and fresh fruit, whatever is more appropriate for your company culture.
If you want to enjoy all the benefits that employee referral can offer, you should take the next step and implement a structured employee referral program.
4. Use social media
Using social media to recruit is another great way to significantly reduce your cost-per-hire. There are many ways in which social media can help you reduce your recruiting costs. For example, you can use social media to proactively search for candidates totally free, to promote your Employer Brand and showcase your company culture.
However, the most important way to have a direct effect on your recruiting budget is to advertise your open job positions for free or at a very low cost.
Social media is a great channel to spread the word about the positions you are looking to fill in a simple, fast and affordable way. In order to reap all the benefits social media can offer, you should turn to your best employer brand ambassadors—your own employees.
Ask them to leverage their professional and personal networks and help you spread the information about your job openings by sharing your job ads on their personal social media profiles.
According to Hootsuite, employee advocacy on social media can be incredibly beneficial for organic reach. When content is shared on personal profiles (rather than the company’s), they generally reach a higher percentage of followers.
Research shows that content shared by employees also gets eight times more engagement, on average, than content shared from a company’s profile, and is re-shared 25 times more frequently.
5. Build talent pools
Building and maintaining talent pools filled with qualified, engaged candidates takes a little bit more time and effort than the previously mentioned methods for reducing cost-per-hire; however, it is totally worth it. Imagine if every time you had a job opening, you had a pool of talent from which you can just pick the best one! Sounds great, right?
This is the reason many recruiters have started building high-quality candidate database. It is the most cost-effective way to reduce your cost-per-hire in the long run.
So how to get started with building your talent pool? What are the best ways to fill your talent
pool with the qualified candidates? Most companies fill their talent pool with candidates who have applied for their open job positions. However, in order to gain a competitive advantage, you need to adopt a proactive approach and reach out to passive candidates.
Remember, these are the candidates who are not actively looking for a job because they are already employed. In order to attract this target group and convince them to join your talent pool, you must give them a good reason to do it.
In other words, you need to provide these passive candidates with something valuable in return. This is where inbound recruiting comes in. By creating interesting and engaging content (such as company culture videos, employee stories, blogs written by your existing employees about the exciting projects they work on, etc.) you can attract the attention of passive candidates and entice them to choose your company as their next employer.
Lower your recruiting expenses and advance your hiring process
When it comes to hiring, every company has the same goal: Hire great people with less money.
In this article I presented five highly effective ways to reduce your cost-per-hire.
Implementing them will help you lower your recruiting expenses and advance your hiring process.
Kristina Martic is a Director of Marketing and Employer Branding at TalentLyft. She is an experienced digital marketer and a certified Recruitment Marketer passionate about latest marketing and recruiting trends.
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