How to Measure Return on Investment in Recruitment?

Measure the Return on Investment in Recruitment

How do we measure the Return on Investment in recruitment?

“It’s important to understand what the “gain” really is and evaluate it across several quantitative and qualitative measures” – Deloitte

If you want to measure the Return on Investment in recruitment, there are a few key metrics that you should consider: time to fill, time to hire, quality of hire, cost of hire, and turnover rate.

1. Time to fill

The time to fill with the time to hire might sound the same but they are 2 different metrics and should be treated separately.
While the time to fill tells you how fast your hiring process is moving, the time to hire tells you how quickly you identify the best candidate.

How to calculate the time to fill?

The time to fill represents the total number of days you need to fill a position from creating a job opening to hiring the new employee.

2. Time to hire

Workable has come up with a formula to calculate the time to hire:

Time to hire = Day candidate accepted the offer – Day candidate entered the pipeline

Statistics say that 57% of job seekers lose interest in a job if the hiring process is lengthy. That means that you can lose great candidates if your team isn’t fast enough.

3. Quality of hire

The quality of hire measures the value that new hire brings to your organization and according to LinkedIn, 50% of companies consider performance reviews (or just performance in general) when measuring the quality of hire.

So how do we measure it?

Quality of Hire (%) = (Indicator % + Indicator %) / Number of Indicators

Quality of Hire (%) = (Job Performance + Ramp-up Time + Engagement + Cultural Fit) / 4

(Source: Harver)

4. Cost of hire

The cost of hire is not something to rely on taken alone. It doesn’t say anything about the quality of hire, only the possible cost of your recruitment efforts: advertising fees, recruiter pay, and benefits, relocation costs, recruiting agency fees, etc.

The formula for the Cost Per Hire:

CPH = (Total internal + total external recruiting costs) / total number of hires in a specific time frame

5. Turnover rate

Most companies use the annual rate calculation to find out the turnover rate, which is the following:

Annual turnover Rate % = Number of employees who left / [(Beginning + ending number of employees) / 2] x 100
Who, when, and why do they leave? – are the questions you should ask to paint a useful picture and analyze your turnover rate.

Why is it important to measure these metrics? Just answer this question: How can you improve something you cannot measure?

Reach out to us learn more.

Leave a Reply