Quality Per Hire Vs. Cost Per Hire

Most of us who are involved in recruiting focus on the concept of cost per hire. We all want to hire great candidates at the lowest possible cost. Average costs per hire are running anywhere from a low of about $3,000 per hire to as much as $6,000 per hire depending on the industry, level of hire, and geographic location. But, whatever you are paying to make a hire, it is probably more than it used to be. Labor shortages, a great economy and savvy candidates all have worked to drive this cost higher. The Saratoga Institute (http://www.sarains.com/index.html} and the Employment Management Association (http://www.shrm.org/ema/index.html) both have a model for calculating the cost per hire. 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. But let me ask you this: what would it cost to recruit a Mark McGwire or a hundred other well known or famous individuals? Would their potential performance be worth the cost? Would you really care about how much you spent on recruiter salaries and benefits, travel and entertainment to get one of these individuals? I think most of would agree that ‘cost’ is a relative term and doesn’t make much sense when compared to total possible achievement or accomplishment or performance of a given individual. Cost per hire is so small in relation to the total salary and to the total impact an employee can have for good or evil on an organization that it is absolutely unimportant in the grand scheme. Focusing on cost per hire can have the effect of either hurrying the hiring process by encouraging quick hiring of unknown candidates, or slow the process as less is spent to advertise or promote which reduces the candidate flow. I believe that as labor shortages make recruiting more and more difficult, the truly excellent recruiters and the truly high performing candidates will be chosen no matter what the cost. I also believe that hiring ‘cheap’ may be perceived as lowering the quality that you are bringing in. My advice is to focus on performance and productivity as the primary measures of how well your recruiting function is doing. Find ways to measure the effectiveness of new employees over six, twelve, and more months. Use your analytical skills to do this, not to measure the tiny costs of recruiting someone!

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Kevin Wheeler is a globally known speaker, author, futurist, and consultant in talent management, human capital acquisition and learning & development. He has founded a number of organizations including the Future of Talent Institute, Global Learning Resources, Inc. and the Australasian Talent Conference, Ltd. He hosts Future of Talent Retreats in the U.S., Europe, and Australia. He writes frequently on LinkedIn, is a columnist for ERE.net, keynotes, and speaks at conferences and events globally, and advises firms on talent strategy. He has authored two books and hundreds of articles and white papers. He has a new book on recruiting that will be out in late summer of 2016. Prior to his current work, he had a 20+year corporate career in several San Francisco area tech and financial service firms. He has also been on the faculty of San Francisco State University and the University of San Francisco. He can be reached at kwheeler@futureoftalent.org.