In today’s competitive business environment, ensuring a strong return on investment (ROI) while hiring is more critical than ever. Every organization wants to get the maximum return from the new employees, though attaining this goal is not as simple as staffing. It is a systemic process of hiring, one that goes beyond mere screening of resumes and interviewing of candidates. So, how can one put this into practice? What steps can an organization take to ensure they are not just hiring a good candidate, but the best candidate for the job? These questions are at the heart of effective talent acquisition, where the goal is not only to fill vacancies but to build a high-performing team.
According to Glassdoor’s research, the average company spends approximately $4,000 and 24 days to hire a new employee. Recruitment ROI helps organizations assess the efficiency of their hiring strategies, make informed decisions on where to invest in talent acquisition, and identify areas for improvement.
In this blog, we’ll delve into the essence of this aspect. Let’s explore how to make informed, strategic hiring decisions that yield measurable returns.
Maximizing ROI through strategic, high impact hiring decisions
Key Metrics to Measure Recruitment ROI
To assess the recruitment effectiveness and the ROI of recruitment strategies, certain key metrics should be measured. These metrics provide insights into the effectiveness, productivity, and success of the hiring process. Below are some of the most critical metrics to consider:
- Cost Per Hire (CPH): It is a key metric that calculates the total expenses incurred in sourcing a new candidate. There is a standard formula set by the American National Standards Institute in conjunction with the Society of Human Resource Management to calculate the cost per hire. The formula states – Add up the costs of both internal and external recruiting efforts and divide by the total number of hires. A lower CPH indicates a more efficient recruitment process.
- Time to Hire (TTH): Time to Hire measures the number of days taken to fill a position from the moment a job requisition is opened until the candidate accepts the offer. TTH is calculated by subtracting the day the candidate accepts the job offer from the day the candidate enters the pipeline. A shorter TTH suggests that the recruitment team is effectively sourcing and screening candidates, leading to quicker placements.
- Quality of Hire: Quality of Hire is an important recruitment ROI that measures the value added to the organization by new employees. It is calculated by taking the sum of the performance indicator percentage and cultural fit indicator percentage and then dividing the sum by the total number of indicators. The survey conducted by LinkedIn’s Global Talent Trends report showed that 88 percent of talent professionals think that quality of hire is the most crucial KPI in the recruitment process.
- Employee Retention Rate: It measures the percentage of employees who remain with the organization after a certain period, usually one year. High retention rates indicate effective recruitment and onboarding processes and a positive work environment. Retention rate is a critical metric for evaluating the long-term success of recruitment strategies.
- Offer Acceptance Rate (OAR): OAR is the percentage of job offers accepted by candidates. A low OAR may indicate issues with the competitiveness of the offer, the interview process, or the candidate’s experience. Tracking OAR helps hiring managers optimize their recruitment processes. By implementing effective retention strategies, companies can reduce turnover rates and ultimately maximize the recruitment ROI.
- Application Completion Rate (ACR): This metric is employed to determine the percentage of the candidates that complete an application process once they have initiated it. In a recent survey, it was revealed that roughly 60% of the applicants fail to complete the application process, as they are boring, lengthy, or complicated. SHRM reported that about 92 percent of people never complete online applications. If ACR is low, it means that the application is lengthy or too complex.
- Applicant-to-Interview Ratio: This is the ratio of applicants offered an interview to the total number of applications received. A high ratio may mean that the job postings are advertising positions to suitable candidates, while a low ratio may mean that the job postings need to be more specific in their ad placement.
- Quality-of-Hire: Quality-of-Hire is a global index for recruitment ROI that looks at the company’s long-term performance of new hires. This can include attributes like the new hire’s performance, appraisals, advancements, attrition rates, and other overall corporate impacts. The Quality of Hire can be evaluated over time, and organizations can point out factors that contribute to either positive or negative Quality of Hire.
Maximizing hiring ROI: Building high-performing teams efficiently
Costs to Measure
Recruitment strategies cost analysis is an important step in measuring the ROI of the recruitment strategies. Understanding these costs will enable a company to measure the cost of its recruitment against the gains it gets from the process. Here are the key costs to measure:
- Initial Costs of Hiring: The cost of hiring an employee includes all the expenses associated with attracting, sourcing, screening, and hiring a new employee. These include job advertising, the salary or fee of the recruiter, the cost of the interview, the cost of background checks, and assessment, among others. Reasonable costs must be determined to have an idea of the whole amount spent.
- Onboarding and Training Costs: After the candidate is hired, there is another cost of onboarding and training them to bring them to speed. The investment in training new employees to reach full productivity includes orientation programs, training materials, mentorship programs, etc.
- Replacement Costs: Various replacement costs arise in situations where a hire is ineffective, and the company must source a replacement. If a hire leaves the company, the costs that can be incurred include re-recruitment costs, severance packages, or lost productivity costs.
- Productivity Costs: The loss of productivity during a position’s vacant period, as well as the time it takes for new hires to become fully productive in their new roles. Productivity costs measure includes ramp-up time, team impact, and quality of work.
- Technology Costs: The expenditure on different technologies used by the company to streamline the recruitment process comes under technology costs. Technology costs relate to the tools and systems used in the recruitment process, such as Applicant tracking systems (ATS), HR software, and integration costs.
How Does EmployWise Maximize the Return on Investment?
EmployWise is designed to enhance recruitment strategies by maximizing recruitment ROI through streamlined and efficient processes. Here’s how EmployWise can help:
- Simplified Onboarding: EmployWise offers a simplified onboarding process that reduces the time and resources required to integrate new hires into the company. With automated workflows, new employees can get up to speed faster, reducing lost productivity.
- Effortless Document Handling: EmployWise’s effortless document handling feature allows HR to store, manage, and retrieve documents digitally. This reduces the administrative burden and minimizes errors associated with manual processes.
- Candidate Screening and Ranking: By automating the initial screening, it helps the company identify the best candidates faster. This reduces time-to-hire and ensures that the company only invests in top talent.
- Rapid Integration: EmployWise offers rapid integration with the existing HR and recruitment systems. This means less time spent on setup and more time focusing on strategic recruitment efforts, further reducing costs associated with technology integration.
- Comprehensive Dashboard: The comprehensive dashboard in EmployWise provides real-time insights into the recruitment processes. Track key metrics, identify areas for improvement, and continuously optimize recruitment strategies to maximize recruitment ROI.
Boost ROI with EmployWise: Streamline recruitment, optimize talent, save time
Final Thoughts
Measuring and evaluating the ROI of recruitment strategies is crucial for any organization aiming to stay competitive in today’s dynamic talent market. Start today by implementing the metrics and methods discussed, and watch as your recruitment efforts become more strategic, efficient, and impactful.
EmployWise’s data-driven features are engineered to boost efficiency, elevate the caliber of hires, and minimize recruitment expenses. By facilitating a more effective and cost-efficient hiring journey, EmployWise enables organizations to significantly enhance their recruitment ROI.
Schedule a call with us today to optimize your recruitment process and maximize your ROI.
