Here’s Why It’s Important to Know Your Cost-Per-Hire|Here’s Why It’s Important to Know Your Cost-Per-Hire

Here's Why It's Important to Know Your Cost-Per-Hire

As someone who spends the majority of his days helping clients get the most out of Glassdoor, it’s shocking to hear that many companies don’t know what their cost-per-hire (CPH) is. To be fair, CPH is definitely not the only way to measure return-on-investment (ROI) – there are many other success factors to consider.

For example, consider the quality of applicants you’re receiving and where your candidates are going to research your company. How many applications does it take to get one hire? How long do those hires stay at your company? Do you know how to measure the impact of your employer brand?

Why knowing your cost-per-hire matters

It’s crucial to have a solid estimate of your CPH. Knowing this figure can help you make smarter investment decisions, define your referral bonuses and save your organization money in the long run.

Sometimes when I ask my clients about their CPH, they tell me, “We don’t track that!” or “That’s not important to us.” While I understand there are other important metrics in the recruitment process, to really know how your investment is doing you have to be able to track how much each applicant and hire cost your company.

How to get more involved

One of my clients, from a large tech company who hires about 500 people annually, came prepped to their last company board meeting with a comprehensive report detailing their Top 10 hiring channels. Great! This analysis helped their management see at a glance who their top recruitment vendors were—but what about the cost? Where does that fit? If you’re paying your recruiting vendor more money for fewer hires, is that channel really working?

How Glassdoor can help

On the sales team at Glassdoor, we calculate factors like CPH on a daily basis. Still, many companies don’t see the value in calculating it.

Tracking yet another recruitment metric seems like a daunting task -- I understand that. Often, it can feel like just one more factor to consider in a laundry list of metrics to report on. And, personally, I believe recruiters and HR pros have some of the most difficult jobs in any company. Without hiring quality people, a company can’t grow and hit revenue goals.

So why does CPH matter?

Imagine a world where you can hire people with less money, faster. At Glassdoor, this is one of the many ways we’re trying to help companies. On average, we see 2X better applicant quality and 30% lower CPH than most other recruitment channels.

How to calculate your cost-per-hire

Calculating your CPH isn’t difficult. Here’s what you need to know:

  • How much did you spend on recruitment last year? (This includes everything: paid sources, HRIS systems, recruiting events, etc.)
  • How many hires did you make last year?

Now divide those hires by how much you spent, and you’ll be one step closer to understanding your CPH.

Want our advice?

To save money and hire better people, hold your recruiting vendors accountable on matching or beating that CPH. Use this number to make better investment decisions so you can save money, spend money where it matters and hire quality people for less.

Knowing your CPH will make your life much easier. And, don’t get me wrong, CPH isn’t the only recruiting metric that matters, but knowing it will take you one step ahead in this war for talent.