Metrics – Are You Measuring
the Right Stuff?
A human resource executive stood in front of his peers and
was very proud to report that their goal of reducing the
cost per hire by 15% for the year was met. Imagine the embarrassment
of the executive when asked by the Chief Financial Officer
why the total recruitment cost increased by 25% over the
same period of time. It turns out that the organization hired
25% more employees than the previous year with no appreciable
increase in overall number of employees. What happened is
that turnover increased. The emphasis placed on meeting their
cost per hire goal overshadowed the resultant lower quality
Cost per hire is one of the most misused measurements of
the effectiveness of an organization's recruitment efforts.
As a stand alone measurement, cost per hire is virtually
useless. A measurement of cost per hire must be looked at
in conjunction with the quality of hires. A better look at
the effectiveness of your recruitment efforts is tenure of
employees leaving the company. What is the percentage of
employees leaving within the first 90 days? Six months? Two
Turnover results in higher costs and lower productivity
and the direct recruitment cost to find a replacement is
only about 10% of the total cost of turnover. When an employee
is missing, other employees are forced to fill in or work
overtime; the cost of unemployment insurance increases, the
manager must make time to place an ad in the paper, review
resumes, screen telephone calls, interview candidates, check
references, etc. If the position includes relocation or agency
fees, the cost goes up.
The truth be told, it is more important to spend more up
front to ensure that the hires you make are the best suited
for your organization. A bad hire will cost the company up
to 10 times or more than the recruitment cost to fill the
position. A hiring mistake results in lost productivity,
lower morale among the good employees, loss of credibility
of management for making such a huge error and maybe a discrimination
charge or a lawsuit. It may be impossible to put a price
tag on a bad hire.
What is your measure of recruitment success?