Prospective clients inevitably want to know quite quickly what our recruitment fees are. That’s a fair enough question. It relates to cost – one of the key recruitment metrics. Yet in our experience, too many employers fail to consider the real cost and value of different recruitment methods to their business: the return on investment (ROI).
If your cost to hire concentrates on upfront costs – such as resource time, agency fees, software and job advert costs – you’re not alone.
Less than one-fifth of organisations measure the return on investment of their recruitment activity.
According to the CIPD’s Resource and Talent Planning Survey 2017
If so, you might want to read on for what the real cost of a bad hire can mean to your business and the often-overlooked recruitment metrics required to calculate and compare the ROI of different methods.
What a bad hire can cost your business
Wasted salaries, training and recruiting costs can quickly add up. However, not only is the employee less productive; the demotivating influence extends to the team’s productivity and overall staff turnover.
You can calculate your likely cost of a bad hire on this handy calculator here.
The recruitment KPIs essential to calculating ROI
The performance rate of good and bad hires
Only 50% of hiring managers who DO measure ROI measure the performance of new hires, according to the same CIPD survey.
It’s perhaps understandable: it can be difficult to put a precise value on an employee’s input to the business. However, in a world where Brexit and disruptive entrants to the market loom at large, even just a 10% variance in performance could be the difference between your company featured in the media as a ‘one to watch’ or another sorry tale of redundancies.
It therefore pays to consider the true business impact of a new hire’s performance, such as productivity, costs saved and sales generated.
The best candidates are not always looking for roles, so a strong candidate hiring strategy requires access to both active and passive candidates – often found in talent pools and on LinkedIn. Eploy’s 2018 Candidate Attraction Report provides an at-a-glance guide to which methods provide the best quality applicants.
Interviews per hire
Only 27% of hiring managers measure the number of interviews per hire
(IF they measure the ROI).
From human resources to line managers and MDs, time is a precious commodity. Time that could be spent elsewhere.
The cost to the business of wasted interview time is much more than a line manager’s hourly wage. Could they be generating service fees or sales? Or could they be overseeing logistics operations where on-time deliveries are crucial to business success?
Too many interviews per hire can also negatively affect the candidate experience.
Many employers see recruitment services as CV-screeners for the prerequisite skills and experience. However, a consultant that truly understands your business and utilises video interviewing software could help screen for cultural fit at an early stage too, whilst reducing time to hire and respecting candidates’ time.
Read more: 5 benefits of video interviewing software
Turnover rate (are you missing rebate periods?)
The turnover rate of new hires is the second most common method used by those who DO measure the ROI (at 75%).
When comparing recruitment consultancies (or deciding whether to recruit in-house or outsource), it’s important to consider both turnover rates and rebate periods. A decent agency should offer a replacement candidate for no extra fee if they leave within a certain timescale, saving you a significant portion of the cost of a bad hire.
It’s important that you check the rebate period. Is it long enough to cover when most early turnover arises? A longer rebate period also suggests they have confidence in their ability to pick candidates that will stay the course.
Time to hire
Time to hire didn’t even make it onto the top six metrics used by those measuring the ROI of their recruitment efforts in the CIPD survey.
This is quite a shocking finding. It is one of the key KPIs we monitor at Cast UK and why we deliver a three-week turnaround with our Edge service. We understand the true cost to a business that is left without an operations manager (leaving a shift operations manager to work double-time to cover the work) or a category analyst that eliminates understock and over-ordering.
After you’ve run the ROI calculations, does that recruitment consultancy fee of 10k now seem such bad value?!
At Cast UK, we believe that good (service) is not enough. Just okay is not okay. We go the extra mile.
Our Edge recruitment bundle delivers a best-in-class experience for employers and candidates alike. We use the latest tools to provide a streamlined process that ensures the right candidate fit – on paper and in the office – reducing time-to-hire by 57% and time spent interviewing by 75%. Why not contact us about your hiring needs here, call us on 0161 825 0825 / email firstname.lastname@example.org and we’ll be in touch.
Reduce your cost to hire
Reduce time to hire by 57% with a 100% success rate
Discover how to get the recruitment EDGE here