Ultimate Performance: Measuring Human Resources at Work

Recruiting Cost Ratio

Perhaps one of the oldest and most frequently used metric to measure staffing efficiency is cost-per-hire. The standard cost-per-hire is the ratio of recruiting costs to hires, using number of hires as a measure of productivity. Simply put, a lower cost-per-hire implies a more efficient or productive operation, since more hires are obtained at a lower cost. Although widely used by many staffing organizations, cost-per-hire is not an accurate metric and therefore, organizations should not measure it. Before Staffing.org’s 2000 Staffing Performance Survey, this standard had been largely unquestioned. Since then however, more and more companies have taken a harder look at cost-per-hire. Listed below are some of the inherent problems with this metric.

Geographic differences. Recruiting costs vary from one region to another. This is evident from the variances in labor markets, cost of living, and cost of services. A $4,000 per hire figure in Connecticut may reflect a highly efficient operation, while a similar figure in South Carolina may reflect a costly hiring process. Therefore the cost-per-hire metric reveals little when comparing one region to another.

Industry differences. Experience tells us that some industries (such as high technology) have more difficulty attracting candidates. Therefore, variations in cost-per-hire from one organization to the next reveal nothing about the efficiencies of their respective staffing operations. An organization in an industry ...