How can you justify the value of your hiring strategies?
The changing role of HR leaders and their teams are quite evident in the realm of such a volatile and dynamic world of today. The question of how HR professionals can add value in this re-shaped world of work is looming around in the boardrooms of almost every company.
At the backdrop of technology, the expectations of Business Leaders have changed when they look up to HR function now. Hence, it is important that the new strategy or initiative or best practices that HR wants to bring in must be backed up by data.
In today’s scenario, the policies and initiatives that are developed by HR, need to be justified by the cumulative benefit that it brings for the organization as a whole in terms of its return on investment (ROI).
All strategies that are being developed need to be backed up by the value they bring to the table. This holds true even for all hiring strategies designed to fetch the right talent for organizations.
Here are some tools and metrics that can act as a foundation to the start of recruitment analytics:
1. Cost per Applicant (CPA)
It’s a prerogative to compute CPA as it measures how efficiently you are attracting available candidates and converting them into probable applicants. This can be obtained when you divide the number of applicants you get in a given period with the corresponding recruiting budget.
2. Cost Per Hire (CPH)
Computation of Cost per hire is done by dividing the number of hires for a given period by your corresponding recruiting budget. The efficiency of all your recruiting efforts, including recruitment marketing strategies from candidate acquisition to recruitment operations is taken care of by these metrics.
3. New Hire Retention (NHR)
A new hire retention rate consists of all hires minus turnover within a given period, especially for the first year and is a critical measure that must be computed by the TA team. It is quite simple to calculate; just divide your retained hires by total hires to compute the exact percentage.
4. Cost per Visit (CPV)
This is calculated by simply dividing your recruiting budget by the number of visitors to your site each year as CPV refers to a broad measure of how much it costs to drive visitors/ candidates to your career site. This is an important measurement because every recruitment marketing activity ultimately drives candidates to your organization’s career site.
5. Revenue per Employee
Every CFO knows this number, presumably, every HR Leader must know it and supposedly it is a necessity for every leader within the organization to be aware of this critical number. This is a core metric for many recruitment ROI calculations and helps in calculating lost or accelerated productivity. To begin with, you can simplistically compute it by dividing total annual revenue with the number of employees.
Apart from the above 5 measurement metrics for computing the ROI of hiring strategies, I also use many other metrics depending upon the problem statement specific to my client organizations. Few of them from the remaining lot are:
- Cost per Quality Hire (CPQ) which measures the basic quality hire threshold that factors manager satisfaction and time to productivity thresholds.
- Time Efficiency measures the time to fill the position from an open requisition stage to signing off the offer letter. It is helpful to know how long you can expect each hire to complete the cycle.
- Visitor to Applicant Rate (VAR) computes how effective your career site is at converting visitors to engaged applicants.
- Application Completion Rate (ACR) is closely related to visitor to applicant rate and is calculated by dividing the number of completed applications by the number of started applications.
Measuring and monitoring the above-mentioned metrics can give an indication of the effectiveness of recruiting campaigns and strategies.
There are many more related factors that need to be taken into account for calculating the exact ROI of any given hiring process or newly implemented strategy. The HR leaders must learn on how such important metrics computation happens because these are the stepping stones to recruitment analytics which has the power to describe, predict and prescribe the future course of action for them and the entire organization.