The most often overlooked cost of running a business is recruitment. This is especially true of new business owners, but even people who have run their companies for years don’t take the time to consider how much money they will have to spend to maintain the necessary staff to keep operations running smoothly.
However, the fact of the matter is that it can cost quite a bit in terms of both actual capital expenditure and employee hours, not to mention costs related to efficiency issues caused by understaffing until you get the right candidate.
Step 1: Estimate the Total Number of Positions You Need to Hire For
This should be obvious, but it’s also crucial. Nothing happens until you know who you need to hire for what positions. This can be incredibly difficult to do accurately, especially if you’re not used to hiring for a particular type of job or came up through another track.
Fortunately, there are a number of great ways to get fairly accurate estimates.
Part of your data collection for this should involve speaking to managers to identify objectives and what they feel they will need to achieve them. Be sure to also budget for unexpected vacancies based on previous turnover numbers or averages for your industry/region.
It can be incredibly helpful to put all of these numbers into a chart based on department, quarter, or other relevant splats. The idea is to make your data as visually easy to comprehend as possible so that you’ll be able to literally see holes in your estimates before you get too far into the process.
Step 2: Estimate Your Costs
There are a lot of small things that can go into this, so I recommend making a list before you even attempt to start searching for numbers.
First, you have basic costs. This can include job board fees like Indeed or LinkedIn, branding efforts like buying space at recruiting events or creating educational materials, and, of course, paying your recruiters to do their jobs.
Recruiting technology is also a part of this. Do you use video interviewing tools for remote positions? Background check services? I hope you have an Applicant Tracking System. And, of course, we recommend getting a programmatic job marketing solution like Talentify.
This is also a good time to think about investments that can improve your recruiting, like candidate screening software, referral programs, and other creative solutions to narrow the candidate field.
Finally, have a category for miscellaneous costs. This is where things like page redesigns, travel costs, partnerships with universities and other hiring outlets, and basically anything that doesn’t fit into one of the above categories go.
Step 3: Calculate Your Cost-Per-Hire
Now that you’ve collected your data, it’s easy to calculate your cost-per-hire.
Internal costs are things that specifically refer to payments that stay within the company, such as the cost of recruiters and referral programs. External costs are things like job boards, agency fees, recruiting technology, etc.
The important thing to realize about cost-per-hire is that there are a number of ways that you can adjust it. It is absolutely vital that you calculate your own cost per hire rather than relying on averages, which can vary wildly from region to region, or even city to city. Again, by breaking down your costs, you can identify pain points easily and get an accurate idea of exactly how to improve your hiring.
Recruiting Doesn’t Have to Be Expensive
You don’t have to waste money on recruitment efforts that don’t go anywhere. Instead, treat recruitment like you would treat any process in your company. Examine how it’s done, identify pain points, and make the changes that you need to in order to solve them. Whether that involves re-prioritization, reorganization, or even investment in new technology, making these changes will be a net benefit for your company.