How to Calculate Recruiting ROI

March 17, 2020
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Cait MacBrien
Director of Marketing at Drafted

Justify Recruiting Spend When Times Are Tough

Let’s cut to the chase - it’s a crazy time and we all know why. What we don’t know are the far-reaching effects this will have. Companies are already cutting budgets, laying people off, and pausing hiring initiatives. It’s a scary time to be a talent professional - there is no sugar coating it. So, we are going to arm our talent community friends with resources they need to turn this now slow hiring time into an opportunity of improvement for their company’s talent program. 

Recruiting teams are often viewed by executives as a cost center - as a marketer, I can totally empathize. I personally have been on the chopping block more than once when budget cuts and layoffs are on the horizon. It sucks, but you can’t bury your head in the sand. So let’s get into the numbers.

Show Me the Money

Recruiting much like marketing is all about the money - I measure things by cost per lead, you measure things by cost per hire. I break things down by lead source, you break things down by hiring source. See? We’re not so different!

You have to spend money to make money which brings me to my good old friend - Return on Investment (ROI). If your job is on the line, you need to come prepared with your numbers and have a game plan for where you plan to decrease spend and increase efficiency. Even if your job isn’t in jeopardy it’s still a worthwhile exercise just to see where your recruiting metrics stand. 

Here’s the info you’ll need to gather to start the exercise - 

  • Sources your hires come from
  • Cost per hire from each source
  • Avg time to hire by each source
  • How many candidates do you get from each source
  • How many hires from each source

ROI Calculator

We created a simple model to plug your numbers into that will show your average cost per hire and break down where your hires are coming from. I won’t tell you what a good cost per hire is because I’m a marketer, remember? But I will share some best practices when thinking about your data. First, look for where you get the most bang for your buck. Which source are you spending the least amount of money and getting the most hires? You will want to focus on that source and come up with a strategy to make it even better with no increased cost to your company. Let’s say the source is employee referrals - what are some ways you can tap your coworkers to get them to refer more of their network? 

Second, where are you spending the most money with very little return? That source has got to go. Come up with a game plan for a cost-friendly alternative to that source - that could mean scrapping it entirely or taking a portion of the budget allocated and moving it to a different source. Some hiring sources will just be expensive, there’s no way around that. Agencies, for example, tend to be pricey but you are probably getting a decent amount of hires through that source. The key to bringing down your average cost per hire and showing positive ROI is balancing those expensive sources with lower-cost alternatives (hint: employee referrals) and eliminating wasted spend.

👇Link below to get started on your own ROI model. 

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