How To Effectively Measure Recruitment ROI
One of the biggest pain areas for all employers is to calculate and set aside a recruitment budget. Traditionally, ROI has been calculated on the basis of cost savings and profit generation against the cost of investment. This compels organisations to focus on cost, thereby increasing the use of lower-cost recruitment channels. The 21st century dilemma here is that cost savings do not usually guarantee quality. So, how can the quality metric be included in ROI calculation?
Relative Financial Impact
The most basic means to measure quality is to convert candidate quality into financial impact. Over a set period of time, the cumulative productivity and revenue generated by each hire can be juxtaposed against the total cost of hiring the employee to gauge the relative financial impact, and thus the Return of Recruitment Investment, for that employee. Discerning employers maintain an ROI scorecard for each new hire and thereby also assess the effectiveness of different recruitment channels.
Metrics are a quantifiable measurement that can be compared to pre-selected benchmarks. Used correctly, they can align recruitment efforts to business objectives. The choice of metrics needs to be carefully monitored. It is important for recruitment leaders to collaborate with business leaders to understand goals in order to define what is important and expected from each recruiter. The ultimate purpose of these metrics is to provide a credible platform to measure recruitment performance and accountability.
As discussed, recruitment metrics in the past were very transactional and cost-driven. Even worse, they encouraged recruiters to “sell” candidates internally. The short-sightedness of this approach would invariably lead to a quality shortfall. Global studies indicate that some of the leading companies use metrics measuring “Quality of Hire”, “Time to Productivity”, “Time to Hire” ad “Job Vacancies Outstanding” as the metrics of choice while assessing ROI. Companies are increasingly also conducting candidate and hiring manager surveys to ensure that the quality of the recruitment process was also consistently robust, thereby positively impacting the Employer Branding of the organisation.
Source: Navigos Search