Posted in: Communication, Employment, Recruiting, Special Report
Good news in the back-and-forth tug-of-war between Human Resources pros and the CFO’s office over the expense of making a new hire: Now there’s a way HR can measure the investment and show the return in terms the Finance people can understand.
Human Resources and the money-watchers often seem to struggle to find common ground (or even a common language) when trying to attach a price tag to the cost of making a new hire, to determine if it’s a cost-effective decision.
Now, it’ll be easier for HR to show, track and crunch the numbers measuring recruitment and hiring costs.
That means HR will have a data-driven approach to better help justify hiring recommendations — in a language the Finance people can understand.
Fortunately, it’s not as complicated as it sounds.
The new standard for calculating cost per hire was devised by a group of HR industry leaders, with the blessing of the Society for Human Resources Management (SHRM). The standard they came up with was then approved by the American National Standards Institute.
The cost-per-hire metric ensures consistency in comparisons and decision-making.
CPH = (External Costs) + (Internal Costs) / Total Number of Hires in a Time Period
External Costs encompass recruitment-driven spending such as advertising, travel costs and placement agency fees.
Internal Costs describes whatever in-house resources were put to use, such as the salary and benefits of the people involved in the hiring, and the organization’s technology costs.
Any success stories you’d like to share about helping to justify a hiring decision using pocketbook tactics? Write in the box below.