ISO/TS 30407:2017

Human resource management — Cost-Per-Hire


0.1   General
Cost-Per-Hire (CPH) is a commonly used metric in recruitment to measure the efficiency (defined in financial terms) to fill an open position within an organization. The information provided from the use of this metric assists the recruitment function of human resources in terms of the budgeting and benchmarking of recruitment costs. This course covers the definition, assembly, and documentation techniques required to produce the CPH.
A central requirement in the design of this document is to provide practitioners with a standard tool to calculate metric CPH. This course allows the calculation of accurate and comparable costs of recruitment through an algorithm to calculate the recruiting costs. Although this course is structured at a high level, specific considerations and responses are also addressed for consideration by individual organizations based on their unique hiring environments and requirements.
This course defines three types of CPH formulae.
  •  Cost-Per-Hire Internal (CPHI) defines a formula and methodology for creating the CPH measure appropriate for a particular organization. This metric is not designed for comparison with other organizations’ CPH data. It is designed to be a comprehensive reflection of CPH data for a single organization.
  •  Cost-Per-Hire Comparable (CPHC) defines a formula and methodology for creating the CPH measure appropriate for comparison across organizations. This metric uses a similar methodology to CPHI; however, it uses a subset of data that is more likely to be used across organizations and is helpful in building acceptably strong comparisons of costs between organizations.
  • Hire-Cost-Ratio (HCR) defines a formula and methodology comparing the total cost of hiring against the total compensation of the newly hired individuals in the first year of their employment. This formula varies from the CPHI or CPHC only in the denominator; whereas CPHI or CPHC are ratios of costs to the number of hires, the HCR is a ratio of costs to the total first-year annual compensation of the new hires.
Recognizing that organizations operate differently, and incur unique costs, this course allows for variance within organizations while still providing a robust methodology for creating a CPH metric that enables comparison between organizations.
A CPH metric does not fully describe the adequacy of a recruiting effort within an organization. Variances of recruiting costs exist based on position type, position level, external market demand, and geographic region. In addition, a cost measurement dimension does not account for other key factors in making recruiting decisions, such as the time it takes to fill a position, the quality of hire, or customer (hiring manager and candidate) satisfaction. It does not measure any post-hire costs or damage to the organization by not having the employee in place.
0.2   Using this course
Organizations use the CPH metric to measure the cost of a recruiting operation. Organizations have found the metric useful in understanding their own internal operations with regard to recruiting and in identifying areas for improvement. Known uses of the CPH metric include those listed below.
Uses of CPH metric

— As benchmark data to be compared with data from other companies, competitors, other divisions, etc.
— As a budget planning tool, quarterly and annually
— As a comparator in recruitment process outsourcing (RPO) decisions
— As a factor in strategic planning and budgeting tasks, to determine future costs in investment decisions
— As a component of tracking and assessing the total cost of workforce turnover
— As an ongoing measure of the recruiting function’s overall performance

Departments and individuals who perform, manage or evaluate recruiting costs
— In setting sourcing budgets and strategy
— In assessing source cost-effectiveness
— As a measure of process improvement success
— As a component of overall recruiting process efficiency
— In measuring and comparing sub-group performance
— In measuring and comparing hiring performance by employee segments, such as professional versus hourly hires
— As a measure of individual recruiter performance
— As a screening criterion in the interview/selection process for recruiter hiring
— As a proficiency benchmark in recruiter training
— As an input in workforce planning scenarios

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