How to Determine the ROI of Hiring
In today’s ever-changing business landscape, you need to hire the best person for the job. To do so you need to know the ROI of hiring for your business.
At the end of the day, people make up your business. Your team is your business. The success of your business heavily depends on the people in the day to day scenes, working with you. But how can you really understand the return an employee has on your business? Are they worth the investment?
Understanding the ROI of each hire will help you decide, who is the best candidate, what profile to look for, and what roles to hire for. With this understanding, you’ll be able to find the best talent and differentiate from other businesses in the industry.
Why Do You Need To Calculate The ROI Of Hiring?
Recruitment ROI also known as the ROI of hiring lets you find and measure the value of each of your next hire. To get the best results from your hiring initiatives, you need to know the Return on Investment or ROI in your hiring process.
Knowing so will help you understand the value of your hiring process and help you to optimize your hiring strategies to increase the overall success of your company.
While calculating the ROI of hiring, you must consider four different and unique factors. Let’s dive into them below.
1. Measure the first-year attrition rate
You need to measure the first-year attrition rate. Doing so will help you determine and understand how many of your new employees are leaving your business within one year.
This is important to know because if your employees leave within a year after hire, you won’t be able to return the investment that you made. It’s important to retain your employees, not only for a positive brand image, but also overall return on the time invested in training, etc.That’s why it’s vital you make the right hire from the start.
2. Assess the Offer Acceptance Rate (OAR)
You must assess and measure a company’s offer acceptance rate or OAR. This is a direct measure of your recruitment efforts. To fill a role, your team invests a lot of time and energy into the process. Whether that’s from reviewing resumes, interviewing, etc.
But after all these efforts, if a candidate does not accept your job offer then it means there were some missing pieces in the process or on the offer. That could be your pay is not competitive, you did not create a positive brand image during the process, or you didn’t move fast enough with each candidate.
Investing in a recruiter can help to increase your OAR and decrease your operational costs. They can make sure to manage all of these pieces and ensure a positive acceptance.
3. Understand the quality of the newly hired applicant
You must understand the quality of new hires because it will help you determine if a newly hired applicant is a good choice for your business and if they are, adding more value to your company.
You can measure the quality of newly hired applicants by using this, Quality of New Hire (in percentage) = (Indicator in percentage + Indicator in percentage) / Number of Indicators.
It’s important to understand how much it costs to acquire your new hire. Sometimes it’s better to invest in a fractional recruiter so you can avoid paying an annual salary to a recruiter.
4. Measure the Time To Hire (TTH)
Time to hire or TTH, is the period that a successful job candidate takes from the moment he/she signs up for a job until they are finally hired. This is just a measure of the time of your hiring process.
Finding the Time to hire or TTH of your hiring process will let you optimize your hiring strategies to minimize costs and add value to your business. This is because an increase in Time to hire or TTH will significantly increase your hiring costs.
If you’re looking to decrease your TTH, consider working with a recruiter to help improve the overall process and find your hire, faster, without reducing quality.
Final Thoughts
Maximizing your business's hiring efforts while minimizing costs and attracting top talents will help your company stand out from competitors. To enable such a thing to happen, you must determine the Return On Investment or ROI of your hiring.
You should also remember that hiring is an ongoing process for it to be fruitful you need continuous evaluation and improvement. Consider working with a recruiting partner to help increase these metrics and find quality candidates that will stay with your company. Doing just that will help contribute to the overall growth and success of your business ventures.
