Aug 22
How to Reduce Your Cost per Hire by 30% and Attract the Right Candidates

How to Reduce Your Cost Per Hire by 30% and Attract the Right Candidates

Consider this scenario: Sarah, a new potential candidate has just found her way to your career site. She’s interested in learning more about your company but isn’t quite ready to start the application process. Where does she go from here? Most likely Google to conduct further research, and you never get a chance to capture her name, let alone her email address, phone number, or resume! This is just one scenario that contributes to the ever-increasing expenses involved with your cost per hire. If you’re interested in building a more efficient and effective recruitment marketing strategy, then you’ve come to the right article.

In this post, we:

  1. breakdown the official definition of cost-per-hire (CPH)
  2. apply CPH to a real-world scenario
  3. discuss a strategy to reduce your university recruiting CPH by 30%

Understanding cost per hire

Cost-per-hire (CPH) measures the costs associated with sourcing, recruiting and staffing activities that are completed by an employer to fill an open position in the organization. CPH is a ratio of the total dollars spent to the total number of hires in a specified time period.

Or, in formula representation:

(Source: shrm.org)

Let’s codify the point with an example:

Your most recent recruiting season just came to a close. Congratulations are in order because you were able to fill all 25 open positions. And you did it in 4 months. Now, let’s look at the numbers to see how effective you were with your resources.

First, the external costs would be any combination of:

  • resume books
  • career fair fees
  • travel costs
  • information sessions
  • equipment rental or purchase
  • printable handouts, swag, etc.
  • career service/faculty relations programs
  • costs to host company visits for potential candidates
  • third party recruiting services
  • third party job boards or social media networks advertising and listing fees

Let’s say you spent a total of $30,000 on these items.

Now, let’s look at your internal costs. This would be any combination of:

  • the fully-loaded salary, benefits, and professional development of your recruiting team (in our scenario, this would be prorated to 4 months)
  • costs associated with creating your recruitment marketing content
  • costs associated with building/maintaining your career website
  • time of other associates spent to interview candidates

Just to name a few…

All told, let’s say your internal costs add up to $70,000.

Adding up the expenses brings us to $100,000 spent over the 4-month period. When you spread out $100,000 over 25 hires, you’re looking at a CPH of $4,000.

Woah, guys… that seems a bit lofty… (Source: your initial reaction)

I get it. When I first tried to wrap my head around an organization actually spending $100,000 to hire 25 people, I just about fell out of my chair. But this represents a very real situation for a majority of corporations recruiting from colleges and universities. NACE’s 2016 recruiting benchmarks report stated the average CPH for on-campus recruiting is actually $4,999. And if you ask SHRM, the average cost-per-hire is $4,129.

Side note: In my personal observation and research on CPH, it’s obvious that the market is still trying to settle on a best-practice for calculating CPH. How do I know this? Because literally, every study has a disclaimer that mentions the disparity in the way CPH is calculated amongst participating companies. I’m assuming that many of you will read this, see the $4,999 CPH number, and begin to compare your own results to it (feeling comfortable, or panicking in the process). While this is a worthwhile exercise, I would highly encourage you to measure your current CPH vs. years past. To do so effectively, you’ll need to maintain consistency with the way you document and categorize your expenses. If you have someone on your team that’s decent with doing their own taxes, they’ll be a powerful asset for you in this case.

Learning from Marketo’s Carl Sweet

Let’s take a step back from the ledge and try to understand how your CPH can add up so quickly.

More isn’t always better.According to ERE, a recruiter will review an average of 250 applications for one corporate position.

We’ll begin with the sheer volume of applicants that many recruiters force through a sorting process. The traditional rule of thought is fairly simple: get more applications, hire more people. But are you doing yourself any favors by attracting irrelevant applications? Nope. According to ERE, a recruiter will review an average of 250 applications for one corporate position. Think about your own recruiting processes. Sure, if you’re attracting 250 relevant applications for every open opportunity at your company, then you are doing something right. But the data suggests that the resumes you thumb through are not relevant. How do we know this? Well, TheLadders did a study in 2012 that uncovered the fact that most recruiters spend about 6 seconds on a resume. It’s pretty simple to connect the dots on this one. It only takes you 6 seconds to scan a document and determine it’s not relevant.

Attracting irrelevant applications is costly.

Consider Marketo’s Director of Talent Acquisition, Carl Sweet.

It all started when managers and executives kept asking me, ‘How many people do I have to interview for this job?’

After digging into the data of his company’s recruiting and hiring processes he landed on an optimal number of candidates and interviews. The ratio for Marketo: 80 candidates (or applicants that appear viable), 8 interviews, 1 hire.

Think about that. Only 10% of the candidates that Marketo is attracting is even worth inviting for an interview. Said another way, if your recruiting team spends just 30 minutes per candidate exchanging emails, addressing initial candidate questions and scheduling (or rescheduling) a screening call, then they will effectively waste 36 hours on irrelevant candidates to find one successful hire.

Apply that to our scenario above, and here’s how the math shakes out:

25 hires = 200 interviews = 2,000 candidates = 900 hours spent on irrelevant candidates

And that’s if you’re operating at peak efficiency – in line with some of the most effective recruiting teams in the world.

But let’s remember that your internal time is only a small portion of the costs. Go ask your recruitment marketing team how much it costs to create the amazing content you’re leveraging to attract new applicants. Or ask your web team to list the costs associated with building and maintaining your career site. Then, there are the external costs we listed above.

I won’t spell out scenarios for each of these items. NACE did the research and packaged it up neatly in various benchmark reports.

Using Content to Reduce CPH by 30%

I had a conversation with a campus recruiting team that hires approximately 350 full-time employees from their internship each year. They also told us that they see a 2% conversion rate from the total number of students they attract to their full-time hires. Quick math on that tells us that they attract about 17,500 students to their employer brand. Think of all the questions, the emails back-and-forth, the resumes, the letters of recommendation, etc. All told, they estimate that they spend about $1,4000,000 to hire those employees.

There’s an amazing opportunity for recruiters to reduce their CPH by a significant margin. In fact, companies who are hiring from universities can reduce their CPH by 30% through the power of content. Let’s break it down.

They’re all asking the same questions.

Consider the last round of candidates you interacted with. How many of them asked a variation of a question that you’ve answered hundreds of times before?

Research from CollegeFeed shows that a significant majority of college students really only pay attention to six key aspects of your company when conducting their career discovery:

  1. People and Culture Fit
  2. Career Potential
  3. Work/Life Balance
  4. Compensation
  5. Challenging Environment
  6. Company Mission

To illustrate the point, I’ll refer back to my first campus career fair at Missouri University – Columbia. It was packed. The energy was high, and the students looked sharp. Hats off to the career services team and faculty for prepping their students and keeping the day very well-organized.

There was one point in the day where our line was getting long. We had about 25 students all decide to learn more about Better Weekdays at the same time. After the fourth student had asked me the same two questions (“What do you guys do?” and “What will I do as a marketing intern?”), I decided to invite the entire line around to form a semi-circle around our booth. The conversation immediately became a community discussion. I didn’t have to repeat myself, and they all learned more together than on their own.

Content can accomplish the same thing. Take note of the questions that students are asking your recruiting team, and create content to address the trends.

Content never sleeps.

One way content reduces your CPH is by addressing the FAQs that job-seekers will almost always have – even when they’re up at 1:00 am conducting their search. Take the time to meet with your recruitment marketing team and audit your content. Do you have content that addresses the 6 most popular areas of curiosity? Here are some questions to help you get started:

  1. Do we have any employee testimonials about our team?
  2. Do we have stories about employee growth and advancement?
  3. How do our team members feel about their work/life balance?
  4. Are we transparent about our compensation packages?
  5. What success stories can we share about serving our customers?
  6. How do we connect the corporate mission to each position in the company?

If you need a hint, our research shows that students love to consume day-in-the-life content and skills-to-acquire content. Simply stated, they want to know what they’ll be doing, and how to make themselves more marketable to your organization.

Content gets personal.

Content also reduces your CPH by attracting a more relevant candidate for your opportunities. This means your recruiters spend less time with irrelevant candidates. Less time with irrelevant candidates translates to a more effective use of time. And in this case, time is money.

The best recruitment marketers understand that their content is positioned for success when it’s targeted to an audience that:

  1. aligns to the opportunity
  2. will engage with the content

They achieve this through the power of a well-defined candidate persona. Candidate personas are semi-fictional representations of your ideal candidate. They go beyond the skills you would typically list in a standard job description. Building an effective candidate persona includes a list of competencies, aspirations, values, qualifications, and cultural preferences.

Once you have your ideal candidate in mind, you can:

  1. create content that will resonate with that candidate
  2. target your content specifically to candidates that are aligned with the persona

Content is sharable.

Another way content can reduce your CPH is by boosting the reach of your employer brand. Students (and people, in general) love to share relevant content. There have been a lot of studies since the rise of social media that try to identify why people share content. If you’re interested in a fairly comprehensive article on the subject, I’d recommend “Why do People Share Content?“.

The takeaway here is that people share for a number of reasons, but one of the most compelling reasons we share content with our networks is because we think it adds value to the people in our lives. The best recruitment marketers create content that:

  1. tells a compelling story
  2. resonates with a clearly defined candidate persona
  3. is easy for most everyone to consume and share

Bottom Line

Your recruitment marketing content can reduce your CPH by 30% because it can:

  • addresses the most popular topics (saving you time)
  • answers FAQs (even at 1:00 am)
  • attracts relevant candidates for your company/opportunity (reducing the risk of wasted time)
  • decreases the number of applicants dropping off (further reducing the risk of wasted time)
  • encourages people to promote your employer brand and opportunities (enhancing your reach with the most powerful form of marketing – word of mouth)

It won’t happen by accident.

Chances are you’re sitting on a treasure trove of good content. When I review inbound recruiting strategies with our clients, they rarely need help creating new content to attract, engage, and hire new candidates. More often than not, the problem is content distribution. Your career site is a fantastic resource of good content. But do you remember the age-old philosophical saying “If a tree falls in a forest and no one is around to hear it, does it make a sound?” Apply this to your content distribution strategy. If you create great content, but no one sees it, does it really exist?

Take your content to the people. When potential candidates do hit your career site, make it easy and interesting for them to give you their information to learn more. Then, with a timely and personal approach, begin to nurture them – each according to their unique engagement with your content. This is the level of personalization required of an effective candidate nurturing strategy. The end result? An informed, relevant, and excited applicant that pursues your interview process with vigor and confidence. I can already hear the praises from your hiring managers.

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