SHRM Working on ‘Cost Per Hire’ Metric

The report on the ERE.net Web site said a draft standard is now being reviewed by members of SHRM’s Staffing and Workforce committee and will then be submitted to the American National Standards Institute where it can be deemed official.

“As the number of standards grows — and SHRM is already working on others — HR will join other business units in having a uniform set of metrics by which to measure and be measured,” the blog post asserted.

According to the report, for example, the proposed standard points out that in addition to factoring in things like job posting, resume searching and candidate travel costs, the “cost per hire” could also include a share of overall office expenses. The proposed standard calls it an indirect cost and says office expenses include “a representative portion of rent, capital expenses, and incidentals incurred while supporting the recruitment function.”

The blog post said that if office costs are not available, HR personnel should “take a percentage of overall office costs based on recruiting headcount.” As the standard notes, “If exact data on these expenses (is available), then that data should be used.”

The blog said the SHRM task force developed three metrics for Cost Per Hire: a “Cost Per Hire Internal” includes a few more costs, principally for hiring manager time and recruiter training, than does “Cost Per Hire Comparable,” which excludes some costs, principally the hiring manager time.

Finally, according to ERE.net, there’s a “Recruiting Cost Ratio,” which compares recruiting costs to total first year compensation of all the hires made during the sample period. The point of this standard is to offer a formula that “normalizes recruiting costs based on compensation as a proxy for the relative value of the new hire to the firm.”