3 Ways You Can Reduce Your Cost Per Hire (and Still Land Top Talent)
Can You Hire More Efficiently Without Compromising on Quality?
When startups or expansion-stage companies decide to grow their employee base, the impulse for many managers is to hold out until the “perfect” candidate walks through the door. In reality, things rarely work out so perfectly. Many factors and preferences go into determining which candidates are more appealing than others (and which companies are more desirable for potential employees, for that matter). The aim is to strike the right balance and find alignment that results in happy hiring managers and happy candidates.
In order to get to that point, companies often need to rethink their specific requirements and hiring strategies, while candidates also need to be flexible on their laundry list of needs from potential employers. All in all, the process of making a successful hire can take anywhere from a few weeks up to several months — and the longer it takes the more it can cost.
Why Cost Per Hire Matters
One metric companies use to capture the costs incurred throughout the recruitment process is the cost per hire. Companies use a range of formulas to calculate this metric and take into account different cost factors. Regardless of the formula used, it is critical that companies acknowledge the full cost of hiring their talent in order to determine how to improve the process and gain new efficiencies without comprising the quality of candidates.
Here are some suggestions for how companies can do just that.
3 Ways You Can Reduce Cost Per Hire (and Still Land Top Talent)
1) Understanding What Matters Most and Why
When it comes to the list of standard job requirements for a role, it is critical that recruiters and hiring managers are clear on which are absolute must-haves and which may be negotiated. It is also important they understand the rationale behind designating specific requirements as absolute. Often, having a discussion around why a requirement is a must-have can help make it more clear exactly which types of candidates are most desired by the company for a particular role.
This single factor alone can help weed out potential candidates much earlier in the process and reduce the amount of time and costs associated with interviewing candidates who ultimately won’t move forward.
2) Determine Cultural Fit — Early On
“Great on paper, but not a cultural fit.”
I can’t tell you how many times I’ve come across strong technically competent candidates who have personality types and/or characteristics that just don’t seem to resonate with the company culture. In order to identify (i.e., remove) these types of candidates early on in the process, recruiters and hiring teams need to communicate — even for just a few minutes — to clearly articulate what characteristics and personalities constitute a good fit.
In other words, hiring managers and relevant team members need to share what they would love to see in potential employees that would make them look forward to working them everyday. These can be very specific requests or may involve scenario-based response preferences.
At an organization level, the company needs to establish a clear set of principles that outline its culture and the qualities that are most admired and valued amongst its employees. These two factors can go a long way toward streamlining the hiring process and moving forward candidates who are not only technically competent, but also strong cultural fits.
It is important to keep in mind, however, that this single factor needs to be considered in the context of the list of must-have’s you ironed out at the beginning of the search (see #1).
3) Pay a Higher Salary to Reduce Your Hiring Costs (No, Really)
It seems illogical, but in reality, paying a highly desired candidate a few thousand dollars more to sign often goes a long way toward keeping the cost per hire down. Not to mention it can also potentially improve revenue in the long run thanks to their top performance. Let’s explore this point further.
Think about the amount of hours that many of your employees invest into interviewing potential candidates. That’s valuable time that could have been spent on writing new code, advancing a sales lead, or any other activity essential to the success of your business. Instead, your employees were switching their focus towards evaluating the merits of a potential new hire. Now imagine everyone is on board — they love the individual and can’t wait to work them. The only obstacle to get them to sign is five or ten thousand dollars (maybe a bit more, maybe a bit less). What do you do?
In this case, the decision makers need to really think about the amount of money that they could lose due to reduced productivity should the candidate turn down the offer and the entire process start over from scratch (that assumes there is only one leading candidate, but in highly specialized/complex searches that can often be the case).
The solution: pay more to save even more!
The examples illustrated above provide some insights on how companies can reduce their hiring costs without compromising candidate quality. What are some ways in which you have streamlined the recruitment process, thereby reducing your cost per hire while continuing to attract and hire top talent in your company?