Reducing cost per hire without impacting quality

Last updated:
May 12, 2020
December 19, 2021
min read
Ingrid Stommer
Table of contents

When your company has a vacancy, every day it goes unfilled represents a day that work is not being done or that other employees are being asked to extend beyond their usual parameters. Getting the position filled is important, but it can also be expensive.

If you're actively seeking new employees, or want to be prepared the next time you have an opening, here's what you need to know to reduce your cost per hire.

Know your costs

Before you can begin reducing the costs of your hiring process, you need to know how to calculate cost per hire, and that means knowing the ways recruiting can cost your company money:

  • Advertising costs to promote posts about your job listing
  • Reduced effectiveness as new employees get acclimated to the role
  • Fees paid to recruiting agencies or job listing sites
  • Referral bonuses paid to staff members for suggesting a candidate who earns the job
  • Staff hours by other employees dedicated to the hiring and training of new staff
  • Training time where the new hire is not spending working hours on their routine tasks
  • Travel and lodging costs if conducting a search that requires flying in candidates for interviews

Understand the importance of quality

Your company's cost per hire is an important metric to understand, but you need to do so with the proper context. While reducing your spending is often an effective way to improve your bottom line, this is only true up to a certain point. If you tighten the belt too much, you may find that you're saving a little in the hiring process but missing out on significantly more as a result of hiring the wrong person for the position. You need to measure your cost per hire versus quality hire percentages.

There is nothing more important at a company than finding the right employees to work for you. If you find somebody who thrives in the position and becomes a longtime member of the staff, then they will justify the cost of hiring them many times over.

The key when working on your cost per hire is finding the right balance by reducing unnecessary excess spending without canceling necessary parts of the hiring process.

Be on the lookout for wasteful spending

There's no singular best way to recruit candidates for an open position, and what works at one company is not guaranteed to work at a different company. This is where tracking your previous hiring efforts can help.

As you start to have metrics on more and more hires, you can begin to notice trends in the candidates you are seeing. If you notice that a particular method of recruiting is consistently producing high-quality candidates while another is mostly providing applicants who are not advanced in the process, you can adjust your budget to reduce wasteful spending on the ineffective options.

Identify internal promotion opportunities

Not only is promoting from within an excellent way to improve employee morale and encourage hard work within your company, but it also has a positive effect on your cost per hire. The resources required to generate a viable candidate internally are less than going outside of the company and recruiting, which means the more feasible options you have from your existing staff, the less money you will have to spend on filling positions on average.

Hiring internally not only saves money on the costs of posting your job but also on production and integration after hiring. Because an internal hire is already comfortable and integrated at a company, they are better situated to jump directly into the flow of work with minimal time lost to onboarding and getting familiar with the rest of the staff.

Ask for internal referrals

Anytime you can find viable candidates for an open position without having to spend any money on them, that's a way to increase the efficiency of your hiring process. One of the simplest ways to find new applicants for your open positions is to seek out referrals from within your company.

Your staff is likely to know other workers in the industry, and also know what is expected of workers at your company. As such, they are well-positioned to offer up quality recommendations. Because the average employee will be concerned about how any referral will reflect on them, they are also more likely to provide only highly-qualified recommendations for your open positions.

Find the right job listing sites

It's important that the sites you use to market your job opening correspond with the budget and type of applicants you are seeking. If you are running a small business and have a minimal budget for your search, but ample time, for example, sites that offer free listings are an excellent way to increase the number of applicants you receive for your position.

On the other hand, for an executive-level position where a staffed HR department is sorting through applicants, restricting your posting to sites likely to appeal to executives costs more but saves working hours for your staff members.

Don't neglect social media

For many open positions, a social media account can provide an excellent source of free advertising for your employee search. If you have a popular brand you will have no shortage of followers eager to work with you, and a single post or even just an acknowledgment in a story can generate many interested applicants.

This does have a corresponding increase in the labor costs of sorting applications if you don't utilize an automated screener but is an excellent way to increase your reach without increasing your direct spending.

Keep a database of qualified candidates

When there's a lot of competition for a position, there's a good chance you'll be in the envious position of having more qualified candidates than you have open jobs. When this occurs, you may end up with one or more candidates you feel would be excellent additions to the team and yet are unable to offer the position to.

Keep track of these strong candidates in a database or file for easy access in the future. When you next have an opening for a similar position, you can reach out to these strong candidates directly to ensure that they are considered for the position if they are still interested in working for you.

Document Throughout the Process

The best way to improve the efficiency of any process within your organization is to assess past performance. The easiest way to do that is when you have ample access to statistics and documentation from prior efforts. This makes it easier to track current metrics to help reduce your cost per hire and to go back and track new metrics.

The most important goal in any recruitment drive is to find the best candidate to fill the position, and then after that, the next priority is spending as little as possible to do so. By focusing on optimizing the way you allocate resources to recruiting, you can lower your cost per hire without harming the overall quality of candidates you discover. When you reach this point, your business benefits from getting the best of both worlds when recruiting new staff.

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