Please welcome Andrew Gadomski who joins the HRExaminer Editorial Advisory Board today. Andrew is the Chief Advisor and Founder of Aspen Advisors, an efficiency consultancy firm. Andrew started Aspen Advisors after a diverse and successful career in staffing and branding so that corporations that are socially and globally conscious can become great at acquiring talent and then advance their value propositions. Full Bio »
Why We Should Adopt the ANSI Cost Per Hire Standard Across HR
by Andrew Gadomski
Today, HR is a business function that needs to be able measure its performance and contribution to the company just like other key functions. Our talent teams need to develop competencies in analysis, metrics and reporting, executive presentation, and strategic initiatives. HR needs to understand and use the available data effectively. But what is that data, and how real is it?
The Society of Human Resource Management (SHRM) has designed a series of workforce groups that address the need to have standard metrics and measures. The goal is to allow companies to track themselves, and also compare their methods, results, and insights with other companies. In order to do that, the data has to be accurate and based on the same measurements.
Recently, SHRM’s Cost Per Hire standard was approved by the American National Standards Institute (ANSI).
I was part of SHRM workgroup that produced this standard. And I believe it is critical for companies to adopt the ANSI Cost Per Hire Standard. I admit advocating this standard, or any standard within talent acquisition, is daunting. Our industry is not known for all doing things one way. We pride ourselves in performing work in individual and customized ways. Yet, the Cost Per Hire Standard celebrates this flexibility, while allowing the industry the benefits of shared standards and practices.
The Cost Per Hire Standard consists of three metrics:
- Cost per Hire Comparable (CPHC). This metric contains a standard set of factors that allow companies to compare with one another. No more “we spend on this and they don’t.” Apples to apples.
- Cost Per Hire Internal (CPHI). This standard formula allows a company to assign certain costs for cost per hire for internal comparison. It can be as detailed as you need. This truly celebrates the flexibility of recruiting. For example, relocation costs are not included in the CPHC above, but can be included here.
- Recruiting Cost Ratio (RCR). This is how much you pay the people you hire. It’s important to run this metric because it will ground your organization as it competes for talent.
Also – don’t be afraid to run these in parallel or combine them. It’s an interesting analysis when you look at your CPHC (the external comparable), and then reference it to total compensation. Run both metrics for all your divisions or groups separately, and rank them in ascending order. You may find you pay more for some groups, and it takes less effort to find them, or vice versa. We believe that adopting the Cost Per Hire Standard will improve your insight into what your company spends to hire new people and will allow you to better compete for the employees you are trying to attract.
The Importance of Publishing Results
Using the standard is not enough. The success of its adoption also lies in companies openly sharing their results of the standard and its usage.
We also advocate that service providers, agencies, technology companies, and outsource providers adopt this standard and publish their results too. Until everyone is using the same metrics and there is no way to truly evaluate whether the technologies available really improve the hiring process or they are just measuring differently.
SHRM will be reaching out to technology and outsourced providers throughout the United States, and will be imploring them to advocate and adopt the ANSI Cost Per Hire standard. We will be asking corporate recruiting organizations to place pressure on their vendors to also adopt the standard. Your support in both regards is appreciated.
On a personal note, I find this is long overdue. This standard, and the upcoming ones, will establish HR metrics that make sense across industries and give HR, company leaders, and vendors, the information they need to see what is working and what should be changed. This is exactly the data HR needs to do its job– as the strategic business function that it is.