Firstly,
thanks. Had an amazing response to my last post on Innovation and it wasn’t the
usual heavy handed legal letters (you know who you are). In fact my heart was warmed by the
number of recruiters who clearly are thinking their world needs to change,
bring it on!
That
was slightly unfair, the biggest issue is
and was not caused by the RPO but by accountants and the simplicity of
the key internal resourcing Key Performance Indicator (KPI), that of Cost Per
Hire (CPH).
I
have not found one in-house or outsource team whose key KPI is quality of hire!
Cost per hire, yes; time to hire, yes; interviews : offer, yes but never
quality of hire. The first three
are absolutely no measures of quality.
We
are frequently asked to review recruitment processes within organisations, we
are never, ever asked to reduce cost of hire, our remit is always to increase
the quality. In the end, as with
most things, people will pay more for quality.
A classic example is an organisation whose outsourced partner had managed to decrease the Cost Per Hire (CPH) to £1,500 for their 250+ sales people they hired every year. On the face of it an astounding result, actually if you know anything about recruitment, it’s not astounding at all, it’s unbelievable, no really, totally unbelievable.
The simple fact is that hiring the
right talent for your business cannot be measured in CPH, it has to be total
employee cost. In this example
over 50% of the hires left in the first year, at a cost to the business of
£1,000,000 in wasted training costs and ultimately further £millions in lost
revenue, oh plus you have to hire them all again at £1,500 per hire.
So
my recommendation? Do away with CPH as a KPI for an in-house or outsourced
team, it’s irrelevant.
When I took over
the resourcing team at Nortel Networks my budget was $10,000 per hire. Yep a
reasonable £5,000 at the time, with 3,500 hires to make, my £20M budget was a
sight to behold...however it simply wasn’t true. The CPH was actually $65,000, let me rephrase that, the
total cost impact of hiring for the business was $65,000 per hire, caused by
mishires, leading to wasted management time, cost of missed revenue, impact on
team morale, leavers etc.
PS:
I did in 9 months get the total cost impact of hiring at Nortel down to $10,000
per hire but that’s another story...
