HR/Alabama A&M

Cost–Benefit Analysis of Recruiting

Many aspects of recruitment, such as the effectiveness of recruiters, can be evaluated. Organizations assign goals to recruiting by types of employees. For example, a goal for a recruiter might be to hire 350 unskilled and semiskilled employees, or 100 technicians, or 100 machinists, or 100 managerial employees per year. Then the organization can decide who are the best recruiters. They may be those who meet or exceed quotas and those whose recruits stay with the organization and are evaluated well by their superiors.

Sources of recruits can also be evaluated. In college recruiting, the organization can di- vide the number of job acceptances by the number of campus interviews to compute the cost per hire at each college. Then it drops from the list those campuses that are not productive.

The methods of recruiting that are used by a company can be evaluated along various dimensions. In addition, the organization can calculate the cost of each method (such as adver- tising) and divide it by the benefits it yields (acceptances of offers). The organization can also examine how much accurate job information was provided during the recruitment process.

Another aspect of recruiting that can be evaluated is what is referred to as the quality of hire. This measure can provide management with an assessment of the quality of new employees being recruited and hired.100 The quality-of-hire measure is calculated as follows:

QH 5 (PR 1 HP 1 HR)/N QH 5 quality of recruits hired

where PR 5 average job performance ratings (20 items on scale) of new hirees (e.g., 4 on a

5-point scale or 20 items 3 4) HP 5 percent of new hirees promoted within one year (such as 35 percent) HR 5 percent of hirees retained after one year (e.g., 85 percent)

N 5 number of indicators used Therefore,

QH 5 (80 1 35 1 85)/3 5 200/3

5 66.6%

The 66 percent quality-of-hire rate is a relative value. It will be up to management to determine whether this represents an excellent, good, fair, or poor level.

Some caution must be exercised with the quality-of-hire measure when evaluating the recruitment strategy. Performance ratings and promotion rates are all beyond the control of a recruiter. A good new employee can be driven away by a lack of opportunities for promo- tion, inequitable performance ratings, or job market conditions that have nothing to do with the effectiveness of the recruiter. Nevertheless, the quality-of-hire measure can provide some insight into the recruiter’s ability to attract employees.