If people are your greatest asset, then Recruitment must be one of your most critical business activities. As such, it makes sense that we understand the value it generates and can measure its Return on Investment (ROI). Understanding how to do this will enable you to transform your recruitment practice to become a profit enabler for your organisation as opposed to a cost centre. By working in this way, Talent Acquisition becomes business critical and is viewed as fundamental to future success.
To help calculate Recruitment ROI and understand its impact on the business, you need to track and monitor certain key measures, including:
Definition: Time-to-hire measures the time between posting a job and the moment the candidate accepts the offer.
Why It Matters: A longer time-to-hire may indicate inefficiencies in the recruitment process, which can drive up costs and lead to missed opportunities for talent. Also, the longer a vacancy remains open, the less productive you’ll be which can also have a knock-on effect on other team members and ultimately your customers.
How to Measure: Track the number of days from vacancy authorisation to offer acceptance.
Definition: Cost per hire calculates the average expense to fill a job vacancy, including both external and internal recruitment costs.
Why It Matters: This is a critical metric in understanding the financial investment required to fill positions and is central to ROI calculations.
How to Measure: Add all external and internal hiring costs and divide by the number of hires during a set period.
Definition: This measures the percentage of new hires who leave within their first year.
Why It Matters: Recruitment begins with Retention – You’ve heard of the ‘leaky bucket’ metaphor, right? A high attrition rate can seriously damage your ROI, signalling either poor recruitment decisions (which lead to re-hiring costs) or issues with your onboarding and induction processes.
How to Measure: Track the number of employees who leave within 12 months divided by the total number of hires.
Definition: This metric assesses how well new hires perform and fit within the company, contributing to the business’s long-term goals.
Why It Matters: High-quality hires are more likely to stay with the company, perform well and support business growth, thus delivering a better return on the recruitment investment.
How to Measure: Typically evaluated using performance reviews, aligned with company values, and productivity during the first year.
Definition: The proportion of job offers extended by the organisation that are accepted by candidates.
Why It Matters: A low OAR indicates potential issues in the recruitment process or misalignment between the candidate’s expectations and the offer made.
How to Measure: Track the number of jobs accepted divided by the total number of offers made.
Definition: The proportion of candidates who accept a job offer and agree a start date, only to pull out beforehand or not turn up on day one.
Why It Matters: A high candidate dropout rate (pre-job start) significantly impacts cost in terms of re-hiring and can highlight issues with onboarding or the capability of recruiters in terms of gaining commitment and assessing candidate flight-risks.
How to Measure: Track the number of jobs accepted divided by the total number of job starts.
Definition: This measures the financial contribution that each employee brings to the company.
Why It Matters: Revenue per employee is a good indicator of the overall productivity and financial impact of new hires.
How to Measure: Total company revenue divided by the total number of employees.
To calculate ROI accurately, you need to understand both external and internal costs associated with recruitment. Recruitment costs generally fall into two main categories:
These are expenses incurred from outside your organisation during the recruitment process. Common external costs include:
Internal costs involve the time and resources your internal employees spend on recruitment activities. Examples include:
By adding both external and internal costs, you can get the Total Recruitment Costs for your organisation over a specific period.
To help you get started here, you can use Omni’s Recruitment Cost Calculator to assess what your current hiring strategy is costing your organisation.
After calculating the recruitment costs, you need to determine the financial value that new hires bring to the organisation. This is often trickier, and you will need the support of the broader business, but can be done by measuring factors such as:
This is the work output of a new hire that contributes to company operations. New hires may increase output, improve efficiency, or take on additional responsibilities over time.
Some departments and employees, such as those in sales or product development, directly contribute to increasing company revenue through their roles.
Some new hires bring process improvements that reduce operational costs, such as streamlining workflows, automating tasks, or introducing innovative solutions.
Employees in client-facing roles, such as business development or strategic account management, may acquire new customers or be critical in retaining contracts and expanding services, adding value through increased market share or revenue streams.
So – you have an idea of the costs of recruitment and of the value created by the new hires. A general formula which can be used to show you where you stand is:
A positive ROI indicates that your recruitment efforts are adding value to the organisation. A negative ROI suggests that costs outweigh the benefits, signalling a need to review and adjust your recruitment strategies.
Once you calculate your ROI, review areas where you can improve your effectiveness. This is where a good grasp of your measures really pays dividends.
Retention Strategies – Particularly in the first year of employment. Does the reality of the role reflect how it was positioned during the recruitment process? Is the culture created by your management team inclusive with individual contributions valued and recognised?
EVP and Brand Activation – What personas are you looking to engage and why would they want to work for you? Be targeted, don’t ‘spray and pray’ and try to differentiate yourself from competitors by elevating your employer brand to attract the same talent as competitors. There may be some upfront investment here, but it will absolutely have its rewards in terms of reduced time to hire and improvements to hire quality.
Recruitment Marketing – What channels work best and deliver the greatest ‘bang for your buck’ in terms of candidate engagement. Make sure you spend your budget where you get the best results.
Agency Spend – Keep a close eye on this and rationalise your suppliers wherever possible to generate enhanced commitment and better commercial rates. Look at your workforce planning and how best to optimise your use of permanent, fixed term and contingent resources. In our partnership with ISS, our team at Omni achieved a direct sourcing hit ratio of 92% resulting in a considerable cost saving in agency spend.
Recruitment Process – Is your recruitment process cumbersome delivering a poor candidate experience? Candidates will naturally drop out if this is case and you will miss out on talent, impacting time to hire. Can you automate to improve the candidate experience and deliver improved ROI?
Recruiter Skills – How effective are your recruiters in gauging candidate commitment and assessing flight risks post job offer? How engaging is your onboarding process? Remember it is vital to Check in before they Checkout if you are to reduce the cost burden of re-hiring.
Beyond Recruitment – Focus should move to shaping productive and engaged employees looking at ways to:
– Optimise the ramp-up time to become a fully contributing employee
– Increase employee performance levels (output) through consistent and tailored professional development
– Map career paths to enhance engagement and longer-term motivation – make sure these are visible to employees and feel achievable.
– Encourage innovation and diverse thinking to improve productivity and bottom-line impact.
At Omni, we work with organisations of all sizes across both private and public sectors to help them understand and quantify their recruitment effectiveness, developing talent strategies designed to deliver ROI.
We understand that every organisation’s journey is different and hope this guide will provide you with some of the basics around the “how to” for calculating Recruitment ROI and, critically, how you can deliver improvements.
RPO, or Recruitment Process Outsourcing, is a strategic approach to talent acquisition where organisations outsource some or all of their recruitment processes to an external provider.
In traditional hiring, organisations typically manage recruitment processes in-house, from sourcing candidates to onboarding. This often requires significant time, resources, and expertise from internal HR teams or hiring managers. However, traditional hiring methods can sometimes struggle to keep pace with changing talent demands, especially in industries facing skill shortages or rapid growth.
RPO offers a holistic and strategic approach to talent acquisition. RPO providers like Omni act as an extension of an organisations brand, assuming responsibility for recruitment activities such as candidate attraction, sourcing, screening, assessment, and even onboarding. By outsourcing these functions to specialised experts, organisations can benefit from industry knowledge, resources, and technology to give access to the best talent at pace.
One of the key differences between RPO and traditional hiring lies in the level of specialisation and scalability offered by recruitment RPO providers. RPO partners often have dedicated teams of recruiters who specialise in specific industries or skill sets, allowing them to access niche talent pools and identify high-quality candidates more efficiently. Additionally, RPO solutions are highly scalable, meaning they can quickly adapt to fluctuating hiring needs, whether it’s scaling up recruitment efforts during peak periods or adjusting to changing market conditions.
Recruitment Process Outsourcing (RPO) can significantly enhance your Talent Acquisition strategy by providing specialised expertise, scalability, and strategic partnership. Here’s how:
Specialised Expertise: RPO providers have dedicated teams of recruiters who specialise in various industries, roles, and skill sets. These experts possess in-depth knowledge of the labour market, industry trends, and sourcing techniques, allowing them to identify and attract high-quality candidates efficiently. By leveraging their specialised expertise, RPO partners, like Omni, can access niche talent pools and ensure high-quality people for your organisation.
Scalability: One of the key advantages of recruitment RPO is its scalability. RPO providers can quickly scale recruitment efforts up or down based on your organisation’s hiring needs. Whether you’re experiencing rapid growth, seasonal fluctuations, or project-based hiring spikes, RPO can adapt to accommodate your changing requirements. This flexibility ensures that you have the right resources in place to meet demand without overburdening your internal HR team or sacrificing recruitment quality.
Cost-Effectiveness: RPO recruitment can offer cost savings when compared to traditional hiring methods. While there may be an initial investment in outsourcing recruitment to an RPO partner, the long-term benefits often outweigh the costs. RPO can help reduce time-to-fill, cost-per-hire, and turnover rates, resulting in overall cost savings for your organisation.
Strategic Partnership: RPO goes beyond transactional recruiting by forging a strategic partnership between the RPO partner, like Omni, and your organisation. At Omni, we become an extension of your employer brand and we work closely to understand business objectives, culture, and talent requirements. This collaborative approach allows RPOs to tailor recruitment strategies that align with your organisation’s goals. By working as an extension of your HR team, RPO providers can provide valuable insights, leading practices, and innovative solutions to help achieve talent acquisition objectives.
There are several key advantages:
Access to Specialised Expertise: RPO providers have dedicated teams of recruiters who specialise in various industries, roles, and skill sets. This expertise allows them to identify and attract high-calibre talent more efficiently than internal HR teams or traditional recruitment agencies.
Scalability: RPO recruitment solutions are highly scalable, meaning they can quickly adapt to fluctuating hiring needs. Whether your organisation is experiencing rapid growth, seasonal fluctuations, or project-based hiring spikes, RPO can flexibly adjust to accommodate your changing requirements.
Cost Savings: RPO can offer cost savings compared to traditional hiring methods. By outsourcing recruitment processes to an external provider, organisations can reduce time-to-fill, cost-per-hire, and turnover rates, resulting in overall cost savings for the business.
Strategic Partnership: RPO recruitment goes beyond transactional recruiting by fostering a strategic partnership between the RPO provider and the organisation. At Omni, we work closely with our organisations to understand their organisation’s objectives, culture, and talent requirements, allowing us to tailor recruitment strategies that align with the organisation’s goals and values.
Recruitment Process Outsourcing (RPO) is a strategic approach to talent acquisition where organisations outsource some or all of their recruitment processes to an external provider, like Omni. The partner is known as the RPO provider and assumes responsibility for various aspects of the recruitment process, including candidate attraction, candidate sourcing, screening, assessments, interview coordination and onboarding.
Recruitment RPO is about leveraging specialised expertise, technology, and resources to streamline the recruitment process and improve hiring outcomes. Rather than relying solely on internal HR teams or traditional recruitment agencies, organisations partner with RPO providers to access a broader range of talent to enhance efficiency and drive better results.
The specific services offered by RPO providers can vary depending on the needs and preferences of the organisation. That’s the beauty of RPO. Some organisations may opt for end-to-end RPO, where the RPO provider manages the entire recruitment process from start to finish. Others may choose to outsource specific elements of the recruitment process, such as candidate sourcing or interview scheduling, while retaining other aspects.