How to Calculate Your Tech Recruitment ROI

The demand for technical talent is higher than ever. Our brand new edition of the State Of Developer Recruitment survey reports that over 30% of respondents are expecting to hire over 100 developers in 2022. Frantically sinking resources into hiring at scale when there are chances that several employees will quit before their first-year mark is your sign to stop and evaluate your tech recruiting ROI; especially when the cost of a bad hire is an expensive mistake to make.

The tech industry already has a high rate of attrition with costs of bad hires skyrocketing. It cannot afford any further delays due to hiring slips and misses. Keeping certain performance indicators in mind will help you assess what is working for you and what needs to be tweaked.

What is Recruitment ROI?

Recruitment ROI (Return on Investment) is a performance measure used to evaluate the efficiency of an organization’s hiring process. It helps businesses and HR professionals determine the value and effectiveness of their recruitment strategies. Simply put, Recruitment ROI gauges the benefits (qualified candidates, successful hires) against the costs (advertising expenses, recruiter salaries, interview expenses, etc.) involved in the recruitment process.

Understanding this metric helps companies allocate their resources more efficiently, ensuring that every dollar spent on hiring brings the maximum possible value to the organization.

7 metrics to monitor tech recruiting ROI

Time to hire

On average, it takes 42 days to fill an open position. Right from posting a new job opening to hiring a candidate for that role constitutes the time to fill metric. It takes time to complete the process right from sourcing, recruitment marketing, screening to interviewing. It is every recruiter’s goal to reduce the time to fill by as much as possible but it is increasingly difficult to do so when recruiting technical talent. 

Coupled with the usual sourcing and interviewing phases, you also need to carry out skills assessments, which only prolongs the time to hire. If this area needs to be optimized, it is time to streamline your hiring processes. Cut down on the several phases of the interview; assess your candidate with a skills assessment instead of a phone interview.

Quality of hire

This recruitment metric is vital to evaluating whether the newly employed candidate is a good hire or a bad hire. You need to assess how much value the new hire contributes to the team and what is their impact on the long-term success of the company. This is subjective and varies from company to company as performance/culture fit can’t just be confined to scores or numbers.

Improving the quality of the source from where you’re hiring directly improves the quality of the candidates. Instead of relying on high-volume recruitment tactics, where you get plenty of leads of under-qualified candidates limit your talent pool. Set aside applicants that are a right fit for the role. Also, assess the ratio of passive to active candidates in your talent pool and work on improving this.

Cost per hire

The simplest way to measure return on investment for your tech recruiting is to calculate how much you’re spending for each hire. What costs are you running up for the entire talent acquisition process? Can you switch to a new tool that is not such a drain on the resources without compromising on its performance? How much are you spending on recruitment marketing?

Tracking the cost per hire helps you analyze where you’re spending more money than you should, how to reduce it, and provides an opportunity for you to spend it elsewhere. 

Candidate experience

63% of job seekers will likely reject a job offer because of poor candidate experience, and you certainly don’t want that. If your hiring procedures are clunky and long, you decrease your chances of attracting top talent by a lot. Find the gaps in your tech recruitment processes to make them candidate-friendly and improve your employer brand.

Getting a candidate on board is not the end game. You have to keep an eye on how the early days of the new hire are going, ensure that they are satisfied with the job, and meet expectations of the role.

Recommended read: 5 Reasons For Bad Candidate Experience In Tech Interviews

First-year attrition

A new hire will take a minimum of one year to settle down and begin producing their best work, especially in an engineering team. If your candidates are leaving before they complete a year with you, you never have a chance of getting back what you invested in them. Talent acquisition costs will add up and affect your company’s bottom line.

Unclear expectations and poor performance lead to first-year attrition. When candidates are met with unrealistic expectations that don’t necessarily align with the job requirements, it’s more likely they’ll quit the position within a year. And when you hire an unsuitable candidate for the job, performance will suffer and you may have to let the employee go. Take care to clearly communicate what is expected out of the candidate for the position and ensure they have enough resources to maximize their performance.

Offer acceptance rate

An offer acceptance rate (OAR) determines the percentage of candidates who have accepted a formal job offer letter from your organization. This measurement ought to be vigorously depended on as a sign of a recruiter’s competence.

It is indicative of the recruiter’s ability to trace out the candidate’s priorities, needs, and major issues before an offer is extended. It is no mean feat to arrive on an offer that hits the sweet spot for both the applicant and the organization.

Application completion rate

Another important metric to track is the number of individuals who finish your application form. Low application completion rates mean that individuals drop off midway by as much as 60% according to a CareerBuilder survey — because it’s too lengthy, is tedious, or complicated.

It could also show some sort of technical issue. Investigate low application completion rates right away. Your entire hiring process is hindered until you do, especially as this is the first step in a series of rounds.

Formula for calculating Recruitment ROI

To calculate the ROI of your recruitment process, you can use the following formula:

Recruitment ROI = ((Benefits of Hiring−Cost of Recruitment)/Cost of Recruitment)×100

where,

Benefits of Hiring is the monetary value that a new hire brings to the organization. This could be measured in terms of the new hire’s revenue generation, cost savings, or any other financial metric deemed relevant,

and,

Cost of Recruitment is the cumulative of expenses associated with the recruitment process. This includes advertising costs, recruiter salaries, interview expenses, onboarding costs, training costs, and any other relevant expenses.

By calculating Recruitment ROI, you can determine the percentage return on the investments made to hire.

Challenges in measuring Recruitment ROI

Measuring Recruitment ROI is undeniably complex, but by understanding and addressing these challenges, organizations can gain a clearer picture of their hiring process‘s efficiency and effectiveness. Some of the common challenges faced while measuring this metric are listed below:

1. Quantifying intangible benefits is hard: Unlike direct costs, benefits like improved team synergy, cultural fit, or long-term potential of a recruit can be challenging to quantify.

2. Variable costs can affect standardization: Costs can vary widely between hiring campaigns, making it challenging to maintain a standard measure for ROI calculations.

3. There is usually no immediate ROI: The true ROI of a recruit might be realized only after a significant amount of time, especially if the position requires extensive training or has a longer gestation period for maximum productivity.

4.Speed of hiring can affect ROI: It’s essential to balance the quality of hires with the number of hires. An organization might make many inexpensive hires quickly, but if those hires are not a good fit, the long-term ROI may be negative.

5. Indirect costs might be hard to quantify: There are hidden costs associated with recruitment, such as the time managers spend on interviews, which might not be easily accounted for.

6. ROI can change if the business goals change: As business objectives shift, the value or “benefit” expected from a hire might change, affecting the perceived ROI.

7. External factors: Economic changes, industry trends, and labor market shifts can all impact the cost or value of a new hire, complicating ROI calculations.

How we calculate recruiting ROI at HackerEarth

We designed an ROI Calculator that simulates the potential amount of time you could save if you use HackerEarth’s offerings in your tech hiring process. This would directly lead to a significant decrease in the cost per hire metric. That’s why they say, “Time is of the essence when it comes to making quality hires!”

Further Reading

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Ruehie Jaiya Karri Author 57 Blogs