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HR speak. Ever heard of cost-per-hire?

Nor me, but HR practitioners in the States have discovered what they believe to be a solid way to determine a new metric for their industry: cost-per-hire, and it has been accepted by the American National Standards Institute, so it must be good. They set the standard size of A4 paper.

Lee Webster, SHRM’s director of standards, says: “The HR profession and its stakeholders can now begin to make business decisions based on credible, transferable and inter-operable human analytics.”

Webster leads the programme for standards, which is sponsored by the Society for Human Resource Management. He worked with a 42-member committee of volunteers that included academics, consultants and practioners to create this first standard. Other committees are working on standards for things such as job descriptions, diversity, performance management and even to measure the financial value of a company’s human capital.

For the first time, human resource practitioners have a uniform way to measure and compare one of the oldest metrics; The American National Standards Institute has accepted the profession’s proposal for determining cost-per-hire.
Webster says: “The approval of this standard establishes a milestone for the HR profession. It affirms that HR has indeed a ‘technology’ that its professionals must apply, improve and preserve.”

The standard took over two years to be completed, but to a great extent, companies that measure cost-per-hire, already take most of the elements detailed in the new standard into account. Outgoings for advertising, candidate travel, recruiter salaries and other expenses, are already being included in typical CPHI calculations.

Where the standard provides particular guidance, is in those areas where there may be wide differences from one employer to another; for example, the standard offers help in deciding how to handle commissions, when to include employee referral fees and how to account for general office expenses.

Indeed, the very issue of what is a hire is addressed in the standard with this advice: “The decision of which definition of ‘hire’ to use, (in this example, starts vs. offers accepted), affects exactly what the CPHI statistic is measuring. If starts are used, the CPHI is measuring the average cost of successful hiring outcomes of the recruiting effort. If offers accepted is used, the CPHI is measuring recruiting productivity.”

Cost-per-hire workgroup chairman, Jeremy Shapiro, executive director of Morgan Stanley, said: “The team wanted to create a standard that would be both accepted by the CFO’s office and practical to implement by HR. I think we hit the mark.”
No practioner or employer is obligated to follow the standard. Those who do, however, will be able to compare their hiring costs to those of their industry, knowing it’s a like-for-like comparison. Even those who do not apply the standard rigorously, it will still give them a guide to know what HR practioners agree should be counted.

Nigel Phillips

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