0WE BECOME YOU™Content Property of Cielo, Inc.

OVERCOMING ASIA’S

COST-PER-HIRE DILEMMA

@CieloTalent

#talentmindset

Organisations hiring in Asia face tremendous competition for talent, but

are also under pressure to decrease their expenses. Too often, they

sacrifice the quality of their workforce by reducing cost-per-hire.

By measuring the right data, organizations can develop a talent

acquisition process that increases the quality of candidates and saves

money in the long run. Sharing this information with executive

leadership will validate HR’s role in driving organisational performance.

1WE BECOME YOU™

TODAY’S PRESENTER

Sadaf Pitt

Client Solutions Director, Cielo

@PittSadaf

• Sadaf is on a journey to elevate Talent

Acquisition across Asia. She strongly

feels that the HR/Talent function needs

to go beyond reactive and

transactional Talent Acquisition

practices and adopt a Talent

Acquisition engine aligned to business

outcomes.

• Architects strategic talent acquisition

solutions that lead to improved

performance, growth, and competitive

advantage.

• Collaborates with the C-Suite and

Function Heads across Asia’s MNCs

who are ready to explore how

transforming their existing talent

acquisition practices can deliver

exceptional business results.

2WE BECOME YOU™

IN RECRUITING, HOW IMPORTANT IS COST-

PER-HIRE?

I believe cost per hire is a misguided means to

judge recruiting department performance.

For one, it rewards the wrong things and

ignores quality of candidate and quality of hire.

For another, it’s far too tactical and narrowly

focused. Worse, improving costs could

degrade quality.

Lou Adler

“

”

3WE BECOME YOU™

• Examine how the importance of Cost-Per-Hire depends

on the talent you need to hire

• Demonstrate how a low Cost-Per-Hire can actually be

more expensive in the long run

• Identify the components you should use to calculate

Cost-Per-Hire

• Understand the potential business impact of having a

high-performing talent acquisition function

THIS WEBINAR WILL HELP YOU…

4WE BECOME YOU™

WHAT IS ROI IN HIRING?

COST

QUALITY

AGILITY

Agility is the

measurement of the

speed at which the

resourcing function’s

strategy and

activities are

capable of

responding to

changes in business

demands

Quality drivers sit across a

number of measures e.g.

candidate & hiring manager

experience, new hire attrition,

new hire performance, source

of hire, employer brand, NPS,

conversion rates

True Cost of Hire is

a complex calculation

including team costs,

operational cost of

line management,

marketing spend, and

supplier costs

The Perfect Balance?

Difficult to achieve, but

then, it is not often the

target. Business drivers

inevitably lead to a

weighted model with

importance of Cost, Agility

& Quality depending on

what talent you are hiring

5WE BECOME YOU™

1. Calculation Methodology

2. Employee Function

3. Region

4. Industry

5. Type of Hire

DRIVERS OF DIFFERENCES

IN COST PER HIRE

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6WE BECOME YOU™

COST PER HIRE VARIES BY ROLEIm

po

rta

nce o

f co

st p

er

hire

de

cre

ase

s

Importance of cost per hire decreases

Scarc

ity

Seniority

Expert One

Skilled Few

Talented Many

Approach

• Investment

• Complexity

• Time

• Resources

Delivering quality

hires consistently

is perceived as the

most important

strategic function

of talent

acquisition for all

stakeholders (C-

Level, Business

Unit Leaders and

Talent Acquisition

Leaders)

Cielo’s Talent

Acquisition 360

Research

“

”

CALCULATING COST PER HIRE

Cost Per Hire = ( )∑(External Costs) + ∑(Internal Costs)

Total Number of Hires in a Time Period

External Costs Internal Costs

• Pre-hire Health

Screens

• Pre-Screening

• RPO fees

• Relocation Fees

• Sign-on bonuses

• Sourcing Costs

• Travel & Expenses –

Candidate

• Travel & Expenses –

Recruiter

• Technology

• Third-Party Agency

Fees

• Advertising &

Marketing

• Background &

Eligibility Checks

• Campus Recruiting

• Consulting Services

• Contingency to

Regular Fees

• Drug Testing

• Employee Referral

Awards / Payments

• Immigration Expenses

• Job Fairs / Recruiting

Events

• Cost of Recruiting

Staff

• Cost of Sourcing Staff

• Internal overheads

• Non-labor office costs

• Recruiting L&D

• Secondary

Management – Cost of

Time for Events

• Secondary

Management – Cost of

Time for Recruiting

# of Hires

• Total number of hires in

a time period

• New hires

• Backfill due to

attrition

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8WE BECOME YOU™

1. Aggregate - Total number of hires during a specific time

2. Recruiter hiring activities

3. Type of Hire

4. Organizational Unit or Geographic Region

5. Requisition – recorded based on each requisition filled

COLLECTING COST-PER-HIRE DATA

9WE BECOME YOU™

1. Shift talent acquisition budget allocation

2. Low-cost sourcing channels and branding opportunities

3. Present non-obvious hires

4. Outsourcing

COST PER HIRE TO INFLUENCE

HIRING DECISIONS

10WE BECOME YOU™

1. Market-entry decision

2. Internal skills development

3. Setting up new operations

4. Improving talent strategy

COST PER HIRE TO INFLUENCE

BUSINESS DECISIONS

11WE BECOME YOU™

1. Is the organization facing new competition?

2. Is the organization changing strategic direction?

3. Is the organization entering a new market?

4. Is the organization growing rapidly?

COST-PER-HIRE TO SUPPORT

CORPORATE STRATEGY

12WE BECOME YOU™

1. Time-to-Fill

2. Interview-to-Offer Ratio

3. Retention Rate

4. Hiring Manager Satisfaction

5. Candidate & New Hire Satisfaction

6. Cost-Per-Vacancy

KEY COST REDUCTION METRICS

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13WE BECOME YOU™

1. Lost productivity of vacant role

2. Coworkers’ lost productivity due to coverage of vacancy

3. Line manager’s lost productivity due to vacant position

4. Direct reports’ lost productivity due to vacant position

5. New hire learning curve

6. Team’s lost productivity due to new hire onboarding

COST-PER-VACANCY KEY CONSIDERATIONS

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14WE BECOME YOU™

WHAT ARE THE CHARACTERISTICS OF AN

OPTIMIZED TALENT ACQUISITION FUNCTION?

Source: Bersin by Deloitte, 2014.

Ne

w-H

ire

Tu

rno

ve

r

Tim

e t

o F

ill (i

n

Da

ys

)

18

%16

%14

%12

%10

%8%

6%

4%

2%

0%

60

50

40

30

20

10

0

17%44

55

Level 1 –

Reactive

Tactical

Recruiting

Level 4 –

Optimized

Talent

Acquisition

Cost-Per-Hire

$3,258

10%

Mature Talent Acquisition

organizations spend more by hire

But, maturity brings better quality

of hire and increased agility

Cost-Per-Hire

$6,465

15WE BECOME YOU™

WHAT ARE THE CHARACTERISTICS OF AN

OPTIMIZED TALENT ACQUISITION FUNCTION?

Source: Bersin by Deloitte, 2014.

Ne

w-H

ire

Tu

rno

ve

r

Tim

e t

o F

ill (i

n

Da

ys

)

18

%16

%14

%12

%10

%8%

6%

4%

2%

0%

60

50

40

30

20

10

0

17%44

55

Level 1 –

Reactive

Tactical

Recruiting

Level 4 –

Optimized

Talent

Acquisition

Cost-Per-Hire

$3,258

10%

Mature Talent Acquisition

organizations spend more by hire

But, maturity brings better quality

of hire and increased agility

Cost-Per-Hire

$6,465

2x

40%

20%

Spend per hire equates to:

Less new-hire attrition

Faster time to fill

What is the potential cost impact?

16WE BECOME YOU™

LET’S TAKE TWO SIMILAR COMPANIES

ABC, INC.

• $1Bn Turnover

• 10,000 employees

• 1,000 annual hires

• Average compensation = $50k

“Optimized” Talent Acquisition Function

• Average CPH = $6,465

• Average new hire attrition = 10%

• Average Time to Fill – 44 days

XYZ, INC.

• $1Bn Turnover

• 10,000 employees

• 1,000 annual hires

• Average compensation = $50k

“Reactive & Tactical” Recruiting Function

• Average CPH = $3,258

• Average new hire attrition = 17%

• Average Time to Fill – 55 days

…now let’s compare based on cost, quality & agility measures

17WE BECOME YOU™

ABC, INC. SPENDS 2X MORE

ON HIRING THAN XYZ, INC…

…what impact does this extra investment have on quality?

1,000 1,000

$6,465 $3,258

$6,465,000 $3,258,000

+$3,207,000 -$3,207,000

Cost Per Hire

Number of hires per annum

Average Cost Per Hire

Total Annual Cost Per Hire

Difference – ABC, Inc. vs XYZ, Inc.

Average Cost Per Hire figures taken from Bersin by Deloitte

18WE BECOME YOU™

LET’S LOOK AT THE QUALITATIVE

ELEMENT HIGHLIGHTED BY BERSIN

First year turnover is a good indicator of quality.

Turnover is expensive.

The average cost of replacing a

departing employee is

$48,982Source: Telegraph.co.uk reporting on 2014 Oxford

Economics Study

The average cost of turnover for

new hires is equivalent to

to times the annual pay of

the departing employee

one1½

Source: PwC Saratoga

…what impact does this have on our example?

19WE BECOME YOU™

40% LESS NEW HIRE TURNOVER

EQUATES TO $4.4M

…what about the impact of Agility as measured by Time to Fill?

1,000 1,000

10% 17%

$6,250,000 $10,625,000

-$4,375,000 +$4,375,000

Cost of First-Year Attrition

Number of hires per annum

First-Year Attrition Rate

Total Annual Cost of Y1 Attrition

Difference – ABC, Inc. vs XYZ, Inc.

First-Year attrition figures taken from Bersin by Deloitte

100 170

$50,000 $50,000

Number of Y1 leavers

Average Annual Salary

1.25 1.25Cost of attrition – salary multiplier

20WE BECOME YOU™

20% FASTER TIME TO FILL

EQUATES TO $2.5M

$1Bn $1Bn

10,000 10,000

44 days 55 days

$20,000,000 $25,000,000

Total Annual Revenue

Number of employees

Average Time-to-Fill

Lost Gross Opportunity Revenue

Average Time-to-Fill figures taken from Bersin by Deloitte

$100,000 $100,000

$455 $455

Average annual revenue per employee

Average revenue per employee day (220 days)

1,000 1,000Number of annual hires

$227 $227

$10,000,000 $12,500,000

Average cost per employee day (220 days)

Total salary saved for open roles

$50,000 $50,000Average annual salary

$10,000,000 $12,500,000

-$2,500,000 +$2,500,000

Lost Net Opportunity Revenue

Difference – ABC, Inc. vs XYZ, Inc.

Lost Opportunity – Time to Fill

21WE BECOME YOU™

WHO HAS BETTER QUALITY HIRES?

COST

QUALITY

AGILITY

+$3,207,000 -$3,207,000

-$4,375,000 +$4,375,000

-$2,500,000 +$2,500,000

-$3,668,000 +$3,668,000

Difference in Cost Per Hire

Difference – First-Year Attrition

Difference – Lost Opportunity/Time to Fill

Total Difference – ABC, Inc. vs XYZ, Inc.

Despite spending 2x more on its talent

acquisition program, the actual cost to

ABC, Inc. is $3.7M less per annum than

XYZ, Inc.

$3.7M

WHICH COMPANY COMES OUT ON TOP?

The Results

23WE BECOME YOU™

Source: Boston Consulting Group

1

2

3

4

5

6

Delivering on Talent Acquisition

Onboarding of new hires and retention

Managing talent

Improving employer branding

Performance management and rewards

Developing leadership

3.5x 2.0x

2.5x 1.9x

2.2x 2.1x

2.4x 1.8x

2.1x 2.0x

2.1x 1.8x

Topic in which most capable and least

capable companies were comparedThe impact that the most capable companies

achieve over the least capable companies

… revenue growth … profit margin

Economic influence is noticeable in all HR topics…

but is most pronounced in six:

EXCELLING AT TALENT ACQUISITION

LEADS TO POSITIVE BUSINESS OUTCOMES.

24WE BECOME YOU™

1. A balanced Talent Acquisition strategy is an optimized blend of cost, agility

and quality – the balance varies depending on the talent you are hiring

2. If you are going to measure cost per hire, make sure you include all the

relevant external and internal components

3. Investing more on Talent Acquisition can improve quality of hire, increase

agility and consequently be less costly in the long run

4. Excelling at Talent Acquisition can have a significant and positive impact

on business performance

5. Within HR, Talent Acquisition is arguably the function that can provide the

best return on your investment

KEY TAKEAWAYS

If you can’t measure it, you can’t manage it.

“ ”Peter Drucker

25WE BECOME YOU™

THANK YOU

cielotalent.com