Recruiting & Hiring Blog for HR Professionals

What’s the actual cost to your company if you hire the wrong candidate? ...$10 ...$1,000 ...$100,000?

“Bad Hire” cost estimates are all over the board and can vary dramatically by industry, job type and company. Some organizations rely on extremely complicated and in-depth formulas to examine the far reaching effects of this slightly intangible cost. While others just have the intrinsic sense that the number is most likely high, and should probably be avoided if at all possible.

Since most companies don’t have a resident cost of hiring algebra savant readily available, we asked a few members of Team Hyrell to share their thoughts on what they think is the biggest “cost” of a bad hire:

How does your HR department measure recruiting efficiency? Cost per hire is one metric companies can use to evaluate and compare recruiting expenses. The cost-per-hire algorithm became an official recruiting standard in 2012 and is the first uniform way to measure and compare internal and external hiring costs.

The formula is simple, at a glance: Cost Per Hire = (External Costs + Internal Costs / Total Number of Hires). But, according to HR research firm, Software Advice, few companies are actually using it. According to the New Talent Times, “businesses should be keeping track of cost per hire metrics. Given the small number of responses to our survey, it would seem that they’re not.”

While measuring cost per hire can aide in organizational-level decision-making, some experts suggest the metric may actually hurt the recruiting function. Here we uncover some of the pros and cons of calculating cost per hire.