Did you hire well? How do you know?

Jan 12, 2021 1:17:00 PM · by David Kushan

When making business decisions, specifically those that require a significant financial investment, it’s customary for an organization to determine their return on investment (ROI). Without an idea of the ROI, it’s almost impossible to conclude whether the investment would be a good or bad decision.


For as long as I can remember, I’ve heard the term “cost per hire.” But what does that actually mean?


I’ve always found it interesting that a standard metric like “cost per hire” would be used without a complementary metric for the return the hires actually provide to the organization. In other words, why would we blend the average cost per hire without understanding the average return that each hire delivers?


Also, is cost per hire a metric that’s better suited for positions that are brought on in volume over the course of a year, as opposed to a specialized position that you may hire only once or twice a year?


When hiring multiple people for the same positions over the course of a year, it may be more viable to track cost per hire as a way to determine if you’re becoming more efficient at performing what has become a routine process. 


However, if the position is one that’s hired only once or a couple of times a year, is it accurate to compare this cost of hire to those for which economies of scale can more easily lower the cost in the long run?


As the world of healthcare IT creates new niche positions, it’s more important than ever to understand how critical specific individuals are to an organization’s success.


When hiring, you’re trying to project not only if someone is qualified for a position, but how successful they can be in a role.


This typically translates into an organization measuring how many years of experience they have in that role, which then translates into what they’re willing to do to get a particular person hired.


Which is great, I guess, but it’s not a proven metric to predict success. Leaders who are great at hiring have figured out how to determine who will project into a 1X, 5X, or 10X producer.


By doing this, they have a potential return in mind that helps them to calculate the cost of the hire.


Until you’re able to predict the potential return on a new employee, you’re leaving out the biggest variable that, ultimately, should determine your cost per hire.

General, Hiring, Misc., David Kushan


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