By Don Darrah and Imre Togyi, Resume Mirror

Technology investments in the recruiting process help organizations achieve their business goals. Because these investments are large, organizations need to carefully evaluate the return on investment (ROI).

If your organization uses or is considering using recruiting software, you need to be able to measure the ROI of this technology and present your analysis to management in your organization. You can also use ROI analysis to evaluate other components and tools in your recruiting process.

Importance of effective recruiting

During the next 15 years, a shortage in skilled and unskilled labor is expected to occur. The impact of this trend on businesses includes the following:

• Organizations may rush to hire people and, consequently, hire the wrong people.
• By hiring the wrong people and continuing to employ them, organizations experience substandard performance and negative effects on organizational culture.
• By retaining substandard employees, organizations may lose higher-quality employees, who leave in order to find better working environments and colleagues.
• Organizations lose competitive positioning because of their inability to maintain a top-quality work force.

It's crucial that your organization is able to recruit the right people and that you have the technology tools you need to accomplish this.

Importance of recruiting ROI in the boardroom

As investments in HR technology become more important to the overall competitiveness of organizations, so too does the scrutiny that executives pay to the costs of these investments. As a result, you must be able to monitor and track the effectiveness of the recruiting tools and processes that you use.

You need to be able to show that you are optimizing costs and ROI. Your ROI models must take into account the short-term financial impacts and long-term qualitative impacts on your organization's human capital performance.

Industry benchmarks

Aberdeen Group identified three key metrics that organizations should consider when evaluating their recruiting performance ("The Enterprise Talent Management Benchmark Report," March 2005):

• Time-to-hire
• Quality-of-hire
• Cost-per-hire

Time-to-hire   This metric refers to the total time it takes to hire someone for a job from the time that the job was posted. Longer times mean lost productivity and higher opportunity costs and, therefore, a negative ROI.

Quality-of-hire   This metric focuses on how satisfied an organization is with the person hired and how satisfied the hired person is with the hiring organization. A good hire enhances the overall performance of an organization and, therefore, improves ROI.

Quality-of-hire is probably one of the most difficult recruiting components to measure. However, Aberdeen Group noted in its recent study that 52% of respondents rated quality-of-hire as a key metric.

The ability to measure quality-of-hire depends upon:

• Carefully crafted job descriptions that are based on success factors for the job.
• Prehiring assessments that weed out candidates who do not match the required skills.
• Clearly articulated objectives to ensure that new hires are aware of the expectations for their positions.
• Clearly defined quantitative metrics/measures against which performance can be assessed.

Cost-per-hire   This metric relates to the total cost associated with a given position and hire. Costs to be considered are advertising, recruiting, resume processing, candidate identification and screening, candidate interview time, travel costs, assessment testing, and hiring administration. The larger the cost-per-hire, the larger the negative impact on ROI. Insufficient use of technology can add significant people costs to the cost-per-hire.

Best practices in evaluating recruiting ROI

A number of best practices can be applied to better understand and optimize the ROI of the recruiting process and the ROI of your recruiting tools.

Show your results

By comparing the performance of your recruiting process to industry benchmarks, you can measure the ROI of your recruiting process and recruiting technology. Executives and line managers can use ROI calculations to make decisions on how to improve your organization's time-to-hire, quality-of-hire, and cost-per-hire. To show executives how recruiting technology can benefit your organization, you can use ROI to hire better candidates faster and at less cost.

About the authors   Don Darrah, vice president of enterprise applicant services at Resume Mirror has more than 15 years' experience in the human capital management industry; his primary focus is on the sourcing, recruiting, and staffing functions in the industry. Imre Togyi, director of marketing at Resume Mirror, is a 16-year high-technology sales and marketing executive and a longtime user of the Internet for corporate recruiting and ongoing candidate management.