The Difference Between Cost Per Applicant and Cost Per Hire

By Jessica Miller-Merrell 

Our industry has been gravitating toward metrics more and more in the last several years, and it’s served us well. They help executives understand what’s going on behind the scenes, allow us see what’s working and what’s not and give us a way to evaluate costs and benefits of our HR and recruiting practices. Cost per hire is one of the most widely accepted metrics, but there’s another measurement that can help us hone our recruiting strategies even further.

Cost per applicant is much more inclusive than its cousin, cost per hire. It evaluates how much our recruiting activities cost per applicant rather than per new hire. Simply put, it’s all the costs of internal and external recruiting divided by the number of total applicants you have for a position or during a certain period of time. While not used by companies as often as cost per hire, I would argue that it actually provides a clearer picture of whether or not your recruiting dollars are being used in the best way.

Where the costs come from

We know that it’s a misnomer that recruiting is basically free. Of course there are email blasts, social media and good old fashioned networking, but here in the real world, recruiting can be a significant expense for your organization. There are the traditional expenses, like your time, email marketing fees and attending recruiting events, but one of the most popular and effective ways of reaching candidates is a bit more complicated than just a flat fee.

Today, it’s all about the pay per click strategy. From job boards to job aggregator websites to search engines, companies are using cost per click to charge you for driving candidates to your job posting. These companies utilize networks, online ads and other media to promote your job listing. You’re paying each time one of those ads works and a potential candidate clicks on one. Essentially, these companies are making your media buys for you, which is much more efficient and cost effective than trying to do it yourself.

Pay per click is a smart way to use online media to reach candidates, but it is unknown territory in a lot of ways. The most significant is probably that the cost of each click can vary depending on how competitive the search phrase is, what traffic is like for the website you’re using and even the time of day. This can make it tougher to budget, plan and evaluate averages.

Why the strategy works

Even with the unknowns that come with utilizing a pay per click strategy, for many companies it’s the best possible strategy they can use. We are HR and recruiting experts, not marketing and media buying gurus. Pay per click takes a lot of the stress out of choosing where to advertise your job posting.

It also makes sense because it allows companies almost immediate feedback on what’s working and what’s not. You can see whether or not your ad is being seen, clicked and finally, whether or not people are making the buying decision to apply because of it. This allows you to quickly find out where things are going wrong and make tweaks accordingly.

Cost per applicant is an important tool in deciding where and how you’ll invest your recruiting budget, and pay per click is an important part of developing that strategy.

TalentCircles is the most comprehensive candidate engagement platform on the market. Take a product tour or request a live demo today. 

Jessica Miller-Merrell, SPHR is a workplace and technology anthropologist specializing in HR and recruiting. She's the Chief Blogger and Founder of Blogging4Jobs and author of The HR Technology Field Guide. You can follow her on Twitter at @jmillermerell.

Recruiting, Retention and Playing in the Rain

By Kevin W. Grossman

A few raindrops we ignore. They’re an annoyance, an inconvenience, and we wipe them away with our hands as we hustle through our busy days.

But as the heavens open up and the deluge begins, we become soaked to the bone or we run for cover quickly. Either way the water pools in front of us and we have a choice: rush inside and dry off, watch from under an awning, or we splash through the rushing water together, milk carton boats in hand.

That’s what it’s like with marketing – we want to seep into the mindset of our buyers, and with recruiting that means seeping (and soaking) into the mindset of job applicants. Attracting talented folk to our organizations is an art more than a science – we start with a lot of rain, a funnel and see what squirts out the tiny end.

Then what? The part that’s missing is the middle ground, the engagement, the playing in the rain together before we source and recruit. We hire and we pray (and work hard) for the right fit and employee longevity.

Some voluntary turnover is normal and churn happens, but according to Bersin & Associates, the average cost per hire for all U.S. companies is around $3,500, which can add up. (And for those keeping score at home, this month the American National Standards Institute (ANSI) approved the first American National HR Standard addressing cost-per-hire, the first HR standard developed solely through the sponsorship of the SHRM.)

Whatever your costs are and how they compare compare to other companies, the higher the voluntary turnover rate is for new hires in year one, the more dramatic the cost per hire numbers can become.

That’s a storm no talent acquisition leader or CFO wants to face. And yet, marketing and recruiting don’t play nice together with retaining candidates long term; they don’t run out in the rain to race to the street river, milk carton boats in hand, solidifying the relationship before the hires are made and after.

A recent article by Dr. John Sullivan titled Do You Need a World Class Retention Program? A Checklist of What It Takes, Dr. Sullivan shares “the most thorough and comprehensive checklist on retention that you will ever see.” I highly recommend it. Surprisingly though, there was really no reference to recruiting as retention partner, and there were only three references to CFO’s playing a role in number-crunching the cost of hiring, turnover and retention.

Let’s go back to marketing rain. Marketing brings in new leads that are generated are then passed over to sales to follow up on and eventually close. Some of them at least. Those in the lead pipeline may be nurtured and marketed to so as to inch them along to close.

Then what? Those that do close become customers and are handed over to account management and customer service folk and then – a year later when it’s time to retain their business and a percentage say thanks but no thanks. “Just wasn’t the right for us.”

User adoption correlates tightly with customer retention, and yet, marketing gets them to the door and sales closes it, then marketing and sales sit on the porch and have a few beers, watching the rain and the employment branding and job applicant kids out playing in it. You’d think that an integrated marketing strategy includes a retention investment, but it’s not.

Same with recruiting talent, regardless if we’re talking contingent, retainer, corporate, RPO — but the argument is that, after the final candidates are presented, even closed, “management” leadership takes over and whatever happens 3, 6, 12 months down the road, isn't recruiting’s problem.

But I’d argue that insightful leaders understand that reducing turnover, increasing team retention and improving overall quality of fit with workplace culture are huge initiatives in an ever-changing and highly competitive social talent economy. That means everybody pre- and post-onboarding on your team plays a role in “user adoption.”

Recruiting is marketing and sales. Marketing and sales should be customer service, but it’s not. Marketing and sales should be partners in retention. The milk carton boats must be made, together.

So make it rain and let’s play.