Early Results Find Companies Spend $173 on Advertising Per HireFebruary 19, 2014 by Erin Osterhaus
In 2012, the American National Standards Institute accepted The Society for Human Resources’ (SHRM) proposal to establish a recognized method for determining cost per hire. The approval of the cost-per-hire algorithm was touted as a great step forward: the first official recruiting standard for the HR profession.
Finally, there is a uniform way to measure and compare one of HR’s most important metrics:
CPH = ( External Costs + Internal Costs / Total Number of Hires)
As Lee Webster, SHRM’s director of HR standards, said at the time, “The approval of this standard establishes a milestone for the HR profession. It affirms that HR has indeed a ‘technology’ that its professionals must apply, improve and preserve.”
Almost a year after the national cost-per-hire algorithm was approved, I had the idea of running a survey to determine one key piece of companies’ external hiring costs: advertising and marketing. Advertising and marketing make up one of the 19 categories SHRM includes in “external costs.” They’re defined as:
“Expenses related to advertising or marketing for a specific requisition across many requisitions. Examples include expenses related to job boards, social networks, search engine marketing, marketing material production or newspapers.”
Despite the fact that most businesses advertise their open positions, many aren’t calculating one of the cost per hire algorithm’s most easily trackable metrics. We’ve been running our Advertising Cost Per Hire survey for over two months now, and as of this writing, our survey has garnered 84 responses, of which only 65 were complete.
We will continue to run the survey in order to capture a broader and richer data set. However, in the meantime, I thought our findings thus far could prove useful to the HR community.
- Companies spend, on average, $173 on advertising per hire.
- Small companies spend more on average for each new hire than large companies.
- 85 percent of respondents said job boards were a primary advertising channel for their companies.
What Is the Average Advertising Cost Per Hire?
Without further ado, here is the coveted, average advertising cost per hire based on our survey responses (to date):
$173 = ( $1,050,743 / 6070 New Hires )
Taking a closer look at our data, I noticed the majority of respondents spend less than $500 per hire. Though, there were other respondents spending well above this. A small number also selected “unknown” due to the fact that their spending was handled by another department. An obvious best practice here would be to communicate costs with all hiring stakeholders, this way you can calculate your average cost per hire and benchmark yourself against others.
I also averaged the total advertising spend for the different sizes of companies participating in our survey. Not surprisingly, the bigger the company, the more they spent on advertising.
Average Advertising Budget by Business Size
To see how well these businesses were capitalizing on their advertising spend, I then calculated the average cost-per-hire by business size. On average, businesses with 50 employees or less were spending more per hire than all other company sizes.
Average Cost-Per-Hire by Business Size
Of the respondents, only nine percent noted that their companies were of 5,000 employees or more. As such, the average cost-per-hire for these business sizes may not be statistically significant. However, we hope to round out our findings as the survey continues.
Where Do Companies Advertise Jobs?
I then examined what channels companies use the most for advertising jobs. The most frequently-used channel was job boards, followed by social networks and company careers pages.
Most Often Used Advertising Channels
Who Took Our Survey?
First, in order to ensure our respondents were directly involved with the hiring process, we asked what their involvement was. Here’s where respondents worked in the organizations we surveyed:
Of the respondents participating, roughly half worked for companies with 250 employees or less, while companies with 50 employees or less were the highest-responding demographic—composing 23 percent of our sample set.
Respondents by Company Size
In order to determine what types of positions companies spend their advertising budgets on, we also asked respondents to break down their total number of hires into three categories:
The findings: Of the positions our respondents advertised, 64 percent were for entry-level positions.
While our sample set for this survey was admittedly rather small, there are still some key takeaways for recruiters, HR managers and small business owners.
First of all, 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. If HR is ever going to gain a seat at the C-suite table, being able to track and report on where the departmental budget is going is crucial. HR professionals will need numbers in order to, as Lee Webster says, “make business decisions based on credible, transferable and inter-operable human capital analytics.”
Secondly, small businesses in particular should be proactive when tracking their hiring spend. When compared with larger businesses, companies with fewer than 50 employees were spending more, on average, for each new hire than businesses with ten times that number. Since smaller companies or startups usually have much tighter budgets, bringing on the talent you need to grow without breaking the bank is critical for long-term success.
Finally, if your company is investing heavily in job boards as a source of applicants, keeping track of your advertising spend is even more crucial. Eighty-four percent of survey respondents were using job boards to promote open positions. But as job board spend increased, average cost-per-hire also increased—indicating that job board spend may not provide the best return on investment.
As such, companies need to be able to answer questions like: Which job boards are bringing in the most candidates, and which are bringing in the most new hires? They should then focus their spend on the highest-performing job boards to decrease their average cost-per-hire.
Do you keep track of your advertising spend per hire? Help us round out our data set, and take our survey!