HR Now Has Its First Official Standard: Cost-Per-Hire

From the HR blog at TLNT.
From the HR blog at TLNT.

For the first time in the history of the profession, human resource practitioners now have a uniform way to measure and compare one of HR’s oldest metrics. The American National Standards Institute has accepted the profession’s proposal for determining cost-per-hire.

Enshrined alongside such venerable standards as those that gave us the first computer languages, and set the size of paper at the local office supply store, the new cost-per-hire standard now allows a company anywhere in the U.S. to compare this element of recruiting efficiency to those of others, elsewhere, including among its own divisions and branches.

“The approval of this standard as an American National Standard establishes a milestone for the HR profession. It affirms that HR has indeed a ‘technology’ that its professionals must apply, improve and preserve,” said Lee Webster, SHRM’s director of HR standards. “The HR profession and its stakeholders can now begin to make business decisions based on credible, transferable, and inter-operable human capital analytics.”

Committees are working on additional standards

Webster leads the standards program, which is sponsored by the Society for Human Resource Management. In this role, he worked with a 42-member committee of volunteers that included academics, consultants, practitioners, and others to develop this first standard. The task force, similar to others, was the first to incubate a standard and usher it through the demanding process.

Other committees are working on standards for such things as job descriptions, diversity, performance management and even for measuring the financial value of a company’s human capital. Just recently, SHRM’s proposal for a workforce planning standard became available for comment.

There are no surprises or “gotchas” in the cost-per-hire standard; its long development (some two years in the making), and the even longer vetting process are by design intended to ensure both deliberation and thoroughness. To a great extent, companies that measure cost-per-hire already take into account most of the elements detailed in the new standard. Expenses for advertising, candidate travel, recruiter salaries, and so forth are undoubtedly already being included in typical CPH calculations.

Where the standard provides particular guidance is in those areas where there may be wide differences from one employer to another. For instance, the standard offers help in deciding how to handle commissions, when to include employee referral fees, and how to account for general office expenses.

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Defining what, exactly, is a “hire”

Indeed, the very issue of “what is a hire?” is addressed in the standard, which offers this advice:

The decision of which definition of “hire” to use (in this example, starts vs. offers accepted) affects exactly what the CPHI statistic is
measuring. If starts are used, the CPHI is measuring the average cost of successful hiring outcomes of the recruiting effort. If offers accepted
is used, the CPHI is measuring recruiting productivity.”

“The team wanted to create a standard that would be both accepted by the CFO’s office and practical to implement by HR,” said Jeremy Shapiro, cost-per-hire work group chairman and executive director of Morgan Stanley. “I think we hit the mark.”

No practitioner or employer is obligated to follow the standard. Those who do, however, will be able to compare their hiring costs to those of their industry, confident that it’s an apples-to-apples comparison.

Even for those who don’t apply the standard rigorously, it will still give them a guide to know what HR practitioners agree should be counted.

John Zappe is the editor of and a contributing editor of John was a newspaper reporter and editor until his geek gene lead him to launch his first website in 1994. He developed and managed online newspaper employment sites and sold advertising services to recruiters and employers. Before joining ERE Media in 2006, John was a senior consultant and analyst with Advanced Interactive Media and previously was Vice President of Digital Media for the Los Angeles Newspaper Group.

Besides writing for ERE, John consults with staffing firms and employment agencies, providing content and managing their social media programs. He also works with organizations and businesses to assist with audience development and marketing. In his spare time  he can be found hiking in the California mountains or competing in canine agility and obedience competitions.

You can contact him here.


3 Comments on “HR Now Has Its First Official Standard: Cost-Per-Hire

  1. Maybe I missed something but where is the concern with the value added of the hiring process.  I certainly understand the cost considerations but if as an employer I want to hire the best qualified people maybe — just maybe — its going to take more time and cost more.  Conversely if I’m looking to add the proverbial live bodies, I can probably minimize hiring costs. 

    I’m sorry but focusing on cost per hire is not the way to show the value of HR. 

    If the goal is to minimize HR costs, deleting the function has to be the answer.

  2. This feels like yet another example of HR waiting around and letting someone else validate what we already know to be important.

    Oh but it’s now official.

    So is my impatience.

    I remember official CPH discussions (how to calculate it/its relevance) back in 2000 with (now) PwC Saratoga. I had no idea this was still an ongoing discussion.

    Everything old is new again.

  3. Understanding and being conscious of cost-to-hire should be quantified in a standard, consistent way. The data can be used as justification for spending MORE money in the recruitment process.

    When companies – and more importantly, the people who control the recruitment budget – see the true cost of turnover they will (or should) INVEST more in the upfront costs (recruitment budget).

    HR pros everywhere can leverage that cost into acquiring the tools that will result in higher quality candidates, which increases productivity and reduces turnover. Both of which add value to a company’s bottom line.

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