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Cost Per Hire Versus Value Per Hire Which Is Most Important

The cost of a bad hire rarely impacts an organization, however, the value of a great hire can often transform an organization.

As executive recruiters, we hear about the “cost per hire” regularly. It seems like every time HR calls, this topic comes up. However, I would suggest that a far better discussion for HR to have is on the “value per hire.” Having this discussion not with recruiters, but with the CEO is a far more meaningful and beneficial discussion. It not only helps justify that HR contributes revenue and value to the organization, but it also brings HR in as a strategic partner.

This also goes for the CFO of the organization, who should work with HR to help determine a way to calculate the value of a hire.

A few years back I was sitting in the office of the VP HR when the CFO came by and stuck his head in to say hi. During the conversation he commented, “You know, over the last x years we have paid you over $300,000 for your services.” I think he was expecting me to be apologetic. I replied, “That is all? I completely agree with you that I have been grossly underpaid.” I don’t think this was the answer he was looking for. I continued, “Considering that you are now a millionaire, and the rest of the executive team I have placed here are also millionaires, and that the company went from $50 million in revenue to $250 million in revenue with a valuation close to $1 billion, I believe the fees I have been paid are justified by the value these people contributed to the company. Wouldn’t you agree?”

This isn’t about me. It is to demonstrate that even CFO’s don’t step back and recognize that for some expenses there is often a lot of value created for the company. If you de-humanize this concept, an employee is just another asset. Many often say the most “valuable asset” in the company. So, if employees are assets then shouldn’t the CFO be capable of calculating an ROI just like any other asset?.

Would this concept benefit HR as they justify the costs to acquire these assets? Isn’t it fair to look at both sides of the equation?

Employees are often described as “human capital” so some sort of return on capital doesn’t seem unrealistic. I’m not suggesting that the calculation is an easy one. I’m sure whoever first figured out how to calculate ROI had to tweak the formula more than once before getting it right, but just because it is difficult to calculate doesn’t mean it shouldn’t be done.

Defining success in the role before you hire a person is a good start. Our Success Factor Methodology recommends developing a job description that defines what great success is in this role. Basically, by the end of the first year what would this person have to have accomplished so that the hiring manager would consider this person not just a good hire, but a great hire. In our book, You’re NOT The Person I Hired, we refer to these as,  “Success Factors.” I believe this is the starting point in determining the value an employee brings to the company. Top talent in your company will hit these. The average will hit these some of the time and below average will rarely hit the success factors. Obviously, for different levels within the company the value added will change.

At least now the company is starting to look at the value a hire brings to the company and can start to assess the ROI.

To learn more about the Success Factor Methodology to help you attract, hire and retain top talent, check out our best selling book, You’re NOT The Person I Hired.

You can also begin implementing the Success Factory Methodology with our comprehensive hiring system. CLICK HERE to review.

I welcome your thoughts, comments and feedback.

Brad Remillard

About the Author

Brad Remillard, an executive recruiter with over 25 years of experience, has conducted over 10,000 interviews and been involved in more than 2,000 executive searches.

Brad previously served as President of CJA Executive Search, which was recognized as one of the top search firms in Southern California. In 2005 he co-founded IMPACT Hiring Solutions a retained executive search firm and best practices hiring company.

He is co-author of two books on hiring. You’re NOT The Person I Hired. His second book helps candidates dramatically reduce their time in-transition is, This Is NOT The Position I Accepted

In 1999, Brad co-founded the American Association of Senior Executives (AASE), one of Southern California’s largest career management and business resource organizations exclusively dedicated to VP and C-level executives. The AASE has assisted more than 1,500 corporate executives manage their careers.

Brad has personally coached many of these executives on success-based interviewing, 21st Century networking techniques, and career transition.

He is a frequent speaker on the subject of career management and executive networking.

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Oleum $45.36 Used – Please note that the content of this book primarily consists of articles available from Wikipedia or other free sources online. Oleum (Latin oleum = “oil”), or fuming sulfuric acid refers to a solution of various compositions of sulfur trioxide in sulfuric acid or sometimes more specifically to disulfuric acid (also known as pyrosulfuric acid). Oleums can be described by the formula ySO3.H2O where y is the total molar sulfur trioxide content. The value of y can be varied, to include diffe

Oleum $56.4 New – Please note that the content of this book primarily consists of articles available from Wikipedia or other free sources online. Oleum (Latin oleum = “oil”), or fuming sulfuric acid refers to a solution of various compositions of sulfur trioxide in sulfuric acid or sometimes more specifically to disulfuric acid (also known as pyrosulfuric acid). Oleums can be described by the formula ySO3.H2O where y is the total molar sulfur trioxide content. The value of y can be varied, to include differ

Oleum $49.48 Used – Please note that the content of this book primarily consists of articles available from Wikipedia or other free sources online. Oleum (Latin oleum = “oil”), or fuming sulfuric acid refers to a solution of various compositions of sulfur trioxide in sulfuric acid or sometimes more specifically to disulfuric acid (also known as pyrosulfuric acid). Oleums can be described by the formula ySO3.H2O where y is the total molar sulfur trioxide content. The value of y can be varied, to include diffe

Oleum $36.62 Used – Please note that the content of this book primarily consists of articles available from Wikipedia or other free sources online. Oleum (Latin oleum = “oil”), or fuming sulfuric acid refers to a solution of various compositions of sulfur trioxide in sulfuric acid or sometimes more specifically to disulfuric acid (also known as pyrosulfuric acid). Oleums can be described by the formula ySO3.H2O where y is the total molar sulfur trioxide content. The value of y can be varied, to include diffe