Why do employers of college students and recent grads care about cost-per-hire?

Until about five years ago, very few employers of college students and recent graduates even attempted to calculate their cost-per-hire, let alone cared about it.

Sure, there were many exceptions who looked carefully at their hiring, retention, and productivity metrics when deciding on their best strategies and tactics for students and recent graduates for part-time, seasonal, internship, and entry-level jobs. If pressed, I could probably name 10 of them without a problem. But for every one of those, there were probably 100 that decided what schools, job boards, and other sources to use based on the number of hires per source. That approach, thankfully, has largely gone the way of the dinosaur.

The problem with looking only at the number of hires by source is that it can make poor sources look great and great sources look poor. For example, let’s say that you’re trying to hire five students and you go to two schools and use one job board. The first school is across the street from your office and you hire one student there. The second school is across the country and in a very rural area but you hire three students there. You also hire one people from the job board.

In terms of cost, the school across the street costs you one staff day, so call that $300 when you include the employee’s wages, benefits, payroll taxes, etc. For the school across the country, you’ve got a day’s worth of travel in both directions so three days at $300 each plus the $500 airline ticket plus another $500 for hotel and other costs, for a total of $1,900. For the job board, your cost is one posting at $75.

If you look only at which sources generate the most hires to determine which is your best source, then the school across the country would win as you hired three students there. The job board and school across the street would be the losers with only one hire each. An analysis like this might cause you to stop recruiting at the school across the street and the job board. But that would be a mistake.

A better approach would be to look at the cost-per-hire by source as the costs associated with each source differs markedly and it is your return on investment that matters. The return, in this case, is the number of hires. The investment, in this case, is your total cost per source. So, looking at it this better way, you’ll see that the school across the street had a cost-per-hire of $300. The school across the country had a cost-per-hire of $633. The job board had a cost-per-hire of $75. Using this ROI approach, the best source is the job board then the school across the street and then the school across the country. Incidentally, the National Association of Colleges and Employers (NACE) reports that the average cost-per-hire for a student hired through on-campus recruiting is $6,110.

Even better is to use productivity data. Cost-per-hire is okay at best, but it only accounts for what it costs to hire the average person. If one hire stays with you for two weeks and another for 12 years, you’d much rather have that second hire, right? If you only used cost-per-hire, you wouldn’t even look at the productivity of each person, and that would be a mistake. To determine your return on investment, your return isn’t so much how many butts you put in seats but what those butts do, and to know that you have to look at the value they deliver to your organization over the lifetime of their employment with you.