Are you considering outsourcing the recruiting process and trying to determine if it makes sense from a financial perspective? In order to make a proper analysis, organizations that are looking at the option of Recruitment Process Outsourcing (RPO) services need to compare their own costs to those expenses related to RPO. During this analysis, there is a need to dig deep into the data to answer the big question of Return On Investment (ROI). What does it truly cost to deliver recruitment services to an organization and what is the return on that investment to that organization?
A cost-per-hire (CPH) or a Recruitment Cost Ratio (RCR) capture only a portion of the relevant costs – although in theory should include all costs. Costs are more than just agency fees, advertising, and career fairs. Costs include payroll, taxes, and fringe benefits of staff, training and travel costs, office costs (telephone, internet, etc.), technology and software, legal and IT support services and dont forget the actual costs of the office space itself.
To identify all costs its often useful to answer the question: If the recruitment function was a stand alone company how much money would you need to operate it?
Once you have identified all your costs, the more important question of return can be answered. Did the investment yield an acceptable return while at the same time meet desired standards of quality of candidates, timeliness of hires and quantity of staff acquired? Can you receive a better return elsewhere (i.e., by outsourcing to an RPO)?
When answering the ROI question, the analysis often suggests that certain functions or levels are better outsourced while others are best performed in-house.
When it comes to deciding if and what to outsource, we believe the ROI metric is an important measurement to consider.
What are your views and experiences? Has your organization gone through this process for recruiting or other functions?