Cost Per Hire vs Value Of Hire – How HR Shows Their Value

A lot of HR teams struggle with how they can show the value they are bringing to the organization. It’s understandable – how do you quantify things like a better culture, or stronger hires? Well, when there’s a will, there’s a way.

It’s always a worthwhile exercise to look at what other parts of the organization are doing to solve a given problem. In this case, marketing once again has shown an interesting way to understand the overall health of our talent acquisition operation, as well as how we can show the value we bring to the rest of the company.

What Marketing Does

Marketers are obsessed with their cost per acquiring a customer, and how that relates to the value of that customer.  For example, if I spend $100 on adwords, does that get me a customer?  Is that customer going to spend more than $100 on my products?  If so, that’s great!  (Ok, any finance geeks out there know this is a bit of a simplification – but hopefully the point is made).

What HR Can Do

HR’s cost of acquiring a hire is very similar to the concept of the cost of acquiring a customer in marketing.  And, the value of a customer is similar to the value of that employee.  So, HR can measure the health of their efforts by looking at cost/hire vs value/hire.  While value is hard to ascribe, it can be approximated by the salary of that person.

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Phil Strazzulla

Founder at NextWave Hire
Phil is a founder of NextWave Hire.Previously, he was a VC at Bessemer, and has a MBA from Harvard, and studied finance at NYU.