Engineering times impact on CPH

CPH is typically blended across ALL your hiring channels and is confined to recruiting spend alone. Computing one holistic CPH and confining it to just the recruiting team’s spend hide problems with your funnel and doesn’t help compare the quality of all your various candidate sources. And, most importantly, it completely overlooks arguably the most important thing of all — how much time your team is actually spending on hiring. 

Drilling down further, engineering time, specifically, despite being one of the most expensive resources, isn’t usually measured as part of the overall cost per hire. Rather, it’s generally written off as part of the cost of doing business. The irony, of course, is that a typical interview process puts the recruiter call at the very beginning of the process precisely to save eng time, but if we don’t measure eng time spent and quantify, then we can’t really save it.

How is CPH typically calculated, and why does it omit eng time?

As I called out above, the primary purpose of calculating the cost per hire is to plan the recruiting department’s budget for the next cycle. With that in mind, within the attached image is the formula that you’ll find if you google how to calculate cost per hire (pulled from Workable)

To figure out your CPH, you add up all the external and internal costs incurred during a recruiting cycle and divide by the number of hires. “External” refers to any money paid out to third parties. Examples include job boards, tools (e.g. sourcing, assessment, your ATS), agency fees, candidate travel and lodging, and recruiting events/career fairs.

“Internal” refers to any money you spend within your company: recruiting team salaries, as well as any employee referral bonuses paid out over the course of the last cycle. Note that internal costs don’t include eng salaries as engineering and recruiting teams typically draw from different budgets. Hiring stuff is the domain of the recruiting team, and they pay for it out of their pockets… and engineers pay for… engineering stuff.

What’s problematic is that, while being called “cost per hire” this metric actually tells us what recruiting spends rather than what’s actually being spent as a whole. While tracking recruiting spend makes sense for budget planning, this metric, because of its increasingly inaccurate name, often gets pulled into something it ironically wasn’t intended for: figuring out how much the company is actually spending to make hires.