Calculating Cost Per Hire When Candidates Are Customers Too

Bad customer experiences cost US businesses an estimated $75 billion a year. That’s according to research by NewVoiceMedia. The research doesn’t touch on an unrecognized customer segment — job candidates. It also doesn’t show that when a job applicant has a bad experience and takes his/her business somewhere else, it impacts your revenue and your cost per hire.

Bad job candidate experiences are like bad experiences for product or service customers. They cost your company. Bad candidate experiences also result in a higher cost per hire when you consider candidates as customers.

Research shows that 46% of job applicants who have bad application experiences with a company take their business elsewhere. And 27% tell friends and family to take their business elsewhere too.

A Bad Candidate Experience Hurts Your Cost Per Hire and Customer Revenue

The 2018 Talent Board North American Candidate Experience Research Report states, “Candidates who believe they have had a ‘negative’ experience tell us every year they will take their alliance, product purchases, and business relationship somewhere else. This means a potential loss of revenue for consumer-based businesses, referral networks for all companies, and whether or not future-fit and silver-medalist candidates apply again.”

The Talent Board Candidate Experience Resentment Calculator puts the effect into actual numbers. Say you’re a US- or Canada-based company that:

• Hires 300 people a year.
• Gets 100 applicants per role.
• Has an estimated average customer monetary value of $100.

According to The Talent Board’s calculator, you stand to lose $653,400 in revenue if rejected job candidates have a negative experience. That figure is really a part of your true cost per hire. Say 46% of that 100 have a bad experience and take their business elsewhere. If you add 46% of $653,400, or $300,564, to the 2015 estimated average cost per hire of $4,129, you get a total cost per hire of $304,693 — ouch!

If you add more than 300 new employees — say 1,500 hires — you can lose as much as $3,267,000 in revenue and drive your cost per hire up to $3,271,129. That’s a lot of lost revenue from a bad candidate experience. And it doesn’t account for a candidate’s friends or acquaintances who stop or don’t start doing business with you because of bad word of mouth.

It also doesn’t account for possible revenue gained from job candidates who have good applicant experiences. Yes, a good applicant experience can add to customer revenue.

Happy Candidates Are a Source of Customer Revenue

A happy candidate who doesn’t get the job can remain or become a customer and a source of revenue for your company.

SHRM cites the example of Kimberly-Clark. Kimberly-Clark — think Kleenex brand tissues — sends every candidate who has a phone interview a coupon after the call. Candidates that don’t get the job are still customers once they use the coupon, if not before. And even if rejected candidates don’t use the coupon, they can leave with a good feeling about the company.

You don't want to use coupons as a consolation prize but as a thank you. And you want to track their effectiveness. (Learn more in How Talent Acquisition Can Become a Revenue Driver).

There are others ways to ensure your rejected candidates have a good experience too.

How to Deliver a Better “Candidate as Customer” Experience

To empower recruiters and hiring managers to deliver a better candidate experience you need to think of candidates as customers. You also need a process and supporting technology that lets you humanize the candidate experience. When you do, you let recruiters and hiring managers spend more time with the most qualified candidates. And you help prevent disappointing lesser qualified candidates.

Delta Air Lines is one company that changed its thought process to see candidates not as unqualified resumes or even poor interviewees but as people and as customers. Delta redesigned its candidate experience to focus not on the one candidate who is hired, but all the candidates who aren’t hired.

Delta Air Lines’ VP of Global Talent Acquisition Jennifer Carpenter told HireVue in 2018, that company’s leading principle for hiring is a belief that “behind every resume is a person with a story to tell.” That principle is supported by five others, including:

• A belief in conversation starters not deal breakers
• A belief that an informed candidate is the best candidate

Once your own company commits to humanizing your own hiring candidate experience, you want a consistent, streamlined hiring process and technology. Delta Air Lines uses HireVue to helps its process. TMX does too. TMX adds the human touch by calling candidates to let them know to expect a request for an on-demand HireVue interview.

Both companies, and many others, benefit from process and technology to shorten the time to hire and improve the experience for applicants, recruiters, and managers. Their recruiters and managers use the time saved to focus on the best candidates and their own jobs. And candidates go away feeling good about the company even when they don’t get the job.

HireVue solutions can help you with process and technology too. And The 2019 Candidate Experience Playbook can teach you more about a good candidate experience and why it matters.

Get The 2019 Candidate Experience Playbook