Are you looking to hire a new employee, but need to justify the ROI first? To do this, you’ll need to choose a method to demonstrate return, so be sure you’ve counted all the costs and more. This is a very common challenge that managers and HR professionals face on a daily basis. Knowing the cost and the benefit of new hires is what will make all the difference. Here’s a look at how you can determine the ROI of hiring a new employee for your team.
Return on investment is a phrase that business leadership is all too happy to use to understand cost and risk, but it’s also a helpful tool to help them understand the need for hiring more staff. Return on investment is calculated on a ratio of benefit (or return) of an investment divided by the cost of the investment. The resulting percentage or ratio is your ROI.
Making the Case for a New Hire
Justifying additional investment is part of the preparation required to bring on more people. But to do so, you need to understand both the costs and the benefits of a new hire. A cost-benefit analysis is a very helpful tool to guide you in this discussion. If leadership thinks that by not hiring, they will miss out on profits, then the obvious decision is to hire. But you have to show them the math first. And to do that, you need to get the data to support your argument.
Show you understand how much it costs to bring on a new hire. These costs include salary and benefits (at the appropriate market rate), but they don’t stop there. There is also the cost of the technology, workspace, and onboarding required to set the new team member up for a successful work environment. Training may be required, as well as recruitment costs. The key to understanding the cost of a new hire is to break down the hiring process to a granular level. Once you know the maximum amount you are risking by hiring a new team member, you can start to evaluate how much money they will help you make.
Hiring as an Investment
Every business owner knows that in order to make money, you need to spend some first. Hiring is an investment in your team, and in your company, that sometimes takes time to provide the returns that businesses are looking for. But that element of time is important to consider when proving the ROI of a new hire. Think about whether there are ways you can make the hiring process more efficient. Can you onboard new staff better and quicker to set them up for success? Are you doing the work required on the front end to help avoid the sort of false start that can cost you precious time and resources in onboarding new staff members? Show you’ll curb costs wherever you can, but don’t cut corners because that can leave you in a worse position than you currently are.
Give recruiters the tools to execute efficiently. Whether your business is a global enterprise or a small startup, don’t short-circuit efficient recruiting by shortchanging investment in tools. Then with the right data on hand, you can be confident the increase in productivity and morale is worth the investment for your company.
For more advice on hiring the right people at the right time, contact the recruiting pros at Verum Technical today.