Revolutionising Recruitment: The ROI of AI for New Zealand SMEs

Recruitment ROI, or return on investment, measures the effectiveness and financial impact of your hiring efforts. Essentially, it answers the question: “Are we getting a good return on the money and time we’re spending to attract and hire new talent?” A strong ROI means your recruitment strategy is successfully bringing in high-quality candidates who contribute significantly to the business, while keeping costs in check. It’s not just about filling roles; it’s about making sure each new hire is a valuable asset.

Understanding recruitment ROI, what does it mean?

Recruitment ROI, or return on investment, measures the effectiveness and financial impact of your hiring efforts. Essentially, it answers the question: “Are we getting a good return on the money and time we’re spending to attract and hire new talent?” A strong ROI means your recruitment strategy is successfully bringing in high-quality candidates who contribute significantly to the business, while keeping costs in check. It’s not just about filling roles; it’s about making sure each new hire is a valuable asset.

Why is it crucial for HR to monitor recruitment ROI?

Monitoring recruitment ROI is a total game-changer for HR. It allows you to justify your recruitment budget to the higher-ups by showing them a clear link between your spending and the value it generates. It also helps you pinpoint what’s working and what’s not in your hiring process. By tracking ROI, you can make smarter decisions, like which job boards are actually worth the money or which recruiting channels deliver the best candidates. This leads to a more efficient and effective hiring strategy, ultimately saving the company money and improving the overall quality of your workforce.

Breaking down the ROI calculation for recruitment

The basic idea behind the recruitment ROI calculation is to compare the total value a new employee brings to the total cost of hiring and retaining them. It’s not as simple as just subtracting one from the other. The formula typically looks at the monetary value of a new hire’s performance and contributions over a specific period, minus the cost of hiring them, all divided by the cost of hiring. This gives you a percentage that shows your return.

Step-by-step guide: measuring recruitment ROI

To get a clear picture of your recruitment ROI, you need to track a few key metrics. These indicators provide the data needed to make the calculation and, more importantly, to understand the story behind the numbers.

Key indicators to track:

First-year turnover rate

This metric tracks the percentage of new hires who leave the company within their first year. A low turnover rate suggests your hiring process is effective at finding candidates who are a good fit and likely to stay, which is a major win for your ROI.

Job-offer acceptance ratio

The ratio of job offers extended versus the number of offers accepted. A high acceptance ratio indicates that your offers are competitive and your company’s reputation as an employer is strong.

Application submission rate

This is the percentage of people who start an application and actually complete it. A high submission rate means your application process is user-friendly and not creating unnecessary hurdles for potential candidates.

Apply-to-interview conversion rate

This measures the percentage of applicants who get a chance to interview. A good conversion rate shows that your candidate screening process is effectively identifying promising talent.

Hiring timeline (time-to-fill)

This is the average number of days it takes to fill a vacant position. A shorter hiring timeline is often a sign of an efficient and well-oiled recruitment machine, which directly impacts costs.

Hire quality index

The quality of a new hire can be measured by assessing their performance, engagement, and retention. Creating an index based on these factors helps you quantify the value each new employee brings to the table.

Recruitment-related expenses to consider

When calculating recruitment ROI, you need to be thorough with your expenses. Think beyond the obvious costs. Here’s a quick list of what to factor in:

• Advertising and job board fees 
• Recruitment software and tools
• Agency or headhunter fees
• Background check and screening costs
• Travel and interview expenses (for candidates and interviewers)
• Time spent by staff on interviews and onboarding (this is a big one!)
• Employee referral bonuses
• Training and onboarding costs

Figuring out your average cost per hire

The average cost per hire is a foundational metric for calculating ROI. You can figure this out by adding up all your internal and external recruitment costs over a specific period and dividing that number by the total number of hires you made during that same time.

Cost per Hire=Total Recruitment Costs​/Number of Hires

Understanding this number gives you a benchmark to measure your efficiency against and a key figure for the ROI calculation.

Action plan: what to do after calculating ROI

Once you have your ROI data, it’s time to act! Use this information to:

• Identify your best-performing channels and double down on them.
• Optimize your hiring process by eliminating bottlenecks and inefficiencies.
• Revise your budget to allocate more resources to successful strategies.
• Prove the value of your HR initiatives to leadership.

This data isn’t just for a report—it’s your roadmap to building a more effective and impactful recruitment function.