How to Calculate Recruitment ROI in the Age of AI

Key takeaways:

• There is skepticism about AI technology, so it’s important to show the value of time saved, money saved, and revenue gained
• Replacing an ATS with an end-to-end operating system can help eliminate point solutions and reduce integration problems
• AI platforms have helped reduce recruitment agency costs, improved NPS, and cut time to hire

Making sure your talent-technology purchases are valuable, and quantifying that value, has always been important. But the return on investment of a hiring solution is arguably more important with the growth of AI. Below, we explain the reasons for this increased importance, and offer up some advice on calculating ROI.

The importance of examining ROI with AI hiring platforms

AI, as it is used to improve the recruitment process, is new, different, and in some cases an experiment. That’s causing some skepticism about whether AI hiring initiatives pay off. A much-publicized report found that 95% of generative AI pilots (not just HR/recruiting related) at companies are failing.  

In a way, some of these failures aren’t surprising. Many companies are rushing into AI because the CEO said to adopt artificial intelligence in the business everywhere possible. It doesn’t always begin with a business challenge, with AI part of the solution.

This skepticism makes it more important to make a solid case for the value of AI hiring technology, and to demonstrate its payoff after it is adopted by an organization.

Components of the ROI of AI talent-technology purchases

When ROI calculations were made to calculate the benefit of replacing one applicant tracking system with another applicant system, it was relatively straightforward, an “apples to apples” calculation.

Now, some companies are replacing an applicant tracking system with an end-to-end talent operating system. That changes the ROI calculation. You’ll want to consider such things as:

• Time saved with integration and other issues with having fewer pieces of software
• Point solutions you eliminate as you adopt the new operating system
• The benefits of the many features (such as interview scheduling, conversational AI, AI-powered screening, or a hiring agent) that were not part of your old ATS but are included as part of the new operating system
• The value of an improved candidate experience and fewer dropoffs as workflow is improved and manual tasks like thank-yous and reminders are automated
• The revenue gained from filling positions faster
• The value of time freed up for recruiters to do higher-value, less routine work

Three components of recruitment ROI

Measuring ROI is not a one-size-fits-all matter. 

Nonetheless, SmartRecruiters has an ROI calculator that can be helpful.

We embedded three types of calculations in that formula. The totals from the three categories below make up a complete picture of the ROI of a talent acquisition platform. “We believe these three pillars are stepping stones to better business outcomes,” says Mike Murawski, SmartRecruiters product marketing manager. 

Technology costs

These include the total cost of ownership, including service and maintenance fees. 

Software fees are often based on the headcount of the organization and come with the option of bundled solutions in addition to the core applicant tracking software. Headcount-based fees mean that you pay for your license for the term of your contract. Updates are included and automatically rolled out. With the SmartRecruiters platform, there are no costly surprises, and no bills to change the configuration. This transparency makes it easier to calculate the total cost of ownership. Other vendors have a host
of other costs that you may not be aware of or that you cannot assess beforehand, making the total cost of ownership, and therefore ROI, difficult to calculate.

Efficiency gains

This includes gains from optimized advertising, improved recruiter, hiring manager, and interviewer efficiency, and lower agency spending. We’ll drill down on those a bit, as follows.

Improved recruiter efficiency 
 

Reducing the time each recruiter spends per hire means that recruiters can hire more people. Or they can explore more innovative recruitment methods thanks to the elimination of manual tasks, and the AI-powered, continually developing nature of the hiring platform.
 

Hiring manager and interviewer efficiency 
 

Less time spent per hire by hiring managers and interviewers represents dollar savings or opportunities for people to drive the business forward in new ways. 
 

Optimized advertising spending 
 

The talent-acquisition platform with integrated job distribution features is likely to reduce your spending on job advertising and job boards. The ability to track the performance of sourcing channels in real time helps optimize spending. Metrics to measure and monitor spend include the cost of advertising spend per applicant and ad conversion rates (i.e. how many hires you make on the applications you receive). 

Agency spending 

Companies that implement the right hiring platform spend less on recruitment agencies, finding the people they need themselves instead.

Revenue gains

This represents monetary returns to the business from filling positions faster.

How quickly and how positively you hire has an impact on your business’s ability to generate revenues. With the right technology, you can streamline processes and integrate solutions for background checks and assessments, cutting days off the hiring process. At scale, this represents a huge productivity and profitability gain. Getting good people into roles that fit translates to money in the bank. 


For example, the time to hire for SmartRecruiters customers in key industries is 42 days. Customers in those industries using AI-powered candidate discovery reduce the median time to hire to 31 days.
By cutting 11 days from the hiring process with AI-assisted hiring,
a company with an annual revenue per employee of $150,000 ($411 per day) that hires 1,000 employees a year would gain $4,251,000. 

Some examples of ROI success

As mentioned above, different organizations calculate ROI differently. Here are some examples of companies that have achieved results with their technology purchases.

• Aspect, a not-for-profit, saved 33% in sourcing costs
• Asbury Communities, also a not-for-profit, achieved a 33% reduction in time-to-fill (46 days to 31 days)
• Catholic Healthcare reduced time to hire 9 days from 51 days and improved six-month new-hire retention by 30%
• The retailer JYSK reduced time to hire from 56 days to 20 days
• Colliers EMEA cut agency spending to more than 7% of hires for the year
• Sana Commerce boosted its NPS score to 90+ in six months

As you invest, you need to demonstrate return on investment. That’s especially true now that artificial intelligence is powering hiring technologies. After all, there’s some skepticism about the value of AI and quite a few failed experiments piloting AI tools.
Hopefully the tips above, the recruiting ROI calculator, as well as this eBook on “The ROI of the Ultimate Talent Acquisition Platform” will be valuable to you. Let us know if we can help further.