# How to Calculate the ROI of Online Communities

By Richard Millington

### If your community has a job vacancy you might pay to post the advert on relevant job sites. You might then filter through the spam and also spend time asking around to see who else might know someone to recruit. This can all be measured in terms of money, resources, and time. We can then use this calculation to determine the cost to attract a single job applicant.

A simple calculation can be the cost of advertising via current mediums contrasted with the cost of hiring via the community. This assumes the quantity and quality of candidates is consistent. A better approach would be to understand the cost per applicant (CPA) and the cost per qualified applicant (CPQA).

To measure the cost per applicant, we need to know the following:

1. Cost per applicant via the community. This includes typical costs if the community is created as a recruitment tool (e.g. technology, staff, processes, overheads) and additional costs (e.g. time spent writing the advert, filtering spam, overheads).
2. No applicants received via community job advert.
3. Cost per applicant via traditional methods. This again includes time spent writing the advert, filtering spam, posting job advert to multiple boards.
4. Number of applicants received via traditional methods.
5. Total number of applicants recruited through the community.

## Step One: Identify the Cost Per Applicant Via Community

First, we measure the total cost of the community (if created for recruitment) or identify the additional cost of writing and posting the job advert on the community. This would involve a small % of a staff member’s time and minor overhead costs.

We then divide this by the number of applicants. If publishing the community job advert costs an estimated \$1,050 in total and receives 97 applicants, the cost per applicant is \$10.8.

## Step Two: Identify the Cost Per Applicant Via Other Methods

We then calculate the cost per applicant via other methods. This might be job advertising websites, social sites or other referral programs. Let’s assume the company pays \$2,000 to post the job advert on three job boards in addition to other minor costs and receives 150 applications.

The cost per applicant would be \$19.7 as shown below.

## Step Three: Determine Cost Difference and Multiply By The Number of Community Members

We can now multiply the cost difference by the number of applicants generated via the community. If the community generated 327 applicants per year (e.g. if the community was used to source applicants or multiple job), the cost saving would be \$2,891.

If the community was used to source applicants for multiple jobs (e.g. 20 jobs per year) and each job generated 100 applicants, this cost saving rises to \$24,660. This cost saving rises with every applicant sourced via the community.

However, this assumes that a) the applicant would have been reached otherwise and the community was the most cost-effective way to reach them, and b) every applicant is then fed equally into the same qualification system and thus holds equal value. Neither of these conditions is likely to be true. This is why cost per hire and cost per qualified applicant becomes an additional metric which may be considered.

## Summary

1. Cost per applicant (CPA) is how much it costs to attract each job applicant via the community compared with traditional methods.
2. A community can reduce CPA primarily through reducing the use of job board costs.
3. To measure CPA, you need to compare cost via community against cost via traditional methods and multiply by the number of applicants.