There was a time in the late 1990's when recruitment had a feel of being seat-of-the-pants stuff, a gut-instinct decision based on what it was felt that the company needed, combined with the firmness of the candidate's handshake and the look in their eye at an interview.
Ok, that may not be entirely true (it was almost certainly a touch more scientific than that), but since that time a huge amount has changed.
Now, everything is tested, measured and analysed to make performance as efficient as possible. This is especially true when measuring the effectiveness of a hiring process.
Whilst you should never underestimate the importance of a candidate ‘feeling right’, analysing key recruitment metrics has become a very important part of a modern HR team's tasks.
They enable you to see what's going right and wrong, and where you should focus your efforts. The purpose of these metrics is to draw invaluable insights for your business so that you channel more or less money into appropriate areas of your recruitment process.
A word of warning for you: the metrics below will at worst teach you some new business notions, and at best revolutionise your HR strategy.
So what lessons can you learn from big business?
Here are 4 key recruitment metrics that you should implement in your business which will boost your productivity, reduce waste and help you get the staff you need.
1. What is your cost-per-hire?
If you advertise any vacancies on job boards or other paid media, you need to know how each pound spent is performing.
Sounds obvious right? It is, yet you'd be amazed at how many companies don't actually do this.
'ROI' is fast becoming the phrase of choice for many boardrooms and was especially relevant during the recession years, but for unknown reasons it's seldom applied to recruitment processes. This is possibly because people don't know what to measure.
Cost-per-hire is a really simple equation:
Total amount of money spent on recruitment / Total number of hires
This is more complex than it sounds as you have to factor in any time spent on recruitment by internal staff, as well as any additional money spent on other items such as advertising or job board postings.
If you're able to track all of that then brilliant, you should be able to arrive at your final cost-per-hire.
What's really important about this metric though is the continuous measurement of it. You need to track whether it goes up or down over time, mapped against different types of roles you're recruiting for also against anything you do differently with your recruitment processes.
Marketeers do similar A/B testing to track performance of marketing campaigns across different media to see where their money is best spent.
Taking this process one stage further, track where your eventual hires originate from. If it was as a result of a posting on your company's LinkedIn page, then perhaps the money you spent on Total Jobs or other job boards could have been avoided for example.
In time you'll be able to see where you should advertise for certain roles and your company's optimal cost-per-hire, and benchmark every recruit against it. Keeping such a keen eye on this will reduce the amount you spend on recruitment.
Recruiter Pro Tip: If you're planning on recruiting directly and not using an agency, then I'd advise that is one metric you can't do without. Companies often balk at recruitment agency fees, but often it can be a false economy for companies to think they can do it themselves, especially when you factor in the amount of time that it takes to manage a full recruitment campaign. If you don't plan on using an agency, measure everything - every hour you or your team spends on recruitment and then get a figure from accounts as to how much that costs. Then make sure you've added in the advertising costs before arriving at your cost-per-hire. You might be surprised at just how expensive it is, and then suddenly using an agency for a huge part of it doesn't quite sound so unattractive.
2. What is your time-to-hire?
Time-to-hire remains one of the most critical metrics, especially for large companies with high staff turnover.
Simply put it is the time when a job requisition was placed to the time the candidate accepts the offer. If the time-to-fill is too long, then it can have catastrophic effects on the company as a whole as the cumulative effect of unfilled posts acts like an anchor on your firm’s growth and profits.
But what is too long?
To make your time-to-fill metric mean anything, it needs business context. A shorter time-to-hire might sound great, but not if it means compromising quality, especially if you're recruiting for a senior level position.
In these instances it might be wise to have different time-to-hire benchmarks for different levels of position within the business, rather than one overarching figure which is used as the go-to metric.
Knowing the time-to-hire helps you evaluate the opportunity cost of not having a new recruit in place, if for instance it's a high revenue generating role that's costing you money for every day it's not filled. You could work out how much money you're losing on a daily basis if you wanted to take the metric further.
Then compare that against the level of financial risk there is in hiring the wrong candidate, and potentially how much it will cost the business in doing so.
There will be an overlap between the two figures that as a business you'll feel comfortable with, and that in turn should determine your target time-to-hire.
Your actual final figure though might be very different, in which case you need to look at the numbers and work out why.
Recruiter Pro Tip: The time-to-hire is arguably the benchmark measurement for any recruitment team and they should aim to reduce it by as much as possible, but importantly, without compromising quality of the people you hire. It's vital that you understand where that quality cut-off point is, and you can only achieve that by watching the numbers, and then comparing them to metric no 3...
3. Quality of hire
On one hand this is a subjective affair and it’s hard to attach a numerical value to employer satisfaction. On the other hand, the numbers don’t lie.
So while we rationalise our choices, a straightforward graph plotting staff turnover shows how many of the new hires stayed the course and weren’t removed from their post after a painful week.
This is a very simplistic measure which doesn't take into account a load of other factors.
Of course, you can go much further.
For instance, if you started to use competency based interviews as part of your hiring process, your Hiring Managers will be able to ask interview questions that are specific to the job in question. The answers they give should in turn increase your quality of hire.
Taking that one stage further, you could have candidates fill out screening questions as part of the interview process - anyone that doesn't meet the grade doesn't get through to the next stage. You can tweak the questions depending on the role and the desired quality level,
There's also software out there now which helps assess post-hire quality analytics, where essentially you track someone's performance through reviews and appraisals against any pre-determined requirements you might have.
Measuring quality of hire can be tricky as it is so subjective - so you need to eliminate any subjectivity wherever possible to make it a meaningful metric.
Recruiter Pro Tip: Committing to measuring the quality of hire is often the next step in your recruitment metrics. Taking the numbers to a higher level requires collaboration and a system across the company as a whole, together with a series of numbers that contribute to an overall quality of hire figure. Turnover, performance and manager satisfaction are all valid, contributing factors to the quality of hire. The key, for the numbers to mean anything, is to keep it consistent.
4. Staff retention and turnover
It doesn’t matter how streamlined your employment process is if the new staff don’t stay.
As the costs of losing trained staff are much higher than hiring them in the first place, it pays to keep a close eye on your staff retention and turnover rates.
How do you do that?
Calculating staff retention requires a bit of maths:
No. of employees at the end of the calculation period / No. of employees at the beginning of the calculation period
So, let's say that for your business you're measuring the 6 months from July - December 2014. As of July 1st 2014, you had 120 employees, and as of 31st December 2014 you had 86 employees, your staff retention rate is:
86 / 120 = 71.67%
On it's own though, staff retention can be a bit misleading. Using this metric on it's own, you might assume that you simply lost 34 employees over the 6 month period. What if you recruited 16 additional people but actually lost 50?
Staff retention gives an overall guide, but it gains more value when considered alongside staff turnover rate. This is calculated as:
No. of employees who left during the calculation period / Total no. of people employed during the calculation period
Using the example above, the staff turnover rate would be:
50 / 136 = 36.76%
Recruiter Pro Tip: If you can, compare your retention and turnover rates to industry standards and compare departments with each other. Also try tracking different months / periods and see if any strange numbers align with any incidents you might have experienced in the business. If one department is losing more employees than the others, there might be a real issue that needs addressing at a management level. Pay rates for that department may not be sufficient or there might be a number of other reasons. Again the numbers don’t lie and a straightforward metric analysis like this can help unearth much deeper-rooted problems that are holding your company back. If all is going well you'll have a sky-high retention rate and very low staff turnover, but this only comes from a satisfied, well-remunerated workforce who enjoy the environment, feel valued and consequently perform well in the job.
Summary
Probably the most important thing to take from all of this is context. What I mean by that is you can only interpret the numbers accurately once you have some figures to benchmark against.
For instance, if you looked at a staff turnover figure of 30% for January, you might think this is really high - and you'd probably be right. But if it was 40% in December, and 50% in the previous January, then that would indicate that there has been an improvement and things are going in the right direction.
You also need to ensure that the metrics and the results you interpret are appropriately aligned with your business' overall strategy.
Overall, get this right and stay on top of the numbers and it will really help supercharge your hiring process.
