Rich Peterson insists recruiting metrics are important.
The quantity of recruiter activity and quality of hires produced by a recruiting team are important figures to understand. Metrics can be used to judge recruiter performance, gauge the quality of employment brand, and develop effective and cost-efficient recruitment marketing.
However, when is all this data too much? When do you move from a smart strategy of examining the recruitment data generated by your team to an the innovation-sucking paralysis of over-examination? When does the cost of examining your recruiting efforts overtake its ultimate utility?
How do we measure the success of our recruiting teams?
There are Good and Bad Points:
Let’s put things into perspective. The recruitment department within each organization is responsible for recruiting the primary assets of the company – its workforce. For a company to make sure that their recruiting department is effective and efficient, proper performance metrics must be employed.
Before metrics are implemented within any recruiting organization, it is imperative that we understand the following three concepts and how the changes in economics and demographics affect the way we view the role of today’s recruiter.
We must understand what recruiting metrics are and what their real purpose is.
We must understand the role of traditional recruiters and the pitfall of their associated metrics.
We must understand the role of today’s recruiter and create metrics that encourage necessary recruiting behaviors.
Since there isn’t a universal formula for calculating recruitment costs, you will need to determine what costs you want to track and attribute to your hiring.
Below are some of the basic costs that you need to consider:
These are many costs that you incur to source for candidates, which may include print ads, online job posting boards, and/or resume banks.
Be sure you divide the cost of these sources by the number of positions you are filling, using that source to have a true cost for a specific hire.
How much time and expense does your administrative staff expend to open, respond, and route resumes to the hiring team? The best way to do this is to figure out an average cost per resume and track how many resumes you receive for each job to be able to calculate the administrative cost per job.
How much time does your hiring team /recruiter spend screening through resumes? This may also be an average cost per resume received for the job.
If your organization conducts preliminary phone interviews, how many were conducted and how much time was spent by the recruiter to prepare, conduct, summarize and communicate the results of those interviews?
Do you have an automated applicant tracking program? This is an indirect cost that you may choose to pro-rate across your hires for a specific period of time, somewhat like depreciating a new computer on your taxes.
Did your hiring team or the interviewee incur any travel expenses that were reimbursed by the company?
How much time was spent scheduling interviews?
How many staff members were involved in the interviews? How long per interview? How many interviews? What is the average cost of the interviewers’ time?
How much time and what was the cost for follow-up with candidates during negotiations and to notify those that were not hired?
What was the cost of referral fees from a recruiting agency or an employee referral?
What costs will the company be paying for the new hire to relocate? Some costs may include moving company, airplane tickets, hotel accommodations, temp housing, house hunting visits, assistance with sell/buy, or spouse/dependent assistance.
What was the cost for background investigations and/or reference checks? Drug screens?
If there was a signing bonus, how much was it?
What costs does the company typically incur to bring someone onboard – orientation, mentor, benefits enrollment, computers, cell phones, uniforms, etc.?
Not every hire will incur all of these expenses. And, your organization may choose not to track some of these costs but this list is a starting point to help you identify your recruitment costs per hire. The key is to identify what recruitment costs you are going to track and then consistently track them for all your hires to have an internal comparison from one hire to the next.
There are other measures you need to consider as you evaluate the overall success of your recruiting and what you can do better next time.
1) How long did it take to fill the position from start to hire date? What could you have done to reduce the time to hire and not have impacted the quality of the hire?
2) What was the impact on productivity while the position was left vacant?
This is a very difficult calculation to conduct especially depending on the position. However, it does have an impact on the hiring.manager and the organization as a whole. If it can’t be quantified, at least keep it in mind.
3) How satisfied was the hiring manager / organization with the hire? This assessment can be done following the hiring but should be repeated again 3 – 6 months after the employee has been on the job to get a real sense of how successful the hire was.
Be sure you review your cost analysis and each of these other measures to identify what you can capitalize on next time and what you need to do different. For example, what was the success of your recruitment sources?
Which ones provided the most candidates and more importantly the quality candidates? Which ones did not?
Problems with Recruiting Metrics
To understand how metrics can often get in the way of good recruiting efforts, we first have to understand some of the problems with the obtaining and using the data.
Costly: As recruitment marketing channels became more numerous, gathering intelligence across those channels became very difficult. Organizations now must consider sources of hire from social media, job boards, traditional media, television, search engines, referrals, and their own employee referrals. Gathering the data from these disparate sources into usable and comparable sets is often very difficult. In order to compare these different data sets, it has become necessary to use specialized software for applicant tracking and/or specialized, highly-trained employees. Read: expensive.
Inaccurate: For most recruiting data sets, there is some human point of input. This could be a recruiter logging an activity call or interview. It could be a hiring manager logging an interview into a VMS or an applicant self-selecting where they found a job online. In each one of these circumstances, there is a very high degree of human error. Very little motivates a candidate to select the proper source of their knowledge and hiring managers aren’t often held responsible for quality recruiting metrics. Finally, individual recruiters are often told to record everything with very little incentive behind this performance – logging activities does not usually prevent a recruiter from being fired. The end result of all of these faulty inputs is terrible, useless data.
Not Actionable: Some of the recruiting metrics commonly examined have very little follow up and/or consequence. If source of hire was (theoretically) perfectly accurate, a recruiting department can make smart decisions as to which job board to allocate more resources toward. However, consider metrics such as the number of applications per view of a job post. A very low apply-to-view number may indicate a low quality job post, an unappealing employment brand, or unrealistic job requirements.
On a per job basis, this metric is quite easy to examine. However, on an aggregate basis, the metric becomes almost worthless. If no one applies to a particular “Legal IV” position, it may mean it’s because it required a particular niche experience; whereas, in the case of a sales role, perhaps the benefits or compensation model were not detailed or appealing. This is just an example, but you can see that applying universal action or coming up with a plan based on that data is highly problematic.
Consider even some of the most highly regarded, important metrics, such as candidate hire per interview. This data can be very interesting – individual recruiters can be judged on the quality of their candidates and the selection criteria for particular departments can be analyzed. However, it is again a ratio usable mostly on an individual case, because of its wild swings. If you are filling an impossibly hard (or intangible) position, you can and should expect a very low ratio. A “good” hire-to-interview ratio could mean easier positions or indicate higher turnover in the future. It’s difficult to draw any conclusions from this metric that you can use to judge a department as a whole or even the performance of an individual recruiter as compared to another.
A Cost Efficiency Model
Considering that recruitment data is often problematic, hard to come by, un-actionable, and/or expensive, when should you implement these programs? How do you know you are placing too much or too little emphasis on recruiting metrics?
It’s easy to justify costs, either in recruitment software or in specialized human labor, through lofty goals such as improved talent pipelines, topgrading, or employee retention or morale.
However, it’s important to understand both the real utility of gathering the data, the validity of that data, and the cost in doing so.
One of the best ways to determine which metrics to follow and/or develop programs and methods to obtain is through a simple cost efficiency model. Recruiting departments often quantify only one side of the equation: the cost of a recruiting software purchase or perhaps the cost of a specialized recruiting consultant or training for their staff. It is rarer that department heads will quantify the benefit of the action gleaned from that data.
To understand the cost savings or increased revenue from any program, you must first understand what action you can take from the data. If you can determine that specific action can be taken (such as hiring another recruiter, firing a recruiter, moving to another job board, developing a better employment website), you have to also consider the financial impact of this action.
It’s somewhat easy to say, “If we had this data, we would understand if we should [buy X, reduce X, etc].” It is harder to say “And because we took that action, we will [achieve X revenue, reduce Y cost].”
This is to say, “improving” a commonly watched recruiting metric is not a benefit in and of itself. It is rather the financial consequences of the action taken because of that data that matter.
Recruiting metrics often mean a lot to recruiters and very little from the standpoint of business impact. To justify expense and recruiting program initiatives, it’s important to study which metrics matter most to your organization in terms of financial consequence. You don’t have to feel bad about ignoring the data that is too costly, inaccurate, or impossible to act on.
Additionally, if the financial impact and yield from the resultant action will be less than the cost of obtaining and analyzing that recruitment data, you can consider that metric as an expense, not a utility to your organization.
Three Key Metrics:
So where are companies to begin?
Focus on three key metrics when working with a recruitment outsourcing vendor:
• The yield on the outsourcing partner’s pipeline of candidates. In this case, companies need to determine whether the provider improves the ratio of qualified to nonqualified candidates at each stage of the candidate pipeline. This is highly measurable and a very good metric because it drives the right behaviors on the part of the vendor and it forces them to manage the client better.”
For example, being measured on their yield should push the vendor to spend more time with hiring managers and encourage those managers to articulate their needs so that the recruiter can create more exact hiring specifications.
• Reductions in the time to hire, including the time to get a new hire on the job and the amount of management time spent interviewing candidates. Although companies obviously do not want to bring this metric down to zero, finding the most appropriate level can reduce recruiting costs and improve productivity significantly.
Reducing time from need to hire means new employees are working with customers faster,” says Lever. And the less time managers spend on recruiting, the more time they have to drive revenue.
• Reducing the cost to recruit. Like the time to hire, companies do not want to lower recruiting costs too much lest they hinder the recruiting process. Instead, the objective with this measure is to achieve a balance between the yield metric and keeping costs within reason. The cost to recruit includes both direct costs (advertising, staff, tools and time) and indirect costs (productivity and time) that are more difficult to translate into hard dollars.
Rich Peterson concludes measuring performance is not enough. It is important that the client company provide the outsourcing vendor with feedback on their performance and any information the company has gathered about its recruitment needs. By sharing data and reports with the vendor, a company can identify and communicate recruitment hot spots or problem areas.
For example, if the time to hire is particularly high in a certain department, a closer look can determine if the recruitment firm is at fault or if the hiring managers in the department are bogging down the recruitment process with unclear job specifications or by not being available for interviews or not providing necessary feedback about candidates. There should be a two-way relationship between the recruiting firm and the company.
Current Metrics Being Tracked
Respondents who track metrics (514) were asked what metrics they currently tracked in their organizations. Table 1 depicts a breakdown of the metrics provided in the survey and the percentage of respondents who are currently tracking that particular metric.
The top three metrics that are currently being tracked are:
1. Number of new hires, 99%.
2. Vacancies, 91%.
3. Source of hire, 90%.
Almost all of those surveyed stated that they currently track the number of new hires. This is a fairly straightforward metric and is relatively easy to track. The same is true of vacancies and source of hires.
Nonetheless, these results provide solid evidence that tracking various staffing metrics is an important part of the staffing function. Later surveys in this series of surveys will explore these and other metrics in greater detail. Organizations always place an emphasis on their recruiting procedures. Thus, for HR professionals concentrating on the staffing aspect of HR, tracking the source of candidates and how/where they heard of their company, how long it takes to fill a position, etc., is always important and frequently measured.
The three metrics that are the least measured are:
1. Cost of turnover, 34%.
2. Involuntary separation cost, 20%.
3. Voluntary separation cost, 17%.
This finding was surprising when looking at the recent trend of layoffs and the phenomenon of turnover in general. It would seem logical for organizations to spend their time and resources calculating the costs associated with turnover, as many organizations have been affected by these phenomena; however, this is one of the metrics that respondents indicated a desire to learn more about. Perhaps this is an area of staffing metrics that, with additional study and education, will allow HR professionals to use such measurements to their fullest potential.
Rich Peterson expects these measurements to be of extreme importance to HR professionals. Analyzing the cost of turnover and separations could help organizations to determine any changes over time and, if so, to investigate the reason for increased or decreased associated costs. Armed with this knowledge HR professionals might be able to modify some of their HR activities to address problems or capitalize on best practices.
Respondents also were asked how often they tracked these metrics. About half of the metrics are tracked primarily on a monthly basis. The other metrics are tracked monthly, quarterly or annually. Rarely are any of the metrics tracked on a semi-annual basis.
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