But for those in the know, recruiting behaves more like the stock-market: it’s fast-paced and varied. You are never sure whether the skills you need will be available at the price you want. Like a stock market trader, the successful recruiter needs a balance of experience and data to land great talent.
Too often, recruitment success is gauged by time-to-fill quotas or cost-of-hire numbers. All these numbers do is tell you how quickly you hired someone at the lowest possible price. These metrics just won’t cut it in a place like Silicon Valley, where skills and expertise (quality) trumps fast and cheap.
William Tincup, one of the leading thinkers in HR, expressed the “recruitment paradox” well with this tweet:
Do we recruit who we want to retain? If not, let’s fix that.
— William Tincup, SPHR (@williamtincup) July 8, 2014
Often we focus on what can be measured. Instead, we need to focus on what should be measured: whether we are efficiently finding the skills and expertise at the right time and for the best price.
Here are five indispensable metrics that will help you determine whether you are finding top quality hires who will move your business forward — In short, whether you are actually recruiting people you want to retain. I will also outline the red flags you should be acting on to refine your recruitment process.
Remember: For all these metrics there is a spectrum in terms of success. The more critical, complex or hard-to-fill the role is, the tighter the target should be:
Must-have recruitment metric #1: Qualified applicants-per-requisition
Why you need it: The qualified applicants-per-requisition metric indicates whether your sourcing practices are delivering what you want: people who can do the job effectively.
How to get it: To calculate this metric, follow these steps:
1. Start at the end of the period you want to analyse
2. Count all of the qualified applicants you have for the requisitions that are still open or were closed during the period
3. Count the number of requisitions that are still open or were closed during the period
4. Finally, divide the number of applicants by the number of requisitions to calculate your metric
You can further refine your numbers by looking independently at the requisitions that are closed and the requisitions that are still open. You can look for flags that indicate whether specific roles or geographies are seeing more or fewer qualified applicants per requisition.
Red flags to act on: If you see that your qualified applicants-per-requisition metric is declining over time, then you need to tweak your sourcing activities. For example, you may need to post job openings in new locations or revamp your referral program.
Must-have recruitment metric #2: Offer acceptance rate
Why you need it: Declined offers are very expensive for tangible and intangible reasons.
How to get it: To track how well your organization is performing, look at:
- How many offers were accepted
- How many were declined (if an offer has not closed then do not count it in the calculation)
- Divide the offers accepted by the sum of offers accepted plus offers declined
By following the above steps, you will be able to see offers accepted as a percentage of all offers closed.
Red flags to act on: Aiming for 100 per cent acceptance is not realistic, however if less than 90 per cent of people are accepting your offers, then you have work to do. This could indicate that there is a mismatch between your expectations, the resources you are putting against this, and the level of player you are trying to “attract” from the market.
You need to remain flexible – just like a stock trader – in terms of the price you will pay. At the offer stage, it may be cheaper to include a signing bonus and land your candidate than to start again. Or it may make sense to introduce some assessment tools or other types of qualifying tests to the interview process so that you fast-fail candidates who will not match your offer.
Must-have recruitment metric #3: Resignations and involuntary turnover for less than 3 months service
Why you need it: If someone leaves your organization within 90 days of starting, then you most likely have no return on the time and money you invested in finding them, onboarding them, and training them to do the work required. The combination of the resignation metric with the involuntary turnover metric tells you whether you are landing the right people or not.
How to get it: To generate this metric, follow these steps:
- Select the time period you want to analyze
- Count all the people who have less than 3 months service at the beginning and end of your analysis period (this allows you to calculate average headcount)
- Count all the people who left, that had less than 3 months service, during the period
- Categorize and group these exits as resignations or involuntary
- Divide the number of resignations or involuntary exits by the average headcount of people with less than 3 months service
Red flags to act on: If an increasing number of people are resigning within three months of starting, then this is a bad sign that the role or culture or something else about the organization was a significant mismatch – that should have been caught through the hiring process. It also could be a sign that expectations about work performance were not properly communicated.
If an increasing number of people are being asked to leave within three months of starting, then this is a sign that the hiring team is not picking up on critical red flags about capabilities or fit.
Must-have recruitment metric #4: New hire performance by lead source
Why you need it: This metric tells you not only whether your new employees are getting up to speed effectively, but by referencing lead source, it enables you to cycle back into your recruiting efforts so that you know where your best people come from. This allows you to consistently fine-tune and improve your sourcing and selection efforts to build overall quality of talent in the organization.
How to get it: To calculate this metric, you need the following data elements:
1. Make sure you record the source of the application for successful candidates as part of their employee record
2. Count the total number of people with less than 12 months of service
- These people should be grouped by the last performance rating they received
- They should also be grouped by the hiring lead source through which they came to the organization
3. Of this group, count the number of people who are not considered low performers
- Performance scales vary so low performance needs to be defined by the organization. For example, on a traditional 5 point performance scale scores 1 and 2 are considered low performance
4. Divide the number of people who are not low performers by the total number of people from steps 1 and 2 above
Red flags to act on: The primary goal of every recruiting function should be to improve the quality of talent in the organization, whilst managing the price that is paid for this talent. New hire performance is something that needs to be tracked over time and action needs to be taken when the trend turns negative. For example, if your new hire performance starts to drop, then you need to review your whole talent pipeline to determine whether candidate quality is dropping or whether onboarding and ramp-up processes are not delivering like they should. That’s why this metric is so valuable: it reveals what is really impacting overall talent quality.
Must-have recruitment metric #5: Vacancy rate
Why you need it: Finance may like vacant positions, as it looks like a cost saving, but in reality having too many open positions can lead to all sorts of repercussions: higher overtime costs, stress (which can lead to absences), as well as mistakes and customer impacts. Therefore, it is important to track how many positions are vacant and for how long. Tracking vacant positions also allows you to determine how well your recruitment process is functioning. If the recruitment team is not landing good new hires fast enough, then your organization will be negatively impacted by the absence of people who do the work.
How to get it: To calculate this metric, follow these steps:
1. Count the current number of open positions (positions which have hiring activity underway)
2. Count the number of employees (headcount) at the beginning and end of the period
- This allows you to calculate average headcount
3. Divide the number of open positions by the headcount plus the number of open positions
- This gives you vacancy rate as a percentage of your total possible workforce.
Red flags to act on: Every organization runs with a certain amount of vacancy. The dynamics of your industry, geography, etc. will determine what is a good number for your organization. But in any case, if the vacancy rate is increasing, then you need to take action.
This is where the other metrics on the list play their part. Are we getting enough qualified applicants? If the answer is no, then you need to review your sourcing strategies. Are people accepting offers? If the answer is no, then you need to review the competitiveness of your roles in the market. Are we keeping people longer than 3 months? If the answer is no, then you need to review your selection and onboarding processes.
Looking at the big picture
Rarely in the dynamic environment of talent and people does one metric tell the whole story. With the combination of metrics detailed above you will be properly informed about the effectiveness of your hiring processes and able to respond to deliver the right people, at the right time, to the right place at the right price.
To learn more about how to take an analytical approach to recruitment and other critical areas of focus for HR, download this whitepaper: The Datafication of HR: Graduating from Metrics to Analytics.
Got a question about recruitment metrics? Post a comment on this blog or tweet us @VisierAnalytics.