In my companion article entitled “Influence Your CEO With WOW And OW! Talent Data” I explained how you can impress your CEO by converting your Talent Acquisition results into dollars. It’s also important to understand that you can’t impress a CEO with a large volume of tactical recruiting metrics. Instead, you must focus on metrics that demonstrate a direct impact on what CEO’s really care about, the firm’s strategic goals. When you shift to this “WOW the CEO” metric model, you need to begin using business impacts as the key selection criteria for determining which metrics to report to senior executives.
The Metrics That Reveal the Highest Business Impacts from Talent Acquisition Actions
Here are my top 14 recommended business impact Talent Acquisition metrics for influencing executives, with the most important ones listed first. Obviously, it’s important to work with senior executives to determine which of these metrics they would prefer to have reported to them.
1. Revenue per employee ratio
This overall HR metric demonstrates the increasing revenue value that your workforce is creating as a result of good HR and recruiting. And it is easily compared between firms in the same industry to demonstrate that your workforce is more productive than your competitor’s. For example, Apple produces an average annual revenue per employee of $1.9 million, Facebook $1.6 million and Google $1.3 million (Note the revenue per employee of all publicly traded companies can be found on MarketWatch.com). An alternative metric is your dollars of profit to labor cost ratio.
2. On-the-job performance of new hires (Q of H)
The most important foundation metric is the quality of hire. Using golf as an example, a quality of hire measure would be last year’s golf team’s new-hires scored an average of 70… while this year’s hires scored 63, an improvement of 10%. There is no more important overall Talent Acquisition metric than the quality of hire because it reveals that you are in fact hiring better performers. But also because the quality of hire measure can be used to validate your hiring criteria and to assess the effectiveness of each element of your hiring process. The one single metric that should be used in the calculation is the percentage improvement in on-the-job performance of new hires compared to previous years.
3. The total estimated $ impact of recruiting on the business
Work with the CFO’s office to convert your quality of hire/on-the-job performance improvement of new hires into dollars. The simplest conversion metric is multiplying the percentage of improvement by the average revenue per employee.
4. The percentage of new hires that become innovators and top performers
It’s important to report the percentage of new hires that turned out to be top performers (in the top 10%) and innovators. And then to work with the CFOs office to calculate that dollar value.
5. Hiring top talent into prioritized jobs
It’s critical that Talent Acquisition identifies the positions with the highest business impact and then to focus its recruiting resources on those prioritized jobs. Start with prioritizing revenue-generating positions because they have the highest measurable revenue impact. Then report the quality of hire, revenue generated, diversity, position vacancy days and the retention rate of new hires in these prioritized jobs.
6. Hiring top diversity talent into “customer and product impact jobs”
The goal is for the diversity percentages of your employees in your customer and product impact jobs to reflect that of your customer base. Then work with the CFOs office to calculate the dollar impact of increasing diversity in those jobs.
7. Excess position vacancy days in prioritized/revenue jobs
Excess vacancies in priority jobs reduce the likelihood of meeting business goals. Be sure and first track excess (the number over target) position vacancy days in revenue-generating jobs because their impact is more immediate and it is easily measurable. Next, calculate the excess vacancy days in prioritized jobs. Work with the CFOs office to put a dollar amount on the lost revenues because of a slow hiring process.
8. New hire failure rate
Calculate the number of new hires that are considered to be an absolute failure. Because when a new hire fails, not only will you have to refill the position but the errors and the damage to customers caused by these failures must also be calculated.
9. Percentage of projects delayed due to lack of talent
As more work shifts to project type work. One of the largest positive impacts of hiring becomes whether managers have enough talent to complete their projects on time. Survey managers to identify the number and the cost of project delays due to a lack of quality talent.
10. Percentage of key jobs not filled
If you never fill a key job, you may permanently damage business results in that area. So track those unfilled jobs and work with the CFO to calculate their costs.
11. Increase in the number of applications received
The only measure of employer brand strength that matters is the increase in the number of qualified applicants that you receive. You may have to factor in the unemployment rate to normalize this success measure.
12. The percent of top quality candidates not hired
It should be considered a major failure when a high-quality candidate applies to your firm but for some reason, they are not hired. Knowing this failure rate allows you to work with those that you lost to find out why and if they might reconsider.
13. Giveaway/takeaway ratio with key talent competitors
This metric is a measure of your talent competitiveness. Where you measure the number of individuals that you have hired away from your direct competitors, compared to the number that they hire away from you in a given year.
14. Workforce planning
It’s critical that firms identify their future talent needs both in volume and skill set so that the recruiting strategy and process can be adjusted to better meet those future needs.
The Benchmark Firm to Follow Is Google
Many Talent Acquisition leaders look for benchmark firms that can serve as a model that they can follow. I recommend that you look at Google as the analytics model to follow. Google has become the second most valuable firm in the world because it focuses on innovators and a data-driven approach to people management decision-making.
In fact, their Chairman reports that they operate on the principle that “All people decisions are based on data and analytics.” And rather than considering HR to be too soft or difficult to measure, he states “We apply the same level of rigor, analysis and experimentation on people… as we do the tech side.”
They also operate a Pi-Lab which conducts experiments, hypothesis testing and A/B testing on possible HR solutions. In fact, some of Google’s internal research found that often used selection criteria including brainteaser questions, grades, going to college (or the school you attended), more than four interviews and unstructured interviews add little predictive value to the hiring decision.
It’s time for other Talent Acquisition functions to adopt a similar data-driven approach. And to begin to make hypothesis testing (i.e. does this factor accurately predict on the job success?) a regular part of their analytic work in order to eliminate the many currently use factors that don’t predict. Fortunately, the philosophy and many of the metric approaches used by Google are outlined in the book Work Rules by Laszlo Bock.
The key lesson to be learned here is that the key criterion to use when you select your Talent Acquisition metrics is whether they demonstrate a direct business impact on revenue or other strategic goals.
This means that talent leaders must learn to stop reporting metrics that they personally care about and to instead adopt the perspective of their CEO. That viewpoint will result in the reporting of a smaller number of metrics and each one will contain its estimated dollar impact on the CEO’s strategic goals and components of their bonus formula.
This business impact approach will likely reveal that among all HR functions, recruiting has the highest business impact. The dollarized Talent Acquisition impact may even exceed that of other more “talked about” business functions. And once that impact is revealed, talent leaders will be more admired, more listened to, and better funded.