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Don’t Just Get them Coffee: A Study in Recruiter ROI

by
Beth Minter
Sep 20, 2001

Remember that Warner Brothers cartoon, the one where the big, burly bulldog named Spike walks down the sidewalk strutting beside a frantic little dog that constantly yelps, “What can I do for you now, Spike? What can I do next? Anything for you, Spike!”? Well, guys, I have some bad news. “Spike” is your company. And guess who the frantic little dog is? That’s right. It’s us, the recruiters. We jump around, we react, we conform, we ask what we can do next, we ask what we can do better, we get them emotional coffee…to our companies, we are that chaotic little dog. And then we complain that they make strategic decisions without us. But here’s the catch: if we stop the coffee and suddenly demand to be treated as business consultants, as partner in the planning of our companies’ strategies, we’ll have to come to the table with hard, predictable data and quality control. That’s right, we’re going to have to measure recruiter’s ROI. Just like our counterparts in manufacturing, IT, sales, consulting, or customer service, we will be required to document the quality of our work. And that’s going to involve accountability. In particular, we’ll have to take responsibility for the performance of our hires. It is the only clear path to illustrating our profitability to our companies rather than our cost. I myself have watched my senior-level hires undergo personality transformations so extreme they would’ve sent Jung back to that archetypal drawing board. As they moved from “my candidate” (Oh, Beth, so glad you called, how are you? How are the kids?) to “a senior manager” (Hey, Beth, can you take care of signing me up for my insurance? Oh, and I take my coffee with two cubes of sugar), the change was drastic to say the least. So, what’s going on out there that facilitates that the regression of otherwise bright and talented managers? This question drove me to design a short survey, posted on ERE. I wanted to know what metrics were being used by other corporate recruiters, so I asked them. The question sparked some healthy debate (and earned me some pretty nasty emails!). But the answers themselves were quite revealing. Below, I’ve broken down the results of my survey into five measures: volume, time, cost, quality, and “warm fuzzies.” Volume Overall, 57% of companies surveyed measured at least one volume metric. Only one company used volume as the sole measure of recruiter performance (that company has less than a 3% attrition rate). These metrics are most often measured using ratios or percentages, and most frequently used in high volume situations. It is a more true measure of a recruiter’s ability to mold a process than it is of recruiting ability. There were three dominant volume metrics:

  1. Screen-Interview ratio. This metric is used by 40% of the companies who measure volume. This ratio improves with time. It should become clear very quickly after a few initial phone conversations whom you want to speak with further and who wants to work for your company just a little too much. Measure how many you like on the phone against the number you actually invite to interview. Eventually, (in high volume, about two days!) you’ll be able to determine skill fit by past behaviors.
  2. Interview-Hire ratio. This volume metric is used by 78% of the companies who measure volume. Also a ratio that reduces with time, you should be able to attach a dollar figure to your managers “time off task” when they interview. If 90% of your candidates are hired, that can illustrate a substantial cost savings to your company (Cha-ching!).
  3. Offer-Start ratio. This metric is used by all (100%) of the companies who measure volume. You can’t predict the spouse or the teenager who just CAN’T leave, after all, but you can control the rejection of the offer. If we’ve realistically set expectations, and been clear through the entire process, there should be no surprises on start day. Don’t sell the job! Measure this by comparing the declines last year to declines this year, assuming the candidate flavor is the same. Less time off task for hiring managers, and more time on task for you, conducting other candidate searches equals a clear financial gain for your company.

Time Eighty-five percent of respondents measured their recruiters with a form of time-related metrics. Two of these metrics stood out. The first, time-interview, is used by 15% of companies who measure time. Apparently, the speed we can herd the cattle when a hiring manager opens the gate is a measurable, and critical skill. (Does anyone hear a dog barking? Is that you, Spike?) Time-start, used by 100% of the those who track time. How quickly can you fill a job? Used extensively in high volume, or start-up situations, it’s not a metric that should be solely maintained in a functional work environment. This mind-set flies in the face of workforce planning and strategic development. If your company evaluates heavily with this metric, do two things: 1) Rely on referral programs. Managed well, they make recruiters look REALLY good. 2) Send me your resume. Cost Cost is measured, to some degree, by 100% of respondents. Some of us continue to repeat the mantra of CPH: “I hired them cheap and fast!” While few of us still use this metric alone (8%) as a measure of recruiter performance, most of us (92%) are partially evaluated on it. A few enlightened companies (12%) use it only as budgetary. Two companies measure all costs incurred against the compensation recruited. That formula takes into consideration common sense; it’s much tougher to find a $200K Sales VP than a sales rep, so it takes longer. Divide the compensation recruited by the number of jobs filled. Quality of Hire I very nearly got tarred and feathered over this one! Twenty-five percent of us look at this, to some degree. Few of us (6%) currently are held financially or professionally responsible for the quality (performance and attrition) of our hires. But one corporation actually bases their recruiters’ bonuses on the quality and performance of their hires! After a year’s tenure, if at least 40% of a recruiter’s hires are still with the company, that recruiter receives a 2%-5% bonus for each! A well-known industry leader, someone considered by many (including this author) to be the “Grand Poo-Bah” of recruiting, said to me on this topic, “Sure, I’d love to come to work everyday knowing I didn’t have to justify my quality.” Good point. Warm Fuzzies Politics, plain and simple. But useful. This metric measures your power, and 49% of our peers use it. It’s purpose is to indicate the way our business partners “feel” about our performance. Surveys are sent out to hiring managers, and to hired candidates. Can anyone say HALO? Thinking About the Results It quickly became clear to me that, no matter where we lie on the continuum of “business partnership,” we are all struggling to identify procedures and measures that will take us to the next level. One trend emerged from the data I wasn’t expecting, but is nonetheless, logical. (I love it when that happens!) Smaller, more progressive companies integrate the responsibilities of their recruiters, and are more apt to evaluate recruiters on the performance of hires. When recruiters have input into the management style of their hires, conduct monthly meetings with them, etc., they are much more prone to own candidate quality. These companies steered away from the solo, punitive-based metrics, like CPH. Recruiters, here, are absolutely regarded as partners. Mr. Coffees. Automatic drip. On the other hand, larger, more “siloed” companies that restrict the job responsibilities of recruiters to simply “recruiting” were a bit cautious about assigning ownership of performance to recruiters (and frankly, their recruiters weren’t too happy about the idea, either). Here, solo metrics were more likely to be employed. The metrics here seemed to be more geared toward “catch the recruiter screwing up” than actually determining their recruiter’s value-add. Mocha Java? If we hired consultants to evaluate our internal metrics, the first thing they would suggest is that we use a wide variety of measures. Anyone who still measures one single metric as an indicator of recruiter performance might as well not only bring the coffee but take orders for lattes as well. In other words, all these metrics have validity, but only when used in conjunction with the other. But if one metric is misused as a determinant of our performance, it’s cost per hire. For some of us, this has become the bane of our existence. Because we attached ourselves to that metric in the 1980s, many of us still cling to it. (How did that happen, anyway? I have a vision of an HR director tied up to a folding chair in a basement, circa 1982, being forced to explain how recruiters contribute to the company. Sweat, duct tape, and chloroform are involved. That’s all I’m going to say.) CPH is useful, yes, but not a deal-breaker. Ask yourself this: what do we do when we corporate recruiters can’t find the right fit? That’s right, our dirty little secret exposed: we call headhunters! Don’t look at me that way, you KNOW you have. Beware that we continue to shirk responsibility for our hires. If that is the path we choose, then we must own that it costs us our credibility as professionals. That a quality recruiter controls CPH should be assumed. No one asks our finance director if she can balance her checkbook. No one asks our safety director if he is measuring his OSHA reportables for the month. I’m not suggesting we should spend with wild abandon, but our days of politically aligning ourselves to ensure we keep our jobs should well be over. I take MY coffee strong, with extra cream, no sugar, thank you. A special thank you to the companies who participated in this survey:

E*Trade

Boston Market

3Com

PureCarbon

Merrill Lynch

Icarian

Synquest

Keystone Health Plan

Nissan

Knowledge Workers

Unicon

EDS

Dell

Bestworld

Hewlett Packard

HR Results

Whirlpool

CAI, Brentwood

Creative Source Recruiting

Credence Systems

Astar Pivotal

Required Technologies

Management Recruiters

Jagit

Accentor

Gately Consulting

This article is provided for informational purposes only and is not intended to offer specific legal advice. You should consult your legal counsel regarding any threatened or pending litigation.

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