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High-impact Strategic Recruiting Metrics for WOWing Executives

Posted By Dr. John Sullivan On January 28, 2013 @ 5:55 am In Advice and How-Tos | 9 Comments

The Top 18 Metrics for Recruiting Leaders

It’s hard to find anything in recruiting that has failed to live up to its potential more than recruiting metrics. For nearly two decades recruiting leaders have poured resources into measuring recruiting success, and in most cases, the best that they have to show for it is being able to say “yes, we have metrics.” If you don’t know what’s wrong with most recruiting metrics, I have outlined in great detail in a previous article “what is wrong with metrics [1]”).

So if you are a recruiting leader and you are frustrated or disappointed with your current metrics, this article will provide you with a list of the metrics that you should be using. I assure you that after reading this list you will definitely question your current metrics. The other possible option is that you may think that the metrics provided here are impossible, but you would be wrong (they are not).

Understanding the Three Time Periods That Metrics Should Cover

Before getting into the list of the strategic recruiting metrics that I recommend, realize that the types of metrics that you use or don’t use are probably contributing to over half of your metric problems.

There are three types of recruiting metrics, and the first is severely overused. Almost all recruiting metrics are “historical metrics” which are based on “last year’s” data. Relying on historical information to base your decisions on almost guarantees failure. These metrics cover what happened “last year.” Historical metrics are backward looking because they rely on data from last year. They many times cannot be reported in real time because the data for the metric cannot be measured at the time of application or hire. Because you need to wait till the end of the year in order to get these metrics, they cannot be generally used for day-to-day decision-making.

The next category is one level up in usefulness. This group of metrics is known as “real-time metrics” because the metrics are based on recent and current data. Providing these “real-time metrics” allows managers to use these metrics to make better recruiting decisions every day. Real-time metrics are calculated on recent recruiting performance over the last month or quarter. They are reported in real time to allow for immediate action because any weakening in the performance on these metrics can and should be addressed immediately.

A third set of metrics are high-impact “predictive metrics ” which almost never appear in the recruiting function. Predictive metrics are unique in that they are future focused. They predict either upcoming recruiting problems or opportunities, so that both recruiters and managers can prepare for them.

Because you need a mix between historical, real-time, and predictive metrics, each of the recommended metrics that I have provided below are labeled at the end of the description in parenthesis, as either historical, real-time, or predictive. Now let’s shift to the list of the seven business impact metrics, the five predictive metrics and the six internal recruiting metrics that you should choose your final metrics from.

Part I — Business-Impact Metrics to Be Reported to Executives

Most of the recruiting metrics that are used by corporate recruiting leaders are not strategic because they don’t cover the business impacts of great recruiting. It’s okay to calculate these tactical internal metrics (cost per hire, average req load per recruiter, etc.) but it’s a mistake to report them to senior executives. Instead focus on the metrics that report and quantify the business impacts of recruiting. No more than seven strategic metrics should be reported to senior executives, and below I have provided my recommended seven “strategic metrics” in descending order of importance.

  1. The performance level and dollar impact of your hires (aka quality of hire) — the most important of all metrics measures the actual on-the-job performance level of new hires. Although it is often called quality of hire, it is actually a performance measure. It is designed to demonstrate that new hires produce significantly more on the job than the average employee. The performance of new hires should also be used to validate the effectiveness of sources, recruiting tools, and individual recruiters. It is calculated from the average performance appraisal scores (or job performance measures) that new hires receive after 6 or 12 months in the job. That performance rating is then compared to the performance scores of the average employee (or alternatively “last year’s hires”) to determine how much the performance of new hires has increased. Alternative or supplemental indications of improved performance that you might also consider include customer service ratings, error rates, 360° scores, and the new hire’s average bonus percentage. You can easily quantify the dollar impact of quality hires by taking the average percentage of improvement of your new hires and multiplying it by your firm’s average revenue per employee. Next, multiply that dollar increase in revenue per employee by the number of new hires to get the dollar impact of quality hires for an entire year (A historical metric).
  2. Project delays and missed strategic opportunities as a result of weak recruiting — because almost all new product development and innovations operate on a project basis, understand whether slow or low-quality recruiting is negatively impacting key projects. This “project-delay metric” is calculated by surveying project managers on a quarterly basis to identify if any projects have been negatively impacted by weak recruiting. The survey should cover the number of project delays, the number of days lost, the cost of those delays, and whether the delays were caused by slow or low-quality hiring. If you are really aggressive, you will also survey executives and ask them if any major strategic opportunities have been missed because of weak recruiting. (A real-time metric ).
  3. Excessive position vacancy days in key positions – realize that for certain key jobs, every day in which a key position is not filled can be damaging to the firm’s performance. It is also true that every day that a revenue-generating job is vacant directly reduces corporate revenue. The position-vacancy-day metric is superior to a “time-to-fill” metric because that traditional metric treats all position vacancies as equal. The vacancy-day metric calculation merely involves counting the number of vacant position days in key jobs and then comparing it to a predetermined standard. Because of the loss of corporate performance and revenue, immediate action must be taken when vacancy days exceed the standard. You should also work with hiring managers to place a credible dollar amount on the annual cost of excessive position days. (A real-time metric ).
  4. New hire failure rate — the worst hire of all is any new hire who must be terminated within the first six months. Not only will you have to rehire for the position but you must also add to that cost the damage that a bad hire probably created. It is calculated based on the percentage of new hires who were terminated or who were asked to leave during the first 6 to 12 months after they start. Failure analysis should be conducted immediately on each major new hire failure in order to determine what went wrong during that hiring process. You should also work with accounting/finance to place a credible dollar amount on the annual cost of your new hire failures. (A real-time metric).
  5. Turnover of new hires — regardless of their level of performance, a new hire can hardly be considered a success if they voluntarily quit within the first few months. This metric is calculated by identifying the percentage of new hires who quit within three months. Then this current new hire turnover rate is compared to last month’s and last quarter’s new hire turnover. Failure analysis should be conducted quickly on each key new hire voluntary turnover in order to determine if it occurred as a result of an error during the hiring process. You should also work with accounting/finance to place a credible dollar amount on the annual cost of new hire turnover. (A real-time metric).
  6. Percentage of innovators and game changers [2] hired — if your organization is among the many who desire to dramatically improve their rate of innovation and product improvement, determine if the recruiting process is successfully hiring innovators and game changers. The best metric involves surveying hiring managers six months after a hire and asking them to assess whether the work of this individual qualifies them as an innovator or game changer. If the percentage of innovator hires falls below the standard, a reassessment of the hiring process is warranted. (A real-time metric ).
  7. Diversity hires in higher-level positions — if your organization places a high value on diversity, measure recruiting’s contribution to increasing diversity. But rather than including all positions, focus your metric on recruiting into positions where diversity [3] can have its greatest business impact. Usually that means restricting the metric to recruiting into managerial, professional, executive, and sometimes key exempt positions. In most cases the definition of diversity should be expanded beyond the legal definition to include diverse thinkers and international hires. (A historical metric).

Part II – Predictive Metrics That Should Also Be Reported to Executives, Hiring Managers, and Recruiters

Almost every business function throughout the firm reports forward-looking or predictive metrics which are unique because they are future focused. By giving decision-makers a “heads up warning” it allows them to change their plans depending on upcoming problems or opportunities. Unfortunately, recruiting leaders almost universally fail to calculate and report a single predictive metric in recruiting. Leaders should realize upfront the extremely high impact of alerting everyone about upcoming problems and opportunities in recruiting so that both recruiters and managers can prepare for them. These metrics also alert executives, so that they can provide funding and the position openings to meet the upcoming problems and to take advantage of the opportunities.

  1. Level of candidate availability/quality forecast – recruiting leaders should gather data and forecast whether there will be a shift in the availability or the quality of candidates during the next quarter or six-months. Knowing that they will be high or low volume/quality of candidate available may allow managers to change their hiring plans accordingly. (A predictive metric ).
  2. Level of recruiting competition forecast – obviously when competitors are planning a heavy recruiting effort the heightened competition will make it more difficult for your firm to land the best available candidates. Under this metric, recruiting gathers recruiting intelligence and uses it to predict whether your key talent competitors will be actively hiring, laying off, or if they will operate under a hiring freeze. This forecast will help decision-makers at weaker or less-well-branded firms to determine whether the recruiting competition will likely be low during the next quarter or six-month period. If the competition is high, decision-makers might put off hiring for a short period until the level of competition decreases. (A predictive metric).
  3. The talent opportunity forecast – recruiting should develop the capability to identify upcoming positive talent opportunities, so that resources can be made available to take advantage of them. Talent opportunities might include gathering intelligence from LinkedIn that would show that top talent is beginning to exit a major competitor or that the competitor’s ratings are beginning to drop on glassdoor.com. For firms that pre-identify top talent to target, hiring managers should be made aware of the probability that individuals on their “most wanted list” are likely to enter the job market during the upcoming time period. This alert may allow managers to open up a position and to enhance their relationship with this “soon to be available” top talent. (A predictive metric).
  4. The unemployment rate forecast – as the unemployment rate drops, the supply of active “easier-to-recruit” candidates decreases proportionally. By providing decision-makers with a forecast of changes in the unemployment rate in their region, you can help them prepare for changes in the available labor supply. (A predictive metric).
  5. Labor costs forecast — when starting salaries are an issue, the recruiting function should develop the capability of forecasting whether the competition for talent will drive up starting salaries in the future. This upcoming increase in salary expectations may cause managers to speed up hiring in order to bring people on board while salaries are still low. (A predictive metric ).

Part III – Internal Recruiting Metrics for Continuous Improvement

Continuous improvement and gaining a competitive advantage are almost always significant goals for recruiting leaders. The mistake that many recruiting leaders make is to mix these tactical or efficiency metrics in with strategic metrics in their metrics report to executives. Executives simply assume that the leader of a function assumes the role of ensuring that their processes are efficient and cost-effective so there’s no need to report them unless an executive brings it up. Many recruiting functions have dozens of internal efficiency metrics, but I recommend that you limit the number to 10 or less. The seven tactical metrics that I recommend are listed below.

  1. Offer acceptance rate – this metric helps to determine if you’re losing top finalists as a result of a weak closing or offer process. Losing top finalists at the very end of the process means that you have wasted a great deal of recruiter and manager time and if you have to reopen the search, they will be unnecessary duplication. The metric is calculated by identifying the percentage of the first selected candidates that reject your final offer and choose not to work at your firm. A decrease in offer acceptance rates should cause you to examine your closing process and the level of your offers so that you can take the appropriate action to improve acceptance rates. A supplemental metric, “quality of applicants not hired,” can also tell recruiting leaders if highly qualified candidates are not making it to the point where the offer is made because of a dull or drawn out hiring process. (A real-time metric).
  2. Source quality usage – all great recruiting functions identify which sources produce the highest quality hires. As a result, the recruiting function must have a metric that reports to recruiters what percentage of the hires in key jobs came from sources that have the highest on-the-job performance, diversity, and tenure rates. Because employee referral hires and boomerang rehires generally produce the best performers and have lower turnover rates, assess the percentage of new hires who came from these two sources. (A real-time metric ).
  3. Quality of the applicants — this metric helps you determine if you are currently receiving high-quality applicants. It is calculated by determining the average percentage of the job requirements that are met by the applicants who appeared on the various interview slates during the last month or quarter. The percentage of qualifications met is then compared to last month’s percentage and the running average over the last year. Getting lower or marginal quality applicants requires an almost immediate root cause analysis. (A real-time metric ).
  4. Manager/new hire/applicant satisfaction with the process — this metric helps you identify user satisfaction rates and their causes. Low manager satisfaction means that your internal customers are not happy, while low satisfaction among applicants or new hires may increase candidate dropout rates and hurt your external employer brand image. Satisfaction rates are measured with any survey and the results are compared to “last year’s” satisfaction rates. (A historical metric).
  5. Individual recruiter performance – recruiting problems can be attributed to the recruiting process or to individual recruiters. Obviously if individual recruiters are the problem, you can’t “fix them” unless you know which ones are under-performing. The best approach is to work with your recruiters to put together an “individual recruiter index” which assesses and compares each recruiter on quality of hire, the use of effective sources, user satisfaction, and the number of hires. (A real-time metric ).
  6. Employer brand strength – a visible and strong employer brand will have a significant impact on both the volume and the quality of the applications that you receive as well as on your offer acceptance rate. There is no universal measure of brand strength, so each firm must create its own measure or combination of measures. Options include using LinkedIn’s Talent Brand Index tool [4] (which allows comparison between companies), the ratio of positive and negative comments on glassdoor.com, or the visibility of your jobs as well as positive and negative comments that can be identified using a simple Google search covering your firm, its job openings, and its employment and employer brand pillars. (A historical metric).

Final Thoughts

If you don’t want to bother with metrics, there is a quick and easy way to find out if you are producing a business impact. Simply measure the number of lines in which recruiting is mentioned in the annual report (compared to other high-impact functions). You should also be aware of the recent research conducted by the Boston Consulting Group that has recently demonstrated that recruiting has the highest business impact on profit of any talent management function [5].

Unfortunately, few recruiting leaders have been able to prove that fact inside their own corporation because they too often rely exclusively on the metrics provided by their ATS or enterprise software provider.

Most commonly used recruiting metrics have such a low impact because they almost universally focus on costs and process efficiency, rather than what executives really care about, which is the dollar value of their business impact. The next-most-common problem is that too many metrics are reported to executives. As a result, you need to dramatically limit the number of the metrics that you report to executives. In addition, current recruiting metrics are all historical, which means that relying on what happened “last year” can lead to some really poor recruiting decisions.

I have found that if, with the CFO’s office help, you can prove with credible data and metrics that you hire significantly better performers and innovators really fast, so that there are no strategic delays or revenue losses, you are well on your way to becoming a corporate hero!


Article printed from ERE.net: http://www.ere.net

URL to article: http://www.ere.net/2013/01/28/high-impact-strategic-recruiting-metrics-for-wowing-executives/

URLs in this post:

[1] what is wrong with metrics: http://www.ere.net/2012/04/16/what%E2%80%99s-wrong-with-hr-metrics-pretty-much-everything/

[2] game changers: http://www.ere.net/2013/01/17/hires-that-will-transform-your-company/

[3] diversity: http://www.ere.net/tags/diversity

[4] Talent Brand Index tool: http://www.ere.net/2012/10/11/linkedins-new-tools-measure-brand-power-and-get-your-job-listings-moved-up-top/

[5] research conducted by the Boston Consulting Group that has recently demonstrated that recruiting has the highest business impact on profit of any talent management function: http://www.ere.net/2012/09/04/news-flash-recruiting-has-the-highest-business-impact-of-any-hr-function/

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