Let start this article with a small riddle. Imagine that you have four recruiters on your team and you need to lay one of them off. The first recruiter hired twelve candidates per year, the second hired twenty-four, the third hired twenty-eight, and the last recruiter hired thirty-six candidates during the year.
Which recruiter would you fire if you had to? Which recruiter do you believe is not performing on the same level as the others?
If this riddle was too easy for you, let’s try this one. You have a team of three recruiters: the first and second hired thirty employees per year, and the third recruiter hired thirty-five employees. Who would you pick to leave your team if you needed to choose one of them?
I know that’s not easy to answer without data, and if you answer based on very limited data you could let a good recruiter go and keep the bad one. And yet lots of companies make this decision only based on the number of filled roles or the time it took them to fill a role as their only KPIs. Making decisions without data is the same thing as making decisions based on wrong/irrelevant data.
Based on the things you know about the recruiters from the first riddle, your answer was likely to fire recruiter number one. But what if you start tracking as KPIs other data not only time to fill and a number of hires? If you start evaluating based on more KPIs like these I mentioned below, you will get a much different view of your team.
Btw. The answer to the first riddle is at the end of this article, and yes you can skip to the end right now.
What are KPIs?
If you are a recruiter and you never heard about KPIs, please don’t tell this to other recruiters, because they will envy you. 🙂 Key performance indicators (KPIs) are parameters by which organizations monitor the success or development of every staff member. Recruiters use KPIs for measuring performance and as a time and task management tool to track productivity. Because recruitment is a blend of HR and marketing – organizations must make themselves attractive to the right candidates – it only makes sense to have a system that gives an evaluation of recruited candidates. This allows managers to understand what works and what doesn’t when it comes to recruiting talents fit for the company and making the best investments in terms of resources spent.
An organization is only as good as the people who work in it. This is why KPIs should be developed and managed by someone who understands its merits and demerits and can strike a balance between them.
Key Performance Indicators
Cost per Hire
This is one of the metrics that recruiters consistently rank as one of the most helpful in their planning. The cost per hire helps show the relationship between recruitment efforts and savings for an organization, and it can be easily understood by people who do not have a background in recruitment. Company leaders especially like this KPI as it ensures that recruitment efforts are feasible for the business while also taking into account the industry, size, and location of the establishment in question.
Mathematically, this KPI is expressed as: Cost per Hire = (External costs + Internal costs / Total Number of Hires)
Interview to Offer Conversion Rate
In your recruitment strategy, it is important to monitor the interview to offer ratio and offer to acceptance ratio. Why are these parameters important? If you have been conducting interviews but not extending offers to candidates, then you have to look into why this is happening. It could be because your company isn’t as attractive as you thought it was, or perhaps there is a difference between your expectation and that of the candidates. It could also be because there is a difference in culture, you are not competitive on the market (benefits, salary), or your competitors employed them while you were waiting to get back to them.
Application Completion Rates
If you need to fill a five-page long registration, you’ll likely start feeling a little frustrated by page three, right? And because your candidates are acting the same way as you, the reason you’re not seeing enough candidates in your Applicant Tracking System (ATS) could be because the good candidates are dropping out and leaving during the application process. The problem could be a long registration form or something as simple as a glitch on your portal. Whatever the case, keeping track of the application completion rate helps to investigate the drop-offs in your job application process. This could also include a variety of other reasons, such as inefficient optimization for mobile devices and too many input fields. Looking into these reasons might allow you to change to an ATS or the development of a better web portal that makes for a smoother candidates/user experience.
From my personal experience, it’s really important to see when and where you are losing candidates during the application process.
There are many channels available to talents today than there were a decade ago. There are job boards, career sites, social networking sites, referrals, etc., and new sources are appearing every single month. And that’s why it is important to know which of these sources offers up not only the most candidates but also the best candidates. Knowing the right source is good because you can learn which source is helping you hire your top-performing employees and which is only cost you money. This will further help your hiring managers and leaders know where they should expend their resources in the future.
As the manager, your responsibility is to balance the quality of candidates recruited with the costs incurred in the recruitment process. In the assessment of a candidate’s quality, parameters such as productivity (the length of time it took the recruit to get to optimum performance level compared to the average time or their peers or predecessors), tenure (the length of time talents stay in the organization before they leave), scale (was there growth professionally and promotion internally), and impact (contribution to the development of the organization) should be looked into.
Measuring data on retention allows an organization to assess which managers or business divisions experience high or low turnover and why that is. It is important to understand that turnovers are normal. Sometimes employees leave because they get a better offer elsewhere, or because they are driven by a different vision, and that is okay. But when these numbers are becoming increasingly high, it is an indicator that something is wrong and that you should investigate and establish a history to benchmark future trends.
In fact, asking why is more important than keeping tabs on the numbers. You should be asking questions like: “Does one manager have a higher turnover than the benchmark?” or “Why are employees leaving, especially those with high achievement?”. If your company is experiencing a high turnover, it is important to look into the cause to forestall an even higher turnover. Having the data for longer periods of time will give you an interesting overview of turnover reasons.
You can also track many other KPIs like: CVs submitted, time to fill, number of placements, and as an agency recruiter you can track KPIs like commission percentage etc.
Typical KPI Problems
- KPIs are sometimes set up by managers who never worked in recruitment or who don’t have much experience with it or even don’t know anything about KPIs and recruitment.
- KPIs do not reflect the current situation of the recruitment market, or they can go a long period of time before being updated.
- KPIs are sometimes set up without any previous analysis and plan.
- KPIs are not accurately measuring the true recruiting process, but only one small part of it (like only tracking the time it takes to fill a position or the number of hires). You can replace KPIs with Realistic Performance Indicators (RPIs). 🙂
Answer to the riddle:
You chose to fire the recruiter number one from the first riddle, right? And what if I told you that you just fired the best recruiter on your team who was able to attract the most talents than the others.
If you are only tracking the number of hires, you are only seeing that the first recruiter hired twelve candidates per year. But when you start evaluating more parameters, like those I mentioned above or the number of referrals, you can find out that these twelve candidates recommended forty other new employees as referrals and the other three recruiters hired them. Without any data or performance indicators in place, you would never find out about this and potentially fire your best recruiter. This recruiter helped you hire twelve people, and these people helped you hire forty more, a total of sixty-two people out of one hundred hired during the year. So, 62% of all your hires were affected by recruiter number one alone. You will need more data to make the right decision; and yes this riddle is only example. But in the end, only tracking the number of hires and not seeing the recruitment in a bigger picture could not only cost you a good recruiter but also affect your hiring activities and an overall number of hires.
Recruiting is an important part of any business, and as such, it is vital that leaders pay close attention to its performance. You don’t want to start losing good employees and keep the low performers. Even though there are many modern tools out there, such as the ATS, technology alone will not be enough to analyze and offer solutions. If you want a good recruitment strategy, you must look at the goals you are striving to achieve and ensure that every member of the team understands the thinking behind the metrics, whether that be how it’s being measured or how these metrics fit into the organization’s long-term growth plan.
If you are planning to implement new KPIs or you are going to update your current ones, don’t forget to discuss the new KPIs with your team and set expectations for the things you are planning to track.
Your success as a manager depends on the success of your team.