Recruiting Metrics that Matter

David Creelman

A SilkRoad TalentTalk eBook

TalentTalk

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Getting good value from recruiting metrics is harder than most people think, yet expectations are high. Everyone is talking about HR analytics; leaders expect their HR departments to be, at the very least, reasonably good at generating useful metrics. The pressure is on. HR needs recruiting metrics—and having a stack of data is not enough, HR needs recruiting metrics that matter.

THE SINGLE SECRET OF METRICS SUCCESS

Whenever the topic of recruiting metrics comes up, people want to know what to measure. They get the usual list: cost-per-hire, source of recruits, time-to-fill, quality of hire, and perhaps a few more. The trouble starts as soon as one starts digging into actually generating this data. Challenges include:

• The data is hard to get

• The specifics of how to calculate the metrics are surprisingly complex

• The accuracy of the data is debated

• The business relevance of the metrics is uncertain

OK, you already know the problems; you want to know the single secret of metrics success. The secret of metrics that matter is to start with a question that matters. I cannot overstate how important this is. When you have a question that matters, everything that follows is much easier and HR’s work becomes highly relevant to the business.

THE MOST CRITICAL BUSINESS QUESTIONS

Of the typical recruiting metrics, which ones will matter to the CEO? Of course, CEOs care about costs, but the savings from reducing cost-per-hire are too small to significantly affect the bottom line. What CEOs care about most is quality of hire. In fact, it is not just CEOs who care; Dave Ulrich’s research shows that one of the most important factors for investors is leadership quality—and that depends on quality of hire along with succession and development.

Now we have the start of a good question: “What is our quality of hire?”

When we think about this question, we have obvious misgivings about answering, “How on earth do we measure quality?” But before answering that, we need to work harder on refining the question so that the CEO will really care about the answer. The trouble with the broad question is that while it is desirable to have the best shippers/receivers, the best PR people, and the best trainers, those jobs might or might not be critical to the business.

The question we really need to answer is: “What is our quality of hire in our critical jobs?”

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Imagine an airline; if HR can report, “The quality of our flight attendants is the best in the industry,” then this will make top management stand up and applaud. On the other hand, if results are poor and the quality is below average, then leadership will say, “Tell us what resources you need to fix this.”

The questions that matter vary from business to business. Another question that can be very important to the CEO is: “Is our time-to-fill in certain key jobs interfering with our ability to deliver on essential projects?” When we ask what matters a lot to the CHRO, we may get a question like: “Are we spending too much of our recruiting budget on agency fees?”

Do not start by asking which recruiting metrics are popular; find out which recruiting issues are most important to the business and work from there.

HOW TO ANSWER QUESTIONS THAT MATTER

It is very important to notice that when the goal is to answer a question, and not just to deliver recruiting metrics, the process is much more focused and frankly much more fun. Take the difficult question of measuring quality of hire; if the emphasis is on a few jobs, then the scope of the problem is much more manageable than measuring quality of hire for all jobs. Also, leadership will be eager to get any reasonable answer, even if it is not precise.

What do we actually measure? With quality of hire, the most practical measure is the hiring manager’s opinion. Sure, this is not a perfect measure, but it is a reasonable start and easy to do. We get better quality data if we are careful in the details of how we do this; for example, asking the hiring manager to review the job criteria before rating the new hire will improve accuracy.

Since we are dealing with an important question, and a highly focused one, we can use more than just one measure. For customer-facing jobs, like flight attendants, we can get insight by asking customers about the quality of the new hires. For well-known companies, their reputation as a good place to work is also a useful data point since the best candidates will apply to work at the best companies.

The final answer to a question that matters is not a number on a dashboard; it is a short presentation to management where HR reviews a number of indicators that help them to answer the question. HR leads with data, provides an interpretation, responds to questions, and then moves on to what action to take.

FAST FACT

When the goal is to answer a question, and not just to deliver recruiting metrics, the process is much more focused and frankly much more fun.

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THE DEVILISH DETAIL OF RECRUITING METRICS

Cost-per-hire is generally not one of the most critical business issues. Nonetheless, HR is likely to be asked to report on it. There is a fantastic general lesson in the cost-per-hire metric and it can be found in the American National Standards Institute (ANSI) guidelines on how to do the calculation. The guidelines are an astonishing 37 pages long.

The standard is so long because it gets complicated when you get into the details of what to include in the cost. There is a long list of internal and external costs; what to include depends in part on whether the metric is just an internal one or it will be used as a benchmark that will be compared with other companies.

The ANSI standard (to get the standard, Google “ANSI cost-per-hire”) is a big help when deciding how to do the calculation. However, it is also a great tool for creating realistic expectations. The CEO might assume that cost-of-hire is a number that HR can crank out in 20 minutes. Sharing the 37-page ANSI standard helps leadership to understand how large an undertaking generating recruiting metrics can be.

One specific tip from the ANSI standard is that the Recruiting Cost Ratio (RCR) can be a more meaningful metric than cost-per-hire on its own. RCR is “a method for comparing the total cost of hiring against the total compensation of the newly hired individuals in the first year of their employment.” It is less expensive to hire entry-level people than more senior ones and RCR is a reasonable way to adjust for that.

Before we leave this example of the devilish detail, it is useful to go back to asking, “What is the important question?” With cost-per-hire, it is often the case that management suspects that the company is taking the easy but expensive route of using staffing agencies when hires could be handled equally well in-house. If this is the real question that management wants answered, then all the work on cost-per-hire might not serve the underlying business need. If we know the question is actually about use of agencies, then we need to collect metrics on how often agencies are used and for what jobs. This might be much easier and reminds us that the real secret of metrics that matter is being sure that we are working to answer a question, not just deliver a set of numbers.

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FACING TIME-TO-FILL

Calculating time-to-fill might be even more complicated than cost-per-hire. The problem with time-to-fill is that it is comprised of many elements, including:

• How long it takes to get a job requisition after the manager recognizes a need

• How long it takes to generate a list of candidates

• How long it takes to do the screening and interviews

• How long it takes to make an offer

• How long it takes after an offer is accepted for the person to start working

This list of elements is actually a description of each step in the recruiting process. The general lesson here is that before we get to metrics we need to have a well-defined recruiting process and the process must be sufficiently automated so that we can track how long each step takes.

As always we make the complicated task easier by asking, “What is the important business question?” No one cares about the average time-to-fill; they care about the time-to-fill when delays are holding up big projects or critical work. If HR knows where the real concern is, then it can devote its efforts to getting numbers that will really matter to management.

Another takeaway is that when we think of time-to-fill metrics as tracking each step in a process, rather than just a single number, we end up with actionable data. One frequent finding is that the painful business impact of long time-to-fills has nothing to do with HR. One of the longest delays in the process can be that managers know they will need a new hire but fail to tell HR until the last minute. Another delay is that recruiting finds candidates quickly but the interviewing process takes forever because busy managers cannot find time to see the candidates.

HR might be able to get a handle on the time internal within the recruiting process, but how can we accurately measure the time between when a manager first knew they needed someone and

the time they submitted a requisition? The working principle here is that we measure what matters, not what is easy. A rough estimate of what might be the single biggest cause of exceedingly long time-to-fills is more important than precise measures of the other steps in the process. The only way HR can get this critical piece of data is to take a sample of the critical jobs and interview managers on their best estimate of when they were first relatively sure they would need to hire. It does not have to be a very accurate estimate to generate a very important answer.

FAST FACT

The general lesson here is that before we get to metrics we need to have a well-defined recruiting process and the process must be sufficiently automated so that we can track how long each step takes.

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The business purpose of a time-to-fill is to identify which steps in the process are interfering with filling critical jobs. When HR approaches the metric with that purpose in mind, it is able to achieve more with less effort.

THE LESSON OF SOURCE OF HIRE

One of the most common recruiting metrics is source of hire. The business question behind this comes from the head of recruiting who wants to know, “Are we spending our limited recruiting dollars in the right places?” For example, HR might know that they spend a lot on job boards and wonder whether this is more effective than, for example, employee referrals or their career page on the company website.

Gerry Crispin and Mark Mehler at CareerXroads have done more work than anyone else in helping us to understand this metric. Their research takes us right back to the opening line of this paper: it is harder than most people think. Crispin says, “Only a handful of the Fortune 500 examine source of hire in a sufficiently sophisticated way that it improves future investment decisions.”

There are two big things to watch out for:

• Is your talent management process capturing source of hire and doing so in an accurate way?

• For a single hire, several sources are often involved; perhaps someone sees the company at a job fair, checks out some jobs on a popular job board, and then finally applies directly on the company website. The job fair might not show up as source of hire, yet it was an essential step in the process. Does your system handle this kind of complexity?

In capturing the information, be aware that the recruiter or candidate might not want to put much effort into giving you accurate data. Crispin points out that most companies have difficult or confusing forms for collecting this data. It takes real effort to make the process of identifying source of hire easy enough that HR will get accurate data. If the question of where to spend scarce recruiting dollars is genuinely important, then it makes sense to take the time to make the collection of data simple and reliable.

The fact that several sources of hire might play a role for a single candidate shows that gathering recruitment metrics is not just about collecting some numbers. We need an inquiry mindset that includes looking to understand candidate behavior. HR people are pretty good at understanding behavior; if they use that know-how, then they will come up with a set of questions to be answered, such as “How did you first hear about jobs at this company?” and “What were all the steps that led you to apply?” We start with the right questions, and then the metrics give us useful insights.

FAST FACT

A rough estimate of what might be the single biggest cause of exceedingly long time-to-fills is more important than precise measures of the other steps in the process.

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TAKEAWAYS

The topic of HR metrics can raise a good deal of angst within the HR function. This angst is well founded. Gathering the metrics can be far more difficult than leadership realizes and too often the result of that effort is numbers that are not particularly useful for the business.

The most important solution is to think in terms of seeking the answer to an important business question, and not in terms of creating a report full of metrics. The more focused HR is on a specific question that really matters, the easier it is to come up with recruiting metrics that matter.

The second part of the solution is to be fully aware that gathering recruiting metrics can be a complicated process. Leaders need to have a realistic understanding of what they are asking for when they want HR to produce common metrics like cost-per-hire, source of hire, and time-to-fill. The only way for leaders to get a realistic understanding is for HR to educate them.

Finally, it goes without saying that HR needs good talent management systems to collect and analyze recruiting data. The good news is that if HR is using metrics to answer questions that matter to the business, then it is easy to justify the investment in an up-to-date system. Metrics that matter follow from questions that matter. Remember that single secret and HR will have success with recruiting metrics.

FAST FACT

The good news is that if HR is using metrics to answer questions that matter to the business, then it is easy to justify the investment in an up-to-date system.

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ABOUT SILKROAD

SilkRoad® is a leading global provider of cloud-based, end-to-end HR solutions that enable customers to find, attract, develop, and retain the best talent. The award-winning Life Suite® includes Talent Acquisition (recruiting and onboarding), Talent Development (performance and learning), HRMS, and Talent Portal solutions that are easy to deploy, easy to use, and affordable for all businesses.