Human Resources has traditionally been a transactional operation, focused on tactical initiatives or short-term objectives. Lately, there’s been a growing demand for HR leaders to gain a “seat at the table” in order to play a more critical and strategic role at an organization.
Being strategic means focusing on business problems that occur outside of HR.
At the same time, many high-growth companies are thinking about talent more holistically to attract and retain top performers, rather than putting rear-ends in seats. Greater value is being placed on the talent function, and recruiting has become a central and integrated function of entire organizations. This is largely due to the proactive initiative taken by the executive team, but not all companies have the necessary buy-in from the C-suite.
To earn the ear of your executive team, you’ll need to begin by measuring Key Performance Indicators (KPIs) that matter, the ones that tie into business objectives. Instead of a calculation that evaluates processing efficiency, recruiting performance metrics should demonstrate efficacy. How do your activities support tomorrow’s business objectives and move the organization forward?
5 Recruiting Metrics that Matter
1. Time to Hire
The Time to Hire metric should be a leading indicator that determines recruiting forecasting rather than efficiency.
2. Source to Close
Source to Close measures how quickly you close candidates once they enter your interview pipeline.
3. Conversion Rates
Monitoring stage conversion rates allows your Talent team to identify where candidates are dropping out, and why.
4. Source Quality
Instead of simply measuring the number of candidates a source provides, you must also measure how far candidates from a particular source get in the interview process.
5. Quality of Hire
Companies should consider the monetary value a high-performing employee contributes to the organization.
1. Time to Hire
Typically, Time to Hire is a measurement of elapsed time starting with the submission of the job requisition and ending with an accepted offer. A hiring manager determines that he or she needs to add a new member to the team. Then, a recruiter is evaluated based on the speed at which he or she is able to complete this task.
This is an outdated, reactive strategy that relies on backwards-looking data to make a future decision. It does not maximize the likelihood that the recruiter will secure high-quality candidates, only that he or she will move quickly.
In order to secure top performers, progressive organizations are relying on recruiting as an ongoing process that is embedded into the company culture. Talent Acquisition teams are building talent communities, engaging passive candidates, and developing employer branding to build relationships and attract prospects. In isolation, this makes the Time to Hire metric less valuable to the organization.
Instead, the Time to Hire metric should be a leading indicator that determines recruiting forecasting rather than efficiency.
2. Source to Close
As opposed to Time to Hire, Source to Close measures how quickly you close candidates once they enter your interview pipeline. This removes the sourcing phase from the equation and evaluates the efficacy of the organization’s hiring process.
Your goal should be to make evidence-based decisions on a candidate as quickly as possible. As a result, Source to Close becomes indicative of how well the company’s interview process is able to collect meaningful and relevant information at each stage.
In the past, recruiters were unable to track this. Today, recruiters are creating structured interview processes that produce robust data around the health of your pipeline.
Your Source to Close Metric Should Indicate:
- The total amount of time it takes for a candidate to complete your interview process
- The amount of time a candidate spends in each recruiting stage
- Interview quality. Did you get the information you need to move the candidate to the next stage?
- Interviewer discrepancies. Is there an interviewer who fails at collecting the necessary information, therefore slowing down your process?
Developing a process with structured interview stages allows your team to identify any bottlenecks and examine contributing factors.
A structured interview process allows recruiters to measure conversion rates at each stage in the recruiting funnel. Monitoring stage conversion rates allows your Talent team to identify where candidates are dropping out, and why. It also helps manage the number of candidates that interviewers are passing or rejecting.
Acceptance rate has long been a KPI of recruiting teams. It’s simple for an organization to calculate the percentage of offer letters accepted by candidates. However, this information is meaningless without supporting data that helps improve the conversion rate.
Strategic talent operations will not simply do the calculation, but will also examine all of the elements of the interview process and candidate experience to increase the acceptance rate.
Many organizations determine the quality of a source based on the number of candidates who have applied from it. At forward-thinking companies, the mindset has shifted from volume of candidates to quality of candidates. Instead of simply measuring the number of candidates a source provides, you must also measure how far candidates from a particular source get in the interview process.
For example, at the end of the month, your company has received 30 applicants from a job board and 12 applicants from your in-house referral program. It’s easy to assume that the job board is your more valuable source, and many organizations stop there. However, if only 6 of these candidates are scheduled for a phone interview, and the same number of referrals make it to the in-person stage, your referral source becomes your higher-quality channel
Much like marketing departments, talent functions use source quality data to measure media performance and make changes to improve their strategy. If you can show your CEO that the referral program results in higher-quality candidates, he or she will be likely to invest in an employee advocacy program.
Quality of Hire
Because businesses rely on human capital to execute their strategies, talent operations has an opportunity to play a large, quantifiable role in company success. Your CEO calculates Customer Lifetime Value (CLV) to help measure the productivity of customer acquisition efforts. Calculating Employee Lifetime Value (ELV) links recruiting to performance metrics and drives strategies to improve talent acquisition efforts.
Cost Per Hire is a common performance indicator of a recruiting operation. However, companies often seek to reduce the cost, rather than improve the Quality of Hire. Companies should consider the monetary value a high-performing employee contributes to the organization.
Knowing Employee Lifetime Value allows your CEO to visualize the value of acquiring a top performer, and hiring a top performer has direct ties to your company’s revenue stream. Beyond avoiding the cost of a mis-hire, hiring top talent has a measurable impact on your company’s revenues because of a significant performance differential. For example, Google has found that hiring a top-performing employee will result in 300 times more productivity and business impact hiring an average-performing employee. And because the average Google employee generates $1 million in annual revenue, a single hire can make the company up to $300 million in a year
GE, Microsoft, Yahoo and Apple have all also estimated significant performance differential (“double- digit”) at their organizations. And it’s no coincidence that these companies are well-known for both their top-tier talent and their hiring cultures.
Coupling this understanding with Source Quality data, talent operations is able to make strategic investments in sourcing efforts that contribute to long-term company objectives.
Recruiting KPIs are evolving as Talent teams become more strategic and integrated into an organization. High-growth companies are operationalizing the Talent function, using data to optimize the recruiting process in order to improve their quality of hire.
In order to be a business partner at your organization, you must begin by measuring the right things. Make sure your applicant tracking system is equipped with the reports you need to measure these 5 KPIs. Having meaningful data at your disposal will allow you to make smart, evidence-driven decisions on where to spend company resources and how to make the best hires. It will also speak the language of the department heads acting as your hiring managers!