Recruiting is a mix of HR and sales — with a strong shot of marketing. Recruiters must simultaneously attract the right audience, size up a candidate, and sell them on the company. A company is only as good as its talent, so having a professional who can master this balance is fundamental for success.
As competition for talent increases, so does recruitment spend:
- Forbes estimated that the worldwide recruiting market was worth about $200 billion in 2017.
- The global market for corporate recruiting software is predicted to reach $2.7 billion by 2022.
- The average cost per hire in 2016 was $4129.
But is this investment paying off?
To ensure the answer is a resounding YES, today’s talent acquisition leaders must accurately monitor and discuss the state of recruiting performance. HR departments are becoming more data-driven in order to justify larger budgets and make recruiting more effective.
Going digital not only helps automate and streamline the hiring process, but provides valuable data to recruiters and businesses. Hiring professionals can leverage this data to monitor the health of their recruiting efforts — if they know what to look for.
Below we’ll examine the essential recruitment metrics and KPIs talent acquisition leaders and executives should be able to interpret in order to assess and improve the recruitment process.
In-house Recruiting Metrics
When investigating which recruiting metrics your company should track, it’s important to note the differences between internal and external recruiting. Agency recruiters are commissioned based on how many candidates they place in a company, so their recruiting metrics will vary from that of an in-house recruiter. While the two may have overlapping analytics (which we’ll discuss later), it’s beneficial to examine the recruiting metrics primarily associated with each.
Cost Per Hire
Cost Per Hire = (External Costs + Internal Costs / Total Number of Hires)
Why is it a favorite recruiting metric?
Because it helps link recruitment efforts to cost savings for an organization and is easily understood by those outside of HR. Cost per hire helps ensure your recruiting efforts are not only feasible for the business, but on par with your industry, size, and location.
Critics of this metric aptly point out cost per hire can distract from quality of hire, or even leave a negative impression on candidates. So remember: you get what you pay for. If you track this metric, be sure to balance it against other performance indicators for a comprehensive picture.
Retention metrics not only help companies keep tabs on recruiting efforts (Are you attracting the right people? Were the job expectations clear?), but company and manager performance. According to Shayleen Stuto, Talent Development Manager at TechnologyAdvice:
“Turnover is part of every company, and it’s not always a bad thing. The key is understanding what causes turnover and to establish history from which to benchmark future trends.
Assessing the “why” is equally, if not more important than just knowing the number. This is one metric where qualitative data is crucial.
Does one manager experience more turnover than others? Is there a running trend on why people are leaving? Do more people tend to part ways during a specific time of year? All of these things are beneficial to look at.”
Examining wanted vs. unwanted departures and high performer turnover rate can provide valuable insight. How long do top performers stay at your organization? What motivates them to leave? If your organization is continually losing top talent, you may need to examine how your company stacks up to the needs of top talent and adapt accordingly.
New Growth vs Attrition Rate
Are your recruiters swamped? Is your company constantly hiring new employees?
Busyness isn’t necessarily a good thing.
Are you hiring because the company is growing, or because employees are leaving? If the majority of recruiting efforts are spent replacing employees rather than growing your team, then you’ll need to follow Stuto’s advice and assess the why.
There are numerous steps and criteria to fulfill before you decide to offer a position to a candidate. Two important conversions to look at include:
- Interview to Offer Ratio
- Offer to Acceptance Ratio
If you are interviewing a lot but failing to extend offers, then it’s time to reevaluate your vetting process. If candidate’s aren’t buying what you’re selling, then you have a mismatch between expectations, a poor culture fit, or they took an offer from a competitor. Keep tabs on where you lose candidates and find ways to improve those areas.
Application Completion Rates
Do you know the number of applications started versus applications completed? Application abandonment rate helps identify weaknesses in your process — such as candidates dropping off on mobile devices or having too many input fields. If you can’t fill the top of your recruiting funnel with applications, then it’s time to consider upgrading to an applicant tracking system with a modern careers and application portal.
Internal vs External Hires
It’s important to evaluate your workforce to determine if internal or external hires are more successful, so you know where to find talent. Though it’s good to bring in outside employees with new perspectives, be sure to mind the gap in hiring versus internal promotions. If you only hire externally, then you can prevent the gap from widening by evaluating and updating your performance management, corporate learning programs, and leadership development processes.
Agency Recruiting Metrics
At a recruiting agency, the product is people. The ability to set the right expectations and find qualified candidates efficiently, and at scale, is a must. External recruiters track a lot of numbers in addition to — or in place of — the recruiting metrics above.
According to Bullhorn’s 2018 North American Staffing and Recruiting Trends Report, agency recruiting professionals consider the following three core sales and delivery metrics most important:
Let’s examine how they compare to internal recruiting metrics.
- Fill Rate: Over half of respondents chose fill rate as the most important recruiting delivery process metric. This is understandable, since placement is king for agencies — no fills, no money.
- Hit Rate: This is simply the ratio of job offers made to job offers accepted. Sound familiar? That’s because it’s the same as the “Offer to Acceptance Ratio” that internal recruiters track. This measure shows how productive your recruitment process is.
- Customer Satisfaction: Customer satisfaction as a priority has actually dropped, as it was the primary priority for agencies in 2017. Bullhorn CEO Gordon Burnes explains the difficulty in using customer satisfaction as the primary success metric:
Using customer satisfaction as the only recruiting metric can be problematic because it may change from placement to placement and is difficult to measure accurately. While subjective satisfaction input is valuable, performance benchmarking recognizes the value of more standard metrics such as fill rate and hit rate. Repeat business also serves as a meaningful proxy for customer satisfaction.
Where internal departments are often concerned with cost per hire, agencies use other metrics to benchmark and drive revenue, including: Total Number of Placements, Average Placement Fee, and Total Number of Job Orders. This focus likely stems from their volume-based business model.
But agencies are focused on more than quantity. Many also track the following recruiting metrics to ensure clients are getting the quality they need:
- Submittal Accuracy: Is the hiring manager satisfied with the candidates recruiters submit? This can be answered by comparing the number of candidates presented to the number interviewed, or calculating the percentage of referrals that get hired through submittals.
- Referrals Per Call: If a recruiter realizes a candidate is not a good fit, the time they spent sourcing and vetting could be considered wasted. To prevent this, recruiters will steer the conversation towards referrals as soon as they know a candidate isn’t qualified. According to Lou Adler, recruiters should aim for two referrals per call because “second round referrals are like gold — you’ll only be calling back those who are perfect fits and they’ll all call you back if you mention the referrer’s name.”
- Sendouts Per Hire: How many candidates need to be seen in order to get one hired? A low number indicates an efficient recruiter who’s also a strong interviewer and knowledgeable about the hiring manager’s needs.
Strategic Hiring Metrics for Both
In addition to performance metrics, both agencies and internal recruiters should focus on strategic recruiting data that indicates a successful process. Beyond execution speed and quantity, track the following analytics to increase effectiveness:
Today, recruiters use more sourcing channels than ever before — job boards, referrals, career sites, social networks, and so on. You must not only identify which sources deliver the most applicants, but analyze which deliver the best candidates. How did you find last year’s top performers? This will tell both recruiters and talent acquisition leaders where to spend their time and effort in the future.
Quality of Hire
It’s necessary to balance recruiting costs with quality. In order to evaluate recruiting quality, organizations should assess quality aspects, including:
- Productivity: How long did it take them to get up to speed, compared to their peers or predecessor?
- Tenure: Did they stay at the company shorter or longer than average?
- Scale: Did they grow professionally and get promoted internally?
- Impact: What kind of value (or ROI) did they create for the company?
When your recruiting analytics look great, it’s easy to forget about one simple performance metric: satisfaction.
Is the hiring manager pleased? Did your candidates have a good recruiter experience? Are the employees you spent so much time and energy on happy?
Frequently answering these questions — especially with data — allows you to make immediate changes in areas that need improvement. After all, if your new hires aren’t satisfied, your metrics aren’t likely to hold up long-term.
Which Recruiting Metrics Should You Measure?
With so many numbers to crunch, how do you choose the right recruiting metrics?
It boils down to both strategy and technology.
Bullhorn’s recruiting survey found 77 percent of respondents said they needed an ATS or CRM system to do their job effectively.
Recruiting is core to your business, you must grow your talent to meet your business needs. In the video below, Leighanne Levensaler, the VP of Product Management at Workday, talks about why it’s so important to work with a recruiting solution you actually love:
But while recruiting software can help you make the most of both your recruiting process and data, technology alone will not suffice.
You need a strategy.
You must identify your organizational goals first, then align metrics accordingly. Ensure your team understands the purpose of each metric, how it’s measured, and how it fits into the company’s long term growth plan.
Let’s examine a few different ways you can mix and balance recruiting metrics— and why.
In-house Enterprise Recruiting Metrics
- Time to hire and cost per hire are popular, but keep in mind: those don’t tell the whole story. Time to fill should be tracked to help predict how long it will take to fill critical roles within the company, or to ensure you can quickly hire a large amount of staff. When tracking this metric, the overall number isn’t always meaningful. For example, it’s more helpful to drill down per department or role to examine why a specific job opening takes so long to fill (or what you can learn from one with a shorter time to fill). Cost is important to help pinpoint inefficiencies, but shouldn’t be used as an excuse to settle.
- Internal vs. external hiring is important to monitor. A large organization should have a leadership and development program that encourages employees to learn and grow within the company. If the majority of your hiring is external, you might be neglecting the potential of your current workforce.
- Applicant source is an important metric for every company to track. But for big companies in particular, be sure to track your employee referral program. Your company has thousands of employees. If they are happy enough to vouch for your organization and refer friends, family, or former colleagues, then your applicant pool could increase by the 1000s.
Agency Recruiting Metrics
We already know the top efficiency metrics agencies track: fill rate, time to fill, and referrals per call. To ensure quality, you should track per requisition metrics, such as the number of candidates who: applied, interviewed, got an offer extended, and accepted; as well as applicant and hiring manager satisfaction.
Depending on your agency’s goals, it’s beneficial to track more granular data.
For example, if you’re having trouble connecting with passive candidates, track emails sent versus response rate. If people aren’t responding to you, this metric can help improve your sourcing efforts. Which messages elicit a response? What kind of person is more likely to answer? Analyze the numbers and adjust accordingly.
Lastly, agencies should track new hire turnover rate. Though this is an internal metric, it helps determine the quality of candidates you refer to clients. Regardless of their performance, if your referral leaves after a few months, then it wasn’t a successful placement — which is something fill rates ignore.
Recruiting Metrics for SMBS
Small to medium sized businesses must focus on laying a solid hiring foundation. In addition to basic recruiting metrics, it’s helpful to look at the big picture: Is your network growing? Are you attracting the right type of people? Benchmark your growth against similar organizations and competitors to ensure you’re on track.
Turnover metrics are especially helpful to SMBs, since retention indicates whether or not your hiring is on track. Since overall turnover lacks context, look at new hire turnover rates for 30 and 90 days. High turnover early on often indicates a poor culture fit or lack of understanding the job. You also want to see if retention is performance or manager related. If employees are leaving your managers, not your company, then you’ll have a hard time growing your business. You want managers who foster employee engagement and help your workforce grow and succeed. Retention shows if your efforts are on track, so be sure to conduct exit surveys to learn why folks are leaving and if the things they mention are preventable.
Recruiting Metrics for Startups
Startups need to build a workforce that propels the business forward. In addition to metrics that fit your recruiting goals, quality should be a top priority. Of course you want to be efficient, but you need to find and attract talent that will ensure success and keep investors investing. Balance metrics such as time to fill and cost per hire with employee satisfaction and quality metrics, such as: productivity, scale, and impact. Stuto recommends looking at employee satisfaction often, “By assessing this quarterly rather than annually, we’re able to gather quantitative data that allows us to make more immediate change in areas that need improvement.”
As you gather more and more data about your recruiting performance, you’re able to tweak the sourcing, screening, and hiring process. Acting on the data you collect means constant recruiting improvement, which improves the company’s profitability — no matter your size or industry.
This also means what you track will change over time.
The most important recruiting metric to track right now may look different one quarter or a year from now. The purpose of recruiting metrics is to help improve your recruiting.
Don’t measure everything; measure what’s most important to your current business goals. Measuring too many things will be overwhelming. Results are everything, but only when you measure the right ones. Need help finding the right tools to measure your results? Check out our Product Selection Tool to compare different recruiting software or contact us one of our Tech Advisors for a free HR software consultation.