One of the most frequent concerns we hear in the recruitment industry is how to determine whether or not a recruitment strategy is paying off. Given that data suggests that as many as 70% of in-house recruitment attempts may end in a failure to hire, so this is no idle concern.
Even when a recruitment effort is successful, it represents a considerable investment of time and resources. In fact, when you consider the new hire’s salary, recruitment costs, bonuses, national insurance payments, pension contributions, training, office space and equipment, and sundry other costs, the real cost of hiring a new employee is estimated to be around £50,000 for the first year of employment.
Considering these high levels of investment and risk, there is a lot at stake when initiating a new recruitment strategy. To make sure you are not wasting your organization’s time and money, you need to know how to assess whether your strategy is working effectively.
The Importance of Hiring Metrics
Hiring metrics are one of the most important sources a recruitment team can use to determine whether a recruitment effort is going well. These metrics measure the success of recruiters and recruitment strategies in terms of different variables—known as ‘key performance indicators’ or KPIs—and provide the raw material for data-driven hiring strategies in the future.
Naturally, to make use of KPIs in your hiring strategy, you need to first collect and then analyse the relevant data. Here, we are going to outline four of the most important metrics you need to be aware of to truly raise your recruitment game.
1. Quality of Hire
The ‘quality of hire’ metric is a percentage determined by adding the percentage of candidates employed by an organization to the percentage of candidates who do not leave within the first year. This metric gives an indication of the number of employees who remain employed after the first year of hire. This metric is important because it provides a measure for whether your recruitment strategy is successfully identifying and selecting high-quality, loyal talent. If your quality of hire metric is low, it suggests that much of the time and effort being expended on recruitment is being wasted or misdirected.
To inform your quality of hire metric data, collect information on turnover rates, job performance, engagement, and how well your new hires fit the company culture. Doing so will help you determine whether your recruitment team is screening for the wrong characteristics.
2. Time to Fill
The ‘time to fill’ metric measures the amount of time it takes for a successful candidate to move from submission of an application to receipt of an offer letter. In other words, this metric measures the efficiency of the recruitment team in processing applications, screening candidates, and conducting interviews. A high time to fill figure, representing a lengthy recruitment process, is indicative of an inefficient recruitment system. This may be causing your organization a number of issues. An inefficient process is more costly in terms of resources as well as time. At the same time, a lengthy and inefficient process may deter high-quality candidates or result in those candidates accepting offers with other organizations before your offer letter is received.
If your time to fill figure is high, you will want to consider whether improvements can be made to your hiring systems and processes, from how applications are screened to how long hiring managers take to make a final decision after interviewing.
3. Offer Acceptance Rate
This straightforward metric measures how many candidates accept your offer of employment once it is offered. You could therefore say that this metric measures the desirability of your organization’s offer to the best candidates. A low offer acceptance rate might indicate that something in your recruitment process is deterring candidates. As already discussed, a high time to fill figure might be an indicator that inefficiencies in your system are to blame; candidates may be accepting offers elsewhere before your offer arrives, or they may be becoming frustrated with waiting for a decision. Alternatively, there may be something in your hiring process that is leading candidates to feel uncomfortable with your organizational culture.
If your offer acceptance rate is low, you may want to examine how well your company culture, compensation packages, and ways of working align with current candidate desires and industry trends.
4. Cost per Hire
This metric measures exactly how much it costs your organization to move from attracting to signing on a new hire. Especially for small businesses and start-ups, where budgets and profit margins may be tight, this metric may well be the most important measure of how effective your recruitment strategy really is. Even if your strategy is consistently delivering high offer acceptance rates and quality of hire metrics, if the cost to your organization is too high, you are on the path to disaster.
Streamlining your hiring process in line with the findings of other metrics is one way to identify and tackle inefficiencies that are leading to cost impacts for your organization.
Once you have collected your recruitment data, it’s time to analyse the metrics and determine what they mean. Start by comparing these metrics with your defined recruitment goals. Do they align? If not, you need to use the data to identify the weaknesses in your strategy and team in order to craft a more robust hiring process. You can use the metric data to reconsider where and how your recruiters spend their time, what to allocate more or less budget to, where your recruitment team might need more training, where you might want to outsource recruitment processes to experts and more.