Big, small, or medium-sized, recruitment is one of the most crucial processes in any company.
The employees that you hire are the ones who are ultimately going to help achieve your business objectives. An effective recruitment strategy is one of the key pillars for any organization to retain its leadership position in the market. With the employment market getting more competitive, a vast majority of the hiring managers today rely on technology (recruitment software) and data-driven recruitment metrics to streamline the hiring process. These recruitment metrics provide a clear indication as to what processes are working and what needs to be changed. Thus they help the firm discover, attract, and employ the best talent for various open positions.
What are Recruitment Metrics?
Recruitment metrics provide valuable information on different processes used during the recruitment process. It could be related to time, cost, quality of hire, and so on. They measure the effectiveness of your recruitment process from the application stage to the time until an employee joins the company, up to the rate of turnover.
Top 10 Recruitment metrics for every manager
Technology today makes it easy to use several yardsticks to measure performance. There is no perfect method. The idea is to choose the ones that serve your business objective the best. Here are our recommendations for the top recruitment metrics:
1. Application Completion Rate
As the name suggests, this smetric gives you an idea of how many candidates complete your application form. It tells you whether the job application process and the platform used is successful in attracting the right talent.
Application Completion Rate is calculated as below
No of applications submitted / Total number of job applications started = Application Completion Rate (%)
A low rate of Application Completion Rate implies that candidates who begin the job application process are faced with several hurdles due to which they abandon their efforts altogether. The common reasons are:
- The form is too long
- Poor structure of questions
- Some questions are too personal/sensitive
- Too many technical glitches in the platform
- Unfriendly user interface
Once you identify which of the above is the real reason why your candidates are not completing the process, it is vital to fix it at the earliest. Too many applicant drop-offs are not a good sign when your aim is to attract the right talent.
2. Time to Fill
This metric is the time taken to find the right candidate for a specific job role. In short, it tracks the time from the beginning of the recruitment process up to the end until the position is filled.
Several organizations calculate Time to Fill using different methods. Normally the calculation of time begins when the job position is created/posted and ends when the candidate accepts the offer. But some firms also use the candidates’ first working day as the end time.
Time to Fill reflects the efficiency of the recruitment team within the organization. If the Time to Fill is high, then it is an indicator that your recruitment process is too long and needs to be optimized for better results.
3. Cost Per Hire
Cost Per Hire shows you the amount of money spent on hiring a suitable candidate for an open position. It takes into account both the internal and external costs associated with the job opening.
Cost Per Hire is calculated as below
Total Internal Costs + Total External Costs / Total Number of Hires during a time period = Cost Per Hire
Internal costs include costs incurred within the organization such as employee referral bonus, infrastructure or space rental (if needed), salaries of recruiters, etc.
External costs are those related to external vendors such as advertising agency fees, recruitment agency fees (if applicable), job fairs, employee signing bonuses, relocation, etc.
A widely used metric, cost per hire tells you the average spend on hiring a candidate. It helps to benchmark for future rules and gives you a clearer picture that helps in budgeting. Over a period of time, managers can also use this metric to evaluate whether the tools or the channels used are giving you the desired results. This metric guides the recruitment budget and determines the cost-efficiency of the recruitment process.
4. Sourcing Channel Effectiveness
Sourcing Channel Effectiveness shows the percentage contribution of each recruiting channel or platform in your overall recruitment process. This includes job advertisements, employee referrals, sourcing networks, etc. This metric can be calculated in terms of quantity and quality.
When you want to calculate it in terms of quantity, simply count the number of candidates who entered the hiring pipeline via a particular channel. Direct Surveys, Applicant Tracking System (ATS), Google Analytics, and gathering information from your recruitment team are some of the methods in collecting this information.
To assess sourcing channel effectiveness qualitatively, the focus must be on the “quality” of candidates that have entered the hiring process via a particular platform or channel.
Companies can use this information and evaluate which channel is helping them in sourcing the right talent. The recruitment manager must then focus on the channel that has the highest percentage and ensure that there are effective tools and mechanisms in place. Any channel that generates only a negligible percentage of candidates could be a drain on resources. If so, then it is advisable that the channel be removed altogether.
5. Quality Of Hire
One of the most important recruitment metrics, the majority of recruitment managers all over the globe consider Quality of Hire as a leading KPI for their teams.
Quality of Hire reflects the value that an employee brings to your company. It reveals how much the employee is contributing to the company’s growth. It is not an easy metric to calculate and varies from one organization to another. Indicators such as cultural fit, employee engagement, job performance, ramp-up time, retention rate, etc can all be a part of the Quality of Hire.
The first step is for your leadership team to determine which are the indicators that determine the quality of hire for your company. When measuring their performance under each indicator, it is important to use a scale of 1 to 100, where 1 implies poor score and 100 denotes excellent performance.
A widely used formula to calculate Quality of Hire is as below:
Job performance score + ramp-up time score + engagement score + cultural fit score / total number of indicators (N) = Quality of Hire
The Quality of Hire of an employee at your firm ideally must be more than the costs incurred while recruiting him/her. A higher metric shows that you are attracting the right talent into your form. It indicates lesser turnover, better productivity, and a good cultural fit. Keeping track of your Quality of Hire helps you streamline the recruitment process. This way you ensure that you are hiring the right candidates who can help steer the company towards progress and growth.
6. Applicants Per Opening
This is simply the number of people who have applied for a specific job role at your company. This metric of recruitment helps you understand how your job post has performed in the employment market. If your job post has not attracted too many applications (poor quantity), or if it has led to too many unqualified applications (poor quality), then it is vital to take a step back and see what has gone wrong. You may need to revise your job description and eligibility criteria or consider a more popular medium to advertise the role.
7. Offer Acceptance Rate
The total number of accepted job offers divided by the total number of job offers given within a time frame gives you the offer acceptance rate
Offer Acceptance Rate is calculated as below:
Number of job offers accepted/ total number of job offers made = Offer Acceptance Rate
A high offer acceptance rate is a good sign but a low rate indicates that there is room for improvement in your recruitment efforts. Some of the most popular reasons for a low acceptance rate are poor compensation when compared to a competitor, too long to take a final decision, employer branding efforts gone wrong, etc. As a recruitment manager, it is important to investigate the real reasons and take corrective action to grow the offer acceptance rate steadily.
8. Selection Ratio
The selection Ratio is the final number of applicants hired by the company divided by the total number of candidates. Selection Ratio helps the recruitment team determine the value of the various assessments used in the recruitment and selection process.
No of candidates hired / total number of candidates applied = Selection Ratio
The value of this ratio must range between 0 and 1. 0 shows a low selection ratio which paves way for better selection decisions. The hiring team can be choosy when it comes to selecting the right person for the job. The selection ratio is dependent on the brand image of the company, how widely the job is advertised, etc. In today’s market, there are many job seekers compared to the number of openings. Even though organizations are flooded with applications, they eventually end up hiring only a few. In such a favorable scenario, it is very important for the organization to choose the right tools and set the right parameters in capturing the best talent in the industry. This determines the success of the Selection Ratio.
9. Annual Turnover Rate
The rate at which employees leave an organization is the annual turnover rate. The reasons for departure could be voluntary such as resignation or involuntary such as termination. It is calculated for a specific timeframe.
Annual Turnover Rate is calculated as below:
Total number of employees who left the organization / No of employees in the organization = Annual Turnover Rate
The turnover rate is indicative of the management culture, training, development, and levels of employee satisfaction within the organization.
Replacing employees is a cost-intensive exercise. A high turnover ratio is not a good sign as each vacant position needs to be filled soon and this could lead to the firm incurring high costs of recruitment and training all over again.
A new hire must be made into a good fit. Effective training, ongoing communication, and satisfactory employee engagement activities are different ways by which the management can reduce these levels of attrition or turnover. Reward and Recognition Programmes are also important to ensure that employees stay motivated.
10. Hiring Manager Satisfaction
Last but certainly not least, one of the important recruitment metrics is the Satisfaction rate of the hiring manager. Hiring Manager Satisfaction percentages tell us how happy they are with the new hire, and naturally this is indicative of a successful recruitment process.
Once a manager is satisfied with her/his hire, it lays the foundation for valuable teamwork and a positive management-employee relationship.
The best way to measure this rate of satisfaction is by using a satisfaction survey for managers. Each question could have a score assigned to it starting from 1 (poor) to 10 (excellent). The results are calculated on the net score of all questions answered. Each employee must have a different survey. If a manager has recruited 3 new candidates, each of them must have a different survey. For best results, it is advisable to conduct the survey 6 months to 1 year after the employee is hired. That way you know if it is favorable in the long run and all the identified gaps (if any) must be addressed before the next recruitment process.
Conclusion
The process of recruitment has been constantly changing over the past decade. Especially In 2020 with different companies adopting more work from home roles and altering their hiring methods, recruitment is getting redefined. But the bottom line is that “a business is only as good as its employees”. And with changing roles, the indicators and parameters of the hiring process need to change as well.
Given a dynamic environment, if your firm does not have a recruitment metric-driven hiring process backed by data and technology, the time to ramp up is now. After all, the most valuable assets in your company are the employees you hire.
