AT A GLANCE

  • In today’s candidate driven market where the war for talent is increasing, it becomes even more important to use recruiting metrics strategically; these metrics should not only look at historic trends, it should also encompass current and predictive analytics
  • Important strategic metrics to measure include productivity performance of new hires, hiring failures, and opportunity costs
  • ROI is generally not calculated for recruiting, but to be strategic, recruiting leaders must compare its overall functional ROI to the previous year and then with the ROI of other key business functions

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March 01, 2016

The Strategic Recruiting Metrics That Matter

Most recruiting leaders today use mainly tactical or operational metrics when measuring their recruiting success. As a result, big picture business impacts are often missed or omitted. Additionally, the most popular recruiting metrics used are historic, providing data on what happened, which has little value for executives who want to know how to prepare for the future and have the ability to predict and mitigate risks or jump on opportunities.

In today’s candidate driven market, where the war for talent is increasing and the skills gap is growing, it becomes even more important to use recruiting metrics strategically. These metrics should provide actionable data that can act as a driver to change and improve the recruiting function. As such, these metrics need to be strategic and quantified with a focus on high-level business impact. They also should be focused on the near future, so that there is an opportunity for managers to act, and they should be actionable. Finally, while each metric requires looking at historic trends, it should also encompass current and predictive analytics.

Productivity Performance of New Hires

Recruiting and onboarding workers is both expensive and time-consuming, so when a company replaces a worker with a new one who only performs at an average level, there is no significant business value. However, if a company hires a worker who ends up producing more than the average worker (perhaps due to better skills or more experience), there is a value. Thus, the strategic metric that needs to be measured is the average percentage of improvement in the performance of new hires as compared to the baseline performance of the average replaced worker in that job category.

Hiring Failures

Most business processes periodically measure their failure rates, with the exception of recruiting. This is partly because there is no precise definition of a hiring failure at most companies. However, some forward-thinking companies consider a hiring failure to be a new hire who severely underperforms, quits within a few months, or who is fired quickly. The reason that it’s necessary to track hiring failures is because of the damaging impact they can have, including their actual lower performance level, the additional management time they require, the frustration they can cause to existing high-performing workers, and replacement recruiting costs. According to one study, the new hire failure rate can be as high as 46 percent. By calculating the losses due to hiring failures, recruiting executives can determine if there is a need to invest in improving the recruiting process so that this metric continually decreases.

Opportunity Costs

Obviously, it is impossible to successfully recruit and onboard every desired candidate. However, there is a business opportunity cost associated with not hiring a top-quality candidate in terms of their potential productivity and innovation value that a competitor stands to gain. Recruiters should calculate the probability of landing exceptionally qualified candidates and then compare that number to their actual success rate.

ROI

The most commonly calculated business metric is return on investment (ROI), which is the ratio of the dollars of return compared to the dollars spent. Because the recruiting function does not generally quantify its positive business impacts, it’s difficult to accurately calculate the ROI of recruiting. In fact, most recruiting leaders only report the recruiting expenditure part of the equation. However, for recruiting to be considered strategic, it must compare its overall functional ROI to the previous year and then with the ROI of other key business functions.

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