Editor’s Note: It’s a TLNT holiday tradition to count down the most popular posts of the past year. This is No. 34. Our regular content will return on Jan. 5, 2015. Happy Boxing Day!
Metrics enable you to gauge the overall health of your talent acquisition process.
Chief HR Officers have certain KPIs (key performance indicators) that they report on. The following are ones they watch as these metrics provide deeper insight into the performance and business impact of your talent management system.
Some of these metrics are standard, some are not; taken as a whole, they create a broad report of where improvement can impact the bottom line and drive value for HR in the C-suite.
1. Time to fill
Yes, everyone measures time to fill. (Also called time to start.) This metric measures the average number of calendar days from the date a job requisition is approved to the date a new hire begins work.
To calculate your average annual time to start, you take the total number of calendar days between the date approved requisitions are received and divide it by the total number of new hires for that year. This metric indicates if your hiring process is effective. It also helps you manage hiring expectations across the business.
If you know your average time to fill is three months, you can set this expectation with hiring managers. But time to fill can also tell you if you’re losing out on top candidates because of outdated systems, or lack of automation, or too many interview rounds.
2. Cost per hire vs. cost per vacancy
What is the cost per hire vs. cost per vacancy?
Cost per hire is calculated by adding up all of your recruitment advertising, agency, travel and interview, relocation, employee referral bonus and HR department recruiter compensation and benefits costs and dividing it by the total number of new hires for the calendar year.
Cost per vacancy can be calculated in various ways, but the most basic method is to take your company’s revenue per employee (total revenue divided by number of employees) and divide that by the number of working days in a year (220). Pivotal and executive roles will have higher costs per vacancy, as will revenue-generating roles such as engineering and sales.
Knowing what it costs you to hire compared to what it costs for vacancy can help you determine if you need to improve your hiring process, bring on an agency or RPO to more effectively manage costs, and improve your succession process for critical roles.
3. Satisfaction rating
This one often gets overlooked, especially if your other metrics are good.
Satisfaction ratings can be measured with surveys of candidates and new hires. While your overall metrics may be positive, it’s important to find out how people experience your hiring process.
This is especially helpful if you find you have high numbers of interview cancellations, no shows, or high turnover rates in new hires. Do candidates feel valued or like a commodity? Satisfaction plays into retention and into building an employer-of-choice culture and reputation in the talent community.
4. New growth vs. attrition rates
What percentage of the positions you fill are new hires vs attrition?
New growth can be measured by calculating how many new positions are requisitioned. Attrition is calculated by tallying how many people leave the company voluntarily or involuntarily each year.
If you are hiring mostly due to attrition, it would indicate that selection, employee engagement, development, and succession planning need attention.
This metric can be broken down by division/department, too, to dig into specific details. If you have high attrition rates, do people understand the career path in your company? Are competitors promoting people faster than you are and luring top performers away? What kind of development are you offering?
5. Quality of hires
When you do hire, how long do people stay? What is their performance like? Are you getting top performers? If not, why not?
Do you have competencies that tie directly to your business strategy so you know exactly what kind of people you need to execute strategy? Are these competencies shared across the enterprise or siloed? Do hiring managers know how to interview for innovation, forward-thinking mindsets, willingness to take on challenges in a candidate?
Track 90-day turnover by dividing the total turnover of employees with 0 to 3 months of service by the total number of external hires; monitor one year turnover by dividing the total turnover of employees with 0 to 1 year of service by the regular headcount with 0 – 1 year of service; and measure new hire performance rates by dividing the average performance rating of regular headcount with 0 – 1 year of service by the average performance rating of regular headcount.
6. Sourcing
Where are you sourcing your most successful hires? Is there a particular company that seems to be developing top performers? Do you offer employee bonuses for internal referral hires?
It’s easy to throw money at job boards, but are you hiring anyone from there? Measure the effectiveness of the tools you are using: social media, email campaigns, job boards, every sourcing channel.
To find the percentage rate for a specific source, divide the number of source hires by the number of external hires. (For example, total Monster job board hires divided by total external hires.) Chances are you can be cutting costs while improving quality of hires.
7. Effectiveness ratio
How many openings do you have vs how many you’re filling? Are you closing the gap or falling behind? How well is your TA system keeping up?
You can measure your recruitment rate by dividing the total number of new hires per year by the total number of regular headcount reporting to work each year. Your requisitions filled percent can be tallied by dividing the total number of filled requisitions by the total number of approved requisitions.
Other metrics that sometimes get overlooked include: high performer retention rates and employee engagement. These and the above metrics reveal not only TM performance, but provide insight into whether your culture is supporting an environment where employees and high performers thrive.
By keeping an eye on these performance indicators, you’ll have a more holistic image of how HR is impacting the business strategy and drive a stronger value proposition for HR in the future.