Recruitment and hiring is at the heart of running any organisation smoothly, so it is imperative that you have a way of measuring it. In this article, we will cover how you can do that by choosing the most relevant recruiting metrics for your business.
What are recruiting metrics?
Recruiting metrics are measurements that you can use to track and analyse your recruiting and hiring process. They help you see the success of your hiring efforts and give you insights about improvement areas by answering pertinent questions such as:
1. How fast do you hire a candidate?
2. Is your recruiting process helping you hire the right candidates?
3. How much does it cost to fill each position?
4. How long does it take to hire your ideal candidate?
What are the key recruiting metrics that you should track?
While there are a number of recruiting metrics that you can choose, here are the most important key performance indicators for any recruitment and hiring team:
1. Time to fill
It is the amount of time taken from the moment you posted a job opening to the time you closed it. Closing a position could refer to job offer acceptance or the first day of the employee.
Why is this recruiting metric important: Time to fill is a critical metric because of the following reasons:
I) The longer the time to fill, the more money you spend on hiring costs such as job advertisements or recruitment agency costs.
II) Helps you see if your hiring process is too long which could lead to a higher job offer rejection rate.
III) Gives you an estimate of how long it takes to refill a position.
The value of this metric has not gone unnoticed by employers and speeding up the hiring process is amongst the top 3 priorities of recruiting teams in 2021.
To calculate the time to fill, you can use the formula below.
Time to fill = Time period between posting the job and hiring the candidate
If you want to calculate the average time to fill, take the time taken to fill the positions and divide by the number of positions. For example, if a marketing position took 40, 45, and 50 days to fill, the average time to fill will be:
(40 + 45 + 50)/3
= 45 days
2. Time to hire
Although closely related to time to fill, this is still a different hiring metric. It is calculated as the time from initiating contact with your best candidates (phone call, interviews, etc.) to the time they accept the job offer or start the job. So, while time to fill can be 30 days, time to hire may be 20 days.
Time to hire = Days between first contact with candidate and job offer acceptance/ start of onboarding process
Why is this recruiting metric important: It can help you evaluate whether your recruiting team is moving quick enough with the right candidates.
To get more insights, you can analyse the time taken at each step. For example, if an engineering position is filled in 40 days, then you can find out how much time is taken by the application process, interview process, offer letter extension, etc. This microscopic view can help you figure out bottlenecks and optimise in the right areas.
You can also compare your average to the recruiting benchmarks in your industry. If the time to fill is too fast, then you may want to examine your process for its comprehensiveness. However, if it’s too slow, then you should work on optimising it.
3. Quality of hire
This is a metric that helps you measure how well a new hire contributes to your organisation.
Why is this recruiting metric important: While time to fill and time to hire are important recruitment KPIs, they should be seen in reference to quality of hire. Your hiring time may be short but if your candidates aren’t able to achieve full productivity within the specified time period or the employee attrition rate is high, then it would only increase the recruitment costs in the long run.
The way quality of hire is measured will vary across companies and roles. Common indicators include time taken to achieve full productivity, contribution to revenue, performance reviews, bonus awarded, promotions, hiring manager satisfaction, culture fit, etc.
LinkedIn recommends the following quality of hire formula:
Quality of hire = (Job performance score + ramp-up time score + engagement score + culture fit score) / (Number of indicators)
4. Cost per hire
This is perhaps one of the most important recruitment metrics which is tracked by 44% of organisations in India. Cost per hire is the amount that you spend to fill a position.
It is calculated by dividing the total recruitment cost by the number of hires. Recruitment cost can include recruiter salary, recruiting software, job advertisements, etc.
Cost per hire = (Internal + external hiring costs) / No. of hires
The cost per hire would differ depending on the position and department. For example, it can be different for the design and engineering teams.
Why is this recruiting metric important: This metric is important for the following reasons:
I) Indicates the return on investment.
II) Helps you in creating your recruitment budget.
III) If the cost per hire is high, you can think of ways to reduce it.
5. Source of hire
One of the most effective recruitment techniques is diversifying your sources of hire such as job boards, social media, employee referrals, career pages, etc. The next step in the process should be measuring the effectiveness of each channel.
You can do this by finding out the number of candidates from each channel within a specific time period. Moreover, you can look at the number of quality candidates.
In addition to tracking the number of candidates, you can also calculate the cost associated with each channel to determine how cost-effective they are.
Why is this recruiting metric important: Knowing which recruiting channel is bringing in the most qualified candidates can help you in putting in efforts in the right direction.
6. Offer acceptance rate
It is the percentage of candidates who accept your job offer.
Why is this recruiting metric important: Reaching the stage of making a job offer can require a considerable effort from your hiring team. So it’s only fair that you analyse to find out if you are doing it right. One way to find out is through the offer acceptance rate which can be simply calculated by using the following formula:
Job offer acceptance rate = Number of offers accepted / Number of offers made
You can calculate it over different periods of time to assess your different recruitment strategies.
7. First-year retention rate
When your recruiting team has spent so much time and energy on getting the right candidates onboard, you should measure how many employees stay with the organisation for a year after they join. This is called the first-year retention rate.
Why is this recruiting metric important: This metric can help you understand if you are hiring the right fit for your organisation. Moreover, it can pinpoint you towards any underlying issues at the workplace that are causing a turnover.
According to Builtin, you can calculate the employee retention rate in the following steps:
I) Determine the time period. It could be anything from a year to a few months depending on your recruitment goals.
II) Find out the number of employees on the first day of the time period. For example, perhaps you had 50 employees on January 1, 2020.
III) Measure the number of new hires who joined after this date.
IV) Calculate the number of employees on the last day of the time period. For example, maybe you had 45 employees on January 1, 2021.
V) Now subtract the number of new hires from total employees on the last day. For example, say you hired 10 new employees after Jan 1, 2020:
Retained employees = 45 – 10 = 35 employees
Retention rate = (35/50)*100 = 70%
Retention rate = (Number of employees retained / Total number of employees in the beginning) * 100
Although low retention rate is an indicator that the new hires do not match the organisation’s needs, it doesn’t always come down to the effectiveness of the recruiting team. It can depend on a number of factors such as lack of advancement opportunities, competitive industry, and so on.
Recruitment metrics to gain deeper insights
Besides the essential recruiting metrics, here a few recruiting KPIs that you can use to determine the effectiveness of your hiring process:
8. Candidates per hire
This recruiting metric gives you the number of candidates that are interviewed before you hire your ideal candidate.
Why is this recruiting metric important: It can help you in planning the recruitment process, managing the interviewer’s time, and figuring out if you are getting the right number of candidates.
To calculate this KPI, divide the number of interviewed candidates by the number of hires. For example, if there were 200 candidates and you hired 5 of them, then the candidates per hire would be:
200/5 = 40
Candidates per hire = Number of interviewed candidates / Total number of candidates hired
You can use this formula to find the candidates per hire in different departments and roles or according to the sources of hire.
9. Candidate experience
It is a score that indicates how satisfied your candidates are with your recruiting process.
Why is this recruiting metric important: Although this metric may not seem significant at first glance, research by IBM has shown that applicants with a positive experience are 38% more likely to accept a job offer. Even candidates who do not receive a job offer are more likely to apply again or recommend the organisation to family and friends.
To find out about the candidate experience, you can conduct anonymous surveys with both candidates who did not receive a job offer and the ones who have joined your organisation.
10. Diversity and inclusion
This recruiting KPI is a measure of different groups within your workforce. It could be the number of millennials, non-binary employees, disabled employees, etc.
Why is this recruiting metric important: Diversity and inclusion have proven to be a crucial element in the success of many organisations. Research has shown that diverse workplaces tend to be more innovative and drive more revenue.
So whether you already have D&I initiatives in place or the plans are in the pipeline, it is important that you measure the existing state of diversity and inclusion in your workplace. At the most basic level, you can do this by measuring the representation of different groups such as age, gender, religion, and so on in your organisation. To get a more in-depth idea about diversity in your workplace, you can also measure the attrition rate for different groups or track the representation at leadership levels.
These statistics can also be used on your career pages to show that you walk the walk of being an equal opportunity employer.
11. Application completion rate
This metric shows how many potential candidates ended up making it to the end of your application process.
Why is this recruiting metric important: It could serve as an indicator to show if your application can be created better.
You can use the following formula to calculator the application completion rate:
Application completion rate = Number of applications submitted / Total number of applications started
The possible shortcomings for a low completion rate can include a lengthy application process, lack of mobile optimisation, and technical issues.
12. Hiring manager satisfaction
This metric shows how satisfied the hiring managers are with the hiring process and outcome.
Why is this recruiting metric important: As hiring managers tend to be the supervisors of the new joinees, it can be worthwhile to measure their satisfaction with the hire. This could help in recognising any gaps in the hiring process. For example, maybe the hiring manager needs more help with the interviewing process or the recruiter needs to be more thorough with shortlisting candidates.
To calculate this metric, you can conduct surveys wherein you ask managers to rate their experience on a scale of 1 – 10 and add additional feedback.
13. Yield ratio
If you want to find out how many candidates make it through each step of your recruitment cycle, then you can track the recruiting yield ratio.
Why is this recruiting metric important: Knowing how many candidates will make it past each stage can help you allott proper time and resources. Additionally, it can give you insights such as the number of female candidates who make it to the interview stage.
The formula for yield ratio of each stage is:
Yield ratio = Number of hirable candidates from this stage / Total number of candidates in this stage
For example, the total number of candidates who submitted the application were 100 but only 50 made it to the assignment round, then yield ratio for this recruitment stage would be:
50/100 = 1 in 2 candidates
What is the process for measuring effective recruiting?
1. Decide upon the most suitable recruiting metrics for your company
For example, if you are a small business, each employee brings tremendous value. In this case, it is important that you measure the quality of hire. Other key metrics could be time to hire, cost per hire, and sourcing channel effectiveness.
2. Collect and analyse data
Once you know which metric you want to track, gather data. This could be done by entering data into Excel sheets, exporting data from an ATS, or using a business intelligence tool.
3. Monitor the metrics
You should determine how often you want to check each metric. For example, retention rate can be measured annually while application completion rate can be measured on a more frequent basis.
4. Adjust your recruitment strategy according to metrics
Once you know what’s working and what’s not, you can make changes to your recruitment strategy.
This was our take on the most helpful recruiting metrics to measure success. How does your company measure their recruitment efforts?
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