14 November 2024

Rethinking Recruitment KPIs: What Metrics Truly Matter

In the world of recruitment, certain traditional key performance indicators (KPIs) have been long-standing champions. But are these traditional KPIs still relevant today? Talent Acquisition experts Stephanie Baysinger, Mary-Kay Baldino, and José Manuel Delgado Garcia share their thoughts.
11 min read
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Amy Gallagher
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In the world of recruitment, certain traditional key performance indicators (KPIs) have been long-standing champions. Metrics like time-to-hire and cost-per-hire are the well-worn paths that have guided recruiters for years. But this begs the question: are these traditional KPIs still relevant today? Have they been challenged recently?

Our recent webinar in partnership with Recruiting Brainfood delved into the world of recruitment KPIs and which ones we should prioritize. We were joined by talent acquisition experts Stephanie Baysinger, Mary-Kay Baldino, and José Manuel Delgado Garcia.

Measure processes not people

KPIs are put in place to measure a process, not people. It’s about looking at how these people flow through the process. Keeping an eye on candidate drop-off is a great place to start in terms of measurements as Stephanie explains.

“You have to focus on the process stages and being able to measure the efficiency from one stage to the next. So what is your recruiting funnel? And what follow up do you have at those different stages? Are you collecting too many applications or too few? And the only way to know that is if you understand how people are flowing through the funnel.”

You can speed up your recruitment process by utilizing your ATS and combining with a scheduling tool, to ensure you're working as efficiently as possible.

Adapting to change

In such a fast-paced and ever-changing industry, it’s inevitable that the KPIs should adapt alongside it. KPIs should be assessed regularly to make sure they’re reflective of the market and your business goals.

“It’s not a one-size-fits-all approach,” Jose explains. “Different companies need to tackle different things. And the market is always changing; we need to keep a close eye on the advancements. I've been in companies that have really changed the process throughout the time, because the market changes so quickly. So definitely, really understanding the moment and the context is really key.”

Go beyond time-to-fill

Time-to-fill is a more controversial metric, and is starting to lose its relevance when looking at recruitment efficiency. Mary-Kay suggests focusing on time-to-fill variance instead.

“Start having conversations with the business about how we can measure things that actually change outcomes that improve efficiency. So for us, we have evolved towards measuring time to fill variance. It's not the actual time to fill that's interesting. It's about how much variance there is between roles. For example, we look at setting up a target start date, when we're doing an initial kickoff to search. So based on how long the interview is, how many interview cycles, and how small and specific the talent pool is for this job, we look at how close we are to actually hitting those target start dates. When you look at the outliers, you're able to really start focusing on what's going wrong in your process.”

It is undeniable that context is crucial when looking at KPI targets and what success looks like, as Jose explains.

“KPIs can be hard to generalize across the board as there’s often a huge variance within company roles a recruiter is hiring for. Some roles might be filled in 10 days, another might take 500 days. And obviously those things skew what the overall measure might be. So you need to do variance in terms of role, and then it's a case of can you improve on that so it's not necessarily one number is a bad number or a good number.”

For time-to-fill, simply subtract the opening date from the offer acceptance date, and look across all of your roles to see what the trends are.

Time to schedule

A recurring pain point for recruiters is coordinating a time for all the people necessary for an interview, particularly complex panel or sequenced interview scenarios. This can lead to a lag between each interview being scheduled, keeping the candidate stuck in the recruitment pipeline for longer. This waiting time is essentially dead time, leaving you susceptible to candidate drop-outs and essentially leaving the job unfilled.

People expect speed and efficiency in every area of their lives thanks to technology and our "everything now" culture, and the time to schedule an interview is no different. If the process takes too long, it's a lot harder to keep the best talent iterested. Jose mentions the importance of speed in recruitment:

"In the end, we're all fighting for the same talent. So it is important to understand how to remain competitive, and speed is a critical part of this. Automation is great for this as it can take out a lot of the time-consuming admin that recruiters hate."

Having scheduling automation in place is the best way to ensure the candidate is moving through the stages efficiently and there is no wasted time. The average amount of time it takes for recruiters to schedule interviews is 3-6 days – our Scheduler whittles this down to just 2 hours, which is a huge saving and a powerful tool for a recruiter to have under their belt.

Recruiting cost ratio

Recruiters should also be looking at recruiting costs relative to the salaries of the people who are being brought in. Stephanie explained how you would calculate this.

“Look at all of your recruiting costs, so your talent acquisition team, your employer branding, and recruitment, marketing expenses, and any agency fees. Then divide it by the salaries of the people being hired. And over time you’ll understand whether your costs are going up or down relative to how many people you're hiring and how those people are paid.”

Factoring in training is also critical, especially if they’re a specialized and highly paid professional. They need to be given the best chance of success and training is an important part of this.

“A general rule of thumb is the more expensive your labor force, the more specialized it is,” said Stephanie. “So you may need to spend more time and more effort attracting that kind of a workforce. And these things only mean something if you train them over time.”

So a good formula for this is:

(External Costs) + (Internal Costs) / Total Compensation of New Hires x 100

A metric that feeds into this is calculating the complexity of a job to establish how much effort and money you should be spending on the recruitment process. This all comes down to what your overall business goals are, as Mary-Kay explains.

“Ask yourself: what are the ultimate business goals, what should you be prioritizing? Which roles are going to impact those, and how do you prioritize them? What is the impact this role is going to have, and how complex is it? And then how do you resource that effectively, so that you can get those results?”

Quality as a priority

Recruiters should focus on quality-of-hire rather than putting such an emphasis on time-to-hire. According to a Linkedin report, only 36% of recruiters measure quality-of-hire while 50% measure time-to-hire. Of course both should be assessed but the quality of the employee is what is most important in terms of making the money, time and effort a worthwhile endeavor.

“If you’re getting in a lot of job applicants but they’re all low quality, you are wasting time and money,” Jose says. "What's important for me is the quality of the hire, how good of a fit are they for your role. So if you're getting a low quality, you need to look at where these candidates are coming from, what recruiting marketing campaigns are you running, and are you assessing each role properly."

You can measure quality of hire while they're in the recruitment process by looking at referral rates and pre-hire assessments, then look at job performance and retention once they are part of the company. And example of how this could be calculated:

Quality of Hire (%) = (Job Performance + Engagement + Cultural Fit) / 3

Conversion rates

The rate of conversion reflects the effectiveness of the recruitment process in keeping the candidates engaged and interested in the role, which is vital to uphold throughout each stage. Jose explains, “If we see the conversion rate throughout the stages is increasing, the cost is actually the lowest because we've done a good job in the beginning, aligning, setting expectations with everyone. And normally, you see them turn into a hire.”

This metric is also about quality of the candidate over quantity.

"If you're plugging in loads of candidates, you can actually over acquire them. Just because they're applying doesn't mean they'll stay within the recruitment process for long. And that's not a particularly efficient way to do things. Instead of looking at how many candidates are applying, look at how many are converting. This means you're more efficient yand you'll be spending less."

The best way to calculate this metric is:

Successful hires made / total vacant jobs x 100 = Coversion Rate (%).

The Enduring Value of Traditional KPIs

The overall consensus is metrics like time-to-hire and cost-per-hire remain fundamental in the recruitment world. When presenting to the C-suite, business leaders, or the board, these metrics offer a clear picture of your recruitment process's health.

“These traditional KPIs are the nuts and bolts when it comes to your recruitment metrics,” says Stephanie. “They're universally understood by various audiences. Once you know these, then you can expand into the things that help you hit business objectives, what your team is really passionate about. But knowing your general funnel metrics are super power tools to have going into any meeting.”

Mary Kay agrees:

“Those metrics are considered baseline and if you can't measure that, you definitely can't measure anything more sophisticated. If you can't produce basic metrics, then forget evolving.”

Here are the simple calculations for those basic metrics:

The time-to-hire calculation: working days from first job post to official hire / number of roles hired = time-to-hire

Cost-per-hire calculation: Internal costs + external costs / number of hires = cost-per-hire

Conclusion

Many of the traditional KPIs are still relevant today, but they should be adapted and expanded on to get a holistic view of modern recruitment efficiency. By embracing a combination of metrics, understanding the nuances of each role, adapting to changing conditions, and fostering creativity in talent acquisition, recruiters can truly measure and enhance their operational efficiency.

The recruitment landscape is ever-evolving, and so should your metrics. Adapt, innovate, and measure what truly matters to ensure you're not just filling roles quickly but doing so efficiently and effectively.