Nov. 17th, 2020 - Measure Your Way To Hiring Success
Recruiting is a sales process: you're pitching the position, the company, and the vision, hoping that a great candidate will buy what you're selling. And just like the sales process, great recruiting needs metrics to monitor performance and quash inefficiencies. Continuing our recruiting thoughts from last month, we'll walk through KPIs for measuring the success of your team's recruiting process, plus how to get that process in place.
1. Candidate Response Rate
Similar to how generic email blasts are ineffective at bringing in new clients, blanket emails and voicemails will not draw candidates in. You must provide value to the candidate up front with thoughtfully written job descriptions, explaining the vision for the role. The right candidate should read what you've written and think that they're a perfect fit.
If you aren't aren't hearing back from the people you have proactively reached out to, reevaluate your description and pitch. Try writing different versions of the copy and A/B testing performance. Poor response rates can mean you're selecting people who don't believe they're a fit, whether for title, experience, or compensation reasons.
Candidate Response Rate = # of candidate return messages / Total # of messages sent
2. Quality of Hire
How well did the candidate perform what they were hired to do? This metric is driven by two factors the company can control:
- Quality of the job description: Did you accurately portray what the candidate would be doing? Were the experience expectations correct?
- Strength of recruiting efforts: Were you able to find candidates who matched the description on a consistent basis? Did you access the right audiences in your search?
Create an iterative feedback loop between the job description creation process and the candidate conversations to bring in the highest quality candidates possible. Quality of Hire is a subjective evaluation and should be the sum of the new hire’s first annual performance review. An example formula could be:
Quality of Hire = Job Performance score + Ramp-up Time score + Engagement score + Cultural Fit score / N(# of indicators)
3. Retention Rate
The hiring process sets the stage for new employees. While not directly related to retention, a poor hiring process, regardless of outcome, can result in a new hire starting on shaky ground. Startups can face upwards of a 25% attrition rate compared to more established firms that hover around 13%.
High turnover is brutal to cope with when growing a startup, though as the company grows, rates commonly rise as pace of work and scope of roles change rapidly. Check in on retention rates annually and hold hiring managers and recruiters responsible if you see the metric slip.
Retention Rate = # of individual employees who remained employed for entire measurement period / # of employees at start of measurement period
4. Cost Per Hire
Recruiting and hiring is expensive. The average hire costs about $4000, and that can balloon to $30-40k quickly when dealing with third-party fees. Process and oversight can prevent unnecessary expenses and move focus to areas with the highest return on investment (e.g. which ad placements work best, which recruiters are performing, etc.). Rather than looking at Cost Per Hire in isolation, factor in Retention Rate and Quality of Hire when evaluating the overall cost of your process.
Consider the following expenses when calculating this metric:
- Employee time spent recruiting
- Fixed costs for new employees (e.g. office space, equipment)
- Recruiting software, such as an ATS or interview platform
- Job board ads
- Recruiting agencies
- Candidate travel
- Background checks and drug screens
Cost Per Hire = (Internal recruiting costs + External recruiting costs) / (Total # of hires in a given time frame)
5. Candidate Satisfaction Rate
An often forgotten metric for evaluating hiring success, Candidate Satisfaction Rate allows your team to learn from their mistakes and ensures consistency between interviews. Asking for feedback makes the process more human and is a good reflection on your company.
There are no set formulas for this metric but using 5-point scales in questions creates a great baseline number. Consider including questions about how well your interview process matched the job description, the overall demeanor of the interviewers, and the quality of any technology platforms involved in the process.
For companies with fewer than 50 employees and no dedicated HR or recruiting staff, ownership is likely to be split between the direct hiring manager (usually who the new hire would report to) and the Head of Operations (or similar). Heavily manual processes are fine in the early days, but it's worth taking the time to set up the metrics to keep quality high as you scale. Evaluate the efficiency of your process, even with only a couple of hires per year, and aim to automate as hiring ramps.
Measuring your recruiting KPIs is easiest with the following in place:
- An applicant tracking system (ATS) or similar tracking software
- A clearly defined hiring process
- A candidate feedback system
Use your ATS (or alternative system) to get a full picture of your candidate pipeline. How many overall candidates went through the process? How can you adjust the process to weed out weaker candidates earlier on? Create reports to measure interviews per job posting and calculate Cost Per Hire.
ATS reports can also be used to measure Candidate Response Rate. See how many candidates fell through the cracks because of lack of interest, slow response, or something else. Small companies will often struggle with this metric as their name recognition will be much less enticing to high quality candidates. Break this down by position to get a better understanding of which present greater challenges.
Satisfaction Rate does best with an automated process. Trigger a feedback form after interviews, if possible, or have another team member manually send them. Keep in mind that you will interview many more candidates than you hire, and they will form opinions that impact the public perception of your company long-term.
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