The challenge of finding good staff has consistently been a ‘top three issue’ for pretty much every CEO in the construction sector for the last 20 years or more. Unsurprisingly management and HR teams are constantly wondering whether they can and should be recruiting better. But what does ‘better’ mean? How can recruitment success be evaluated? What are the pros and cons of different metrics? And given the shortcomings of recruitment evaluation is it even worth doing? (The answer is ‘yes’ and I will explain why at the end of this article)
What does ‘better recruitment’ mean?
‘Better recruitment’ will mean different things to different companies – some will want to reduce cost, others will want vacancies filled faster and others will want to attract ‘better’ candidates (an even more subjective concept). Whatever the company’s recruitment objectives, the first steps to improving performance are 1) to agree targets, 2) to determine metrics to enable you to measure against those targets, and then 3) to understand current levels of performance.
How is recruitment success measured?
Metrics used to measure recruitment success can generally be divided into three categories: cost, efficiency and quality. However, simply measuring one aspect of recruitment performance is likely to be counter-productive and companies will typically build a dashboard of metrics covering all three areas.
Sadly, there is no one size fits all answer to measuring recruitment. Not only will the most appropriate metrics to use vary depending on the role, but what may constitute a good score or ratio for one role may be quite different to the next depending on seniority, function, location etc.
In other words evaluating recruitment isn’t a science that should dictate recruitment strategy. Instead, a considered dashboard of metrics applied to the right roles and then analysed with judgement, typically delivers the best results.
‘Cost per hire’ is probably the easiest and most common way to evaluate recruitment. The metric can be as simple as simply identifying all financial costs (recruiter fees, advertising fees, applicant tracking software costs, psychometric testing costs, referral checks, vetting costs etc) and dividing that by the total number of hires for the same period. Most companies will also attribute a cost to the internal time spent on the recruitment process as well as adding in training and onboarding cost to get a more accurate figure of the true cost.
At an organisational level, and especially for small to mid-size companies, cost per hire can feel like a blunt tool due to the number of variables involved and the likelihood of a single role distorting the wider picture. However, using ‘cost per hire’ in a more targeted manner can be very informative, for example calculating cost per hire for graduate intakes can be helpful as you will be comparing like for like, year on year and very often there will be specific costs attributable to the graduate intake programme such as university careers fairs.
The most important aspects of using ‘cost per hire’ are consistently including/excluding the same costs, and then comparing like for like, for example counting, or not, contractors as hires.
There are various metrics that can be used to assess the efficiency of hiring processes. For example, ratios of ‘applications to interview’ (number of applications % number of interviews), ‘interviews to hire’ (number of candidates a hiring manager needs to interview to make a hire) and ‘offer to acceptance’ (percentage of candidates who accept a formal offer) all help build up a picture of how efficient and effective the recruitment process is. Typically, so long as the candidate quality at the end of the process is high the company should be looking to minimise the ‘offer to acceptance’ and ‘interviews to hire ratios’. Ideally the ‘applications to interview’ ratio should also be low, however it may be necessary to increase it if the quality of the candidates is low.
One interesting exercise is to identify where candidates drop out of the process. Starting with the ‘application drop-off rate’ (used to compare the number of candidates that complete the application form compared to the number who start the process) identify pinch-points in the process through to offer acceptance or even candidates starting to understand where candidates decide to leave the process.
Counter intuitive as it might seem so long as the quality of the candidates making it to interview is high then a ‘high application drop-off rate’ is often good as less time is spent filtering applications to decide who to interview. As the process progresses however, the company should be aware of the number of candidates that it deems suitable who drop out of their own accord, for example because they have accepted an offer elsewhere, as this may indicate bottlenecks in the recruitment process.
‘Time to hire’ is another useful ratio but again can be calculated in different ways. Most employers calculate it as days from the moment the job is advertised but the end date may be when an offer is made, accepted or the person starts. From the candidate’s perspective what matters is the time between submitting their application and the offer or start date. Either way the longer companies draw-out application and interview processes, the fewer strong candidates are likely to remain available by the end of the process resulting in lost talent, wasted time and, in all likelihood, a weaker applicant being appointed.
Quality of hire
Quality of hire is in many ways the Holy Grail for recruitment evaluation – most companies would happily swallow a 10% increase in recruitment costs if all their hires were as good as the top 25% of employees. But how can you measure quality?
- Performance reviews: while measuring ‘quality of hire’ through performance reviews would seem an easy and obvious solution it is highly subjective. For example, some managers are much harder to please than others so will consistently score recruitment success lower. Hiring manager satisfaction suffers from the same subjectivity. Furthermore, it typically takes 3+ years before employees are fully embedded into a company and know the systems, processes and people well enough to achieve their full potential.
- Ranking scores for employees: asking colleagues to score one another can smooth over some of the subjectivity that come from performance reviews, however it can also be a measure of popularity rather than effectiveness. For example, a candidate who is brought in to implement a restructuring programme may be very effective but not score highly.
- Length of tenure: assessing how long an employee stays with the company can also provide an insight into whether or not they were a good hire. Certainly, the money spent on an employee who stays with the company for ten years is going to appear a better investment than one who stays less than twelve months. However, not only can this metric only be calculated retrospectively but length of tenure may be the result of the employee value proposition more than the result of the recruitment process or the result of the candidate being unable to find a job elsewhere.
Even if a company successfully measures quality of hire, it is then hard to untangle what makes those hires stand out and replicate the success… a recruiter’s skills of persuasion? identification of a specific talent pool? the thought hiring managers put into their interviews? speed or professionalism of the hiring process? Specific training or experience the candidate had? The answer is likely to be an indecipherable combination of factors.
What is the point in evaluating recruitment success?
There is no magic bullet that will drive ‘better’ recruitment but by measuring what we perceive to be key steps through the recruitment process, companies are at least able to compare performance either historically or against expectations and to adjust, refine and replicate processes appropriately. Furthermore, using the right metrics will make sure that the hidden costs of recruitment don’t get forgotten or brushed over.
In short evaluating recruitment success is crucial not only to having confidence in how well the function is performing but also to setting budgets and strategy.
If you would like further details about any of the trends or would like to speak with us about how we can support you then please email me: firstname.lastname@example.org or call 0330 174 6801.