Across the recruiting industry there is a push to become more metrics and data-driven, and that push comes from a logical place: If we don’t hire the people we need, our companies will be understaffed and resource-strapped. In recruiting, like in other departments, the key to our success lives in data and analytics.
With data and analytics comes the ability to derive actionable insights around opportunities for improvement and the ability to predict hiring. Yet although we all recognize the importance of measuring our work, the recruiting industry as a whole hasn’t really come to consensus on the key metrics for driving decision making. Our collective goal should be for CEOs, COOs, and Boards of Directors to all be asking for the same set of metrics, because with this standardization across the industry, recruiting can drive strategic decisions around headcount growth, budget allocation, and even the best way for an organization to reach their long-term objectives.
The truth is, there are lots of interesting recruiting metrics to track, and they all have their time and place. What I’m most interested in is finding consensus around Key Performance Indicators (KPIs). KPIs are critical when you want the most bang for your buck and only have time to measure a handful of things.
To review, KPIs are:
Key – Focused on the most important metrics
Performance-related – Tied to business objectives
Indicators – Headlines, not the whole story
I’ve noticed a handful of metrics that are talked about often, but don’t tell you what you need to know from a KPI, so they don’t give you the full picture you need to optimize your team. Let’s explore why the following three metrics don’t tell you enough.
Cost of hire
Your CEO and Finance team likely ask for a number to attach to each person who joins your organization, which is why many recruiting teams measure cost of hire. We should all know what our cost of hire figure is, but this metric doesn’t pass muster as a KPI. Why? First, it’s tough to interpret without a concept of quality: Is a declining cost of hire a good thing if it means we end up with lower-performing hires and that cost simply gets passed down the line as performance management?
On the other hand, many organizations make a strategic decision to spend on hiring for the sake of propelling the growth of their organization. In that case, a high (or rising) cost of hire might be exactly what you want.
Because of this nuance, “cost of hire” doesn’t pass the test of being “Key.”
However, don’t discount this metric entirely! It can be really helpful in solving specific problems that arise. For example, you can use cost of hire to guide what the right referral incentive program should be. Spending up to your average cost of a hire on an incentive prize is a great investment! Thinking of hiring a new recruiter? Use the cost of that recruiter’s slate of expected filled roles and compare it to their salary. This can help you decide whether it makes sense to grow the team or hire an agency.
In short, cost of hire is a great tool to use, but it isn’t a KPI that will tell you how your process is doing when you track it quarter over quarter.
Number of applications
The number of applications (or "leads") is sometimes cited as a key metric. If recent applications are too low to support the throughput of your pipeline, recruiters can amplify sharing the job on additional channels, or continue actively sourcing and reaching out to qualified candidates. In many other cases, however, the number of applications doesn't help you make any decisions. Why? Some job titles are so broad (like Office Manager or Event Manager, for example), the result is a huge influx of applications, which can go one of two ways: Very few people end up actually being a fit, or in contrast, many people who applied fit the role profile to a T and move on in the interview process. Though the data is the same in both of these situations, the next steps they require are very different.
Instead, a top of funnel KPI should be normalized for quality. An answer to this is the “Qualified Candidate” or QC metric, recruiting’s version of marketing’s “Marketing Qualified Lead” or sales’ “Qualified Lead.” A QC is someone who appears to have the skills and experience required to warrant an early conversation and makes it out of application review. A QC metric is a leading, strategic top-of-funnel indicator that the interview funnel is filling up with relevant applicants. This can be aggregated to the team level, or broken down by role.
Time to fill
Time to fill is a tricky metric. It suggests that the right measure of role completion timeliness is the number of days between when a role is posted and when an offer is accepted. This works well for one-off roles that are opened looking for one hire, and then closed once filled. However, there are many organizations that have evergreen roles that were opened once and remain open, sometimes for years, as they continually grow those teams. For example, Greenhouse’s Sales Development Reps req would suggest a time to fill of over 365 days, although we’ve hired nearly 25 people since we first opened the role at Greenhouse a year ago. However, our typical req would suggest a time to fill of close to 40 days. In this case, our SDR time to fill metric would incorrectly appear as an outlier that needs to be improved upon.So, we can’t aggregate across our organization to create a meaningful average time to fill.
However, there are two important pieces of information that come together to help you understand the speed of your pipeline and predict future hires: open to source and source to close.
Open to source measures the number of days between when a req opens to when someone is contacted or applies to the role. Source to close measures the number of days that pass between when someone applies and ultimately accepts or rejects their offer. You can average this across all roles and get a sense of the true average speed of your interview process.
However, when planning, you’re missing a piece of the equation: how long it takes for recruiters to source the person that ultimately gets hired. With this metric, hiring teams can estimate the hire date for each req from the time of opening the req. To calculate your days to source, simply take your non-evergreen roles and calculate the average of how many days pass between when a role is opened and when the candidate who was ultimately hired applied. Then, to calculate your source to application metric (which is similar to time to fill, but different in its execution), combine the two averages—days to source and source to close.
Uncovering the KPIs that really matter
We’re always pressed for time, so when it comes to measuring performance, we want to be as efficient as possible. The metrics headlined above can be interesting, but won’t give you all the information you need to truly understand your team’s accomplishments and take action to improve your process.
But, don’t be discouraged—there are impactful KPIs for recruiting. I’ve compiled my research on how to get a more accurate and complete picture of a recruiting team’s process and performance in the ebook “5 Recruiting Key Performance Indicators.” You can download your copy here.
Lauren Ryan is the Director of Talent Acquisition at Greenhouse. She leads recruiting strategy, tracks the company’s recruiting KPIs, and oversees process improvements. She’s thrilled that she’s found a company that’s as passionate about the intersection of people and data as she is!