1 Clara Moon & Lingmin Li Cornell University ILRHR 6640: March 28, 2012 QUESTION What are the key metrics to focus for recruiting? How should a company track them? What are other companies doing regarding the process of tracking and reporting all their metrics? INTRODUCTION Recent study shows that organizations at the highest level of workforce analytics practice have 8% higher sales growth, 24% higher net operating income growth, and 58% higher sales per employee 1. According to HR Focus Survey in July 2010, Recruiting metrics is the second most-tracked-workforce-metrics following turnover 2. Today, companies can improve workforce planning and drive financial return on human capital investment by making good use of recruiting metrics. While there are many recruiting metrics, the most fundamental ones considered by both the academic world and real companies can be divided into two areas 3 : 1. Efficiency: Time to Fill, Time to Source, Recruiter Workload, etc. 2. Effectiveness: Cost per Hire, Productivity, Retention, Source of Hire, Manager/Applicant Satisfaction, etc. KEY RECRUITING METRICS Although the efficiency metrics have been consistently ranked as the most useful metrics from the past, recruiters today are paying more attention to the effectiveness of staffing processes and the quality of new hires 4. Best-inclass companies are found to pay great attention to the following five metrics 5 : 1. Time to Fill: This metric measures recruitment processing time beginning with submission of the requisition. While most companies are using this metric, there are significant differences in how far out each employer measures. Companies measure (1) time to hire, (2) time until a screened candidate pool is returned to the hiring manager, (3) time until an offer is made to the selected candidate and (4) time until the selected candidate begins employment. Companies continue to monitor processing time as a dashboard metric, but focus their attention on other recruiting performance measures. 2. Cost per Hire: These metric measures the amount of financial investment the company makes to attract and recruit new hires. It indicates a direct line of sight between the recruiter s ability to effectively source candidates and the resulting cost savings for the organization. As industry, staff size, profitability and geographic region influence recruiting costs, companies can benchmark effectively by comparing their Cost per Hire against similar organizations metrics. 3. Quality of Hire: Manager Satisfaction and New Hire Turnover (Retention) are the most common methods of measuring quality of hire. Companies are measuring this metric by: (1) conducting some forms of post hire manager satisfaction survey, (2) measuring retention after one year and (3) using solutions like Recruiting Effectiveness Dashboard to track quality of hire 6. While many companies are interested in measuring new hire productivity, they have found it difficult to accurately measure it until several years of job appointment. 4. Source of Hire: Companies measure both the number of hires per source, and the cost per hire for each source. Best practices are (1) generally measuring applicant source ROI over time and modifying list of primary sources accordingly, (2) adopting a hosted recruitment posting and application system, specifically measuring the cost of new service against prior advertising costs and (3) measuring the number of successful hires from targeted colleges and universities. 5. Applicant Satisfaction: This metric impacts both employers ability to secure their preferred candidate and their reputation with other prospective applicants. Companies use a range of applicant surveys with varied questions and rating scales. Best practices are (1) using the NetPromoter metric, a measure of how likely applicants are to recommend the employer following their experience and (2) using a survey instrument that measures the quality of the candidates overall experience, whether they were treated with respect, and their impression of the selection process. Campus Recruiting: For campus recruiting, companies have different focus on metrics from experienced recruiting. Rather than Time to Fill, campus recruiters pay more attention to the other four metrics. Additional common metrics include Percentage to Plan, Interview to Hire Ratio, Offer to Acceptance Ratio, Intern Conversion Rate, Diversity and Campus Yield Ratios at target schools 7.
2 HOW TO TRACK AND REPORT METRICS We reviewed how best-in-class companies are tracking and reporting the key metrics and found that these are the four main steps that the company should take to make metrics-based improvements in recruiting. Step 1: Choose right metrics that make sense to your organizational goal and business strategy 8 Alignment: Get the whole company aligned in developing recruiting metrics so that everybody who will see them understands their meaning and knows how to use them. This includes setting the meaning of metrics, the purpose of why for metrics and goals associated with metrics. Standardization: When selecting metrics, make sure each metric term is industrially standard and able to be compared to benchmarks among a peer group internally and externally. Benchmarks are an important indicator of relative performance, detailing a need for improvement or outlining effective operations. Training: Train recruitment staffs about how often metrics are needed, what can and should be done with metrics, how deep to look into metrics, and how to handle two conflicting metrics. For example, companies can pay attention to Quality of Hire over Time to Fill and Cost per Hire, as long as the business strategy and organizational goal support this decision. Step 2: Equip recruiting team with updated technologies for automated metrics tracking Technology Integration: The four core recruiting technologies include (1) an HRMS product, (2) an onboarding tool, (3) an ATS * and (4) a CRM *9. According to SHRM and Bersin & Associates, the ATS is the core part of recruiting technologies. With more and more companies desiring to tie their ATS with HRMS and onboarding systems, now ATS is being used for not only candidate tracking but also post-hire tracking such as performance appraisals, talent forecasting, and employee management 10. An integrated technology set of ATS, CRM, HRMS, and onboarding tools allows the company to track pre and post hiring metrics including Time to Fill, Cost per Hire, Manager Satisfaction and First-year Turnover. Outsourcing ATS: Based on a membership survey by CEB * in January. 2012, all companies outsource the ATS to a vendor rather than develop it in-house 11. It is noted that because ATS have to be so specific in their function and compliance with post-hiring systems, the industry tends to be quite specialized and divided among a broad expanse of relatively smaller companies 9. Although it is hard to find a single pure-play ATS vendor, CEB s survey shows that more than half of recruiting departments use Taleo as their ATS vendor. Companies can talk to their ATS vendor about customizing metric tracking needs and integrating ATS into other data models and HR systems the company is using. While it is important for a company to put careful thought into choosing ATS to set up, it is equally important to conduct regular reviews of the system and identify new offerings from the vendor to improve candidate management and metric tracking 12. Step 3: Develop your own recruiting metrics dashboards While data-collecting technologies like ATS might not be able to extract a clear metric report as you wish, it is advisable to develop your own recruiting metrics dashboards. In most cases, this requires creating reports and pulling the data into a spreadsheet for manipulation 13. The analyst needs to understand the database well enough that s/he knows how to interpret and extract data and make sense of it. Leading companies usually develop their own dashboards and customize them to the organization s strategic needs; but external providers of metrics management are offering common tools such as RPM Dashboard 14. Step 4: Capture real time metrics and schedule regular recruiting performance reviews. Historical metrics will provide some insight but come too late to make real time changes in the recruiting process. Recruiting departments should produce capture real time metrics and provide readable, useful and succinct recruitment reports for management, goal setting and talent forecasting. Top performing departments schedule these at least quarterly and often monthly 15. CONCLUSION Our research identified five most popular key metrics to evaluate the efficiency and effectiveness of recruiting programs. Additionally, companies are suggested to select more metrics based on their business needs. To collect and track recruiting data, companies need a sophisticated applicant tracking system and a technology-based reporting structure which can be integrated into HRMS all through talent management process. Recruiting metrics should be viewed not only as department efficiency metrics, but also as part of the corporate dashboard regularly viewed by senior management; therefore, recruiting departments need to work closely with strategy and business units in designing, tracking and reporting metrics with customized dashboards 16. *ATS: Applicant Tracking Systems *CRM: Candidate Relationship Management *CEB: Corporate Executive Board
3 APPENDIX I. Definition for Recruiting Metrics Metrics & Sub-categories Definition Useful Sources 1. Time to Fill Time to Fill Time to Start The average number of days from the day a job is requisitioned to the day a candidate accepts an offer The average number of days from the day a job is requisitioned to the day a new employee starts the job HR Magazine Incentives for recruiters 2. Cost per Hire Cost per Hire (In general) Cost per Hire, Internal (CPHI), Cost per Hire, Comparable (CPHC) Recruiting Cost Ratio (RCR) Salary per Hire Total recruiting and training costs divided by the number of positions filled A ratio of the total dollars expended (in both external and internal costs) to the total number of hires in a specified time period A ratio of costs to total first-year compensation of the new hires The starting wage per new hire within a job classification. HR Magazine Incentives for recruiters SHRM Cost-per-Hire American National Standards SHRM Executive Brief: What Factors Influence Costper-Hire? Staffing Org. Corporate Recruiting Report 2010 Edition Dr. John Sullivan. Measuring Quality of Hire 3. Quality of Hire New Hire Performance 1) Average % rating of hires after 6 and 12 months compared to standard 2) performance appraisal ratings and/or production 6 to 12 months into the new employee s job as compared to their peers ERE 6 Good Metrics Manager Satisfaction % of managers who are satisfied with the hiring process and the candidates HR Magazine Incentives for recruiters New Hire Turnover % of hires that voluntarily quit within 12 months, or average tenure compared to standard HR Magazine Incentives for recruiters 4. Source of Hire (Source Distribution) 1) Number of job applicants and new hires per recruitment source 2) % of new hires from each defined candidate source 3) % of hires per source, with highest onthe-job performance and tenure rates 4) Cost per hire for each source 5. Applicant Satisfaction % of applicants who are satisfied with the hiring process as judged by a candidate survey ERE 6 Good Metrics State of Washington Recruitment Process Benchmark and Best Practice Study 2009 ERE 6 Good Metrics
4 II. Campus Recruiting Metrics 7 Categories Metrics Definition Business Impact Metrics Supplemental ways to measure new hire performance Process Efficiency Metrics Internal Program Effectiveness Metrics Observed Job Performance College Hire Retention College Hire Diversity % to Plan Termination Rate Training Failure Rate Total College Hire Compensation Recruited Bonus Compensation Rate Promotion Rate Training Scores Compare performance of recent college hires to existing employees in the same role Calculate retention rates at six-month intervals for three years Compare actual rates of diversity hires you produce to either preestablished targets or rates from previous time periods Compare the actual number of college hires by the target time desired to the target number Percentage of college hires that must be terminated during the first two years of employment Percentage of college hires that fail during initial training The total compensation including all one-time bonus payments for college hires generated during a specific time period The average bonus compensation rate of recent college hires compared to hires in previous periods The rate of college hires promoted at six-month intervals for the first two years of tenure Aggregate individual scores from training assessments into a single new hire training score, and compare to past college hires 360 scores Average 360 scores of new college hires after one year Stakeholder Satisfaction Employer Brand Ranking Applicant Quality Intern Conversion Rate Offer Acceptance Rates Hard-to-Head Hire Rate Cost per Hire Top Schools Percentage Local Schools Percentage Goals Met ROI College Career Site Effectiveness Number of Attendees Critical Incident Count/Cost Online Comment Ratio Number of Applicants Manager, applicant, and new-hire satisfaction with the process Firm ranking scores from the Universum brand survey Percentage of applicants that exceeded the minimum qualifications The conversion rate of top-performing interns to permanent hires. Percentage of offers accepted Percentage of hires that accepted an offer over offers from key talent competitors The cost per college hire The percentage of hires from top-10 targeted schools The percentage of hires from local schools The percentage of program goals that were actually met ROI (benefits minus costs) of the program Monitor statistics related to raw hits, hits to event specific landing pages, duration of stay, and conversion Percentage of attendees at info sessions, career fairs, and interviews Number and cost of EEOC/legal issues resulting from college hiring practices challenged The amount of both positive and negative information about the firm that can be found by applicants online The overall number of formal applications received each year
5 III. Best Practices Although benchmarking data in the CPG industry was not available, we were able to find some best practices of how other companies are using recruiting metrics and updating ATS in the market. Eli Lily s Recruiting Metrics Makeover (2008) Starting in the middle of 2006, a special team headed by the Recruiting Operations Manager of Eli Lilly U.S. began designing a new recruitment metrics system for the company. Prior to early 2007 By End 2008 Recruiting and staffing metrics system lacked sufficient goal setting, standardization, and benchmarking The system focused on hindsight views of business results and not on timely, process-focused reporting Metric reports contained up to 24 pages of detailed tables and graphs in a mind boggling format Recruiting departments responded to requests from their internal business partners for specific metrics, by format and frequency, that the partners wanted tracked The metrics process assessed the outcomes without providing measures or feedback within the process Replaced company-specific terminology with definitions from Recruiting Roundtable and Staffing.org Added much-needed recruitment goals and benchmarks Transformed metric data collection by updating ATS Centralized metrics reporting system in the Recruiting Operations Department and standardized reporting for each hiring stage (sourcing, interviewing, post-hire evaluating) Partnered with EEO colleagues to obtain diversity metric indicators Simplified easier-to-read new report format, estimating needed numbers for each category After the Recruiting metrics makeover, Lilly achieved great improvement in both recruiting efficiency and workforce planning. Highlights of the makeover process include: (1) Engaged a metrics expert in recruiting to create a rough outline for the full-scale metrics makeover. (2) Educated the top leader, the Divisional Director of U.S. Recruiting and Staffing to gain leadership support. (3) Modified data collection to accommodate the needed system fields including changes to the ATS through PeopleClick and URL tracking of online recruitment sources. (4) Taught the new data collection system to each business unit s Team Leaders. (Source: HCI White Paper. May 6, Metrics-Based Talent Pipelining: A Case Study from Eli Lilly.) Ryder Systems of Miami (2009) Prior to 2007, the recruiting system of Ryder Systems of Miami was not cost-effective. With as many as 5,500 hires per year, Ryder had no assessment platform and no ATS. The recruiting services department worked out in detail a desired future state for Ryder s recruiting program with the following specifications: (1) Reporting of ROI including identification of sources of applicants and related expenses. (2) Key productivity metrics such as Time to Fill, Cost per Hire and source effectiveness. (3) Automatic EEO tracking and reporting for affirmative action planning and Office of Federal Contract Compliance Programs compliance. (4) Candidate status reporting and pipeline visibility for hiring managers. The company decided to automate data collection and develop an employee assessment system. To address its ATS and assessment system needs, Ryder selected ADP/Virtual Edge and PreVisor. As a result, Ryder has improved efficiency and transparency and lowered costs. It has reduced the number of search firms needed from more than 80 to fewer than 15, including less reliance on big firms. (Source: SHRM.org. June 24, Forum Examines Employee Testing, Tracking Systems.)
6 REFERENCE: 1. CedarCrestone. CedarCrestone HR Systems Survey: HR Technologies, Service Delivery Approaches, and Metrics: 13 th Annual Edition. Abstract: This survey has 727 responses, providing a worldwide benchmark of workforce technologies adoption and the value achieved from their use. 2. The Bureau of National Affairs Inc. (July 2010). A Supplement to HRfocus: Survey looks at Reasons for Using Metrics, Functions Most Measured. Abstract: HR metrics tend to focus on data about employees, including information on turnover, salaries, benefits, absenteeism, and hiring. HR focus examines the reasons HR professionals are using metrics in their organizations, as well as the types of metrics used most often, broken down by industry, region, and organization size. 3. (1) David Earle (2011). Recruiting Analytics: 5 ways to benchmark success. Staffing.org Abstract: In recruiting, we often measure Time to Fill to gauge efficiency and Cost per Hire, Candidate Quality, and Hiring Manager Satisfaction to gauge effectiveness. The research also lists the most frequently measured metrics: Time to Fill/Start, First-Year Turnover, Manager Satisfaction, Cost per Hire, Candidate Satisfaction, Quality of Hire, Interview/Offer Ratio, Offer/Close Ratio, Time to Source, Recruit Funnel Ratio. Having software or technology system that allows your employees to view a variety of dashboards that are tailored to their specific needs will help your teams effectively collaborate and improve the hiring process. (2) The Ladders (2011). Measure Up: Measuring and Increasing Quality of Hires. Abstract: While this white paper examines many performance metrics in use in today s marketplace, and explores the value each metric can convey, the paper s emphasis is on the smaller set of metrics that recruiters feel matter most in terms of driving performance and demonstrating effectiveness. For more and more recruiters and hiring managers, quality-of-fill is the emerging metric that best measures this more meaningful contribution. (3) Lynne Eisaguirre (2009). Measuring and Tracking: Recruiting and Retention Success Abstract: For many organizations, using a combination of the traditional recruiting and retention metrics, along with increasing their sales opportunities such as establishing relationship and making presentations, will yield the best results. Traditional metrics include Time to Hire, Quality-of-hire, Number of vacancies outstanding, Cost-per-hire, Longevity-of-hires, Recruit source effectiveness, Time-to-productivity, Boomerangs hires, Turnover numbers. 4. David Earle (2011). Recruiting Analytics: 5 ways to benchmark success. Staffing.org 5. (1) HR State of Washington (July 2009). Recruitment Process Benchmark and Best Practice Study. Abstract: Between April and June of 2009, analysts of Washington State government contacted 41employers recognized for their accomplishments in the field of recruiting. Common metrics found in best-in-class organizations are Quality of Hire (manager satisfaction and new hire retention), Applicant Satisfaction, Applicant Source Return on Investment (ROI), and Time to Fill (time to refer interview pool, time to job offer, and time to start). (2) SHRM (2011), Recruiting and Attracting Talent: A Guide to Understanding and Managing the Recruitment Process. Abstract: The recruiting department should have two major goals first, to learn from past recruiting information and modify recruiting methods in the future, second, to demonstrate to functional managers that HR is providing values to the organization.
7 Phillip Morris and PricewaterhouseCoopers are examples of employers that conduct rigorous evaluations of their recruitment efforts. Along with other metrics, these companies have gathered data on universities that typically have yielded the most hires, employees who received the strongest performance reviews and new hires who stayed with the organization the longest. Based on this information, these firms have increased recruiting at some schools and dropped others from their recruiting rosters. (3) Minton-Eversole, T. (2009). Quality measurement: Key to best-in-class talent acquisition. HR Magazing, pp Abstract: The research reveals six most important recruitment metrics as following: Time-to-hire, Cost of filling the position, New employee retention rate, New employee performance level, Hiring manager s satisfaction with the recruitment process, Applicants perceptions of the recruitment process. 6. CLC Recruiting. https://rr.executiveboard.com/pdfs/merchandiser%20page/column%202/recruiting%20executive%20dashboard/ RED_Introduction.pdf 7. John Sullivan (Mar. 23, 2009). Metrics for Assessing College-hire Effectiveness and ROI. Abstract: Like all practices that augment the capability and capacity of the organization, college recruiting needs to run more scientifically, with decisions based on data and research. The article introduces metrics to assess the effectiveness of your college recruiting practices. 8. NAS Insights (2005). Recruiting Metrics. Abstract: Recruiting metrics requires several characteristics to be effective and reliable: (1) they must be aligned with business needs and objectives; (2) they must be actionable and predictive; (3) they must be consistent in what they measure; (4) they must be tracked over time in order to generate internal benchmarks and analyze internal performance; (5) they must be open to peer comparisons. 9. Dave Zielinski (May 27, 2011). Applicant Tracking Systems Evolve: Systems play new role in talent acquisition and other HR necessities. Abstract: It s rare that just one technology works effectively for recruiting any more, given varied hiring and succession planning needs. The core four include an HRMS product used for foundational data like job structure requirements but that can have recruiting capabilities, an onboarding tool, an ATS and a CRM. The ATS is now seen as the core part of an ecosystem of ancillary recruiting technologies that have hit the market over the past two years, said Sarah White, principal analyst from Bersin & Associates, an HR research and consulting firm. A minimum requirement should be that an ATS enable all users to build their own custom reports against a data model that already exists. Reporting should be user-friendly, and companies should be able to just drag and drop field information into a report and have the system understand it based on limited data. 10. Recruiter.com (January, 2011). Applicant Tracking System. Abstract: Modern applicant systems can automatically import candidate resumes from social media, job boards, and Internet resumes. Most applicant tracking systems are also sophisticated communication systems, allowing recruiters to , SMS text, page, or even Tweet with candidates. A more recent development in the history of applicant tracking or ATS software is that they are being used for post-hire tracking as well as candidate tracking. Once a candidate is hired, the same applicant software can now be used for performance appraisals, talent forecasting, and employee management. 11. Corporate Executive Board CLC Recruiting (January 31, 2012). Taleo is most popular ATS. Abstract: According to a survey this month of our membership, more than half of recruiting organizations use Taleo as their ATS vendor. Virtually all organizations outsource the ATS to a vendor rather than develop it inhouse.
8 12. Stephenie Overman (Apr. 1, 2009), Pick the Best of the Bunch, Staffing Management Magazine, Vol. 5, No. 2 Abstract: Many applicant tracking systems have the capability to do much more than recruiters realize, either because new staff haven t been trained completely on the system or the recruiters haven t been trained to use software updates. What tends to happen is that employers put a lot of thought into the ATS when it is first set up, but they don t keep up with the system s new features and functionalities and then end up a few years later with a system that seems outdated. Companies that use ATS should conduct regular reviews of the system, identifying new offerings from the vendor that may help their candidate management process. Updating doesn t have to take a lot of time and money. 13. David Creelman (March 2005). Metrics in Recruiting: The Real World. Human Capital Institute. Abstract: This case study looks at how Northwestern Memorial Hospital (NMH) collects recruiting metrics. Northwestern developed key recruiting metrics based on company strategy of providing the best patient experience, getting the best people, and creating exceptional financial performance. It also maintains a number of dashboards reporting on the most important metrics for different purposes. For example, the monthly staffing dashboard contains considerably more details than the executive report. 14. Anonymous (September 27, 2011). 360 degree Metrics Management takes Recruiting from Art to Science. Abstract: Revenue Performance Management, LLC (RPM) launches new cloud based Metrics Management system for Recruiting and Staffing Organizations. The RPM Dashboard allows users to set goals, calculate metrics and view weekly data in an interactive dashboard format. More importantly however, RPM makes a critical leap by providing actionable expert subject matter information to managers and users that can impact performance immediately. 15. David Earle (2011). Recruiting Analytics: 5 ways to benchmark success. Staffing.org 16. SHRM.org (July 13, 2011). Metrics: Which HR metrics should we measure? Abstract: HR metrics can help pinpoint where human capital issues exist and can be an effective way to monitor trends. Information from appropriately selected HR metrics can be effectively used to assess, plan and improve HR and business strategies and objectives. HR should review company strategy and define valuable HR metrics to the company. Then determine how data should be collected and reported. An effective HR metrics reporting practice will be critical in delivering HR value.