Success is only as good as you can measure it. Measuring KPIs can help elevate an organization’s recruiting and hiring practices and accelerate organizational growth. KPIs typically measure a company’s progress against industry benchmarks and their improvement over a period of time, providing countless benefits and opportunities to examine, assess, and grow current practices and strategies. These metrics are valuable tools and resources for companies hoping to take their recruiting practices to the next level.
Recruiting KPIs (key performance metrics) allow you to track and measure how effective your current recruiting methods and processes are. These metrics measure a company’s performance to evaluate success. Using KPIs allows you and your team to effectively assess, adjust, and implement various strategies to your process and systematically show results. These metrics will enable you to understand your current strategies' effectiveness and indicate how you're performing in relation to your goals.
Key performance indicators (KPI’s) help businesses measure success and failures and are important as they relate to recruiting because while having many candidates in your pipeline may appear advantageous, recruiters must balance quantity with quality. By measuring specific metrics throughout the hiring funnel, you will be more inclined to act efficiently and fuel growth within the organization. Let’s break it down:
With industry benchmarks and your organization’s unique data, you can use KPIs to understand where your current practices are strong and where they could use improvement.
Having measurable metrics can help you understand where you are in relation to your goals and what you need to prioritize to reach them.
With the benefits gained from measuring KPIs, an organization can understand and improve its performance and reach its goals more efficiently. Doing so leads to an overall increase in effectiveness across the board.
Hiring strong team members is instrumental in organizational growth, productivity, performance, and so much more. Consider adding these 10 KPIs to your recruiting and hiring strategies to ensure your practices are strong:
By measuring this KPI, we can better determine whether our hiring process meets the expectations for speed. Additionally, we can use this data to extrapolate a timeline to reach our overall headcount goals. While it varies based on industry and role, a study done by SHRM found that the average time to fill a given position is 42 days.
Calculate time-to-fill by measuring the amount of time that elapses between creating and approving a job opening and filling that open role with a candidate accepting an offer.
The interview-to-offer rate identifies how many screened candidates, on average, a hiring manager may interview before making a hiring decision. While quantity, having a large pool of candidates in your pipeline, looks good on paper, quality is also a key factor influencing your interview-to-offer rate. Tracking your interview-to-offer rate allows you to measure the level of quality in your talent pool. Ideally, the interview to offer ratio will fall around 31%.
Calculate interview-to-offer by dividing the # of unique offers extended by the number of applicants interviewed, and multiplying by 100.
Your offer-to-acceptance rate measures the percentage of offers made that are accepted by candidates. This metric can reveal a lot about an organization’s effectiveness at selling the role to candidates throughout your recruiting process. If your offer-to-acceptance rate is low, it may be time to reevaluate and reconfigure current practices and procedures. Compensation, brand perception, team dynamics, and role expectations are important factors to consider. Keep in mind that the average offer-to-acceptance rate is 65.7% across all industries.
Calculate your company’s offer-to-acceptance rate by dividing the number of offers accepted by the total number of offers.
Cost per hire measures the amount of money spent per hire throughout the recruiting process and is especially useful when preparing budgets. In determining cost per hire, consider all costs associated with recruiting, such as job board and advertising fees, referral fees, and potential relocation costs. This metric allows teams to assess the cost-effectiveness of their current processes and examine their respective expenses when calculated. A study done by SHRM found that the average cost per hire is around $4,129 across industries--a number that can significantly rise depending on the skill-sets needed for the role.
When calculating cost-per-hire, use SHRM’s formula: the sum of all recruiting costs divided by the number of hires in a specific time period. (This includes both external and internal recruiting costs)
As you are evaluating candidates, they are also evaluating you and your organization. Ensuring that candidates have a positive experience from start to finish has a significant impact on the outcome of a hire. Measuring a candidate’s experience will allow you to see whether your recruiting and interview processes work or need improvement. Regardless of the outcome of an interview, it is beneficial to leave a strong impression. If a candidate has a bad experience, they are more likely to speak out against your brand.
To measure candidate satisfaction, employers can offer a post-interview experience survey to candidates. In this survey, candidates can rate their overall experience and satisfaction while scoring various aspects of the process. Candidates’ input can help business leaders understand and measure how candidates perceive your recruiting process and then be used to improve the process for future applicants.
Turnover rate is the rate at which employees leave an organization and need to be replaced. Typically, companies measure the first-year turnover rate. A high turnover rate is indicative of issues like poor work culture, management, or job fit. If you are hiring efficiently yet experiencing quick turnover, you will have to increase your hiring efforts and spend more to compensate for backfill.
According to SHRM, there are five steps in measuring turnover rate:
Calculate number of employees
Calculate average number of employees
Calculate number of separations
Divide the number of separations by the number of employees
Determine annual turnover rate
Headcount growth measures the growth of the number of people employed over a specific time frame. Measuring your company’s headcount growth allows you to produce more accurate projections for the quarter and year ahead and helps you plan realistic goals. When you calculate your headcount growth, you can better understand and visualize growth patterns within your company.
Calculate your company’s headcount growth in a given period with this formula:
(# of employees during current time frame - # of employees during previous time frame)(# of employees during previous time frame)x 100 = % growth
Quality of hire is arguably one of the most important metrics, yet also the most difficult to measure. Adding new team members is more than just filling a position--measuring quality of hire ensures that new hires add value to the organization. Because quality of hire can be subjective and sometimes not based completely on tangible metrics, measuring it can be a challenge.
SHRM recommends measuring quality of hire both pre and post-hire. Pre-hire, measure things such as their candidate assessment scores, candidate quality, and time-to-fill. Post-hire, measure things such as productivity, performance, and cultural fit.
By measuring how many qualified candidates apply to your opening, you can get a better sense of how well your job marketing is. A candidate is considered qualified if they make it past the first stage of the hiring process; their resume was reviewed, their background experience met the requirements, and they’ve been evaluated by the hiring team. If this number is high, your recruitment marketing is reaching the target audience and bringing talent into your pipeline. If this number is low, it might be time to reassess your current processes and improve your marketing strategy.
You can measure this metric by calculating the number of candidates that make it past the application review and to the second stage of your interview process.
Adverse impact should especially be measured because it sheds light on harmful or biased recruiting practices. Adverse impact refers to employment practices that appear neutral but have a discriminatory effect on a protected group; it may occur in hiring, promotion, training and development, transfer, layoff, and even performance appraisals (SHRM). Measuring adverse impact can also help organizations develop better diversity and inclusion practices.
You can measure adverse impact by applying the four-fifths or 80% rule (The EEOC Guidelines):
The selection rate for any group is substantially less (usually less than 4/5ths or 80%) than the selection rate for the highest group in hiring, promotion, or other employment decision.
Key performance indicators, or KPIs, are various metrics that allow companies to understand and improve performance, efficiency, and effectiveness. These metrics are essential for businesses to utilize when looking to improve their current recruiting and hiring practices, as they offer valuable insights into what is working well, and what needs to be improved.
Although there are various factors that human resources and hiring managers must consider when strategizing, typically the most important ones are: cost-per-hire, time-to-fill, interview-to-offer, offer-to-acceptance, candidate satisfaction, turnover rate, headcount growth, adverse impact, quality-of-hire, and the number of qualified candidates per opening--consider these first to implement into your current strategies!