With 70% of hiring managers stating recruiting departments need to become more data-driven to improve long-term business impact, the need for accurate recruiting metrics has never been greater.
HR costs make up 28% of a company’s total operating expenses on average, according to PwC.
With so much money at stake, it’s no wonder that companies are increasingly demanding their recruiting departments to calculate metrics and demonstrate their ROI.
To provide a comprehensive overview on how to measure, optimize, and show the business value of your recruiting process, we created this guide on recruiting metrics for talent acquisition professionals.
See a quick summary of recruiting metrics in our infographic below.
Recruiting metrics are measurements that provide insights into the value and effectiveness of your recruiting process.
These measurements capture the time and money spent on specific practices as well as the conversion rates of the various steps of the recruiting funnel.
By provide information on which functions are working well and which functions are underperforming, recruiting metrics are crucial for understanding where process improvements are needed and justifying investments into specific recruiting functions.
The potential list of all the metrics a company might collect is long. Jibe found the top 10 metrics that talent acquisition professionals use to assess the success of their recruiting process include:
Recruiting metrics also include conversion rates across the recruiting funnel. Overall, approximately 1% of candidates are hired.
Lever’s data of average conversion rates include:
In this guide, we focus on 4 key recruiting metrics:
Source of hire is the recruiting metric that shows where your new employees are coming from.
Silkroad’s data shows the most common sources of hire include:
Source of hire data provides insights on where you can reduce costs, how to allocate your marketing and advertising budget, and which recruiting programs and tools to invest in.
Time to fill is a measure of how efficient your recruiting process is. SHRM’s latest survey finds the average time to fill is 41 days. But with a tighter talent market and increased hiring volume this year, recruiting teams are facing pressure to reduce their time to fill.
iCIMS breaks down the time spent on the hiring process as:
This means 63% of the recruiting cycle is directly under your control to streamline or automate.
Time to fill may be the easiest recruiting metric to improve because there are so many recruiting software tools you can use to automate parts of your recruiting workflow.
Reducing your time to fill has the added benefit of creating a competitive recruiting advantage if you can reach out and make offers to candidates faster than your competitors.
Here are 9 tips to reduce your time to fill.
With a resume spending 15% of its time in the applied phase, the ATS has become a must-have recruiting software tool. 94% of companies who use an ATS say it’s improved their hiring process.
Many ATSs have a feature that allows you to post your job to dozens of job boards and aggregators with 1-click (or it integrates with a tool that does this for you). ATSs also have the option to share your job postings on social media.
When 71% of recruiters use an ATS that doesn’t have the option to rank resumes, it’s no wonder a resume spends 23% of its time in the screening phase.
To overcome this major limitation, a new breed of recruiting software uses AI to automate resume screening.
Automated resume screening uses AI to learn the experience, skills, and other qualifications of existing employees and then applies that knowledge to new candidates to automatically screen, grade, and rank them (e.g., from A to D).
This type of resume screening software works within your ATS, which means it doesn’t disrupt your current workflow and you don’t need to learn a whole new system.
Companies who have employed automated resume screening have reduced their time to fill by 75% on average.
Companies collect thousands – even millions – of resumes over the years. Once these resumes go into an ATS, however, the majority of them are never looked at again.
Candidate rediscovery is the ability to mine your existing resume database to find previous candidates for current reqs.
Software that automates rediscovery analyses your job description and then searches your existing resume database to find candidates that are the best matches for the current job requirements.
Rediscovery reduces time to fill because it allows you to skip the time taken to post a new job ad, attract new candidates, and then screen them by re-using a source of candidates you’ve already collected.
You can automate your candidate outreach with tools that allow you to auto-email and auto-text candidates.
To further optimize your email outreach, you can add an email analytics tool that tracks when the candidate has opened the email so you know who’s interested and when to follow up.
The biggest delay in the hiring process is the hiring manager review stage at 37% of the time.
Although there’s only so much control a recruiter has over hiring managers, providing more information about candidates to hiring managers will help speed up their decision making.
By automating your resume screening, you can present a shortlist of candidates who are ranked and graded based on their qualifications.
By automating your candidate outreach, you can collect information on candidates’ availability and assess their level of interest to encourage hiring managers to take action.
Interviewing takes up nearly a quarter of the recruiting process at 23%.
A quick win for reducing time to fill in the interviewing stage is using a software tool that integrates with major email and calendar providers to auto-schedule interviews with candidates.
For example, some companies will send an automated interview request for all candidates rated an A by their resume screening tool.
With the average interview process taking 23 days, online interviewing has continued to grow in popularity.
Interviewing software allows you to be flexible because you can conduct online interviews in real time or you can watch pre-recorded interviews on your own time.
A new innovation in online interviewing assesses factors like candidate word choices, speech patterns, and facial expressions to predict how well a candidate will fit a particular role.
This type of interview technology promises to reduce time to fill by providing additional data points on each candidate, which has the potential to allow you to make better decisions in less time.
Digitizing your reference checking by using software eliminates the time taken chasing referees on the phone.
Because referees can provide information on candidates on their own time, reference checks can be completed much faster.
Although the hiring stage only takes up about 2% of the recruiting process, a quick win here is to use software that allows candidates to e-sign their contract and send it back without unnecessary delay.
Cost per hire is a measure of the cost effectiveness and efficiency of your recruiting process.
Having data on your cost per hire is important to identify areas for improvement and help guide your recruiting budget. Here’s an overview of how to calculate your cost per hire to optimize your recruiting process.
SHRM’s formula for cost per hire is the sum of all recruiting costs divided by the number of hires in a given time period
Internal recruiting costs are expenses related to internal staff and organizational costs of the recruitment function. These include:
External recruiting costs are expenses related to external vendors or out-of-office costs including:
External recruiting costs can also include candidate-related costs such as:
To better understand and compare cost per hire at your company, you can calculate specific cost metrics. Categories by which you can calculate cost per hire include:
For example, cost per hire for roles in software development may be higher than in finance due to a tighter market for developers compared to finance professionals.
You can compare your costs against available benchmarks to determine if your cost per hire is high, low, or average.
Industry benchmarks for cost per hire include:
Recruiting channel source of hire benchmarks include:
Cost of hire data can be invaluable to help optimize your recruiting process by making process improvement and strategizing your planning and investment.
You should be calculating your costs regularly to assess the impact of a process improvement, a technology or automation project, or a recruiting event.
An increase in costs isn’t necessarily negative. For example, costs may increase because you’ve increased recruiting headcount to handle higher hiring volume.
Compare your cost per hire data by department and position to help identify areas for process improvement and lower costs, if possible.
For example, if interviewing costs for leadership positions are higher because of additional interviews, discuss whether you can reduce the number of interviews with no negative effect.
Understand which sources of hire are the most cost-effective. Tracking source of hire can be done manually or in your ATS.
Cost per hire data should be examined it in the context of other recruiting metrics that are important to you such as time to fill and quality of hire.
If possible, you should analyse their correlations with each other. For example, does cost per hire decrease as time to fill decrease? What happens to quality of hire as cost decreases?
Understanding these relationships can provide insights on which trade-offs – if any – are worth it for you.
As a measure of the recruiting function’s performance, cost per hire is an important factor in strategic planning and budgeting to determine future investments in recruiting tools and increasing company headcount.
Quality of hire is a measure of how well your recruiting process selects the right people.
With 40 percent of today’s Fortune 500 companies predicted to go out of business over the next 10 years, hiring the right people is crucial.
Quality of hire is the recruiting metric hiring managers care about most, according to LinkedIn. With the advent of real-time feedback, employee engagement, and performance surveys, collecting the data you need to measure quality of hire has become easier these days.
The latest recruiting software and tech are helping recruiters use data to close the loop with hiring managers to demonstrate candidates’ quality of hire.
Here are 5 steps to measuring the quality of your candidates.
Generally, there is no “one-size-fits-all” metric quality because it depends on what your priority is.
According to LinkedIn, the top three ways quality of hire is measured are:
Hiring manager satisfaction can be measured with a simple one-item measure similar to a net promoter score (e.g., how satisfied are you with the new hire on a scale from 0-10) or a longer survey that asks about the new hire’s time to productivity, performance, or other metrics you’re interested in.
Other common quality of hire metrics include:
Here’s a formula for calculating the quality of hire of an individual employee:
It’s important that all your measurements are using the same scale (e.g., all scores out of 10).
A formula for calculating an average quality of hire score of all new employees:
To assess the success of specific recruiting practices relative to each other, you can compare their quality of hire scores.
For example, you might want to know how well your automated resume screening software identifies qualified candidates compared to screening resumes manually. Compare the quality of hire scores of the employees hired using automated resume screening to the scores of the employees hired with manual resume screening.
To measure how successful your recruiting process is overall, calculate the average quality of hire score of all new hires and the retention rate.
Retention rates vary across industry and job position. The Bureau of Labor Statistics reports the average annual retention rate is around 60%, ranging from 25% for hospitality roles to 80% for government roles.
The formula for calculating new hire retention is:
The formula for calculating the quality of hire of your recruiting process including retention is:
Again, make sure your measurements are using the same scale. In this case, both measurements should be out of 100.
Linking recruiting metrics to business outcomes is essential for recruiting departments to demonstrate their financial and strategic value.
These business outcomes include reduced costs, increased revenues, and other company goals.
Increasing retention can easily be linked to business outcomes through reduced costs.
Using your company’s cost per hire and its retention rate, you can calculate how much you’ve reduced turnover costs for every percentage you increase in retention:
Using the average cost to hire an entry-level employee of $3,400, and the average annual retention rate of 60 percent, if you hire 500 employees a year, you can reduce costs associated with turnover by $28,000 for every one percent increase in retention.
Showing the monetary contribution of your successful recruiting actions through higher retention as well as the positive effects of a more stable workforce helps demonstrate recruiting’s strategic value.
Top performers contribute disproportionately more to a company’s productivity. Research has found a top employee generates 4x the output of an average employee.
If you’re able to find out what the revenue generated per employee at your company is, you can attach a monetary value to each high quality employee you’ve recruited:
Not only does this number demonstrate the additional revenue you’ve contributed to your company’s bottom line by each top performer you recruited, but it also proves how you can improve your company’s competitive position by hiring top talent.
Remember to bookmark this post and keep it as a resource to answer all of your recruiting metrics questions!