Recruiting Metrics

The Top Metrics for Demonstrating the Impact of the Recruiting

Function

ERE WebinarNov 29, 2007

© Dr. John SullivanProfessor, Author and Advisor to Management

www.drjohnsullivan.com

Dr John Sullivan

[email protected]

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Dr. Sullivan’s current books

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Topics for today

1. Introduction

2. Tactical recruiting metrics

3. Strategic recruiting metrics

4. Metrics that demonstrate the business impact of

recruiting

5. The 13 primary metrics for measuring the

overall recruiting function

6. Your questions

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Premise for today

The metrics you now use have not made you

rich, famous or given you a huge HR budget

It’s time to shift metric approaches

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When selecting metrics >

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You need a separate metric for…

You need a metric for

1.Every major program goal… and for every improvement area – For example… Reduce turnover, cut costs, increase productivity

2.Every CFO/ management funding decision criteria – For example… an ROI of above 20%, a payback period of 18 months >

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Top 10 CFO decision factors for HR projects

1. Low initial investment2. High ROI3. High success rate/ low risk4. Immediate start up5. Short payback period6. Provides a competitive advantage 7. Increased productivity (Profit per people dollar)8. Accurate results metrics and counting9. No new headcount 10. Consequences of failure are built in (Individual accountability)

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Beware of “So what?” metrics

Avoid

“So what” or “that’s interesting” metrics

Example – It takes 3 days to get a req signed

Example – Your cost per hire is up 1% (Brain surgery?)

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Beware of “So what?” metrics

Instead focus on…

“Action metrics”… that change the way people act

They elicit the response of… “holy cow,” I better

do something right now!

Example – Your new hire turnover rate is 99% within the first 3 months or >

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Would these metrics get your CEO’s attention? (Rev per employee)

1. Average $160,0002. IBM $260,102

If you were IBM’s CEO Sam Palmisano, would yoube pleased?

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Would Sam be pleased now?

1. Average $160,0002. IBM $260,102 3. HP $592,600 4. Microsoft $699,0165. Dell $870,2456. Google $1,056,000 7. Apple $1,169,5948. Nintendo $2,500,000 ($440,000)

It takes 10X more employees at IBM… to produce the same revenue as Nintendo

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There are two levels of metrics

1. Tactical

2. Strategic

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The two levels of metrics

“Tactical Level” metrics (Not to be reported externally)

1. Efficiency/ diagnostic metrics (Cost metrics)

2. Recruiting results metrics (Number of hires)

3. “Cause” identification metrics (Why they accepted)

4. Satisfaction level metrics (Manager /applicant satisfaction)

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Now shifting to strategic level metrics

that will be reported to senior executives

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The 4 strategic level metrics

Strategic Level

1. Predictive metrics - Alerts/ smoke detectors

Goal – Provide “heads up” warnings, so that managers can prevent or mitigate upcoming problems and take advantage of opportunities

Target - Operating managersExample of an opportunity – Tiger Woods just resigned from his golf team… interested?Example of a problem - Mgr X, your quality of hire is now at D+ level, the chance of getting your bonus is now below 33%

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Strategic Level

2. “Other pocket” connect the “unintended consequences” metrics

Goal – To make sure that everyone knows the full unintended consequences of cost cutting

Target - Operating managers and the CFO

Example – We used the “cheapest” source of hire (Saved $1,500) but… we hired a salesperson that sold $67,000 less than the hire from the more expensive source! >

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Another “other pocket” example

Ex. 2 – Remind CFO’s of “other pocket” costs

Pocket #1 – Froze safety hiring (Saved $10K)

But look at “other pocket” costs…

Pocket #2 – Accident rates doubled (+$400,000)

Pocket #3 – Insurance rates up 23% (+$187,000)

P. #4 – Turnover of safety ee’s +15% (+$89,000)

Other pocket costs = - $676,000 >

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Strategic Level

3. Split sample/ Dead bang proof

Goal – Unwavering proof that this recruiting

program works (Does what it says it does) to get

managers to pay attention to recruiting

Target - Operating managers and the CFO

Example – % of business performance

improvement after the employee referral program

was updated >

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Split sample between 2 sales groups

Sales group “A”

% of sales goals met

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After referral update 100 % of sales goals met

Before referral update… 70% of sales goals met

Sales Aafter one year

“Control group”

a constant 85%

Sales group “B”

100% Before After

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The last strategic metric…

Strategic Level

4. Revenue/ profit impact on the business

Goal - Direct proof (in dollars) that recruiting

increases revenues/ profit

Target – CEO and senior managers

Example – Revenue increases and business

impacts after hiring 100 new nurses using a new

ATS system >

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Example

Demonstrating 24 different business impacts in

a recruiting example

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Business case - ATS

Note : This example is for hiring nurses in a public

hospital using a new ATS e-recruiting system

(Comparing last years hires to ATS hires)

Hiring 100 Nurses… at an average salary of 80k

The new ATS system costs $1,250,000

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24 different recruiting business impacts

1.New hires (NH) produce 5% more output ($5 mil)

2.NH reach minimum output faster (30 days/ $250k)

3.NH have increased customer satisfaction ratings (12% / $100k )

4.NH on job failure rate is 50% lower (Customer damage ($1 mil) and replacement costs (salary wasted/ $96k)

5.NH stay 12% longer (COV $600k)

6.NH make 14% fewer errors (on patients/ $1.2 mil)

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7. 50% fewer vacancies as a result of the new NH system means reduced nurse stress and as a result, nurse turnover is reduced by 4%/ $900k)

8. The ATS system hires top performers from competitors (1% net swing in revenue/ $2.1 mil)

9. NH’s need less training (23 fewer hours/ $90k)

10.NH training failure rate is 50% lower ($65k)

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11. NH have new skills so they can do 20% of the tasks that were formerly done by more experienced nurses ($322k)

12. ATS system requires 6% less management time

(before and after measured/ $64k)

13. NH output increase means 5% of proposed new positions can be eliminated ($240k)

14. OT & agency hiring costs reduced by 51% ($3 mil)

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15. Because ATS selects more skilled nurses, we can now expand our high margin med service offerings that were restricted because of NH nurse shortcomings (cancelled operations were reduced by 14% / $9 mil)

16. 20% less generalist time spent on recruiting

($9k)

17. NH system also works for exec nursing positions

so 32% fewer exec searches are needed ($340k)

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18. NH system hires 30 days faster (Vacancy cost/

$670k)

19. When new hires exceed 25% of the population

of a unit, the average patient stay is reduced by

one day (Loss in revenue $92k)

20. NH sys cuts HR out of pocket costs per hire (by

2%/ ($2k))

21. 50% fewer discrimination complaints ($72k)

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22. The productivity of other nurses increases where % of NH’s exceeds 10% ($82k)

23. Written up in Nurse mag. helps build our brand (product/ employment/ ($122k))

24. Continuous learning /feedback element improves NH system impact 7% each year ($1.7 mil)

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How much was the total business impact?

Total program cost = $1,251,000

Total 1st year $ impact = $24,232,000

ROI – priceless!

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Additional business impact recruiting metrics

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A “before and after” metric that

demonstrates the impact of diversity recruiting

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Before and after – Illustrating diversity business impacts

Emergency room team diversity impacts

A team of 10 (with no diversity) had two diverse people added (ADA, EEO, Gay, Age)

Within three months because of: Better communicationsLess fearIncreased trust andBetter understanding of patient needs

The following changes occurred >

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Illustrating diversity business impacts

Better patient satisfaction + 36%

Number of mis-diagnosis < 27%

Service delays (waiting for an interpreter) < 8%

Patient complaint rate < 48%

Team turnover rate < 8%

Teams on other shifts had no measurable changes

Estimated $ impact… Priceless

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The negative revenue impact of…

excessive position vacancies (Slow hiring)

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The costs of a position vacancy for a radiologist

Lost revenue from an vacant radiologist positionWe can’t bill them out at $4,950 a dayWe can’t do two voluntary operations at $20kOperations take 5% longer because of

understaffing, so we have 5% higher operational costs ($3,400)

The error rate of the overstressed radiology staff goes up 1.7% (Insurance, law suits, turnover)

Estimated dollar impact per day… $29,500 >

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The costs of a position vacancy for a radiologist

It takes us 43 days to fill a vacancy…

And 25 days of that is due to manager caused

delays

Even if the hiring managers cut their slack

hiring time by only 40%...

That would mean over $300,000 in increased

revenue for the facility

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Increasing your business impact

by shifting sources

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Changing the source… impacts your results

Primary source: 2003, Major US Healthcare chain, source comparison study

Source impact New Old Improvement Source Source

Cost $2,796 $1,877 - $919

Offer Acceptance Rate 95.4% 81.2% + 14.5%

Voluntary Turn < 1 yr 9.3% 22.1% + 2.3X

1% increase in retention is equivalent to over $400k in operational performance, costs and lost salary

Voluntary Turn > 1 yr 3.2% 12.5% + 3.9X

Termination rate < 1 yr 1.2% 4.4% + 3.6X

Performance Increase 14.36% Baseline

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Get your managers attention with a correlation

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Correlation between hiring speed and attaininga manager’s business results

Hiring speed – average days to fill

% of a manager’s business results that were achieved

There is a .99 Correlation between hiring speed and a manager’s business results

100%

60 days

30 days

10 days

0%

50%

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Demonstrate that you make a direct profit

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Great recruiters make a profit!

HealthEast once operated a rent a radiologist service

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Now let’s shift to…

The 13 metrics that I recommend

for the “over-all” recruiting function

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The first 4 are quality of hire measures

1. Performance of the hire (on the job performance ratings (or performance appraisal) after 6/12 mths)

2. New hire failure rate (% of new hires in key jobs had to be terminated or asked to leave)

3. Vol. turnover of new hires (the % that voluntarily quit within their first year or average tenure compared to a standard)

4. High level diversity hires (The percentage of hires in professional, managerial & key jobs that are diverse (Using a global definition))

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13 primary recruiting metrics

5. “Need”/ Start dates met (the % of key positions filled by the managers designated “need” date) Santa

6. New hire “time to productivity” (Time it takes for new hires to meet the minimum output standard)

7. Give away/ take away ratio (The # of employees in key jobs that we “poach” from a firm compared to the number they “poach” from us)

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8. Manager & new hire satisfaction (% of key managers, new hires in key jobs and applicants for key jobs that are satisfied with the hiring process)

9. Employment brand strength (Differentiated name recognition among possible candidates)

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10. Referral rate (What percentage of all hires come from referrals?)

Note: Referrals, besides producing top

performers, they also indicate company pride &

help extend your employment brand)

11. Quality sources used? (What % of applicants for key jobs came from top sources?)

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12. The quality of non-hires – A great hiring system doesn’t “miss” hiring top people. Great systems measure the % of superstars missed, as well as the number of “exceeds qualifications” that were “not hired” from our top 5 competitors

13. The total dollar impact of great recruiting on

the business this year (Also it’s ROI compared

to other OH and business functions)

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Final steps

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Final steps

Partner with the CFO’s office

1. Let the CFO pick & present your metrics (3x5)

2. Get the help of the CFO and cost accounting to

convert HR metrics into $ of revenue impacts

3. Hire interns to do your calculations (Do own Taxes?)

4. Use sampling tools & avoid “counting them all”

5. Use professional estimates… when the CFO will

allow it

Don’t be subtle if you want managers to pay attention to metrics!

6.Reward managers for great recruiting & retention

7. Integrate/ embed your key metrics into already

existing business performance & financial reports

8.Provide more than history… include alerts and a

“heads up” so that managers can act in time

9.Show that the very best managers utilize metrics

Did I make you think?

How about some questions

Hundreds of articles on all aspects of HR by Dr. Sullivan can be found at…

www.drjohnsullivan.com

Recruiting Metrics

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