Given the focus on capital efficiency and allocation of resource many Founders are feeling right now, measuring the return on investment (ROI) of your hiring efforts is crucial. It will allow you to assess the effectiveness and efficiency of your hiring strategy and make data-driven decisions to optimise processes. Here are some key metrics you should be focusing on:
What is it? The total cost of making a new hire. Includes expenses related to job postings, advertising, external support (e.g. agencies or embedded partner), background checks, interviews, and any other hiring-related costs.
Why measure it? Whilst it’s not tied to the quality of a hire or a predictor of their impact, cost-per-hire is the ultimate metric for assessing ROI on hiring activity. It will give you an indication of how efficiently capital is being deployed on hiring, and can then be used to measure against the future impact of a candidate in their role (most obvious is sales / commercial roles).
What is it? The time it takes from opening a new vacancy to hiring a candidate.
Why measure it? TTH is the key metric associated with most hires in order to assess ROI and hiring performance. Whilst speed isn’t always the priority (see also quality and cost), shorter time-to-hire indicates an efficient hiring process and minimises productivity gaps in your team.
Quality of hire
What is it? The overall impact a candidate has on your business, which can be a mix of quantitative and qualitative data, e.g. performance against objectives, retention rate, productivity and feedback from managers and colleagues.
Why measure it? Assessing the quality of your hires is critical to determine if your hiring process is attracting top talent (and whether your business is an environment in which quality talent thrives)
Source of Hire
What is it? Analysis of which channels (platforms, job boards, referrals, external partner) are most effective in attracting suitable candidates.
Why measure it? By understanding where you’re having the most success in sourcing great candidates, you can be more efficient with where you deploy your time, money and effort. Cut off ineffective channels – as quickly as possible – and double-down on your most effective sourcing channels.
Offer Acceptance Rate
What is it? The percentage of job offers you make that are accepted by candidates, often expressed as a ratio.
Why measure it? It gives you insight into how effectively you are engaging candidates throughout the process and convincing them to place their career in your hands. A high acceptance rate, for example, indicates that you have a compelling proposition and you’re communicating if effectively to candidates. In short; they want to work with you.
What is it? The rate (%) at which new employees remain in your business beyond their first 6 months in the team (sometimes measured against 12 months instead of 6).
Why measure it? Retention rates will help you understand which areas in your hiring and onboarding process are performing well (or not!) – high retention rates suggest satisfied, engaged candidates. Low retention rates can be a costly issue with an adverse impact on productivity, employee morale and overall business growth.
Candidate experience (NPS scores)
What is it? Candidate experience is the measure of individual satisfaction within your business, typically measured on a weekly or monthly basis.
Why measure it? Whilst the NPS model has it critics in terms of the quality of data it provides, candidates experience is a crucial metric for establishing ROI on hiring activity. Not only does it provide data which can pre-empt any unanticipated employee turnover, but it also highlights the extent to which your hiring process and onboarding experience are engaging candidates properly.
You can calculate the overall ROI of your hiring efforts by comparing the costs associated with hiring and onboarding to the value delivered by new hires. Consider factors such as increased revenue, cost savings, productivity gains, or contributions to company culture and innovation as the ‘return’ aspect of your investment.
You should do so by tracking and analysing the metrics described above, so that you gain valuable insights into the effectiveness of your hiring strategy and can make informed decisions on where your hiring processes need improvements or further investment.