Success of a business requires constant measurement of efforts and analysis of strategies. When assessing the success of recruitment process, there are multiple metrics to be measured. Some metrics describe the efficiency and speed of the hiring process while others are focused on quality. But which metrics you should measure to what effect depends on your organization and objective. In 2019, when every step of the recruitment process has evolved with the help of latest technology, measuring recruitment efficiency is a lot easier and important.
Hiring not only takes time but is also one of the major overall expenses of any organization. While spending money to hire new candidates is justified, making sure that the talent acquisition process is cost effective is one of the biggest responsibilities that recruiters and CHROs have consider over the course of their career. So what steps can help a TA manager contain the recruiting costs without sacrificing the quality of talent being hired? Let’s examine.
What is the Cost of Recruiting Employees?
Although the recruitment costs varies from company to company and region to region, the different components that contribute to the hiring costs are more or less the same. These components include job advertising expenses, recruiter salary & benefits, employee relocation costs, sign-on bonuses, employee referral payouts, third party recruiter fees amongst others. The average cost of hiring a replacement is significantly higher than that of a new employee as it also adds an additional component of separation costs that includes severance pay, time spent conducting exit interviews amongst others. There are other components of recruitment costs that are harder to quantify such as the hours of productivity spent until the position gets filled, the time taken by the new employee to achieve a productive level and others.
How to reduce hiring costs?
Now that we have a fair idea of the cost of recruiting employees, the next right thing to do will be to find ways that reduce the overall cost of hiring qualified employees. Here are some of the most effective ways of reducing recruitment costs:
- Automating recruiting process is a cost effective recruitment strategy
- Hiring qualified and quality candidates is a good idea for reducing recruitment costs
- Measuring results with reports and analytics will reduce the cost of recruiting employees
- An employee referral program leads to reduction of recruitment cost
- Social networks reduce the cost of recruitment and selection
Automating recruiting process is a cost effective recruitment strategy
Automation in recruiting is great cost saver as it reduces the time spent in doing the various recruitment activities which has a direct impact on the productivity of recruiters and allows them to hire more thus reducing the overall costs of recruiting. With automation, less number of work hours will be spent in doing repetitive tasks, such as report generation, job posting, interview scheduling and other recruitment activities, which will directly impact the productivity and final bottom line of the business.
Also Read: The Recruitment Automation Trends in 2019
Hiring quality candidates is a good idea for reducing recruitment costs
It is pretty evident to every recruiter in the business that hiring replacements is a costly affair. If you are not careful and accurate in your selection process the first time, re-hiring can be expensive. Therefore, investing in hiring high quality candidates the first time is worth the efforts, even if it means spending a little extra in terms of time and remunerations being offered. While it may seem counterintuitive but it is important not to ignore the quality of hire during the selection process while trying to reduce the cost per hire. A study by SHRM reveals it typically takes 6 to 8 months’ salary for replacing an employee.
Measuring results with reports and analytics will reduce the cost of recruiting employees
Using automation tools in recruiting has another advantage. These tools have the ability to track and analyze the huge amount of data generated during the hiring process. By using the latest analytical technologies, recruiters can easily track the effectiveness of the recruitment efforts and implement the corrections wherever necessary. Also, by making the recruitment process metrics-driven, it will help identifying the methods that are proving useful in finding the candidates, and the methods which need improvement, thereby ensuring best recruitment performance and least resource wastage.
An employee referral program leads to reduction of recruitment cost
An employee referral scheme is a long term strategy for saving money spent in hiring candidates. While there will be immediate expenses related to bonus payouts while setting up the employee referral program, the long term benefits of hiring through referrals will be able to offset this initial investment. Employee referrals have long been recognized as the most effective source of quality hiring. Employees only refer candidates those they know will fit the role’s requirements and fit the organization’s work culture. Such candidates, if hired, will be less likely to leave. Referrals have been the subject of a number of researches and stats reveal employees hired through referrals tend to stay longer.
Also Read: How to Encourage Employee Referrals?
Social networks reduce the cost of recruitment and selection
The millennial is a social media savvy generation which again is an opportunity in disguise for the recruiters. Social networks like LinkedIn and Facebook are great channels for not only advertising job openings but also spreading word about your company’s value and vision, and work culture. Most of the features on these social networks are free to use and it’s only when the engagement with audience is at advanced level that one needs to subscribe to the paid features. Building a company page, posting daily updates, posting open jobs, all can be done easily and if done right, the reach and popularity of social media will ensure that companies don’t even have to use paid platforms to advertise their jobs, thus saving recruitment costs further. Also, recruiters must motivate employees to share the jobs on their personal social network which can bring in more reliable and qualified candidates without spending a fortune.
When we had earlier talked about top recruitment metrics, Quality of Hire was right at the top of the discussion. While most ATS and recruitment software claim to make the recruitment process more efficient, the ultimate focus should be on hiring the best possible candidates because that will have a greater impact on the final bottomline. Therefore, it is essential to understand what exactly quality of hire is and how recruiters can measure it consistently.
What does Quality of Hire mean?
Quality of Hire tracks the value that new employees bring to the organization, how productive and proactive they are and how well they fit in the cultural fabric of the company. A hiring manager is now more of a strategic partner within the organization and as a result, there is more focus on the measurable benefits that recruitment can bring to the business. Therefore, quality of hire has now become one of the most important recruitment metrics and also one of the toughest to measure.
(Also Read: Top 5 Recruitment Metrics That Matter)
Why is Quality of Hire important?
People are the most important asset of an organization. Therefore, getting the best people to work for you is not an option, but a prerequisite for any organization’s success. At the end of the day, it’s not the strategies that do the magic; it’s the people who execute them. This is why your employees can prove to be your biggest competitive advantage. At the end of the year when you spell out the sales figures never forget that it’s your employees who made it all possible.
Companies that win are often those that invest in building a strong workforce. Such organizations make sure they hire only the top quality candidates for any role. Their recruitment strategy is centered on improving their quality of hire because a bad hire can not only prove to be wastage of financial resources but also have detrimental impact on overall performance of the team.
How to measure quality of hire?
Measuring quality of hire is no simple task as each organization and within each company; individual teams define value and performance differently. According to experts, it is an elusive metric and companies are still evolving, with companies testing out different methods to come up with their version of quality of hire. In other words, we cannot fit this metric in a straightjacket because in the end it all depends on the businesses’ priority. Quality of Hire depends on some factors such as employee performance, retention, productivity, impact on business bottomline, and employee turnover although these are not quality-of-hire measures by themselves.
(Also Read: How To Measure Candidate Experience?)
Some of the ways in which you can measure quality of hire in your organization are:
- Conduct Hiring Manager Satisfaction Survey to gauge quality of recruits
- Measure Quality of Hire through Performance Reviews
- Use Retention and turnover to measure Quality of Hire
- Predicting Quality of Hire through Pre-hire quality assessments
Conduct Hiring Manager Satisfaction Survey to gauge quality of recruits
The easiest way to gauge quality of hire is to ask the hiring managers through a periodic survey their satisfaction level regarding the performance of employee. This method is quite popular as getting data from hiring managers is not that tough. Also, the survey can be conducted regularly. However, there are some drawbacks to this method as hiring managers can be quite subjective in their response. Instead of approaching the survey objectively, they might be influenced by emotional and other human factors while judging the new hire. Besides, many hiring managers would avoid filling long surveys and especially HMs who have made 10 requisitions wouldn’t certainly want to fill out 10 surveys.
Measure Quality of Hire through Performance Reviews
If your company has a comprehensive performance review process in place, it can provide an accurate and objective measure of the quality of hire made. Comparisons of the new hires with your consistent high performers can be pretty effective to gauge their quality. Linking the new hires with performance metrics such as achieving a certain objective/target within a limited period of time is also quite popular. Whether it is selling certain number of units, acquiring new customers or achieving certain level of customer satisfaction, all these are measurable goals which can provide an accurate picture of the quality of new hire. However, this method will only work if the company is good at measuring performance and doesn’t set unrealistic goals for employees.
(Also Read: How to Improve Recruitment and Selection Process?)
Use Retention and turnover to measure Quality of Hire
According to LinkedIn, 48% of companies use Turnover and retention metrics to measure quality of hire. Retention rates tell how many employees found the company as the right fit and therefore chose to stay on. However, the retention rate applies to overall organization and therefore they can’t be used to find individual quality of hire. Also, retention rate is more often than not influenced by the manager, the onboarding process and the quality of workplace. This is why we cannot take it as a reliable metric for measuring hire quality.
Predicting Quality of Hire through Pre-hire quality assessments
All the points discussed earlier are for measuring post-hire Quality of hire. These are long-term methods and can be used to establish a company standard for measuring this metric. However, with pre-hire tests and assessments in place, we can quickly gauge how successful the candidate will be, if hired. Lou Adler, the founder of The Lou Adler Group, a talent consultancy firm has created a unique talent scorecard that helps predict QoH. Using a mix of these strategies will help you get a fair idea of the quality of hire.
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ABOUT NAUKRI RMS
“Naukri RMS is the Enterprise Cloud Business division of Naukri.com. Since its inception, Naukri RMS has developed a bouquet of customized recruitment solutions addressing needs of different market segments. Naukri RMS intends to evolve recruitment into more productive and efficient process through automation of the entire recruiter workflow, right from requisition to offer. It aims to become India’s largest one stop recruitment platform. “