Industry Insights

Get the Latest News and Notifications

Important Recruitment KPIs To Track | Filling The Hiring Gap – Episode 05

Filling the Hiring Gap is a five part series, presented by Mosaic Human Capital Solutions, a professional services company focused on delivering human resources to client companies. In addition to maintaining an HR consulting book of business, Mosaic Human Capital offers fractional HR services, turnkey startup support, and we are quite effective and active in the talent acquisition and retention space.

In the first episode of Filling the Hiring Gap, we shared a general overview. And then in the second episode, we covered applicant tracking systems, why they’re essential in this labor market, as well as how one goes about maximizing ATS capability to accomplish hiring goals. And in the third episode, we discussed candidate experience, why it is never been more important, as well as how to offer best in class candidate experience. And last episode, we discussed efficient workflows, and how to avoid the five pitfalls that tend to bottleneck efforts. Today’s episode is on key performance indicators, or as we all know them by, KPIs.

Key Performance Indicators (KPIs) are important to track in the human resources (HR) field, particularly in the context of talent acquisition and recruitment. Henry Martinez, Founder of Mosaic Human Capital and former Senior Vice President of Human Resources for Valero Energy Corporation and CST brands mentions that KPIs are critical for tracking and measuring the performance of HR activities and for making informed decisions about how to improve those activities. He also emphasizes the importance of focusing on a small number of key KPIs that are most relevant and meaningful to a particular organization, rather than trying to track every possible KPI. We will be discussing a selection of important KPIs in layman’s terms, with a focus on talent acquisition. Business owners and HR practitioners who are unfamiliar with KPIs may find this discussion helpful as a refresher or a starting point for defining important KPIs for their organization.

The Importance of Tracking Turnover as a KPI

As we all know, we are currently in a tight labor marker. Henry suggests that tracking turnover as a KPI is particularly important, as it can provide insight into larger retention issues within an organization. We recommend tracking turnover on a year-to-date and year-over-year basis, and suggest that analyzing the turnover rate among supervisors may be useful for identifying and addressing retention issues. Position management, or tracking the “reports to” relationship in HR systems, is also important as a way to gather data on turnover and identify potential problem areas. Overall, it’s important to have a clear understanding of turnover as a KPI in order to inform strategy and improve retention within an organization.

Tracking the Application-to-Hire Ratio for Improved Resource Planning

Luke Sesler, Director of Operations for Mosaic HCS states that following the turnover rate, as a business owner or HR professional, he thinks it’s important to also track the application-to-hire ratio. This is the number of applicants or candidates needed to fill a position, and it can vary depending on factors such as the hiring process, sourcing locations, and industry. Tracking this KPI is particularly useful for planning and goal-setting, as it can help someone understand how many candidates they need to focus on in order to fill a position and how much it may cost to advertise and recruit. It can also help identify any changes that need to be made to the job description or pay in order to increase applicant volume and make the hiring process more efficient. Overall, tracking the application-to-hire ratio is important for productivity and resource planning.

The Importance of Offer-to-Acceptance Ratio in Talent Acquisition

After considering the turnover rate and applicant-to-hire ratio, another critical KPI to consider is the offer-to-acceptance ratio. This refers to the number of verbal offers that are made and how many of them are accepted. In Henry Martinez’s career, he has typically seen an offer-to-acceptance ratio of 93-95% or higher, largely due to his experience at Valero Energy. However, it’s important to consider the reality of the offer-to-acceptance ratio for Mosaic HCS clients as well. This KPI is particularly relevant in today’s competitive labor market, as wages are a major factor for many job seekers. When considering raising wages, it’s important to proceed with caution, as it may significantly increase the cost of goods sold for a manufacturing company, for example. The offer-to-acceptance ratio can provide insight into the acceptance rate of previous offers and can be used to gauge the effectiveness of wage increases or other changes to the recruitment process. For example, if you increase wages in order to attract more applicants and improve the applicant-to-hire ratio, it’s important to track whether the offer-to-acceptance ratio improves as well. While it can be difficult to compare this KPI to other companies, it’s important for a company to know their own offer-to-acceptance ratio and use it as a key data point when evaluating and adjusting the talent acquisition process. It’s also worth noting that, in our experience, wages are typically a recruitment issue rather than a retention issue. If the offer-to-acceptance ratio is low, around 50-70%, it may be worth considering increasing wages to potentially improve the ratio. Ultimately, having a goal and a plan in mind will help you identify the necessary improvements and give you a good indication of the overall health of the process.

Time-to-Fill Is a Good But Tricky KPI to Track

Luke Sesler thinks that time-to-fill is an important KPI to track. It measures how long it takes from when an applicant applies for a job to their first day on the job. This KPI can help measure the decisiveness of hiring managers and HR teams and can also be broken down by department and specific job to identify areas for improvement. For example, if the maintenance department has a time-to-fill of a week, but operations has a time-to-fill of 30 days, it could be due to the hiring manager not making decisions fast enough, a lack of applicant volume, or a bottleneck in the process. Time-to-fill is a good indicator of the efficiency of the process and the performance of the overall recruiting operations.

Tracking and Analyzing the Cost-Per-Hire

We think it’s important to regularly analyze the total cost of procuring talent (cost-per-hire), whether it be every three to six months or once a year. This can include recruitment fees, placement fees, and other costs such as those associated with using third party payroll or job search platforms. It’s important to track these costs consistently year over year in order to measure the efficiency of the talent acquisition process. We suggest including these costs in the “cost of goods sold” category rather than overhead, as it allows for a clearer understanding of the cost of procuring talent and allows for flexibility in finding ways to improve the process and bring down the cost per hire.

We believe that once you have your total procurement costs for the year, it’s important to divide that number by the number of hires to get a cost per hire ratio. This ratio is strategic and represents discretionary spending that you can use to acquire talent. Ideally, you want this number to get lower year over year. However, it’s important to make sure that any decisions are not made in a vacuum and to understand why you are making a change and whether it has improved the process. At Mosaic, we try to avoid paralysis by analysis and focus on making small decisions, such as increasing the budget for job posting websites or improving SEO for our website. As long as the cost per hire is not higher than the previous year, we allow our HR team the flexibility to move money around and make improvements as needed to effectively acquire talent in today’s market.

We hope you found value in this Filling the Hiring Gap, our five part series designed to help your talent acquisition efforts. And because we want to continue to be a resource we plan to bring more instructional tools to you in the near future, so stay tuned. Please know we welcome your thoughts, questions and participation in these critical conversations. Stay well and we look forward to seeing you again soon.