Let us start with a story. This story is about Josh. Josh owns, umm, an IT consulting firm. The ones which tell you what you are doing wrong with your existing software ecosystem and how can you do much better.
Josh worked hard for years, saved money, built up capital, quit his job, and invested it all in his dream. He rented a nice office in the nice part of the city and proudly cut the ribbon with all his friends and family. But Josh did not get the customers he was hoping for.
He has a person for everything – marketing, branding, sales, front office, everything. But his clients are disappearing. His team is not meeting the schedules and deadlines. And it is not that they are lazy, no. Everyone is working hard but there are no results. He even replaced some of the employees who, he thought, were underperforming. But no improvement.
What is happening? Josh is unable to understand how could these “experts” not bring in enough revenue for the business. And why is that? What is it that Josh is doing wrong?
As his funds start to move toward zero, his clients start to leave him for not meeting promised timelines, he had an epiphany. He realized it, the secret code to success, the roadblock to his ‘startup of the year award’. He did not think about one thing that matters the most – hiring the right people.
More precisely, he did not think about tracking recruitment metrics for making better hiring decisions.
Here's what you will learn
It is a difficult road for you
In their paper titled The Impact of Recruitment and Selection Criteria on Organizational Performance, Ekwoaba et al. lay down the basics of recruitment & selection and its importance in any business.
“Recruitment and selection form a major part of an organization’s overall resourcing strategies, which identifies and secures people needed for an organization to survive and succeed in the short to medium-term.”
They further break it down to the core level, explaining what exactly is the purpose of recruitment.
“The basic purpose of recruitment is to create a pool of suitably qualified candidates to enable the selection of the best candidates for the organization, by attracting more and more employees to apply in the organization whereas the basic purpose of the selection process is to choose the right candidate to fill the various positions in the organization.”
Finding the right talent is as essential as running the organization
Running an SME is hard. And finding the right people for your team is even harder. But it is important. Perhaps the survival of your business stands on the shoulders of your ability to hire the right people.
“45% of all service-based SMEs go bust in their first four years.”Statistic Brain Research Institute
Many studies show that the top talent generates 4x more output than an average employee. This is true for almost all businesses. Even internal audits show that only a small percentage of executives are responsible for the major revenue of the business. In recent years, the most noticeable change in the business world is the increasing focus on human resources.
So, when people like Josh start losing business and are unable to judge how to hire a good employee who is the best fit for the business, what do they do? They panic and hire a costly consultant who sweet talks with words like analytics, ROI, talent, sales, efficiency, big data, etc.
Josh cannot afford this. So, he decides to do something about it by himself. He sits in his cabin and thinks about his options:
- Hire expensive human resources who will drive sales? Sure, and he can pay their salary by auctioning his body organs on the dark web.
- Fire more employees who are not performing? Why not, and hope that the remaining two people can make you the next Oracle.
- Cut off employee benefits? Will not work because he has pre-paid most of them for the entire term of one financial year.
So, what can Josh do? Be a good captain and sink with his ship?
No, that is not the solution. He did not start on this path to become a failure. After talking to other entrepreneurs, friends, and scouring the internet, he realized what he had to do: track and improve his recruitment metrics to attract the right talent for his business.
Wow, very nice. But how will he do that?
Here is what Laszlo Bock, Co-founder and CEO of Humu, an action management platform, and author of Work Rules!: Insights from Inside Google That Will Transform How You Live and Lead, says about recruitment:
“Hiring is the most important people function you have, and most of us aren’t as good at it as we think. Refocusing your resources on hiring better will have a higher return than almost any training program you can develop.”
Experts periodically stress that human capital is the initiator of the business funnel that concludes with profits and revenue. Over the years, several studies show that there is a correlation between hiring the right talent and business growth.
Yet, recruiters and business owners are turning the war on talent instead of war for talent.
Start believing one thing – hiring the right talent means more wealth. Developing people, enhancing their competency, and streamlining the process throughout the business is the essence of human resource management. Your HR executives are not limited to settling employee disputes and tracking who came in late and issue warning letters.
And the key to growth lies in tracking and improving recruitment metrics.
But what exactly are recruitment metrics?
Recruitment metrics are a set of parameters that tell you the effectiveness of your recruitment funnel and your ability to attract and retain top talent in the organization.
Studies show that recruitment and selection criteria have a significant effect on an organization’s efficiency. The more objective we build the recruitment and selection criteria, the better is the organization’s efficiency.
Josh had hired a recruitment agency to find, interview, and recruit people on his behalf based on his business needs and the job description. But most candidates they sent his way were incompetent, unaligned, or not at all enthusiastic.
If you were Josh, what would you do? Continue hiring people from that agency hoping one fine day they will send a unicorn your way? No. You will terminate their contract and start looking for a new agency or hire an in-house recruiter. This is called having a problem with the “source of hire”. And you just managed a recruitment metric.
Subconsciously, most recruiters and business leaders already track and micro-manage recruitment metrics. But having a clearly defined checklist and its impact will help you understand this concept better and align your recruitment strategies better with the business objectives.
Some of the recruitment metrics that are in use for more than five decades include rates of turnover, job survival, and job performance along with organizational issues such as referrals by current personnel, in-house job postings, and the rehiring of former employees. But they are insufficient now. And it can be overwhelming for anyone to keep track of all these metrics, right? Instead, start with the top of the chain – the key recruitment metrics that you should keep your eye on.
Why should you care about recruitment metrics?
Most SMB owners think that getting more money is the key to business growth. There is no need to retain my employees. If they want to leave, let them because I can always hire a new one to replace him/her.
Even today, many businesses are not looking for the most cost-effective method of taking their business exponentially higher – to recruit and select high-quality employees at every business stage.
Recruitment metrics like the cost of hire, quality of hire, time to hire, etc. give you an overview of where the problem lies and which funnel processes you need to redefine to attract better candidates, the ones who will take you from a small business to a Fortune 500 company.
Here is an overview of why recruitment metrics are important for you and why you should care about them:
1. Makes you understand what recruitment is
Hiring involves minimal effort, no regard for business goals, and definitely no concern if the candidate is a fit for the business or not. In essence, hiring is a no brainer activity that only focuses on one thing – to fill a vacancy by any means.
Recruitment, on the other hand, is a process. You identify the right people and attract them to apply to work with you. You do not care if it is someone from within or outside the organization, you just want to make sure that this is the perfect person for this job.
Recruitment is not a lone activity. It is accompanied by selection. Selection is when you identify the candidates of the right caliber.
2. Sets up your brand value
No matter how hard you try, humans always find a way to become flawed. This is why most recruitment and selection processes have elements of subjective judgment inherent in them. This also makes recruiters and business owners biased towards the candidates.
But you can use these metrics to treat your job applicants professionally. That means honoring their time, decreasing the friction in the application process, and dealing with them positively at the time of the interview. This way, even if they are unsuccessful, they will develop a positive outlook for your organization, indirectly catalyzing brand equity.
3. Employees influence organizational life
Expecting your employees to make a great work culture without assessing their fit to the business is like asking a blind person to make a reproduction of the Mona Lisa. Although most people will applaud the blind man for trying, the result against the invested time and resources will be nil.
Thousands of entrepreneurs and business owners say in unison that every time they hire the right person, it positively impacts the organizational life and breathes in culture with positivity. At the same time, making a poor hiring decision results in damaging the efforts faster than they are created.
4. Your employees are the reason for your success
Hiring the right people means they are better employees. Better employees mean they are directly responsible for the success of your business. By the same token, hiring underachieving employees means your organization is now set for failure.
In his thesis Recruitment and selection practices of organizations: A case study of HFC Bank (GH) Ltd., author Edward Djabatey says:
“Hiring the wrong people or failing to anticipate fluctuations in hiring needs can be costly, it is important that conscious efforts are put into human resource planning.”
After this, where do business owners like Josh go? First, it is important to know which recruitment metrics are important for your business and prioritize their impact directly on your business outcomes.
For your business to build a competitive advantage and sustain it in the long run, there is no other way around proper staffing. Josh realized that recruitment & selection is important and an ongoing process for his business. Your organization’s human resource policies and practices will represent the important forces for shaping employee behavior and attitude which make or break the business.
And how does the story of Josh ends? With a smile on his face and relaxed in his office chair knowing that he is now tracking his recruitment metrics and improving them gradually to attract the right kind of employees and serving his clients, one employee at a time.