Recruiting Metrics

The Top Metrics for Demonstrating the Impact of the Recruiting Function ERE Webinar Nov 29, 2007 © Dr. John Sullivan Professor, Author and Advisor to Management www.drjohnsullivan.com Dr John Sullivan [email_address]

Dr. Sullivan’s background

Former Chief Talent Officer of Agilent Technologies , the HP spin-off with 43,000 employees

Selected among HR’s “Top 10 Leading Thinkers”

Fast Company Magazine called him the “Michael Jordan of Recruiting”

Staffing.org coined him “the father of HR Metrics”

SHRM called him “One of the industries most respected strategists”

He has written more than 700 articles and 7 books

Now Professor of Management at San Francisco State University’s School of Business

BMW HP Starbucks Siemens Cisco Baxter Intel Oracle Pfizer Sprint World Bank Whirlpool Mc Donald’s Corp. Phillips Med Abbott Charles Schwab Mc Kinsey & Co J&J AOL Sun Macy’s Microsoft JP Morgan Dow Corning Deloitte Consulting Marriott NIKE Principal Financial Dell MGM Grand Chevron/Texaco Morgan Stanley SC Johnson B of A Schering Plough Yahoo Texas Instruments Coors Nestle Stanford Hospital General Mills Valero Energy GE PepsiCo Google

Global reach of Dr. John Sullivan Work Published (43 Countries) Publicly Presented/Advised (23 Countries)

Dr. Sullivan’s current books

Dr. Sullivan has a monthly column… on the “last page”

Topics for today

Introduction

Tactical recruiting metrics

Strategic recruiting metrics

Metrics that demonstrate the business impact of recruiting

The 13 primary metrics for measuring the overall recruiting function

Your questions

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

When selecting metrics >

You need a separate metric for…

You need a metric for

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

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

Top 10 CFO decision factors for HR projects

Low initial investment

High ROI

High success rate/ low risk

Immediate start up

Short payback period

Provides a competitive advantage

Increased productivity (Profit per people dollar)

Accurate results metrics and counting

No new headcount

Consequences of failure are built in (Individual accountability)

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?)

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 >

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

Average $160,000

IBM $260,102

If you were IBM’s CEO Sam Palmisano, would you

be pleased?

Would Sam be pleased now?

Average $160,000

IBM $260,102

HP $592,600

Microsoft $699,016

Dell $870,245

Google $1,056,000

Apple $1,169,594

Nintendo $2,500,000 ( $440,000 )

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

There are two levels of metrics

1. Tactical

2. Strategic

The two levels of metrics

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

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)

Now shifting to strategic level metrics

that will be reported to senior executives

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 managers

Example 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%

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! >

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 >

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 >

Split sample between 2 sales groups Sales group “A” % of sales goals met 50 10 After referral update 100 % of sales goals met Before referral update… 70% of sales goals met Sales A after one year “ Control group” a constant 85% Sales group “B” 100% Before After

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 >

Example

Demonstrating 24 different business impacts in a recruiting example

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

24 different recruiting business impacts

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

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

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

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

NH stay 12% longer (COV $600k)

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

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)

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

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

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

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

ATS system requires 6% less management time (before and after measured/ $64k )

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

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

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 )

20% less generalist time spent on recruiting ( $9k)

NH system also works for exec nursing positions so 32% fewer exec searches are needed ( $340k)

NH system hires 30 days faster (Vacancy cost/ $670k)

When new hires exceed 25% of the population of a unit, the average patient stay is reduced by one day (Loss in revenue $92k)

NH sys cuts HR out of pocket costs per hire (by 2%/ ( $2k) )

50% fewer discrimination complaints ( $72k)

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

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

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

How much was the total business impact?

Total program cost = $1,251,000

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

ROI – priceless!

Additional business impact recruiting metrics

A “before and after” metric that demonstrates the impact of diversity recruiting

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 communications

Less fear

Increased trust and

Better understanding of patient needs

The following changes occurred >

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

The negative revenue impact of… excessive position vacancies (Slow hiring)

The costs of a position vacancy for a radiologist

Lost revenue from an vacant radiologist position

We can’t bill them out at $4,950 a day

We can’t do two voluntary operations at $20k

Operations 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 >

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

Increasing your business impact

by shifting sources

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

Get your managers attention with a correlation

Correlation between hiring speed and attaining a 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%

Demonstrate that you make a direct profit

Great recruiters make a profit! HealthEast once operated a rent a radiologist service

Now let’s shift to…

The 13 metrics that I recommend

for the “over-all” recruiting function

The first 4 are quality of hire measures

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

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

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

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

13 primary recruiting metrics

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

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

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)

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

Employment brand strength ( Differentiated name recognition among possible candidates)

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?)

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