Recruiting Metrics

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ERE Webinar from 11/29/2007, hosted by Dr. John Sullivan

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  • Recruiting Metrics

    1. 1. 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]
    2. 2. Dr. Sullivan’s background <ul><li>Former Chief Talent Officer of Agilent Technologies , the HP spin-off with 43,000 employees </li></ul><ul><li>Selected among HR’s “Top 10 Leading Thinkers” </li></ul><ul><li>Fast Company Magazine called him the “Michael Jordan of Recruiting” </li></ul><ul><li>Staffing.org coined him “the father of HR Metrics” </li></ul><ul><li>SHRM called him “One of the industries most respected strategists” </li></ul><ul><li>He has written more than 700 articles and 7 books </li></ul><ul><li>Now Professor of Management at San Francisco State University’s School of Business </li></ul>
    3. 3. 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
    4. 4. Global reach of Dr. John Sullivan Work Published (43 Countries) Publicly Presented/Advised (23 Countries)
    5. 5. Dr. Sullivan’s current books <ul><li></li></ul>
    6. 6. Dr. Sullivan has a monthly column… on the “last page”
    7. 7. Topics for today <ul><li>Introduction </li></ul><ul><li>Tactical recruiting metrics </li></ul><ul><li>Strategic recruiting metrics </li></ul><ul><li>Metrics that demonstrate the business impact of recruiting </li></ul><ul><li>The 13 primary metrics for measuring the overall recruiting function </li></ul><ul><li>Your questions </li></ul>
    8. 8. <ul><li>Premise for today </li></ul><ul><li>The metrics you now use have not made you </li></ul><ul><li>rich, famous or given you a huge HR budget </li></ul><ul><li>It’s time to shift metric approaches </li></ul>
    9. 9. <ul><li>When selecting metrics > </li></ul>
    10. 10. You need a separate metric for… <ul><li>You need a metric for </li></ul><ul><li>Every major program goal… and for every improvement area – For example… Reduce turnover, cut costs, increase productivity </li></ul><ul><li>Every CFO/ management funding decision criteria – For example… an ROI of above 20%, a payback period of 18 months > </li></ul>
    11. 11. Top 10 CFO decision factors for HR projects <ul><li>Low initial investment </li></ul><ul><li>High ROI </li></ul><ul><li>High success rate/ low risk </li></ul><ul><li>Immediate start up </li></ul><ul><li>Short payback period </li></ul><ul><li>Provides a competitive advantage </li></ul><ul><li>Increased productivity (Profit per people dollar) </li></ul><ul><li>Accurate results metrics and counting </li></ul><ul><li>No new headcount </li></ul><ul><li>Consequences of failure are built in (Individual accountability) </li></ul>
    12. 12. Beware of “So what?” metrics <ul><li>Avoid </li></ul><ul><li>“ So what” or “that’s interesting” metrics </li></ul><ul><li>Example – It takes 3 days to get a req signed </li></ul><ul><li>Example – Your cost per hire is up 1% (Brain surgery?) </li></ul>
    13. 13. Beware of “So what?” metrics <ul><li>Instead focus on… </li></ul><ul><li>“ Action metrics”… that change the way people act </li></ul><ul><li>They elicit the response of… “holy cow,” I better do something right now ! </li></ul><ul><li>Example – Your new hire turnover rate is 99% within the first 3 months or > </li></ul>
    14. 14. Would these metrics get your CEO’s attention? (Rev per employee) <ul><li>Average $160,000 </li></ul><ul><li>IBM $260,102 </li></ul><ul><li>If you were IBM’s CEO Sam Palmisano, would you </li></ul><ul><li>be pleased? </li></ul>
    15. 15. Would Sam be pleased now? <ul><li>Average $160,000 </li></ul><ul><li>IBM $260,102 </li></ul><ul><li>HP $592,600 </li></ul><ul><li>Microsoft $699,016 </li></ul><ul><li>Dell $870,245 </li></ul><ul><li>Google $1,056,000 </li></ul><ul><li>Apple $1,169,594 </li></ul><ul><li>Nintendo $2,500,000 ( $440,000 ) </li></ul><ul><li>It takes 10X more employees at IBM… to produce the same revenue as Nintendo </li></ul>
    16. 16. <ul><li>There are two levels of metrics </li></ul><ul><li>1. Tactical </li></ul><ul><li>2. Strategic </li></ul>
    17. 17. The two levels of metrics <ul><li>“ Tactical Level” metrics (Not to be reported externally) </li></ul><ul><li>Efficiency/ diagnostic metrics (Cost metrics) </li></ul><ul><li>2. Recruiting results metrics (Number of hires) </li></ul><ul><li>3. “Cause” identification metrics (Why they accepted) </li></ul><ul><li>4. Satisfaction level metrics (Manager /applicant satisfaction) </li></ul>
    18. 18. <ul><li>Now shifting to strategic level metrics </li></ul><ul><li>that will be reported to senior executives </li></ul>
    19. 19. The 4 strategic level metrics <ul><li>Strategic Level </li></ul><ul><li>1. Predictive metrics - Alerts/ smoke detectors </li></ul><ul><li>Goal – Provide “heads up” warnings, so that managers can prevent or mitigate upcoming problems and take advantage of opportunities </li></ul><ul><li>Target - Operating managers </li></ul><ul><li>Example of an opportunity – Tiger Woods just resigned from his golf team… interested? </li></ul><ul><li>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% </li></ul>
    20. 20. The 4 strategic level metrics <ul><li>Strategic Level </li></ul><ul><li>2. “Other pocket” connect the “unintended consequences” metrics </li></ul><ul><li>Goal – To make sure that everyone knows the full unintended consequences of cost cutting </li></ul><ul><li>Target - Operating managers and the CFO </li></ul><ul><li>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! > </li></ul>
    21. 21. Another “other pocket” example <ul><li>Ex. 2 – Remind CFO’s of “other pocket” costs </li></ul><ul><li>Pocket #1 – Froze safety hiring (Saved $10K ) </li></ul><ul><li>But look at “other pocket” costs… </li></ul><ul><li>Pocket #2 – Accident rates doubled (+$400,000) </li></ul><ul><li>Pocket #3 – Insurance rates up 23% (+$187,000) </li></ul><ul><li>P. #4 – Turnover of safety ee’s +15% (+$89,000) </li></ul><ul><li>Other pocket costs = - $676,000 > </li></ul>
    22. 22. The 4 strategic level metrics <ul><li>Strategic Level </li></ul><ul><li>3. Split sample/ Dead bang proof </li></ul><ul><li>Goal – Unwavering proof that this recruiting program works (Does what it says it does) to get managers to pay attention to recruiting </li></ul><ul><li>Target - Operating managers and the CFO </li></ul><ul><li>Example – % of business performance improvement after the employee referral program was updated > </li></ul>
    23. 23. 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
    24. 24. The last strategic metric… <ul><li>Strategic Level </li></ul><ul><li>4. Revenue/ profit impact on the business </li></ul><ul><li>Goal - Direct proof (in dollars) that recruiting increases revenues/ profit </li></ul><ul><li>Target – CEO and senior managers </li></ul><ul><li>Example – Revenue increases and business impacts after hiring 100 new nurses using a new ATS system > </li></ul>
    25. 25. <ul><li>Example </li></ul><ul><li>Demonstrating 24 different business impacts in a recruiting example </li></ul>
    26. 26. Business case - ATS <ul><li>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) </li></ul><ul><li>Hiring 100 Nurses… at an average salary of 80k </li></ul><ul><li>The new ATS system costs $1,250,000 </li></ul>
    27. 27. 24 different recruiting business impacts <ul><li>New hires (NH) produce 5% more output ($5 mil) </li></ul><ul><li>NH reach minimum output faster (30 days/ $250k ) </li></ul><ul><li>NH have increased customer satisfaction ratings (12% / $100k ) </li></ul><ul><li>NH on job failure rate is 50% lower (Customer damage ($1 mil) and replacement costs (salary wasted/ $96k ) </li></ul><ul><li>NH stay 12% longer (COV $600k) </li></ul><ul><li>NH make 14% fewer errors (on patients/ $1.2 mil) </li></ul>
    28. 28. 24 different recruiting business impacts <ul><li>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) </li></ul><ul><li>The ATS system hires top performers from competitors (1% net swing in revenue / $2.1 mil ) </li></ul><ul><li>NH’s need less training (23 fewer hours/ $90k ) </li></ul><ul><li>NH training failure rate is 50% lower ($65k) </li></ul>
    29. 29. 24 different recruiting business impacts <ul><li>NH have new skills so they can do 20% of the tasks that were formerly done by more experienced nurses ($322k) </li></ul><ul><li>ATS system requires 6% less management time (before and after measured/ $64k ) </li></ul><ul><li>NH output increase means 5% of proposed new positions can be eliminated ( $240k) </li></ul><ul><li>OT & agency hiring costs reduced by 51% ( $3 mil) </li></ul>
    30. 30. 24 different recruiting business impacts <ul><li>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 ) </li></ul><ul><li>20% less generalist time spent on recruiting ( $9k) </li></ul><ul><li>NH system also works for exec nursing positions so 32% fewer exec searches are needed ( $340k) </li></ul>
    31. 31. 24 different recruiting business impacts <ul><li>NH system hires 30 days faster (Vacancy cost/ $670k) </li></ul><ul><li>When new hires exceed 25% of the population of a unit, the average patient stay is reduced by one day (Loss in revenue $92k) </li></ul><ul><li>NH sys cuts HR out of pocket costs per hire (by 2%/ ( $2k) ) </li></ul><ul><li>50% fewer discrimination complaints ( $72k) </li></ul>
    32. 32. 24 different recruiting business impacts <ul><li>The productivity of other nurses increases where % of NH’s exceeds 10% ( $82k) </li></ul><ul><li>Written up in Nurse mag. helps build our brand (product/ employment/ ( $122k) ) </li></ul><ul><li>Continuous learning /feedback element improves NH system impact 7% each year ( $1.7 mil) </li></ul>
    33. 33. How much was the total business impact? <ul><li>Total program cost = $1,251,000 </li></ul><ul><li>Total 1 st year $ impact = $24,232,000 </li></ul><ul><li>ROI – priceless! </li></ul>
    34. 34. <ul><li>Additional business impact recruiting metrics </li></ul>
    35. 35. A “before and after” metric that demonstrates the impact of diversity recruiting
    36. 36. Before and after – Illustrating diversity business impacts <ul><li>Emergency room team diversity impacts </li></ul><ul><li>A team of 10 (with no diversity) had two diverse people added (ADA, EEO, Gay, Age) </li></ul><ul><li>Within three months because of: </li></ul><ul><li>Better communications </li></ul><ul><li>Less fear </li></ul><ul><li>Increased trust and </li></ul><ul><li>Better understanding of patient needs </li></ul><ul><li>The following changes occurred > </li></ul>
    37. 37. 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
    38. 38. The negative revenue impact of… excessive position vacancies (Slow hiring)
    39. 39. The costs of a position vacancy for a radiologist <ul><li>Lost revenue from an vacant radiologist position </li></ul><ul><li>We can’t bill them out at $4,950 a day </li></ul><ul><li>We can’t do two voluntary operations at $20k </li></ul><ul><li>Operations take 5% longer because of understaffing, so we have 5% higher operational costs ($3,400) </li></ul><ul><li>The error rate of the overstressed radiology staff goes up 1.7% (Insurance, law suits, turnover) </li></ul><ul><li>Estimated dollar impact per day… $29,500 > </li></ul>
    40. 40. The costs of a position vacancy for a radiologist <ul><li>It takes us 43 days to fill a vacancy… </li></ul><ul><li>And 25 days of that is due to manager caused delays </li></ul><ul><li>Even if the hiring managers cut their slack hiring time by only 40%... </li></ul><ul><li>That would mean over $300,000 in increased revenue for the facility </li></ul>
    41. 41. <ul><li>Increasing your business impact </li></ul><ul><li>by shifting sources </li></ul>
    42. 42. 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
    43. 43. Get your managers attention with a correlation
    44. 44. 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%
    45. 45. Demonstrate that you make a direct profit
    46. 46. Great recruiters make a profit! HealthEast once operated a rent a radiologist service
    47. 47. <ul><li>Now let’s shift to… </li></ul><ul><li>The 13 metrics that I recommend </li></ul><ul><li>for the “over-all” recruiting function </li></ul>
    48. 48. The first 4 are quality of hire measures <ul><li>Performance of the hire (on the job performance ratings (or performance appraisal) after 6/12 mths) </li></ul><ul><li>New hire failure rate (% of new hires in key jobs had to be terminated or asked to leave) </li></ul><ul><li>Vol. turnover of new hires (the % that voluntarily quit within their first year or average tenure compared to a standard) </li></ul><ul><li>High level diversity hires (The percentage of hires in professional, managerial & key jobs that are diverse (Using a global definition)) </li></ul>
    49. 49. 13 primary recruiting metrics <ul><li>“ Need”/ Start dates met (the % of key positions filled by the managers designated “need” date) Santa </li></ul><ul><li>New hire “time to productivity” (Time it takes for new hires to meet the minimum output standard) </li></ul><ul><li>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) </li></ul>
    50. 50. 13 primary recruiting metrics <ul><li>Manager & new hire satisfaction (% of key managers, new hires in key jobs and applicants for key jobs that are satisfied with the hiring process) </li></ul><ul><li>Employment brand strength ( Differentiated name recognition among possible candidates) </li></ul>
    51. 51. 13 primary recruiting metrics <ul><li>Referral rate (What percentage of all hires come from referrals?) </li></ul><ul><li>Note: Referrals, besides producing top performers, they also indicate company pride & help extend your employment brand) </li></ul><ul><li>11. Quality sources used? (What % of applicants for key jobs came from top sources?) </li></ul>
    52. 52. 13 primary recruiting metrics <ul><li>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 </li></ul><ul><li>13. The total dollar impact of great recruiting on the business this year (Also it’s ROI compared to other OH and business functions) </li></ul>
    53. 53. <ul><li>Final steps </li></ul>
    54. 54. Final steps <ul><li>Partner with the CFO’s office </li></ul><ul><li>Let the CFO pick & present your metrics (3x5) </li></ul><ul><li>Get the help of the CFO and cost accounting to convert HR metrics into $ of revenue impacts </li></ul><ul><li>Hire interns to do your calculations (Do own Taxes?) </li></ul><ul><li>Use sampling tools & avoid “counting them all” </li></ul><ul><li>Use professional estimates… when the CFO will allow it </li></ul>
    55. 55. Don’t be subtle if you want managers to pay attention to metrics! <ul><li>Reward managers for great recruiting & retention </li></ul><ul><li>Integrate/ embed your key metrics into already existing business performance & financial reports </li></ul><ul><li>Provide more than history… include alerts and a “heads up” so that managers can act in time </li></ul><ul><li>Show that the very best managers utilize metrics </li></ul>
    56. 56. Did I make you think? How about some questions Hundreds of articles on all aspects of HR by Dr. Sullivan can be found at… www.drjohnsullivan.com

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