properly utilizing recruiting metrics for better performancerecruiting metrics for better...

Properly Utilizing Recruiting

Metrics For Better Performance

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Ronald Adler, Laurdan Associates, Inc.

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Metrics For Better Performance

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mail: P.O. Box 509 Eau Claire, WI 54702-0509 • telephone: 866-352-9539 • fax: 715-802-1131email: [email protected] • website: www.lorman.com • seminar id: 405375

Prepared By:Ronald Adler, Laurdan Associates, Inc.

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Presented by

Ronald Adler, President-CEO

Laurdan Associates, Inc.

© 2018 Laurdan Associates, Inc. All Rights Reserved. 1

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What is the impact of new technologies or methods having on your business?

Are these changes driving a need for business transformations, including in your in your recruitment, selection, and hiring process?

How can you use this data to improve recruitment, selection, and hiring performance?

How do you turn these data and measurements into actionable items and gain a buy-in from senior management?


An employee, a government auditor, a risk manager, the CFO, an investor, and your CEO want to talk to you. The employee indicates: A friend asked if he should work here and had

questions about benefits package. “What data should I give him?” The government auditor asks: Are your human resource management

recruitment and hiring practices in compliance with the law? What practices do you measure?

The risks manager asks: What are our organization’s recruitment, selection, and hiring practices? How do we measure them?

The CFO asks: How much should we budget for recruitment, selection, and hiring practices? What HR metrics should we use?

The investor asks: How do your recruitment, selection, and hiring practices affect the value of the company?

The CEO asks: What strategic human capital decisions should we make? Can we make better recruitment, selection, and hiring decisions?


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How effective is your organization’s use of HR measurements, HR metrics, and HR analytics in answering these questions?A. Very effectiveB. Moderately effective C. Slightly effectiveD. Not effectiveE. We do not use HR metrics


Does your organization usually connect its recruitment, selection, and hiring practices performance to corporate performance, i.e., does your organization demonstrate how applicants and employees contribute to your organization’s earnings per share?◦ Always◦ Sometimes◦ Rarely◦ Never◦ What’s our organization’s earning per share?


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As organizations recognize the value of their human capital, HR management is increasingly expected to provide quantitative and qualitative information about:◦ The value added by the organization’s human capital;◦ How human capital affects competitiveness;◦ How human capital helps the organization achieve its

strategic and business objectives; and◦ How to assess and manage human capital related risks.


From management’s perspective, HR now has to:1) Demonstrate its ability to support companywide initiatives2) Monetize human capital related activities and results3) Make the linkage between investments in human capital and

organizational results4) Identify and assess human capital related risks5) Provide human capital related information that allows the

organization to make business decisions6) Help link business decisions to the right results


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What head count do we need to support current activities? What head count will we need to support new initiatives?

What skills do we have in the current environment? What new skills will we need in the current-future

environment?

What human capital risks do we currently face? What human capital risks will we face in the future?


• Dr. John Sullivan notes that the reason few executives pay attention to HR is that most HR metrics “are simply not compelling.”

• He notes five “Differentiators of Great Metrics”– Formal planning–Compelling format–Visibility–Relevance– Emphasis on dollar impact


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1) Organizations measure what they treasure.

2) What gets measured, gets done … if the results of an activity are not measured, the activity is not being managed.

3) Metrics should have an owner.


4) To have value, metrics should have a target to be compared to.

5) To get attention, metrics should be mapped (linked) to financial statements.

6) Metrics should allow management to determine causes, make decisions, and predict future outcomes.


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1) How does your organization produce revenue? How do your recruitment, selection, and hiring practices impact revenue creation and profitability?

2) Are your recruitment, selection, and hiring practices aligned with your organization’s strategic and business goals and objectives?


3) Does your organization consider human capital key business measurements and metrics? What impact does the investment in human capital have on your organization’s success? What human capital factors have an effect on your organization’s scorecard?

4) What are your organization’s business imperatives, i.e., what distinguishes your organization in the marketplace?

How does human capital impact these imperatives?


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5) What are your organization’s risks and opportunities? What are your inherent, residual, and material risks? What is your risk appetite?

* How do your human capital activities impact these risks?* What are your human capital risk metrics

6) What human capital decisions do you want to influence?7) Can you connect the dots between recruitment, selection, and

hiring practices and decision making?8) What happens if your organization misses the target?


Dr. Sullivan notes HR-Business strategic metrics: 1) Revenue-per-employee (RPE): ◦ Formula: RPE = Company Revenue/Number of Employees◦ How much revenue does the average employee generate? ◦ Target: Revenue per employee = 3 times average salary

2) Return on investment (ROI): (Benefits-Costs) ÷ Costs◦ Formula: ROI = Total Profit/Total Cost of the Workforce◦ Target (Minimum) = 0.2 to 1


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3) Recruiting and Employer Branding Effectiveness◦ Formula: Number of employment applications received each

week◦ Formula: Number of new hires that come from employee

referrals

4) Top Performer Turnover◦ Formula: Top Performer Turnover = Number of Lost Top

Performers X Percent of Increased Performance from Top Performers


What do CEOs want from the organization’s recruitment, selection, and hiring practices ? ◦ Maximize shareholder value?◦ Increase revenue and profitability?◦ Make better hiring decisions?◦ Manage labor costs?◦ Increase productivity?◦ Reduce turnover?◦ Increase employee ROI?◦ Note: According to a survey by Staffing.org and the HR

Metrics Consortium, “new hire quality” was rated by C-Level executives as the most important HR performance metric.


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What do CFOs say they want?◦ How much should we budget for recruitment, selection, and

hiring practices? ◦ What metrics, including HR metrics, should we use?◦ What are the financial performance measures we should

consider?


How do your organization’s recruitment, selection, and hiring practices affect the value of the company? -- Investment in human capital-- Retention of talent-- Leadership depth-- Leadership quality-- Employee engagement-- Human capital responsiveness-- Alignment of human capital investment with business objectives


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How do your organization’s recruitment, selection, and hiring practices and activities affect business risks and opportunities?Key issues: Severity, incidence, velocity of risk-- Emphasis on material risks-- Level of compliance with employment laws and regulations-- Impact of your recruitment, selection, and hiring practices on critical talent and top performers-- Impact of your recruitment, selection, and hiring practices on human capital chain disruptions


Are your recruitment, selection, and hiring practices in compliance with the law? -- What is the level of compliance with federal, state, and local employment laws and regulations?-- What are your organization’s recruitment, selection, and hiring practices compliance behaviors?-- What is the enforcement record against your organization?-- What are your EEO-1 statistics?


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Key Planning Issues◦ Provide data such as human capital projections and costs

and how they affect the organization’s overall budgets.

◦ Develop and manage an HR budget that supports the organization’s recruitment, selection, and hiring practices, goals, objectives, and values.

◦ Establish metrics for workforce planning (for example: recruitment, selection, and hiring statistics and costs).

◦ Establish metrics of the methods to assess past and future staffing effectiveness (for example: costs per hire, selection ratios).


Key Planning Issues:◦ Develop the impact of compensation and benefits on

recruitment, selection, and hiring issues.

◦ Conduct compensation and benefits programs needs assessments to determine how recruitment, selection, and hiring practices are affected.

◦ Evaluate the effectiveness of employee relations programs through the use of metrics to determine their effect on recruitment, selection, and hiring practices.


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Total revenue◦ Operating revenue (OR)

Expenses◦ Operating expenses (OE)

Profits◦ Net operating profits (NOP)◦ NOP = OR- OE


Return on Investment (ROI): Compares the cost of an activity with its outcome. ROI = (Benefits – Costs) ÷ Costs

Return on Human Capital (RoHC): Quantifies the relationship of cash flow to the investment in human capital. Expressed as a percent, RoHC = net operating profit (NOP) ÷ the amount of human capital investment. NOTE: When NOP is greater than the cost of human capital, the organization is creating value.


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Leadership Depth◦ Percent of defined positions that have an identified path to future growth◦ Percent of open defined positions that are internally filled

Leadership Quality◦ Relevant comments from people that perform that job

Applicant/Employee Engagement◦ Relevant comments from people recruited and employed by your

organization Human Capital Discussions and Analysis◦ Narrative that provides a discussion of recruitment, selection, and hiring

issues◦ The identity of material risks or other material information that affects

recruitment, selection, and hiring results


Critical Metrics:◦ 1) Revenue per Employee = Annual Revenue ÷ Number of Employees Per a study by APQC: the annual revenue per employee (ARPE) for

the top 25% of organizations studied was $562,500; for the bottom 25% it was $188,889; the median was $322,835

The study also noted, when adding 30% for benefits, the median value of an employee’s job was five times APRE

◦ 2) Profit per Employee = Annual Revenue – Net Operating Expense ÷Number of Employees

◦ 3) Profit per Employee Costs = Revenue – Net Operating Expense ÷Total Pay and Benefits for All Employees


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RA1 Ronald Adler, 12/9/2018

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Benefits:◦ 1) Percent of Individual Benefits = Cost of Individual Benefits ÷ Total

Benefit Cost Measures the cost of each benefit provided: not necessarily a measure

of employee satisfaction or competitiveness◦ 2) Average Benefits Total Cost per Employee = Total Benefit Cost ÷

Number of employees

Compensation: ◦ 1) Executive Management Compensation Formula = Total Pay and

Benefits of Executives ÷ Total Pay and Benefits for All Employees◦ 2) Top Performers Compensation Formula = Total Pay and Benefits of

Top Performers ÷ Total Pay and Benefits for All Employees◦ 3) New Employee Compensation Formula = Total Pay and Benefits for

New Employees ÷ Total Pay and Benefits for All Employees


Diversity: This data is increasingly important as organization increasingly hire more women and minorities.◦ 1) OFCCP Diversity Hiring Ratio = Number of the Minority Group Members

Hired ÷ Total Number of Application◦ 2) Percent of Various Diverse Groups in Key Positions = The Average Number

of Diverse Group Employees in Key Positions ÷ The Average Total Number of Employees in Key Positions

◦ 3) Diversity Turnover Rate = The Number of Separated Diverse Employees ÷Total Number of Employees

◦ 4) For applicants: the total number of applicants for employment and the number of applicants who are known individuals with disabilities

◦ 5) For new hires: the total number of job openings, the number of jobs filled, and the number of individuals with disabilities hired

◦ 6) The total number of job openings and the number of jobs that are filled◦ 7) Bias in pay: compare the pay levels of women and minorities are hired


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Talent Management:◦ 1) Value of Top Performer = Estimated cost per day of operating without key

employer◦ 2) Key Employee Performance Measure = The comparison of the organization’s

effectiveness between the performance of key employees and regular employees◦ 3) Average Time for Employees to Become Effective = The period of time it

takes for new key and regular employees to become effective◦ 4) Cost of Turnover of Key Employees = The total cost associated with key

employee turnover


Recruiting:◦ 1) The number of visitors to your organization’s career website◦ 2) The percent of visitors who subsequently apply for a given job ◦ 3) The number of job interviews◦ 4) The time between interviews and job offers◦ 4) The interviews-to-offers conversion rates = The percent of job interviews that

resulted in offers◦ 5) The offers-to-acceptance conversion rate = The percent of job offers that

resulted in job acceptance◦ 6) The cost-per-application (CPA)


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Impact of the Federal-State Unemployment Rates:◦ 1) Current national rate = 3.7% in November 2018◦ 2) Individual state unemployment rate◦ 3) Individual state unemployment insurance experience rates◦ 4) Impact of state UI offices to identify potential applicants◦ 5) Number of employees that have Been laid off

Voluntarily quit Are working part-time


Skill Set Completion Rate = The percent of skill sets the applicant can perform satisfactorily

Note: The percent of high-potential employees you attract with important skill sets include:◦ Soft skills: interpersonal or people-oriented skills that relate to a person’s

personality and ability to work with others., e.g., critical thinking, problem solving, creativity skills, attentiveness to detail, and managing people skills

◦ Hard skills: quantifiable skills, e.g., computer programming, accounting, mathematics, or data analysis

◦ Transferable skills◦ CNC (computer numerical control) or CAD/CAM skills

Issue: Does your organization strictly adhere to certain hiring requirements or does it prioritize candidates’ competencies and potential?


19

Risk measures: “…strategic risk is essential to meeting revenue and earning targets.”◦ Inherent, residual, and material risks◦ Impact of HR risk management in the area and cost of RSH,

including D&O, Workers’ Compensation, EPLI, and other insurance policies◦ The frequency and severity of employment practices

liability claims ◦ The talent gap between employee skills and current and

future skill requirements


Quality of New Hire◦ How do you define exceptional performance?◦ Start with employee sourcing: You want to get a better — not

bigger — talent pool. Develop a cost-effective strategy where the quality of the talent pool is maximized.

◦ Identify key sourcing components, including the cost of each channel, its yield, the number of recruiters required, typical cycle times, and the performance data of employees hired.

◦ Ensure applicant fit. Applicants should be provided with realistic and accurate job descriptions, realistic company and work-life descriptions, and clear information about job expectations.


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Quality of New Hire: Measurements and Metrics◦ Surveys of line managers about the quality of the information provided◦ Surveys of line managers about their ability to evaluate applicants◦ Review cycle time/cost per applicant◦ Surveys of line managers about the quality of applicants◦ Surveys of line managers about their satisfaction with the recruitment

process◦ Surveys of line managers about their satisfaction with the new hires◦ Surveys of line managers and new hires about their level of satisfaction

at 30 days, 90 days, 3 months, 6 months, 1 year. How does this compare with their expectations?

◦ Calculate the turnover rate of new hires


Quality of New Hire: Measurements and Metrics◦ Calculate new hire preparation and preparedness◦ Conduct regular on-boarding check-ins with managers and new hires to

ensure employees are fully engaged

HR Quality Measurements◦ Conduct subjective assessments of manager and performance reviews◦ Determine if — and which — qualifications were met◦ Conduct an impact analysis on key issues: revenue, sales volume,

profitability, percent or projects completed, customer satisfaction scores ◦ Review Top performers employees’ retention rates compared to others


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Create an HR-business metrics team Identify and catalog human capital metrics Determine how these human capital metrics are currently

being used; what message do they convey about what the organization considers important; and what consequences –intended or otherwise – have resulted from their use

Ensure that currently used or proposed human capital metrics are aligned with current and FUTURE organizational objectives◦ Develop organizational and unit benchmarks


Ronald Adler is president-CEO of Laurdan Associates, Inc., an HR management consulting firm specializing in HR audits, employment practices liability risk assessments, HR metrics, strategic HR, and UI cost management. Mr. Adler is the developer of ELLA®, the Employment-Labor Law Audit™, the nation’s leading HR auditing tool—now in the tenth edition. Mr. Adler teaches a graduate course at Villanova University on HR Auditing.

Mr. Adler has served as a subject matter expert to SHRM on HR metrics and served on a national taskforce developing professional standards in human capital measurements.

For more information, contact: Mr. Ronald Adler, Laurdan Associates, Inc. 2305 Glenmore Terrace, Rockville, MD 20850, [email protected]


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