How to use success ratios to produce recruitment KPI’s that WILL work.
Following on from my blog “why bad managers give recruitment KPI’s a bad reputation”, this blog explains how to work out KPI activities targets using efficiencies bespoke to each recruiter. I have always been an advocate of KPI’s being tailored individually. Broad brush targets don’t play to recruiter’s strengths, react to commercial changes on the recruiters desk and can demotivate recruiters who don’t buy in to standard KPI’s.
How to calculate efficiencies.
It may be a little more time consuming, however I advocate getting the recruiters to work out their own efficiencies to help them understand how their activity targets are bespoke to them, getting more buy in and moving them to self-management.
The basis for your ratios is historical activity and results, I’ve found the most recent 3 months generally the best period to work from, however this can vary dependent on how fast the recruitment process works in the recruiters market. If the process is quick and fee’s small, then 1 month can be enough. However if the general gestation period from interview to placement is beyond 10 weeks, and fee’s larger you probably need longer. And note I mention most recent, as skills and markets change, so will the efficiencies, so review them regularly to keep them relevant.
The basis for the activity calculations are the recruiter’s financial efficiencies.
- New Candidates
- Candidate spec out
Each KPI efficiency is £’s placed / activity results over the chosen period e.g. 3 months.
Over the last 3 months the recruiter has placed £60k, arranged 60 interviews, found a total of 150 new candidates and made 200 candidate spec out calls.
Interviews – £60k / 60 = £1000 per interview
New candidates – £60k / 150 = £400 per new candidate
Candidate spec out – £60k / 200 = £300 per candidate spec out call
You may at this point also get the recruiter to work out how much each KPI will earn them in their commission, making this even more relevant. I’ve found this can be a eureka moment for a recruiter seeing how much each KPI is actually worth to them. Knowing they get for example £300 for every interview they arrange can make the whole business of making money using KPI’s really make sense.
To turn these financial efficiencies into the activity target for the month discuss and agree the revenue target for the month. Then ask the recruiter to simply use these efficiencies to calculate the activity targets.
You agree a target of £24k for the month
Interviews – £24k / the £1000 efficiency = 24 interviews
New Candidates – £24k / the £400 efficiency = 60 new candidates
Candidate spec out call – £24k / the £300 efficiency = 80 candidate spec out calls
The recruiter now has a proven plan to success, they should now fully understand and buy into these numbers, which if hit WILL deliver the revenue target.
If you are going to use this style for the first time, start with asking the recruiter how much they want to bill in the next 12 months, or how much they want to earn. Then explain you can show them a new way of working which works out exactly what number of interviews they need arrange to achieve that number and what number of activities to get those interviews. All they need to do is hit the numbers you’ll work through with them and they WILL hit their target and earn what they want. This can be hugely empowering stuff, and can turn average recruiters into super billers.
I do want to mention at this point I also see great value in sometimes using an alternate technique for calculating the activity numbers of ratios per activity using the results of that activity that aren’t measured using £’s.
If the recruiter has secured some retained work, which is not typical to their desk, the £’s per headhunt call calculated historically is being measured in very different circumstances. So in this instance, if you can calculate how many candidates you need to find for a retained search short list, calculate the historical success of Headhunt calls to candidate and you can work out the new KPI number for headhunt calls while they’re working on the retained assignments.
Finally, I do advocate adding in a “measurable initiative” to the KPI reviews. These are value adding agreed actions that don’t fit into your normal KPI’s. For example, arranging 8 meetings for an upcoming trade show.
Measures and KPI’s are for all people in your business.
You can’t manage what you can’t measure, so for those staff you don’t feel you can KPI you need at least to measure what they do. Some business leaders have raised their eyebrows when I mention measures for admin or support staff, but how you can see how productive they’re being if you don’t measure what they do? Plus their numbers are often good indicators for your business. For example, how many CV’s are being added to the system is a very useful number to know about your business.
Some owner manager’s measure and KPI their staff but not themselves, or the business. Surely these are the most important numbers? The placed, pipeline and invoiced figures must be measured to judge and target the progress of your business and manage cash flow. If you’re looking to grow your staff numbers this is just as easy to KPI using ratios as recruiters KPI’s. What’s the ratio of successful hires lasting past 9 months? What is your current attrition rate? How many interviews does it take to make a hire? With these ratios you can work back from your staff growth target to how many recruiters you need to hire each month, how many interviews it’ll take to hit the numbers of hires, and even better target the routes you use to find recruiters to interview.
I will be writing another blog for owner managers on how to use business measure effectively to manage and grow your business.
I hope with this blog I’ve changed some attitudes towards KPI’s and importantly helped them to be used more effectively and in the process reduced their bad press!
Written by Rhys Jones Managing Director – Davidson Gray.
Rhys sold out of his previous recruitment businesses in 2012 to focus solely on helping recruiters set up and build recruitment businesses. Follow Rhys on LinkedIn or contact him direct for help with your start-up recruitment business or for coaching to grow an existing one.