Oddly enough it’s common for recruiters who progress beyond running a desk to stop using KPI’s. It’s the same for a lot of SME business Owner / Managers who not only don’t KPI themselves, they don’t even track the businesses progress beyond placed and invoiced figures. This is easily done in the early days of growing your business, as the owner makes the gradual transition from running a desk to running the business, but remember “you can’t manage what you don’t measure” and if you aren’t keeping track of your business metrics you can’t possibly manage your business effectively.
I will be writing a follow up blog on how to accurately predict your cash flow four months ahead, the basis of this is measuring two key numbers, interviews and pipeline. You can’t effect change after the event, so Owner / Managers should seek to know the state of their business as early as possible to make positive changes before a cash flow situation occurs. If you work backwards to where the money comes from you know what to measure. Typically in a recruitment business the money flow is this:-
Interviews – pipeline – placed – invoice – cash
If you only look at placed, your view of the business is probably a couple of months out of date.
The above should be tied to your annual forecast and broken down into months. KPI’s work well for the above but are far more effective when used to implement your business plan.
The Business Plan
A lot of SME’s don’t have business plans as such, just a monetary target to hit by the end of the year. If you’ve read any of my series on How to Write a Start Up Business Plan, you’ll know I am a huge fan of keeping a plan simple, but you do need a plan that extends beyond just a placement forecast.
How to write a business plan for an SME is far too big a subject to go into now, however when coaching an Owner / Manager who only has a monetary target, I start with “how” are you going to hit your plan. Even adding increased staff numbers into your plan is a good start, but then adding the “how” are you going to staff up, and challenging that strategy shows it isn’t quite as simple as it seems.
“Add 12 heads who bill £10k a month and we’re there”
What about those staff already in your business that leave? Every business has staff attrition, however small. What about those new recruits that don’t work out?
If you just add these two considerations to your staffing up plan you can quite easily double that recruit number. Therefore we go back to “how” again. If you want to hire 24 staff in the next year, that’s not a small number for an SME, so what strategy do you have? This is where your own KPI’s help a lot.
Find the number of interviews you’ve conducted in the last 3 to 6 months and divide that by the number of hires. Just like the recruiter KPI’s you then have a success ratio to use, say 6 interviews to a hire, which then means 12 interviews a month to get the 2 hires a month needed. Applying this ratio to the number of hires you want often tells you you’ll need to find more recruiters to hire than you thought. That’s why using ratios to work out the required activity numbers is so important. You can reduce your first staff growth plan, or put strategy in place to hit this higher than expected interview target. Either way it sets you up to hit your plan.
Having this new KPI of 12 interviews helps, but if it is a big increase in the historical numbers you’ve achieved you will need to put some work into adding more substance into your staff attraction strategy. What will give you a far greater chance of hitting your interview KPI is to set targets for each of your staff attraction methods, in the same way a recruiter may have numbers for their methods to find their candidates. If you add a new method of attracting staff I highly recommend that it definitely has a clear target, usually if an activity is new it won’t get done because it’s not working habit.
It’s at this point I can get resistance from the Owner / Manager to set themselves targets or KPI’s. Often one of the motivations to owning your own business is to be your own boss, and not have KPI’s or targets. If I’m working with an Owner / Manager with these reservations I’ll do a coaching session on why they want to grow the business, their real motivations and help them decide if they want their success enough to overcome these barriers. This can involve addressing issues like being concerned their staff might think less of them for having targets, feeling they now have a “job” again or not wanting to feel they need to “report” figures to anyone. These are more common than you might think, but it’s part of growing as a business owner to get past these feelings to be the person that set up and grew a highly respected and successful recruitment company.
If the Owner / Manager does have a more expanded plan beyond simply total invoices, the aspects of the plan need to clarify how you will know when these parts of the strategy have been achieved or not. Where possible then broken down into measurables that can be targeted.
“Raise the businesses social media visibility”
How will you measure this and how will you know you’ve achieved it?
If your strategy wants more Twitter visibility then how many followers do you want, what does that equate to as an increase each month and how is your business going to achieve this? From this you may target how many Twitter posts you want and a plan to affect this increase.
You can build your SME to a certain level with no business plan, metrics or KPI’s, but it will hit a ceiling, or worse start to go backwards. The old adage “if you’re not going forward in business you’re going backwards” is truer today than ever with the speed the recruitment industry is evolving. Recruitment has no barrier to entry so with new hungry business owners starting up every day you can’t become too content with your current success, which is why you need to use some business planning.
A mantra we used during my work at Cranfield Business School on their Business Growth Programme was “the quality of the plan won’t matter if you don’t execute your plan”, trust me, you will have significantly more chance of not only implementing your plan but also achieving your business goals if you break it down into measures and targets.
An extremely common issue for SME Owner / Managers not achieving their plan is relying on their own self-discipline to stick to it. I’ve grown a number of successful recruitment businesses, I know first-hand how extremely easy it is to get dragged into the day to day running of the business and neglecting the business plan. In my blog “why all businesses need a business coach for growth” I explain why having a Non Exec or business coach can help enormously. If you have a peer to report your numbers to on a regular basis you’ll have a much better chance of focusing on them, hitting them and achieving your plan. If you are in a partnership and have monthly meetings to report your respective numbers this can work too. However, in my experience, some of this from when I was in a partnership, it often doesn’t. If you are both working in the business it’s too easy to put these meetings off, plus the familiarity you have with each other can reduce the feeling of accountability.
You can ask a trusted business contact to act as this peer who you meet on a regular basis and report your figures. Keeping to your plan and your KPI’s does take a lot of self-discipline especially when you’re growing a recruitment business, so make it as easy as you can for yourself and find a method that works for you.
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.