More than ever before, HR departments must use their resources efficiently to demonstrate their performance with metrics and data. Recruiting and selection is one of the major metrics. To evaluate and identify needs for improvements, we need a clear understanding of the main KPIs (Key Performance Indicators) in recruiting. These are Cost-per hire, time-to-hire, and validity of selection. How can you optimize these crucial KPIs?
The annual quit rate in the US was overall over 20% in 2013 (Bureau of Labor Statistics). In total numbers, a company with 10,000 employees had to hire 2,000 new people in one year. In the same period, the average cost-per-hire was about $3,500, so we are talking about seven million in hiring costs for this company. Knowing this, it seems to be worth taking a closer look at the cost-per hire KPI.
Costs-per hire can be broken down in two distinct metrics: Recruitment costs and adaption costs.
- Costs of posting vacancies
- Costs of job interview processes and assessments
- Costs of external consultancies
- Continuing training
- Costs of productivity differences
A large portion of these costs is due to the recruiting process. Using video interviewing softwareis one option to reduce travel expenses for recruiters. It can also enhance interviewers’ productivity by enabling them to interview more candidates per interviewer (Find out more). Improving the decision quality by using better assessment procedures will also reduce the total costs for recruiting as it ensures matching between candidate and job, which results in lower employee turnover.
Time-to-hire describes the period of time until a new vacancy is filled. This metric is important, because vacancies are associated with high costs. Vacancies in sales cause lost revenues. Deadlines expire and projects get lost. In the US, the average time from the publication of a vacancy until it is filled is more than 7 weeks. Therefore, efficient hiring processes are crucial to keep the time-to-hire short. This includes using efficient technology and well-defined decision processes.
Quality of assessment procedures: Validity
Low costs-per-hire and a short time-to-hire periods are useless if the people who are hired perform below the requirements of the job and company. The metric that describes the relationship between tests scores and on the job performance is called validity.
The winners are: structured interviews, cognitive testes, work sample tests
There is a large variance of validity between selection procedures. The most valid ones are structured interviews, cognitive tests, and work sample tests. Using unstructured interviews as well as looking at job experiences alone are less effective in identifying suitable candidates. For example, considering handwriting as a way to assess a candidate’s fit is completely useless.
How to best combine those methods
The best results are achieved when two effective procedures are combined. This could be, for example, the use of structured video interviews to effectively preselect the best candidates to invite to an assessment center to find out the optimal fit for the job and company.
Do you want to enhance efficiency in your recruitment right from the beginning of your selection process? Video interviewing software can help you optimise your KPIs significantly providing a structured interview process. We would be happy to tell you more with a demonstration.