Cost Per Hire, Time to Fill, and Quality of Hire - Pick Two and Call Me in the Morning...

The latest article is up at Workforce Recruiting entitled "Evaluating Recruiting Effectiveness" and it's pretty much what you would expect.  Everyone says recruiting and talent acquisition is core to the business, but everyone's pointing to a lack of funding, a need for better technology and stressed recruiters as problems to overcome.

Welcome to recruiting in America, and to running a business.

Here's the secret, and it's like anything else in life - you can get new hires 1) good and fast, 2) good and cheap, or 3) fast and cheap.  The problem is that you can't get all three factors (high quality, low average time to fill and low cost per hire) consistently over time. 

It's Economics 101.  Without question, you can manage the factors you can control, become uber- organized, plan/prepare and make technology work for you.  Once you do that, further improvements require you to choose the two most important factors (quality, time or money) and live with the results of the one you didn't choose.

Let's examine your choices:

1. You want high quality - So does everyone else.  Once you make the smart jump to quality, you have to choose whether you are going to be patient with your recruiting/HR team and live with an increased time to hire (which keeps your costs low), or you are going to spend more on internal or external recruiting resources (which will drop your time to fill).

2. You want a quick time to fill - Great!  Pay more related for increased internal or external recruiting resources or accept that you're not always going to get the highest quality if you force your internal recruiting team to fill it within 30 days.

3. You want to control your costs - Not a problem!  Just accept the fact that you will have lower quality over time (if you want low costs and a quick time to fill) or a higher time to fill (if you want quality as well as controllable expenses).

Again, a strong Director of Recruiting or competent HR pro can make improvements to all three factors by developing an efficient department that makes good use of talent/technology and is active in the talent game.  Once they develop an efficient department, however, it's a market-driven game.  You can choose two of the three factors outlined above, but you can't have all three.

It's probably one of the best examples of the Talent game resembling a factory.  Once you streamline your department and get the natural improvements in all three areas, be a business partner and educate your internal customers on the trade-offs, and let them help choose what's most important to them. 

Most will choose quality first, then be faced with the toughest choice of all in the talent game.  Do I want it early or cheap?

Good luck with that one!    

Comments

[Tim Ruef]

Choosing metrics to evaluate hiring success has always been challenging. Cost per hire, time to hire, percentage of cost to compensation, and quality of hire have all been employed. The first three are relatively easy to work with and allow us to "fill in the blanks" when we are reporting our department's success from a cost point of view. Bear in mind, however that no linear relationship exist between these three and quality. Allowing more time to hire does not in any way guarantee a "good hire." If the internal or external recruiters are sub par, they will be unable to attract passive, "A Level" candidates, no matter how much time is allocated to the hiring process. Furthermore, a focus on quantitative measures such as cost per hire completely misses the point relalive to the objective of hiring and selection. It should be about quality, and only about quality. The problem is, how do staffing departments report on quality and thus justify their existence in the corporate culture. Some have suggested that the hiring manager do an evaluation of the new hire at 6 or 12 months,while others espouse the value of an evaluation immediately post hire to assess how well the job specs have been captured in the new candidate. Others look for academic qualifications as a measure of quality. At our firm we look at contribution over time, and the best way to assess that is promotion. If a candidate is promoted at least once in a 24 month period, it can be assumed that the new manager has demonstrated added value to the hiring manager and his or her team. The more the public acknowledgements and promotions the more that the new manager or executive is seen to be contributiong to botton line company success. The ability to do this is the only reason we should be hiring anybody.

[James Hayton]

Whichever ones you pick, you will still want to have a clear picture of the returns as well as the costs. Do you guys (talent peep's) find much evidence of employers actually estimating the returns on their investments in talent acquisition/management?

[James Hayton]

Whichever ones you pick, you will still want to have a clear picture of the returns as well as the costs. Do you guys (talent peep's) find much evidence of employers actually estimating the returns on their investments in talent acquisition/management?

[James Hayton]

Whichever ones you pick, you will still want to have a clear picture of the returns as well as the costs. Do you guys (talent peep's) find much evidence of employers actually estimating the returns on their investments in talent acquisition/management?

[James Hayton]

Whichever ones you pick, you will still want to have a clear picture of the returns as well as the costs. Do you guys (talent peep's) find much evidence of employers actually estimating the returns on their investments in talent acquisition/management?

[Todd Rogers]

James.
I personally find employers focusing on objective (and often irrelevant) metrics most often. If I'm dealing with someone who is in the executive or investor quadrant, it's a whole different story, though. For example, in sales, I only work with and place sales professionals who can demonstrate - in writing - their pattern of success (among other things). They must be able to verify that they can sell...period. When I get a big muscle sales-god, I can only chuckle at hiring managers who look at the fee as opposed to a proven return that can be captured by hiring a Tom Brady/Peyton Manning sales person. I see, in my experience, a far heavier focus on cost management than potential return.

[Joshua Letourneau]

Kris, good post. I'm actually working on one given some observations about the one subjective metric of the 3: QOH.

I'll be back soon, but here's a teaser: QOH is normally not really predictive of future performance. Rather, it's indicative of "QOH on Day 1", or "QOH as determined by fit to profile" . . .

How many companies correlate performance ratings to initial QOH ratings? Frankly, I don't know any. In fact, what I see is a 'Post-Hire Survey' . . . and guess what? The performance ratings might be poor, but that survey never will be. The last thing you want to do is fill out a survey in such a way that might come back on your partner (that is, if you know what's good for you!) :)

[William]

I'm not sure on the comment referencing ROI, but the three factors are actually referred to as the "Triple Threat" in project managment. You can only control two of the three items (scope, time, budget). The key is securing the buy in from all stakeholders prior to the start of the project. I've been exploring how project management is relevant to recruiting for in my personal blogging. So, it makes sense for to have the on-going alignment measure this (across all projects, er hires). Great post, Kris.

[Todd Rogers]

William.
Kris and I were actually just emailing about this in the last two day. However, I learned the term triple-constraint as opposed to threat, as well. I personally found constraint to more accurately capture the notion of a boundary or limitation as oppose to a threat. Now, the some of the kids over at PMI (or those with the letters PMP on their resume) may prefer threat. But the idea for me is the same. And I agree with you - wholly - about gaining buy in from stakeholders, AND also validating buy-in. The recruiting process is, without question, a project; it's sometimes as simple as going to the store to buy milk or as complicated as building an airport. As such, it always has three dictates: performance, resources, and time.

[KD]

Tim - Good stuff and thoughts regarding how to measure quality. I like the promotion-based thing, although that will work better in big companies than small companies based on bulk opportunity... Also, cost and time matter in every organization I've ever been a part of, so I still feel like that's a reality...

James - my take is that ROI is rarely calculated due to difficulties in measuring quality...

Todd - very true when it comes to Sales Pros. The easiest to measure returns against since they start from scratch every month...

Josh - let me know when you get complete with the quality thing - I definately want to see that. No question you are right about companies not measuring quality vs. actual performance (sales is the only exception), which is because there is a fundamental weakness across America in performance management...

William - that's the series you are doing over at Talent Alchemy, right? Good stuff...

[Zan]

I would like to know international benchmarks on quality, time & costs. I am doing research on this and am finding there is very little academic research conducted on these measures. Any suggestions?