Choosing the right staffing metrics (Toughest HR Question)

Look beyond cost per hire, time-to-fill equations
By Yaseen Hemeda
|Canadian HR Reporter|Last Updated: 01/28/2013

Question: What metrics should senior HR professionals use to evaluate the effectiveness of staffing systems?

Answer: Surprisingly, many organizations continue to rely on traditional, transactional staffing metrics that are relatively low-impact, such as cost per hire and time-to-fill. While there may be benefits to these metrics, they are increasingly viewed as ineffective in properly evaluating a staffing system.

Cost per hire, for example, focuses only on the upfront dollars — it does not look at the long-term costs associated with not hiring the most suitable candidate. And the time-to-fill metric does not take into consideration the long-term costs associated with turnover percentages and other recruitment costs that may be incurred from not hiring the right candidate. Both cost per hire and time-to-fill equations can show if an organization is able to find people quickly and cheaply, but not necessarily if the candidates are a good fit.

Incorporating other metrics

These two metrics should be complimented with other metrics that are specific, measurable and quantifiable so they can be benchmarked.

For instance, to measure quality of hire, employers may want to consider using the first-year resignation rate and 90-day turnover rate metrics provided by the HR Metrics Service, which is operated by the British Columbia Human Resources Management Association (BC HRMA) in partnership with the provincial HR associations in Alberta, Saskatchewan, Manitoba and Ontario.

Turnover metrics, when monitored regularly, can be poignant indicators of a number of different successes and challenges experienced by the HR function.

The 90-day involuntary turnover metric, for example, is quite valuable because if isolated by dismissals, it would be indicative of the recruitment processes’ ability to effectively screen candidates to ensure fit with the job, business unit and organization at large. When employees are dismissed shortly after joining an organization, this clearly reflects a flaw in the process.

In the same vein, if this metric is isolated by looking at layoffs, it could point to a deficiency in workforce planning and forecasting processes, as candidates were hired and, shortly thereafter, no longer needed. HR will need to make its own assessments about the metrics to track based on trends at its own organization.

Furthermore, it is important to consider metrics holistically. If you have an excellent time-to-fill metric but hiring managers are giving low ratings for candidate quality, then perhaps recruiters should spend more time communicating with managers and viewing them as the “customer” looking for these new recruits.

HR professionals need to take more ownership of and responsibility for the recruitment process to ensure the best candidates are hired, and not place the burden on line managers, even though they ultimately make the final hiring decision.

Although there are a plethora of metrics used to evaluate staffing effectiveness, it is more useful to focus on a few critical ones and consider each organization’s particular needs, objectives, policies, procedures and overall strategic direction. There isn’t a one-size-fits-all strategy to staffing metrics. What works for one organization may not work for another.

Organization’s have unique challenges so it is important to align these metrics with the overall business strategy. For example, if an employer has a mandate to improve its diversity climate, it would be crucial to consider the diversity hire ratio metric.

This will help the organization understand what percentage of employees hired externally self-identify as belonging to one of the four designated groups (women, Aboriginal Peoples, persons with disabilities and members of visible minorities).

Move towards standardization

There is plenty of subject matter expert commentary, opinion and analysis, as well as various blogs, that attempt to provide deeper insights into the best HR metrics. But there is still a lack of industry-wide standardization.

The accounting profession, for example, shares a common language across the profession through the application of Generally Accepted Accounting Principles (GAAP). Standardizing financial measures (such as current ratio always equals current assets divided by current liabilities) allows finance professionals to have an apples-to-apples comparison.

Unfortunately, the HR profession lags behind in establishing this type of metrics standardization. Formulas are often not equivalent among organizations, which makes benchmarking problematic.

In fairness, the HR Metrics Service is working towards greater standardization by creating a set of metrics for HR practitioners and sharing them openly with any employer that wishes to use them (as long as the metrics are not manipulated and are properly referenced).

The move towards standardization is a positive step and will enable HR professionals to compare and benchmark metrics across organizations and industries.

Yaseen Hemeda is a product writer for Consult Carswell. He can be reached at yaseen.hemeda@thomsonreuters.com or visit www.consultcarswell.com for more information.

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