Let's Get Analytical

Jim Buchanan | October 21st, 2020


The appetite for data analytics is getting crazy. I recently read that Los Angeles Dodgers outfielder Mookie Betts had the highest WAR in baseball for the 2020 season. WAR, huh, what is it good for? I looked it up. It stands for Wins Above Replacement. The formula used to calculate WAR is a dizzying array of numbers and mathematical symbols. A high number is good – I guess? I'm sure someone understands it, but not me.

Analytics Are Everywhere

Ever feel this way about your hiring analytics? We're swimming in analytics such as Recruiting Conversion Rate, Time to Fill, Turnover Rate, Applicant to Hire, Applicant Drop-out Rate, Cost Per Hire, Source of Hire, Quality of Hire, Candidate Satisfaction, Applicants Per Opening, and probably ten more than you could name. The analysis of all this data is probably important to your business. However, in the world of hiring hourly employees, I suggest that four basic metrics far outweigh the others.

The Four Most Important Hourly Hiring Metrics

What are these four metrics? Here they are with a brief explanation:

1. Employee Turnover at 180 Days

This statistic represents the percentage of new hires who terminate their employment, either voluntarily or involuntarily, within the first 180 days. This stat is probably the easiest and quickest approximation of a quality hire. The probability of termination goes down substantially for those employees that stay on the job at least 180 days.

2. Time to Hire

This metric is not the typical "Time to Fill" measurement that people usually think about. In the faster-paced world of hourly hiring, it's essential to concentrate on the number of days from completed application to onboarded hire. Suppose you are unable to review applications and make offers to your candidates quickly. In that case, they will likely take a job elsewhere. Many times, these candidates need a job urgently. Good candidates will have multiple opportunities, and you need to act quickly.

3. Applicant to Hire Ratio

This ratio is the total number of applicants divided by total hires in the same measurement period. For hourly positions, sometimes the applicant to hire ratio may exceed 100 to 1. That's fantastic, right? Maybe not. Will your store manager review all 100 applications to find one hire? Not likely. They will look at a few and make the hire based on those applications. What about the ones that no one reviewed? People took the time to complete our application. Did we engage with them at all? It's quite a negative experience for a candidate to invest time in our company and not hear anything back.

So, what's the right ratio? It's kind of a Goldilocks' situation – not too much and not too little. It should be a number high enough to get quality candidates, but not so many that managers cannot properly evaluate the applications. If you have a high applicant to hire ratio, you absolutely need a decision support system powered by machine learning. Without it, you will never optimize your talent acquisition system to find the best applicants. A machine learning algorithm can analyze all applications in seconds and make recommendations as to which applicants will make the best employees.

4. Cost per Hire

Some would suggest that this metric be very comprehensive and include all direct and indirect hiring costs. I recommend limiting the calculation to direct expenses paid to third parties in the talent acquisition process. Figure out how much you pay to third parties for sourcing candidates, software such as CRM, ATS or onboarding, assessments, background checks, drug screening, etc. Also include the cost of new employee training. At least in the first phase, I would not allocate costs such as manager interview time, trainer time, and the like. Take this total cost over a period of time divided by the number of hires during the same period.

The Importance of Benchmarks

These numbers by themselves may be interesting, but it's important to have a benchmark. To have a benchmark, you have to start recording your activity. Monthly or quarterly measurements are best. If the reporting period is longer than that, say annually, it doesn't allow the opportunity to react quickly to fix problem areas.

Over time, as you work with these metrics, you will discover relationships between the numbers. Let's say your cost per hire is higher than you find acceptable. There's a chance that high turnover could be the culprit. You may be spending a lot of money on assessments, background checks, and drug screening because you're making many replacement hires. In that case, address the turnover issue first. Maybe your applicant to hire ratio is the culprit. If you're spending substantial amounts of money on job boards and creating a 300 to 1 applicant to hire ratio, you're probably spending too much money on sourcing. And maybe your high turnover is related to a particular applicant source that's not providing value. It's both fun and rewarding to do the detective work.

Conclusion

Get a handle on your hiring analytics without getting overwhelmed. The talent acquisition process is a system that needs rigorous management. It's a complex system with interdependent parts that can provide great results when optimized. Think of these four basic metrics as a scorecard for your talent acquisition program. Set a standard for what you would like to achieve in each area. As you evaluate your results each period, make changes, and take new actions to get your desired results. You won't be there overnight, but you'll be on the road to improvement.

 At Cadient Talent, we offer a recruiting solution for employers with large hourly workforces. Having supported large companies with distributed hourly workforces for over fifteen years, we know that hourly recruiting is hard. We evaluate every aspect of our clients' talent acquisition process to help improve the quality of their hires. 

Learn more about how you can improve your recruiting process to increase profits and achieve better business results by making more quality hires. Visit us at BetterHiresMadeSimple.com

Jim Buchanan

CEO