Many companies say our people are our most important resource and it is often one of the largest operational expenses. The workforce of many companies has a direct or indirect impact on many of the Key Performance Indicators (KPIs) of an operation. Inspite of its impact many of the same companies do not include the quality of hire and cost of turnover in their KPIs.
Recruiters are always looking for the best candidates. The challenge is to identify the candidates who will be top performers and whose values align closely with the company’s values to maximize the quality of hire and minimize turnover. How do you measure these KPI’s and why are they important?
Quality of Hire
The quality of hire as well as the costs of the recruitment process are important KPI’s for a recruiter. As a recruiter you are always looking for quality. To define quality you have to define guidelines that distinguish a bad hire (doesn’t perform on the required level), a performer (performs on the required level) and the outperformer. The outperformer is the qualified employee who performs on a higher level than expected. The outperformer contributes to the growth, innovation and distinctiveness of the organization.
Why do you measure the quality of hire?
Have you chosen the right recruitment strategy? The cost per hire is one essential KPI in recruitment but, if you have hired candidates for a low budget, it doesn’t mean that you have hired the quality you are looking for. Hiring bad hires is more expensive for your business. To define an effective process to find the right candidate, you have to measure the quality of hire.
Ask yourself:
- Do you know what you are looking for in a candidate?
- How will you know when you find it?
- Did you find the qualified employees and fulfill your organization targets?
We have the expertise and tools to help you design a process that will answer these questions. Please contact us at rick@x-stress.com for more information.
The cost per hire and the quality of hire are two important KPI’s in your recruitment process. By measuring both, you are not only informed of your total recruitment budget, but you can also develop an effective process for recruiting.
Cost of Turnover
Why measure the cost of turnover?
One of the most important KPI’s of competent leadership is the cost of turnover. Some leaders do not recognize the importance and impact of the cost of turnover until it has a significant impact on the main stream KPI’s and morale/turnover itself, making recovery long and stressful to the organization’s bottom line. Recovering from a high turnover environment also reduces focus on operational advancements. Not knowing the cumulative overall cost of turnover is a huge mistake.
How to identify the cost of turnover.
The cost of turnover is calculated using relevant KPI/criteria results from a specified reporting period, including the turnover rate and comparing the results to those of subsequent reporting periods. Organizations using an objective/unbiased approach when identifying criteria will have more reliable data for making decisions. Consulting with an outside expert/team to identify the relevant criteria would be the most objective choice. Soliciting team input and using root cause analysis on KPI results are alternatives. As with most studies, including more recording periods will yield more accurate data. Criteria/KPI’s will vary depending on the industry or sector.
We have the expertise to partner with your organization to help identify the criteria and develop a comparison report and graph. Please contact us at rick@x-stress.com for more information.
The examples below will help you get started with your selection.
Cost of hiring:
- Employment sites
- Advertising
- ATS system
- Employment/background screening
- HR
- Interviewing
- Incentives
Operational costs:
- Productivity
- Service level (lost sales, damaged, out of stock)
- Lost product
- Overtime
- Training
- Safety incident rate/insurance costs
- Company provided equipment/uniforms
These are examples of some of the directly related costs. Other things to consider are your organization’s “Employer/Talent Branding” and how it impacts your organization’s ability to attract quality talent and the costs associated with it. An organization’s branding/reputation is becoming a more valuable component in today’s competitive talent market and, if not effectively managed, can be costly and stressful to repair.