TTH & CPH are terrible metrics!

More and more TA teams are expected to have (all the) answers to organizational talent needs and challenges. This in itself is a good thing, though I see many TA teams around the world shoot themselves in the foot as they stick to metrics like 'time-to-hire' and 'cost-per-hire' to tell their story on how well they are doing.

Where do 'Time to Hire' & 'Cost per Hire' come from?

Today these two metrics are still the most widely used globally as an indication of how the Talent Acquistion function is performing. The reason, I think, we have all adopted these metrics is because we are part of the HR function. And what is the HR department in any organisation? It is a Cost Centre. And how do you optimize a Cost Centre? You optimize it by making all activities more efficient or; 'Faster' and 'Cheaper'.

If we apply becoming faster and cheaper to Talent Acquistion we end up with two key metrics 'Time to Hire' (Faster) and 'Cost per Hire' (Cheaper). So I do not think anything is wrong with the fact we used these metrics as our key indicators of success in the beginning days of recruitment, as we started to develop this function under the wing of HR. Adopting the key success metrics of HR seems like the logical thing to do.

However, we have learned over the years that our beautiful profession is more closely related to a Sales and Marketing function than a Cost Centre. So we need to look more closely at these departments to understand how we can define our success indicators.

Approaching TA as a cost center is in my eyes a deadly mistake. Optimizing a cost center revolves around making the processes cheaper and faster. Trying to build a TA function with a focus to become endlessly cheaper and faster, has absolutely nothing to do with becoming better at hiring the right person, exactly at the right moment.

This question sums up a lot of the frustrations we encounter daily as talent acquisition (TA) leaders. There’s a constant focus on “faster and cheaper;” yet we know that doesn’t help us attract the right people. 

one tasked with finding a solution to organizational talent needs and challenges. Though TA has come a long way, certain aspects of it have not—like the metrics time-to-hire, cost-per-hire, and quality-of-hire.

The problem with legacy recruiting metrics

TTH & CPH only look at how the work in the TA function itself is performed in terms of how fast and how much it costs. The value we add to our organisation does not lie within the TA function, it does not even lie within the HR function.

Each organisation has certain company goals, and every organisation needs the right people in place to be able to achieve these goals. So the value of the TA function lies in the business. To be more exact, our value is to what degree we can successfully hire the right person, exactly on time, so the business can achieve its goals.

If you still struggle to understand the concept that our value lies in the business not within our team, ask yourself this question: 'What is the right Cost per Hire and Time to Hire that helps you solve all recruitment challenges?'

There is no correct answer to that question... So what is the point of these metrics as you are never able to say you are doing it well?

Reporting to your CHRO that your average cost per hire is 2000 and your average time to fill is 90 days, the conversation you are going to have is; “what are you going to do to lower the cost or reduce the time?” You won’t be able to have a conversation about investing in a CRM, Employer Branding or Hiring Manager training.

If you keep talking about TTH and CPH being your most important metrics, the only thing you set yourself up to talk about is what you will do to become faster and cheaper.

You need metrics that are connected to the business outcomes you are impacting with making great hires. Also, TTH and CPH don’t account for the nuances of hiring for different roles. Hiring a CTO will likely cost much more and take a longer time than hiring an office manager, cost per hire or time to hire do not account for that

Final thought on this; Quality of Hire. This is exactly the reason many TA teams struggle with measuring this properly, as we should not look at the TA team performance to figure out the Quality of your hires. We should look at the business impact of our hires to properly measure it.

What’s the solution?

We need a set of metrics that will allow us to demonstrate our ability to deliver the right quality of talent, exactly on time (to ensure our companies’ business objectives are met), and against the right budget. We need the Hiring Success metrics.

The Three Metrics of Hiring Success

Hiring Budget

Hiring Budget reframes the costs of recruiting as an investment by anchoring the recruiting budget relative to the salary of people hired. The result is a percentage, which is calculated by taking the total cost of recruiting and dividing it by the combined total salaries of new employees or New Hire Payroll (NHP). 

An organization’s recruiting costs include the salary of all talent acquisition team members, program spending, outside recruiters, travel costs of candidates, and technology infrastructure. Time spent by hiring teams engaging in the process is excluded. 

Hiring budget reframes your recruiting costs akin to customer acquisition costs used in sales & marketing - the amount you invest in hiring a candidate should be tied to the value of that employee (i.e,  higher value employees typically command higher salaries). With this new frame, you can now tailor your recruiting investment based on the type of role you are trying to hire. For example, you can justify a higher hiring budget for hiring high-value employees such as a new CTO. 

Hiring Velocity

Hiring Velocity measures one thing: the percentage of jobs filled on time. Why is this important? Well, it answers one simple question: Are we able to hire the people we need when we need them? It’s critical for CEOs and their executive teams to know that their decisions and plans can be implemented because they have a TA organization that can deliver results. For example:

• Are sales people hired “on time” to hit next year’s growth targets? 
• Are software developers hired “on time” to build a new product?  
• Are enough drivers being hired “on time” to manage expected delivery demand during the holiday season? 

For these scenarios, it doesn’t necessarily matter how long it takes to hire; what matters is whether or not the talent needed to achieve company-wide goals is hired on time. This metric also forces TA teams and executives to think more strategically about their hiring goals. You can now set realistic target start dates based on the type of role you’re hiring. 

Net Hiring Score

How do you develop a reliable metric to measure how well new hires fit with the organization? We looked at the Net Promoter Score: a simple, solid, and proven method that evaluates consumer sentiment. With a similar mindset, we created the Net Hiring Score (NHS), which evaluates the fit of each hire based on the following:

• 90 days in, we ask hiring managers one question: On a scale of 1 to 10, is this person the right fit for the job? This gives us a sense of employee performance.
• 90 days in, we ask new hires one question: On a scale of 1 to 10, is this job the right fit for you? This gives us a sense of employee satisfaction.
• We then average the scores across managers and new hires, this goes into the calculation of the NHS.

• Aggregating the scores across all new hires and subtracting the percentage of detractors from the percentage of advocates gives a score between -100 and +100 and that is your Net Hiring Score.

A score of zero, for example, indicates a company is hiring as many bad fits as good ones, resulting in a net neutral impact on the company. Above zero, a company is hiring more good hires than bad ones. Below zero, and the company’s bad fits outweigh the good ones.

The value of using the NHS is two-fold. First, you now have an objective, scalable method to quickly assess the performance of your recruiting team and process without having to wait for year-end review or turnover. Second, you can accurately measure both employee satisfaction and employee fit. 

Hiring Scorecard

Once these metrics are determined, they’re put together in the form of a Hiring Scorecard. This will allow you and your colleagues to finally have a conversation about what matters: Are you delivering on budget, on time, and are you hiring the right people?

Below you’ll find three scorecards for different organisations using the Hiring Success metrics. On the left is an American retailer that has a strong focus on delivering on time. This approach to hiring tends to result in subpar hires, as is reflected in the NHS (Net Hiring Score). On the right is a prominent gaming studio; they strongly focus on hiring the best of the best. This affects their ability to source talent on time, as is evidenced by their Hiring Velocity score. This could potentially pose a problem if the company needs to scale up in a short period.

With this scorecard, hiring teams can now have more compelling conversations about how the investment in TA (Hiring Budget) leads to the desired outcome of being able to hire the right person on time. For example, if there’s a proposed decrease in spending, talent teams can point to the potential harm it could have on their ability to keep up the velocity or quality of hire.

The Hiring Success metrics also make it easier to build a business case for investing in new technology or other resources. For example, when describing the return on investment of a CRM, it can be linked to the expected impact on Hiring Velocity and Net Hiring Score.

Learn more about the Hiring Success Metrics and how to implement them.

The hiring success metrics are part of the Hiring Success Methodology. You can get access to all the content of the methodology and become a Certified Hiring Success Change Leader for free.

Closing thoughts

It is essential for TA teams to measure and track the work they do, and their outcomes. This is why you need to have a clear idea of what you’re measuring and why. The Hiring Success metrics provide a much clearer picture of the impact of the work you do, thus improving your chances of becoming that strategic business partner or talent advisor.