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Direct Sourcing KPIs

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Picking the Right Direct Sourcing KPIs: 5 to Count On

In our last post, we discussed direct sourcing and how to control the candidate journey. In this week’s post, we will discuss direct sourcing and how to track its effectiveness, along with the entire recruitment process, by implementing and tracking direct sourcing key performance indicators.

 

Key performance indicators. We all have them. Commonly referred to as KPIs; big to small organizations use them as measurement tools to keep a business on track. They are critical to the performance process and are typically tracked, calculated, and reviewed regularly. Tracking data tied to suppliers – spend, quality performance, number, delivery statistics – or staff – spend per employee, cost savings/cost avoidance, training, and development –is an everyday occurrence as KPIs measure important aspects of business.

 

KPIs tied to talent acquisition and direct sourcing are no different from those tied to suppliers of staffing. HR and Recruiting Managers use certain KPIs to dive deeper into performance and measure the business impact of the talent management team. Many companies use direct sourcing / talent acquisition KPIs to ensure their recruiting team is successfully managing the candidate journey through their efforts.

 

Ok so let’s dig into KPIs for direct sourcing in more detail.

 

What are KPIs?

 

Key Performance Indicators (KPIs) are important gauges of progress toward an intended result. KPIs provide motivation for strategic and operative improvement, create a sound basis for decisions, and help concentrate attention on what matters most. In short, KPIs should highlight what’s going well and what needs improvement on your talent sourcing team. They serve as signals for further optimization opportunities.

  • Key – Most critical metrics
  • Performance – Metrics tied to business objectives
  • Indicators – Signals or gauges for areas of focus

 

 

What makes a "good" KPI?

 

  • Show Progress: Good KPIs provide impartial evidence of progress towards realizing a wanted result.
  • Measureable: Measure with goal(s) in mind to help informed decision making; tracking competence, efficiency, value, suitability, authority, performance – project, personnel, et al, and utilization.
  • Comparable: Create and suggest evaluations which measure degree of performance change over a period of time
  • Balanced between leading and lagging indicators. A few things to note on indicators: “leading indicators” look forward at future outcomes and events whereas “lagging indicators” look back to assess whether the intended result was realized.

 

 

What types of direct sourcing KPIs should be tracked?

 

Depending on the objectives set for your direct sourcing team, your KPIs can vary, which will impact your efficiency. Direct Sourcing KPIs, such as Time to Hire (TtH), allow managers to review individual talent acquisition strengths as well as the strengths of the sourcing team. Tracking the right sourcing metrics provides you with more in–depth insight on your hiring process and which sourcing strategies work best for you and your team. Some direct sourcing KPIs are:

 

1.   Time to Hire (TtH)

 

The Time to Hire (TtH) KPI is one of the easiest to track and evaluate. It identifies the amount of time it takes for a candidate to become shortlisted, interviewed, and hired as a new employee or contractor. This information is important because it can help you predict your future needs as well as conduct risk analysis on your existing workforce and sourcing processes.

 

The TtH KPI is calculated by subtracting the date the candidate applied for a position from their date of hire or when they receive the offer. The metrics attached to TtH are critical because they measure the efficiency of your overall direct sourcing process and can expose general problems in your method such as general talent acquisition procedures or your communication practices. This KPI is one of the best to track because it can help boost your application process.

 

 
Why It Matters…

 

A company’s Time to Hire KPIs are linked to industry hiring trends. Slow time to hire rates can be harmful to the organization causing the possible loss of highly qualified candidates and negatively impacting your talent acquisition team and organization - both of which affect your company brand which can then impact the quality of candidates down the road.

 

Tracking this metric will

  • Identify and unblock jams in the hiring pipeline
    • If candidates are dropping out throughout the sourcing process, you may want to evaluate length, accuracy, and items causing delay in the process.
    • How many messages does it take to get an initial response from a candidate?
    • How long is the nurture period of candidates to convince them to apply for a role?
  • Help with forecasting and shaping your complete direct sourcing approach
    • When you better plan the amount of time needed to find and engage with the ideal candidate, you can prevent overwhelming your talent acquisition team as well as ensure your processes are running smoothly.
  • Indicate whether direct sourced candidates move through the hiring process (screening and interviewing) faster than general applicants.
  • Assist in making the right hires at the right time.

 

2.  Interviews to Hire (ItH)

 

Streamlining your hiring processes is critical to creating and maintaining a well-functioning human resources team. Establishing metrics that capture the elements of your interviewing process – from early screening to offer acceptance – can help you identify areas of improvement to ensure your company’s job offers are competitive and effective. If candidates still decline offers, the information can offer peace of mind that your team did everything possible.

 

On average, the interview-to-hire ratio is around 4.8:1 but the ratio can vary based on industry, geographic area, as well as candidate experience level.

 

 

Why It Matters…

 

Let’s be honest. Interviewing is the nuisance of all hiring managers. According to Victoria Hoevemeyer in her book High-Impact Interview Questions (2017), “…(the reason) hiring managers dislike interviewing is that they feel so overworked and overwhelmed that the thought of having to go through the interview. This doesn't take into consideration the cost and time impact of an in-person panel interview with 4 of your more senior colleagues.ing and selection process depresses them. They feel that it’s an imposition that is just going to make it even harder for them to get their jobs done.”

 

Without interviews – either in person or Zoom – limitations occur as to identifying and sourcing the best talent for roles. Direct sourcing is a way for companies to curate their own talent communities and circumvent the long, drawn out, interview process. By opting for direct sourcing and building talent communities, companies can positively impact their budget, retention, and recruiting time. Ultimately, by utilizing direct sourcing, companies will see a positive impact across the board including lower hiring costs, increased efficiency, reduced turnover, and decreased risk in hiring mistakes.

 

While sitting face to face, or now via Zoom, is a trusted aspect of the interview process, it’s perception as the “ideal” is being shelved due to the potential of unconscious bias. The old school, in person/Zoom, interview method can also be cost-prohibitive for all parties – employer and candidates; especially when you consider the dollar value of your time.

 

 

3.  Offer Acceptance Rate (OAR)

 

Another trackable metric for you to keep an eye on with regards to sourcing is Offer Acceptance Rate (OAR), or the percentage of candidates accepting your job offer. This number is a significant identifier used to determine your direct sourcing success rate.

 

In an ideal world, all of your high-quality candidate selections would say yes without push back or negotiation. Right? In reality, while the aforementioned scenario would be great, it doesn’t always happen. This is where tracking of accepted offers is key to demonstrating how effective your direct sourcing strategy is.

 

OAR is one of the more simplified KPIs and easy to calculate, as you are examining the numbers of offers accepted out of the number of offers extended.

 

Why It Matters…

 

This metric is usually calculated annually but can be reviewed more frequently, say in quarterly reviews or for a specific project. While this percentage has some leeway, keep in mind that numbers don’t always tell the full story such as when creating a comparison for year-over-year OAR. Outlying factors may impact the numbers. For instance, comparing 2019 to 2020 OAR may skew the numbers. Why? 2020 was an anomaly of sorts with various industries experiencing below zero returns for the first time ever, COVID-19 shuttering everyday life, massive layoffs creating never-seen-before unemployment numbers, and so much more. Your sourcing team’s OAR in 2020 could be significantly lower and while the data will still have merit, it may be advised not to weight it as heavily as past “normal years.”

 

 

4.   Quality of Hire (QoH)

 

The Quality of Hire (QoH) KPI is a unique, hard to measure, but critical metric to track for companies’ hiring processes due to the real value tied to the metric. Often called the “Golden Metric,” QoH is viewed as elusive to track due its dependency on data tied to hired candidates’ performance as well as retention. This is tricky to calculate because “quality” is relative to your specific goals as a hiring manager and company. With so much focus and uniqueness on this specific metric, calculating it correctly is paramount to truly evaluating “quality.” To be helpful, there is a formula to calculate Quality of Hire.

 

 

However, defining “quality of hire” will ultimately need to be determined by you.

 
 
Why It Matters…

 

Poor hiring decisions have significant financial impact, each bad hire could cost your organization, some calculate at as much as $50,000. When you look at Zappos as an example, CEO Tony Hsieh estimates that a history of “bad hires” cost his company “well over $100 million.” According to a 2016 LinkedIn presentation, “39% of talent leaders agree that quality of hire is the single most valuable metric to evaluate their team’s performance.”

 

Evaluating quality of hire (QoH) does not begin post-hire. In fact, many companies rely on pre-hire quality assessments to determine a candidate’s “long term fit.” These data-based assessments are short term indicators focused on predicting quality of hire which could be relevant to the candidate’s longevity. They may also set precedents for determining effective interviewing tactics and lay framework for evaluation of candidates post-hire.

 

Direct sourcing is a good answer to concerns tied to Quality of Hire data. An important advantage to using a direct sourcing approach and nurtured talent communities is that a bulk of the candidates already have gained awareness, as well as maybe some information, of the company. If they have already worked at the company, hiring managers will have exposure to their abilities, focus, and how they mesh with the team.

 

 

Pulling It All Together

 

KPIs, or benchmarking, are critical tools to help you evaluate your internal processes tied to direct sourcing as a method to identify decisions and activities that may result in positive or negative outcomes. It’s important to note that external business initiatives or extraneous circumstances can impact your KPIs, for example a pandemic sweeping the globe, shutting down the work environment of old.

 

Another consideration to keep in mind is that “data in a bubble” will not create confidence on the relevancy of your numbers. Awareness of the state of talent acquisition for your company’s industry provides baseline data for comparison of how your direct sourcing initiative is doing - where it is under-performing, identifying important trends, and uncovering pain points not known otherwise.

 

By keeping an eye on these performance indicators, you’ll have a more holistic image of how your direct sourcing and talent acquisition strategy is impacting the business strategy and drive a stronger value proposition for sourcing talent in the future. To learn more about setting up KPIs for your direct sourcing efforts, click here 

 

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