Our Recruiting Stock Price

Recruiting measurement is something we all strive to perfect — that magic number that answers many of our professional life’s little mysteries; the key that opens the door to recruiting issues and then tells you how to solve them. Many of us have tried to find that ideal fit for our organizations, but seem to come up with only pieces of the puzzle. After all, there are only so many processes that can be measured — and are these all-encompassing?

Recently, Fifth Third Bank created a simpler, single metric to represent Recruiting Operations: the Recruiting Stock Price. I’m delving in-depth into that metric in two places: 1) the Fall ERE Expo and 2) in the September Journal of Corporate Recruiting Leadership. But I wanted to give this wide audience a preview.

A Single View of the End-to-End Process

For us, our customers specified that the following were important to them:

  • Overall satisfaction with the recruiting process
  • 90-day retention rates
  • Recruiter efficiency measures
  • Diverse candidate pools
  • Time-to-fill
  • Number-of-fills
  • Cost-per-hire

These are fairly typical metrics that many companies currently measure. The key to success though is not just measuring these, but understanding how they relate to the customer experience and how they relate to one another.

Knowing the customers’ needs and how important they are is a huge accomplishment, although it’s not the final piece of the puzzle. We must now determine what level of performance the customer expects for each need. Is filling an open requisition in 30 days sufficient, or do they need it in 15 days? Does it vary by type of position?

For each we will need to know the level of acceptable performance — or the spec limit. For example, our customer satisfaction measures are done on a scale of 1.0 to 5.0. The threshold or spec limit for all of these measures is 4.0. Anything below a 4.0 is not meeting customer needs, whereas anything above 4.0 is exceeding customer needs. If we didn’t know the spec limit we would have no way of evaluating the customer’s feedback. If we received a 3.0 on a survey and we didn’t have a defined spec limit then, as recruiting leaders, we might interpret this as acceptable. In our mind a score of a 1.0 or a 2.0 would certainly be below customer expectations but a 3.0 “seems” decent when in fact, anything below 4.0 is not acceptable. Knowing and understanding the spec limits — the minimum acceptable performance — is another critical component of realizing how we are performing and where we need to focus our efforts.

This gets included on a two-part scorecard. The first is a scorecard that is segmented by our recruiting regions. This shows the detailed performance of every metric for each region with the ability to see infinite detail for all measures within each region. The second version is segmented by individual recruiter. Each measure for every recruiter is included, as is a stack-ranking of all recruiters across the company.

Both versions are public knowledge and available to anyone in recruiting. Both versions also include the ability to drill down and see performance in greater detail.

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We show the overall health of the recruiting process summed up with a single chart. At first glance, it’s quite simplistic. The green line represents customer needs. Anything greater than zero (above the green line) indicates that the recruiting organization is exceeding customer needs. Anything less than zero shows that customer needs are not being met.

Beginning with the Recruiting Stock Price in March, by drilling-down we can see that both Quality and Delivery measures were above customer needs, while cost did not meet customer needs. Further diving into cost shows that the recruiting organization was under budget; however, the cost per hire was much too high. Additional analysis revealed that cost per hire was above spec because overall hiring volume was down versus the plan. The resulting action was that we were able to use several recruiters on other projects across the bank until hiring volume picked back up two months later.

Prior to the Recruiting Stock Price, response plans were relatively unused in human resources at Fifth Third Bank. Knowing what actions we would take should certain situations arise was something we practiced very little. For each of our key process drivers — our customer needs — we have thresholds that are even stricter than the customer spec limits. Here, we want to take action and make changes prior to missing a customer spec limit, so acting early and often is critical.

For example, our customer satisfaction measures are on a scale of 1.0 to 5.0 with a customer spec limit of 4.0. In our response plan, we set a threshold of 4.1. For any individual recruiting region, we do further data analysis and provide coaching, make process changes, etc. every time a satisfaction measure drops to 4.1 or lower. By taking action before we drop below 4.0, we increase the likelihood that we can catch problem areas and fix them before it impacts the customer’s ability to manage their business.

Having accurate measures is a huge step toward improving the overall performance of our recruiting process. However, it doesn’t matter how good the measures are if we don’t do anything with them. Fancy graphics and colorful charts by themselves do very little. We must take these measurements and take action.

Richard Newsom joined Fifth Third Bank in 2003 and is currently director of recruiting operations, with the responsibility for bank-wide recruiting processes and measurement. Prior to his current position, he held the position of senior process improvement manager in the Process Improvement Group. Newsom previously worked as the director of Project Management for Broadwing Technology Solutions, senior program manager for marchFIRST and for MicroAge, and senior client analyst for Cincinnati Bell Telephone. Newsom obtained his Lean Six Sigma Master Black Belt and is Project Management Professional Certified from the Project Management Institute. He also earned his bachelor’s degree in Marketing and Finance from the University of Cincinnati and his master’s degree in Business Administration from Xavier University, in Cincinnati, Ohio.

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8 Comments on “Our Recruiting Stock Price

  1. Richard, interesting article – I’m trying to visualize how you take all these metrics and distill down solely to one – the “Recruiting Stock Price”. Specifically, I would be attempting to identify the relationship of actual firm performance to this particular distilled metric you’re describing. Does it track overall firm performance? To use the term “Recruiting Stock Price”, I would imagine that it would have to . . . especially if there were efforts to drive acceptance through Upper Mgmt (i.e. if actual stock price is down and the “Recruiting Stock Price” is up, then all credibility would go out the window.)

    The risk, however, with comparisons to stock price is that stock price itself is based upon forecasted future earnings (thereby discounted back to net present value). Another risk is what I outlined above – I have concerns about presented a ‘postive’ “Recruiting Stock Price” if in fact the firm’s stock price is down for any reason. I doubt a negative beta to actual performance would go over well.

    In that sense, we’re indicating that recruiting performance should be more likened to the Finance function (forward-looking), rather than the Accounting function (backward-looking). If that’s the case, then all backward-looking calculations would hold nominal value (i.e. Cost-per-hire, Time-to-fill, etc.)

    The way I’m reading your article here, however, is that you’re describing an approach that closely mirrors Kaplan & Norton’s Balanced Scorecard (http://en.wikipedia.org/wiki/Balanced_scorecard – Note: This link is not for you, but for other readers, as I can tell based upon your education that you are extremely familiar with this.)

    The issue I see in regards to metrics (at least “meaningful”) KPIs is that there is no consensus on a decision framework when it comes to recruiting. Due to this, organizations calculate their metrics and KPIs differently, much like what we saw in the Finance and Marketing functions prior to the emergence of their own decision frameworks (which allow for apples-to-apples benchmarking).

    P.S. The foremost educators in our profession, Boudreau, Ramstad, Beatty, etc. are attempting to overcome the lack of a decision framework . . . but I personally believe their challenge is resistance among the market itself to establish consensus (and thereby become accountable to legitimate and actionable benchmarking).

  2. Hi Richard,

    You and I have discussed this topic in the past, and I think you have done an exceptional job here capturing the concept in writing.

    Knowing the problem is important, but almost anyone can make a diagnosis; the real value here is taking action, measuring the impact of that action, and refining again.

    Very impressive!

    Rob Jannone
    MBS RPO
    rjannone@mbs.manpower.com

  3. I just completed a sourcing project where I had to determine what C level the recruiting organization reported into and then determine who the top three levels of management were in that organization. The only companies where this customer was interested in having names generated were companies where the recruiting org reported up and into to the Chief Financial Officer’s office. In only about 20% in a list of companies out of the Fortune500 did the recruiting orgs report up to the CFO. When you narrowed the companies to those in the Fortune100, the percentage went up a good deal.

    Hey, Richard, I’m a UC alum too!
    I enjoyed the article. Thanks.

  4. Rob, the educators I presented (Boudreau, Ramstad, and Beatty) are doing more than diagnosing the problem. They are attempting to develop an accepted decision science; to build a foundation that we can grow from. Otherwise, the concept of a “Recruiting Stock Price” (and/or any form of metrics or KPIs) are going to be calculated differently from organization to organization. While these calculations may hold value internally, there is little benefit in terms of apples-to-apples benchmarking in the external market (i.e. other HR, TA, and OD functions).

    If I am correct, I believe what Richard is attempting to do is introduce us to what is working for him at Fifth Third Bank, so that it may be added to the overall body of knowledge. This body of knowledge is continuously added to, massaged, and refined so that we can grow collectively.

    My question is in regards to whether the reference to “Recruiting Stock Price” is actually a “Recruiting Balanced Scorecard”? (which allows for drilling further down). The notion of “Stock Price” indicates a single economic value, not a scorecard.

    My comments and questions here are from a point of reading Richard’s work, respecting and digesting it, and logically, having follow-on questions. IMHO, media is more valuable today because it has changed to more of a multi-way conversation, so I believe this string has significant potential. Let’s dive in further.

  5. Thanks for the comments thus far – very insightful so keep them coming. The full article comes out in September and will provide more details about what we’ve done. In the mean time, here are a few additional blurbs to help shed some light on the questions posted so far:

    • The term recruiting stock price is actually only a term we use when discussing this with someone outside our recruiting organization. It has helped others to visualize what we are talking about. Our internal name for our Measurement plan is “Magellan” – referring to the explorer as we are embarking on uncharted waters. The recruiting stock price isn’t tied to overall company performance; just represents the end-to-end recruiting performance from the time a candidate first encounters Fifth Third until they have been employed with us for 90 days. Also, the stock price isn’t future looking; it represents actual, past performance.
    • Our measurement plan does have some elements of the balanced scorecard mentioned. It’s not company-wide performance though; just recruiting. It allows for considerable drill-down capabilities so that actionable items can be uncovered at the lowest level.
    • You are correct in that some benchmarking against industry numbers would be difficult in that all organizations measure recruiting a little differently. We each have our own KPIs. In many respects, benchmarking against other organizations is a good thing. From one viewpoint though, it is fine to have different KPIs than recruiting organizations at other companies. Our true success is in eyes of our customers (candidates, hiring managers, etc.) and thus our KPIs are dictated by what is important to them instead of being dictated by what the KPIs are for the company across the street. This is our attempt to satisfy customer needs on the end to end process as a whole instead of just in isolated metrics.

    Thanks again for the interest thus far. Looking forward to the continued discussion.

  6. Richard, thanks for the clarification and thoughts. I must say this is very impressive and candidly, pretty awesome. We need more of this stuff 🙂

    I’d be interested in seeing what your KPIs’ are (meaning those that aren’t proprietary). I say that because I assume you’re a few chess moves ahead of the average bear.

    I understand where you’re coming from in regards to what metrics should be utilized and how this can lead to tunnel vision. There is value in benchmarking (for example ROE or ROA, etc.), but benchmarking is more of a ‘rough cut’ to gauge performance against the sector you’re in. There would be great value in us speaking much of the same language, however (at least moving beyond the basics of COH, TTF, etc.) I imagine you may have some forward-looking metrics so that you can justify increased investments in certain segments of the talent pool.

    For example, let’s assume that ‘Business Customers’ were the bread-and-butter (the most highly prized customer segment) of your bank. If your bank had brick-and-mortar locations, then those employees that interface with and consult with Business Customers would be extremely valuable. For your online bank, perhaps it’s the customer service reps that are focused on biz customers and/or those in charge of new product development aimed at satisfying biz customers.?. As a consequence, you could make the case for mixers, direct mail, pay-per-click advertising, steak dinners with referrals among this talent pool, etc.

    In essence, your recruiting strategy would then mirror your marketing strategy in a way. Increased Organizational Value (in terms of contribution made) = Increased Investments (geared at attracting, hiring, and retaining the top quartile of the talent market, both internal and external).

    Ok, better run – Kudos for the great stuff and I’m looking forward to more in the future 🙂

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