Rethinking Metrics in a Recession

Well, we have finally arrived at the legal definition of a recession. So, for all of you who have been waiting for the official “okay” to be worried and depressed – commence fretting. Changes in the economy also bring fresh expectations from our business partners or clients. Sometimes they are reasoned and thought out. More often, they are not. Rather, they are expectations based on wishful thinking, reinforced by rhetoric, and enforced by dictatorial edict. Those who are currently trying to meet staffing needs and requirements understand this better than most. This evolution of potentially erroneous expectation is made even worse by the efforts of the last ten years to use the increasing number of automation tools available to create and monitor a family of metrics to measure staffing professionals performance. The automatic assumption of many is that, during a recession, no matter what your performance against these metrics might have been, they will certainly improve during an economic slump, downturn, or full-fledged recession, because “recruiting gets easier!” Right? (Okay, stop laughing and let’s move on.) The metrics that you once used to measure yourself (or were used by others to measure you) may need to be reviewed and rethought if you want your efforts and the difficulties you must still overcome to be accurately weighed against your performance. The most common metrics are:

  • Cost Per Hire (CPH). At best, it’s a dangerous tool that I recommend only for planning budgets and reviewing performance improvement on a year-to-year basis.
  • Quality Of Hire (QOH). A post hire review of the overall match of the candidate hired as opposed to the position description. This helps determine if you are “settling” for candidates or are being given the wrong “road map,” which results in “settling.” Conversely, it may show you are right on target.
  • Time To Fill (TTF). Measuring the time it took human resources or the agency to put a “soul in the seat” based on the first day the position was approved “to fill.” (I prefer actual start date and not acceptance date.)
  • Offer To Hire (OTH). The total number of offers made by requisition, group, department, division, or company wide to fill “X” number of positions. (I recommend measuring by all the above sub-groups to show variations based on type of needs, personalities of hiring teams and areas that are working and areas that need work.)
  • Interview To Offer (ITO). The total number of interviews made by requisition, group, department, division, or in total to generate “X” number of offers.
  • Route to Interest (RTI). The ratio of routed resumes to resumes of interest sent to hiring managers. This many have been hiring manager directed pre-screening, hiring manager directed phone screening, or hiring manager directed efforts to arrange an interview. The outcome is not the issue. This tool indicates the ability of the recruiting process to locate the right profiles and identify them.

You may well use another family of tools, some of the above, or even some I have not mentioned. But to my way of thinking, the above can measure you and your hiring managers in your performance and interactions. Obviously other areas of the staffing process can be “drilled down,” but at some point you do have to stop writing reports and actually interview somebody! So how can “recession based expectations” be your ruin based on the above metrics? Well, if cost per hire is to have any hope of being a truly effective tool, it should measure not only your individual recruiting costs, but also all line items in your budget. You pay IT for their support, operations for office space and supplies, payroll, benefits and other personnel long-term costs. Anywhere from 50% to 75% of your costs are fixed, based on what you are charged back by your employer to work for them and the number of people you have on staff. The only “big ticket” items you have to reduce CPH dramatically are personnel based, just like everyone else. If your “recruiting advertising” costs (website, job boards, referral programs, media advertising, agency fees, etc.) only account for 25% to 50% of your costs, then even a savings of 20% in that area will only impact your CPH by 5% to 10%. If you have CFOs and hiring managers drooling over expected savings, they will be disappointed if you do not confront them with the facts. After all, one year ago the unemployment rate was 3.5%, now it is 5.5%, or for every block of 100 prospective candidates there are currently only two more unemployed than this time last year. Even in a recession, it costs money to make the best aware of your openings. Osmosis is still a poor recruiting philosophy. The Quality of Hires (QOH) may appear to suffer as well, despite the common belief that it should improve. Remember, metrics are not reality based if not constantly reviewed. They can be no better or no worse than the formula applied. For example, last year managers tended to write very broad-based position descriptions so they could appeal to and hire practically anybody who applied and they felt could do the job. The inflated titles and requirements as well as salary ranges made the real target difficult to discern. If the requisitions have not been revisited, how can you hope to measure the quality of matching? For example:

  • With less work, the manager hired a less expensive junior candidate to save money. It appeared you “underhired.”
  • With senior candidates costing less, your manager “overhired” to take advantage of the market.

Either way, if your performance is based on “hitting the mark” you will appear less than successful if the pre-recession needs and not reevaluated and rewritten based on the realities of the manager’s hiring needs in a recession. The Time To Fill (TTF) should improve by all logic this year over last year. Unless your managers are hesitant to make offers because they:

  • Are hesitant to hire in case of future layoffs
  • Are holding out for the perfect candidate (95% is no longer good enough)
  • Are keeping requisitions open, but have no desire to hire at this time

The Offer to Hire (OTH) ratio seems equally likely to improve in a recession, unless you take into account:

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  • Managers “low balling” candidates to try and “take advantage” of the market
  • Offering junior positions to senior candidates to take advantage of the market
  • No longer “selling the company” due to the market (or the “only game in town” mindset)
  • Candidates are still “looking” but less likely to move for marginal gains at the cost of losing their current seniority in their current job (Why be “last hired” in the event of a layoff?)

Interview to Offer (ITO) ratio can easily be affected badly, as in the above examples, by managers who are only “shopping” or keeping busy by burning up your time. They could be searching for the perfect candidate, and despite the quality you are presenting, it does not fit with their conjured up version that should be “easy to find” in a recession! Route To Interest (RTI) is also impacted by whether or not managers truly want to hire and have a realistic view of what is available. In some companies the managers want to do all prescreening, in others they want the recruiting professional to manager that phase. In the former, the RTI is not critical, since you have no input in the process. It is a number driven purely by the hiring manager. You can only be faulted if you do not “pump in” the resumes. In the latter situation, a manager who is not responding due to hesitation or unrealistic expectations may impact the perception of your ability to “screen” candidates effectively. Despite your quality work, no interviews are occurring. You worked hard, I hope, inputting “reality checks” in establishing the metrics that you are currently measured against. Well, the time has arrived to do it again before “recession myths” make you look bad. Meet with the managers you are recruiting for and insure that:

  1. The position descriptions you are using are real
  2. The manager’s intent to hire is real
  3. None of his or her expectations, procedures, or processes have been changed due to the economic slowdown
  4. They realize they need to sell top candidates during the interview in a recession. The best still have options.
  5. They understand that many candidates can be hard to close during a recession due to uncertainty. Closing is always an art and always a 50/50 proposition.
  6. Those unemployed candidates can still be great candidates despite their current employment status and should be contacted, interviewed, and “sold” with the same enthusiasm as employed candidates. Read resumes and interview candidates without prejudice
  7. Everyone maintains timeliness. The slowdown in the economy is no excuse to respond, without a good and compelling reason, by slowing down the hiring process, especially once started.

Most of all, make sure they realize that hiring is not made easier by a recession. Quality is always a difficult goal to achieve. During a recession it is more important than ever that your efforts and performance be measured accurately and fairly. The metrics developed to measure you in the “good times” may not serve you fairly in the “bad times.” There is the assumption that your job got easier, and so your numbers should look better all by themselves. Well, the numbers might not only be not better, they may well get worse and that may have nothing to do with you or your effectiveness. But as in all issues, the correction begins with open and frank discussions with your partners or clients to insure that nobody is operating under a misconception or misunderstanding of the true impact of a recession on staffing, which is minimal. Finding the “best and brightest” without “breaking the bank” is always a tough job, good times and bad. There is an old clich?’ that goes, “We have done so much for so long with so little, that it is now possible for us to accomplish anything, forever, with nothing.” To me, this has always been a cry of frustration, not a statement of fact. We all hate report cards, unfair ones most of all. Have a great day recruiting!

Ken Gaffey (kengaffey@comcast.net) is currently an employee of CPS Personal Services (www.cps.ca.gov) and has been involved in the Department of Homeland Security, Transportation Security Administration project since its inception. Prior to this National Security project Ken was an independent human resources and staffing consultant with an extensive career of diversified human resources and staffing experience in the high-tech, financial services, manufacturing, and pharmaceutical industries. His past clients include Hewlett Packard, First Data Corporation, Fidelity Investments, Fleet Bank, Rational Software, Ericsson, Astra Pharmaceutical, G&D Engineering, and other national and international industry leaders. In addition to contributing articles and book reviews to publications like ERE, Monster.com, AIRS, HR Today, and the International Recruiters Newsletter, Ken is a speaker at national and international conferences, training seminars, and other staffing industry events. Ken is a Boston native and has lived in the greater Boston area most of his life. Ken attended the University of South Carolina and was an officer in the United States Marine Corps.

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