Every department in any organization have set expectations on what they’re supposed to achieve. For example, the sales department has certain sales targets & key performance indicators (KPIs) to hit, while in a digital marketing department, there are certain social media KPIs, email marketing targets, and even ecommerce numbers to achieve as well. But, today, let’s talk about HR targets and KPIs.
Before delving into the topic, let’s define what KPIs are. A Key Performance Indicator is a measurable value that demonstrates how effectively a company is achieving key business objectives. Organizations use KPIs at multiple levels to evaluate their success at reaching targets. High-level KPIs may focus on the overall performance of the enterprise, while low-level KPIs may focus on processes in departments such as sales, marketing or a call center. KPIs help demonstrate your goals and objectives, they show how effectively you are achieving them, they help everyone in your department stay on track, and they keep a record of what’s working in your recruitment efforts and how well it’s working. When you really think about it, KPIs are, in a way, more beneficial for you as an employee than they are to your direct manager. Granted, it is a way for your manager to measure the effectiveness of your work, but it’s also a method for you as an HR professional to see what’s working best for you and how you can constantly improve your current performance.
In order for an organization to truly become successful, each employee and department need to contribute to its success. It is also the role of HR professionals to search for, interview, and hire the right employees who will drive the organization’s success.. To ensure the efforts of HR professionals can be quantified and assessed, we’ve selected three main KPIs that HR professionals should measure in order to make sure their jobs are as effective and efficient as possible.
1. Yield ratio
The first KPI, and the one HR professionals might find most important, is yield ratio.
Yield ratio = Output/Input * 100
The yield ratio, in this particular form of a KPI, indicates how many candidates you yield as an HR professional throughout various steps in your recruitment/selection process in comparison to the total number of candidates considered for a certain vacancy. To demonstrate, let’s look at an example:
Let’s say Z-Tek, an SME based in Dubai, is hiring three Web Developers. They advertise their job and source candidates. Z-Tek ends up receiving 90 applicants for this position. Of these applications, 65 CVs match the opening requirements, and are moved onto the “phone interview stage”. Of those shortlisted candidates, 25 are sent assignments to complete as further screening, and of those seven were called in for interviews. Z-Tek ended up with five applicants to choose from, and offered the position to two.
Here’s where the yield ratio comes in: We can calculate it at each stage separately, choose which stages we want to compare, or we can even calculate the total ratio.
The way to do so is by dividing the number of candidates in one stage over the number of applicants in the previous stage, and multiplying the quotient by 100%.
By using the yield ratio, we can track many different KPIs, such as “qualified candidates per opening” which is directly related to “interview costs”.
Of course, in order to achieve a great yield ratio, we need to optimize our recruitment process. And of course, there are tools that help us get there, such as Bayt.com’s advanced filtration, screen out box, and prescreening tests that are available in both job postings and CV search. The first tool gives you the option to search for candidates according to your specific criteria, the second automatically filters out applicants who apply for your job but do not meet specific criteria set by you, and the third gives you the ability to add an automatic screening questionnaire to every job you advertise on the website.
By using these tools, you automatically eliminate candidates that do not have the skill set you are looking for. Each option improves your qualified candidate per opening ratio, increases relevancy, lowers recruitment costs, lowers interview time and costs, and – of course – improves your overall yield ratio.
2. Salary Competitiveness Ratio
Did you know that 66% of employees state that a low base salary is their main reason for leaving a job? (Bayt.com job satisfaction in the MENA region - 2015). Over the years, employers have come to realise this face too, and to prove that, the same survey showed that 83% of employers find it important to research market salaries when offering jobs to candidates. Therefore, the second KPI is your organisation’s salary competitiveness ratio. This KPI evaluates the competitiveness of the salary you offer your employees and potential candidates by comparing it to other companies in your industry and field.
SCR (Salary Competitiveness Ratio) = Avg. company salary/Avg. Competitors salary * 100
By calculating your salary competitiveness ratio, you maintain your attractiveness to candidates, as well as your ability to retain your current employees, while ensuring healthy compensation within your specific market. We know that acquiring information about average salaries in your industry, especially ones offered by your competition, is not an easy task. This is where tools like Bayt.com’s Payscale Analysis Report comes in; it offers customized and detailed breakdowns of salaries for specific job titles, specific industries, and for specific locations. This way, you’ll be able to maintain a healthy “average salary”, and can build your own pay scale within the parameters of the average salaries offered by your competition.
3. Offer Acceptance Rate
Another KPI, which you should definitely track as an HR professional, is your offer acceptance rate. The offer acceptance rate basically shows you a percentage of how many offers were accepted compared to the total number of offers extended.
Offer acceptance rate = Number of accepted offer/Number of extended offers * 100
The higher the acceptance rate, the less effort and money you’ve wasted on trying to recruit candidates. For your offer acceptance rate, you need to look at how many job offers you extended in any month, or quarter, or even a year. How many of those accepted the offer and ended up joining your workforce?
To track your offer acceptance rate, you divide the number of accepted offers, over the number of extended offers, and multiply by 100%. The higher the percentage, the more efficient your recruitment has been. Always look at the bigger picture for this one. Don’t limit it to one or two openings. Look at five or 10 at least at a time.
To improve your offer acceptance rate and lower your overall hiring costs, we need to look at the factors that affect the offer acceptance rate:
There are additional techniques that will help you improve your overall offer acceptance rate. One of the main techniques is choosing the right candidates to send offers to. Bayt.com tests helps you assess candidates based on various factors. By using categories such as: job knowledge, communication skills and personality tests, you can ensure that the person is actually the perfect fit for the job, and are much more likely to accept your offer. You can also eliminate candidates that do not have the required skill set you are looking for.
On a final note, and what the majority of HR professionals consider the most important, is how much money, and how much time it takes for each hire. Why does this matter? Because this is the sum of all of the above and it is directly related to the success of all stages of the recruitment process. This is also what proves the credibility of your recruitment process and is the bottom line for your HR departments.
As a last word of advice, try to calculate the KPIs for the previous quarter, and come up with a plan to improve your numbers for the coming one.
And, as always, happy hiring!