Do KPIs actually work in recruitment?

Well, yes...and no!

The trouble with KPIs (Key Performance Indicators) is twofold. Firstly, no-one really like them. Let's be honest.

Many (not all) recruiters don't like being measured against them and many managers often dread the process of setting, targeting and holding people accountable to them.

Then there is the issue that people very rarely ever hit them.

I suppose that is the point to an extent - they are aspirational - but I much prefer setting Minimum Standards that people have to hit (no excuse, no questions) than KPIs that never get hit. Feels sensible to me.

Now don't get me wrong, we need metrics to run a business. In fact, it is business critical. We need data and we need to hold people accountable to key performance measures.

But there is something not quite clicking in the world of metrics that we need to address... so let's do that now with some of the core facts that we need to consider if KPIs are to be a positive driver of performance, and not just an uncomfortable stick to beat people with.

The following are some of the key principles to consider when it comes to data, metrics, KPIs in a recruitment company, as far as I am concerned:

Recruitment leaders should make data-based decisions, not instinct-based decisions.

The best recruitment businesses understand exactly what drives performance and use data to guide every major decision. Fact!

That includes a blend of inputs (activity), effectiveness (conversion ratios) and outputs (results). Any of these in isolation is interesting but not useful.

Together, they tell the full story.

Every recruitment business should have a core monthly KPI dashboard.

And alongside that, every recruiter should have a core monthly KPI dashboard.

If you don't have a consistent set of management information each month, it's difficult to understand or scale the business effectively.

In short if you don't know what metrics have the biggest impact on your business, then you can't replicate them. Similarly, if you don't know what is slowing your business down, you risk duplicating those activities and behaviours.

Remember, not all KPIs are equally important as each other. Some matter significantly more than others.

Identify a handful of metrics that genuinely drive performance, rather than trying to measure everything.

Look beyond surface-level metrics.

A KPI only becomes valuable when you understand the context behind it.

For example, average fee should be considered alongside average candidate salary, average margin, client type (new or existing) to reveal the real story.

Then use that data data to challenge assumptions.

Management intuition is often wrong. Analysing the data objectively helps uncover the real causes of performance issues and opportunities.

KPIs should drive better management decisions.

The purpose of measuring performance isn't reporting, it's identifying where there is untapped opportunity and to help focus our efforts on where to improve.

The goal is to translate this information into intelligence. Collecting KPIs is only the first step.

The real competitive advantage comes from converting that data into insight that improves decisions and business performance.

People metrics are just as important as sales metrics.

True performance in a recruitment business is a blend of revenue generation at the top, cost ROI in the middle and profit conversion at the bottom.

For example, recruiter churn impacts cost ROI and GP to operating profit conversion hits the bottom of the P&L where they can both in essence wipe out any revenue generated at the top (these are are often two of the strongest indicators of management quality and long-term business health, by the way).

Similarly, service metrics drives repeat business metrics (or certainly should!) and account penetration, which are all sales metrics in the end.

My Top 20 Company KPIs

From a company-wide perspective, if I were to pick 20 key performance metrics to measure across the business and stick on a dashboard, I would probably chose most of the following:

• Gross Profit (GP) Run Rate
• GP per Recruiter
• GP to Operating Profit Conversion
• New Clients Won
• Active Clients - As, Bs, Cs
• Vacancies Taken
• Exclusive / Retained Vacancies %
• CVs Submitted
• Interviews Completed
• Interview to Placement Ratio
• Placements - volume and value
• Fill Rate
• Average Permanent Fee (£)
• Average Fee %
• Average Candidate Salary
• Contractors Out
• Average GP Day Rate
• Recruiter Churn
• Time to Fill
• Client Retention Rate

All my recruiter KPIs (or in my case, Minimum Standards) would align to all of these.

Recruitment dashboards increasingly combine financial KPIs (gross profit, net fee income, contractor margin etc.), sales KPIs (meetings, vacancies, win rates etc.), delivery KPIs (CV to interviews, interviews to placements, fill rates etc.) and operational KPIs (time to fill, recruiter productivity, revenue per head) into one single (live) view.

This ensures that you get the full story behind current performance and align your thinking and future KPIs to all the leading data that will impact future results (increase average fee value, reduce time to hire etc.) , rather than those lagging KPIs that have already happened (placements, fees etc.)

So, to my first question, do KPIs work in recruitment? Absolutely yes, as long as they are meaningful and can positively influence future decision making.

Otherwise, no - not really!

Article by James Osborne