Recruiting Leader Data Toolkit Six Calculators, Worksheets, and Resources to Help You Better Understand Talent Acquisition and Direct Hire Agency Performance
Recruiting Leader Data Toolkit 2 INTRODUCTION When you re a recruiting leader, you re fighting a lot of battles. Hiring managers need new employees yesterday, your team might be constantly understaffed, and executives want to know how you re working strategically to hire to meet the goals of the organization. You need reliable resources that can help you make sense of your recruiting organization, so you can make strategic plans for your recruiting organization that are informed, cost-sensitive, and performance-oriented. In this toolkit, we ve included: Understanding the broad talent acquisition picture... 3 Assessing internal and external spend... 4 Cost-per-hire calculator... 5 Recruiting cost ratio calculator... 6 Assessing internal recruiting team quality... 6 Internal recruiting team quality worksheet... 8 Understanding the agency picture... 9 Tracking agency spend...10 Agency cost calculator...10 Direct hire agency benchmarking data...11 Tracking agency quality...14 Agency quality calculator...16 Conclusion: Taking a data-driven approach to recruiting...17 BountyJobs frequently encounters organizations that need help understanding not only their direct hire agency performance but their talent acquisition performance as a whole. Whether you re trying to get more information on how agencies are performing, how your in-house team is actually using agencies, or even something as simple as costs, BountyJobs has helped organizations sort these pieces of data out for the last eight years. We recognize that agency use is only a small piece of your overall talent acquisition efforts. In order to get a clearer picture of your agency performance, you need to take a step back and evaluate your entire talent acquisition organization. You can t just look at the direct hire agency stats and make an assessment without looking at the rest of your talent acquisition picture; you ll need both to see an impact on your organization.
Recruiting Leader Data Toolkit 3 Take, for example, a straightforward measurement like cost per hire. Now, it might be higher for agencies than across the rest of the talent acquisition organization, but what types of roles are you using agencies for? Are you only using them for executives or difficult-to-fill roles? Context is key. In that scenario, many organizations are willing to pay more. Other organizations might use it as a reason to increase their internal capabilities through hiring or training. Another might outsource more roles to a direct hire agency. No matter your strategy, your first step should be to understand what s going on in your overall recruiting organization. The following sections and tools will help you start doing just that. UNDERSTANDING THE BROAD TALENT ACQUISITION PICTURE Most organizations want to have a better understanding of how they re spending their hard-earned recruiting dollars. For too many of them, projecting these costs is nearly impossible: hiring managers and departments might have final authority on the budget, tracking performance can be difficult, and agencies might be used under the radar. As you look to understand the strategic outlook for recruiting, we ll cover how to understand the costs and some of the metrics that you should be looking at broadly to help you discover quality of hire. The first thing we ll look at is cost one of the most common concerns we hear about.
Recruiting Leader Data Toolkit 4 Assessing internal and external costs We want to first understand the costs that are going into your talent acquisition program. According to the American National Standard for Human Resource Management, 1 costs should be divided into two different categories: internal and external. Internal costs This tracks costs that are strictly internal to the organization. It includes costs such as: External costs Everything else falls under external costs. This includes things like: Salaries, benefits, development, and Direct hire agencies other loaded costs of your entire recruiting team. Your recruiters, sourcers, admins, and even the time you spend Applicant tracking systems and other technology costs recruiting fall under this category. Job advertising Hiring manager time spent on recruiting. Travel to job fairs This might be hard to estimate, but you can do it based on the amount of time hiring Interviews and background checks managers spend per requisition and their Assessments and other pre-hire services average salary. Office costs. This includes any proportion of the physical costs that your team takes up in office space. Any other internal costs. If there s any other loaded internal costs that you would typically count toward a department, this is where you d capture it. To help you understand the cost picture, we ve included a worksheet and a calculator in the following section. One is a cost-per-hire worksheet that will help you capture all of your internal and external costs and help you figure out your cost per hire. The other is a recruiting cost ratio calculator. Once you ve captured your recruiting costs, you can understand your recruiting-cost ratio. As a benchmark, Staffing.org puts the average recruiting cost ratio at 10.1 percent 2. 1 https://americanstaffing.net/wp-content/uploads/2015/08/hr-standards-booklet_web_revised.pdf 2 http://www.staffing.org/documents/recruitingintelligence.pdf
Recruiting Leader Data Toolkit 5 COST PER HIRE BASIC ASSUMPTIONS BOX TOTAL Hires (expected in 12 months or actual of a 12-month period) Average annual compensation per hire Average hiring manager hourly rate Average time (in hours) hiring managers spend on hiring per requisition A B C D # # INTERNAL COSTS (INCLUDE SALARIES, BENEFITS, LOADED COSTS) BOX TOTAL Recruiting managers Recruiters Sourcers Administrative staff Hiring manager cost (Boxes A D C) Office costs Other internal costs TOTAL INTERNAL COSTS (Add boxes E K) E F G H I J K L EXTERNAL COSTS BOX TOTAL Direct hire agency Advertising (job postings, online advertising, print) Career fair (including travel) Resume access Technology (ongoing) Candidate research Referral program cost Background check Reference check Assessments IT support for technology Other external costs TOTAL EXTERNAL COSTS (Add boxes M X) M N O P Q R S T U V W X Y TOTAL RECRUITING COSTS (Boxes L + Y) COST PER HIRE (Boxes Z / A) Z AA
Recruiting Leader Data Toolkit 6 RECRUITING COST RATIO RECRUITING AND COMPENSATION COSTS BOX TOTAL Total Recruiting Costs (Box Z) Total Compensation Recruited (Boxes A B) RECRUITING COST RATIO (Boxes BB / CC x 100) BB CC DD % Benchmark From Staffing.org = 10.1% Assessing internal recruiting team quality Assessing and managing costs makes sense for every organization, but it doesn t answer all of the questions about overall talent acquisition performance. A key component of recruiting department success is understanding the quality you can drive within your internal organization (we ll get to understanding the external picture in the next section). If you re just getting started tracking quality, here are five key areas to start with: Requisition load by recruiter: This is the average number of open positions a recruiter is trying to fill. Depending on the types of positions the recruiter hires, we ve seen this number range from less than five to more than 20. Candidates per hire by recruiter: This is the number of candidates a recruiter brings in to a final interview to fill a position. Four candidates is a good baseline for most organizations. Candidate quality by recruiter, channel, job level, and geography: Have hiring managers do a quick rating of candidate quality. Track performance of hired employees and track against source, recruiter, position, and location. Time to interview, offer, and fill: Track each job from the time it opens to the time of the first interview, offer, and fill. If you can break this out on a per-job level or location basis, it will be more helpful to understand that it will take longer to fill certain types of positions in certain areas. First-year retention: Track new hires for first-year retention percentage. When someone quits or is let go in the first year, it falls at least partially on a bad hire fit.
Recruiting Leader Data Toolkit 7 We ve put together a worksheet in the following section that can help you get started on tracking this, but it s likely that some of your existing applicant tracking or HR systems might be able to help. Even with all of this all of this information, we can t tell you how to prioritize this information. That s going to depend on your organization. Some will outspend competitors to get people hired faster or with better quality, while others take a slower, more deliberate approach. Neither is wrong, but you need to understand what is driving the overall talent acquisition picture for your organization. At the very least, it s worth understanding the kind of quality you re getting from your internal recruiting team as you begin to dive into understanding your agency use.
Recruiting Leader Data Toolkit 8 INTERNAL RECRUITING TEAM QUALITY RECRUITER NAME AVG. PER RECRUITER Level 1 Reqs (Administrative, clerks) Level 2 Reqs (Technical, managerial) Level 3 Reqs (Executive, low availability) Candidates per Hire (# of candidates to final interview per hire) Candidate Quality (Average rating from hiring manager, 1-5) Average Time to Interview (Number of days it takes to get the first interview) Average Time to Offer (Number of days it takes to give an offer) Average Time to Fill (Number of days it takes for a new hire to begin) First-year Retention (Percentage of year the average hire stays)
Recruiting Leader Data Toolkit 9 UNDERSTANDING THE AGENCY PICTURE The first thing people question about their agency use is usually how much they re spending on agencies across the entire organization. Getting a handle on direct hire agency costs can be tough. As we like to say, agency use in organizations is an 8 billion leaky faucet. It can be more difficult if you haven t been tracking costs consistently across your organization. In many organizations, hiring managers can and do go rogue and use direct hire agencies on their own. They may hide those costs, purposefully or inadvertently, making it difficult for even the folks in accounting to know exactly how much is being spent. If you re just getting started, you can often begin understanding your agency costs by looking at: Accounting codes: If you have an accounting code that your organization has consistently used to track agency costs, you re in a better position than most. You might even be able to break it down by department, vendor, and position. Invoices: If your use of accounting codes has been inconsistent, you can look to invoices to sort it out. After all, direct hire agencies are definitely getting paid, and it s usually a pretty substantial amount. Talk to the hiring manager and department heads: If you strike out with accounting codes or invoices, it s time to have a conversation with hiring managers and department heads. Figure out how they are using and paying for direct hire agencies. It could vary significantly from department to department.
Recruiting Leader Data Toolkit 10 Tracking agency spend Like before, the cost associated with direct hire agencies is often the first thing recruiting leaders are interested in. For agencies, you ll want to focus on four key metrics that should be fairly straightforward to track: Total amount spent on agencies: An organization-wide figure, as well as a location or job-level breakdown of those costs, is preferable. Average fee by dollar/percentage: Both the dollar amount spent per position and average percent are relevant measures, especially if you re looking to benchmark with other organizations. Agency cost per hire: The total amount of money spent on agencies divided by the number of hires you made. You ll want this so you can compare agency cost per hire vs. the overall cost per hire. Agency recruiting cost ratio: This is the total agency cost divided by total annual compensation of the hires made by agencies times 100. You ll want this so you can understand your agency cost ratio compared with your overall recruiting cost ratio. In the worksheets immediately following this section, we ve included two tools for you to better understand your direct hire agency costs. The first is a worksheet that will help you gather and calculate all of these costs. The second is a benchmarking report from BountyJobs that lists average fees in percentage and dollars by job category and industry. AGENCY COST CALCULATOR AGENCY COSTS Total spent on agencies Number of jobs filled by agencies Total compensation of jobs filled by agencies Average fee by dollar amount (Boxes EE / FF) Average fee by percent (Boxes EE / GG 100) Agency Cost per Hire (Box HH) Agency Recruiting Cost Ratio (II) BOX EE FF GG HH II JJ KK # TOTAL % %
Recruiting Leader Data Toolkit 11 ALL DIRECT HIRE FEES AS DOLLAR AMOUNTS 25,000 20,000 15,000 10,000 5,000 0 18,518 18,892 19,366 20,793 22,113 2010 2011 2012 2013 2014 ALL DIRECT HIRE FEES AS PERCENTAGE OF FIRST YEAR S SALARY 21.5% 21.0% 20.5% 21.0% 21.2% 20.0% 19.5% 19.0% 18.5% 19.8% 20.2% 20.6% 2010 2011 2012 2013 2014
Recruiting Leader Data Toolkit 12 INDUSTRIES RANKED BY AVERAGE FEE AVERAGE FEE AMOUNT INDUSTRY 2010 2011 2012 2013 2014 Aerospace/Aviation/Defense 24,565 23,248 23,885 20,617 22,635 Energy 21,017 22,751 21,576 22,684 24,440 Engineering 19,066 19,668 18,987 21,683 22,955 Financial Services 21,042 21,240 22,920 24,974 24,089 Healthcare/Health Services 15,753 15,862 17,514 17,827 17,468 Information Technology 18,139 19,479 19,624 22,186 24,096 Manufacturing and Production 18,119 19,314 18,762 18,745 19,924 Pharmaceutical/Biotechnology 27,092 27,176 25,514 28,392 31,449 Professional Services 14,401 16,882 17,788 17,804 17,797 Retail/Wholesale 16,059 17,819 18,054 18,873 18,438 GRAND TOTAL 18,518 18,892 19,366 20,793 22,093 JOB CATEGORIES RANKED BY AVERAGE FEE AVERAGE FEE AMOUNT INDUSTRY 2010 2011 2012 2013 2014 Research and Development 22,877 27,098 22,926 31,144 39,032 Executive 33,194 32,432 25,764 29,500 30,567 Finance/Accounting/Legal 20,183 20,531 21,881 23,810 24,019 Information Technology 19,231 19,229 19,832 21,791 23,320 Engineering 19,637 19,838 19,586 21,242 23,070 HR Management 18,986 18,556 18,793 20,941 23,480 Sales/Marketing/Creative 18,241 19,297 18,987 18,687 20,512 Manufacturing 16,741 19,819 18,529 18,235 19,395 Office/Clerical/Administrative 16,858 15,305 17,268 20,702 18,093 General Management 15,886 16,344 18,693 18,976 21,176 Medical/Health 15,822 15,592 17,432 18,182 18,174 GRAND TOTAL 18,518 18,892 19,366 20,793 22,093
Recruiting Leader Data Toolkit 13 JOB CATEGORIES RANKED BY AVERAGE PERCENTAGE OF FEE AVERAGE PERCENTAGE OF FEE INDUSTRY 2010 2011 2012 2013 2014 Research and Development 23% 24% 25% Finance/Accounting/Legal Manufacturing Engineering HR Management Information Technology Sales/Marketing/Creative Office/Clerical/Administrative Executive Medical/Health General Management 18% AVERAGE
Recruiting Leader Data Toolkit 14 Tracking agency quality Outside of costs, you ll also want to track a few quality metrics that will help you understand which agencies are doing well for your organization. Three of the metrics will help you compare the results agencies are able to provide to your own internal team. They include: Candidate quality by recruiter, channel, job level, geography: Have hiring managers do a quick rating of candidate quality. Track performance of hired employees and track against source, recruiter, position, and location. Time to interview, offer, and fill: Track each job from the time it opens to the time of the first interview, offer, and fill. If you can break this out on a per-job level or location basis, it will be more helpful to understand that it will take longer to fill certain types of positions in certain areas. First-year retention: Track new hires for first-year retention percentage. When someone quits or is let go in the first year, that falls at least partially on a bad hire fit. The second set of quality metrics is mostly to help you understand how direct hire agencies compare with one another. They include: Number of jobs taken: Does the agency only get a handful of jobs or does it get more than its fair share? Agency performance can vary depending on how much each agency gets to work. Average days to submit/interview: One advantage to using agencies is the amount of time it takes to get candidates in the door. Understanding the velocity, especially as they compare to others, is critical. Refund or replacement rates: If you re having to replace employees from an agency, you need to monitor refunds or replacements to see who is getting it right on the first try. Compliance or special initiatives: If you have particular compliance requirements or initiatives, like diversity, you ll want to track agencies that help you in those areas. Even an agency that might not be performing in line with the rest could be a good partner for a hiring initiative.
Recruiting Leader Data Toolkit 15 We ve included a worksheet in the following section that can help you capture all of these measures to compare direct hire agencies to your internal processes and to one another. Unfortunately, more advanced metrics and agency quality can be nearly impossible for you to track manually without a vendor management system like BountyJobs in place that manages all of your direct hire agencies.
Recruiting Leader Data Toolkit 16 AGENCY QUALITY AGENCY NAME AVG. PER AGENCY Number of Jobs Taken (Number of jobs agency has taken in last 12 months) Average Days to Submit (Average days to submit candidate to hiring manager) Refund or Replacement Rate (Average percentage of hires who need replacements or refunds) Compliance/ Initiatives (Scale of 1-5 how helpful agency is to compliance or initiatives) Candidate Quality (Average rating from hiring manager 1 5) Average Time to Interview (Number of days it takes to get the first interview) Average Time to Offer (Number of days it takes to give an offer) Average Time to Fill (Number of days it takes for a new hire to begin) First-year Retention (Percentage of year the average hire stays)-
Recruiting Leader Data Toolkit 17 CONCLUSION: TAKING A DATA-DRIVEN APPROACH TO RECRUITING Are you feeling overwhelmed thinking about all of the information you need to track down? That s OK. To get a data-driven picture of talent acquisition, you have to start somewhere. Sometimes, that might require focusing on a key metric that s driving the conversation in the organization (like cost). Other times, organizations are looking to completely rethink their talent acquisition program. How you use this information won t be the same as another company. We ve seen organizations completely turn over direct hire agencies, readdress technology, and consider structural changes to their internal recruiting teams. Others might just be looking to push down costs a bit and want to do more than just cut across the board. However you need to understand your talent acquisition organization, collecting the data is a start, even if you don t know how you ll use it. We put together these tools to help guide you through the process of analyzing your talent acquisition and direct hire strategy: The cost of hire and recruiting cost ratio calculators can be used to dissect and compare agency vs. internal performance. Agency cost worksheets can help you track down all of your agency costs. The quick-reference fee chart can help you determine how you re stacking up compared with the market. Quality worksheets can help you determine how your team and agencies are performing in key metrics. Some metrics, such as agency spend and performance, can be tough to track on your own. We know. It s one of the reasons we started BountyJobs.
Recruiting Leader Data Toolkit 18 We can help you manage your agency relationships better and help you get a complete picture of your direct hire agency data. We ve guided many organizations through the transition to BountyJobs and helped them understand direct hire agency relationships much more deeply than they can on their own. WANT TO LEARN MORE? Have questions about using this toolkit? You can get in touch with us and find out how we can help you become a better data-driven recruiting leader. ABOUT BOUNTYJOBS BountyJobs is a direct hire agency recruiting marketplace that simplifies the entire process between companies and direct hire agencies, helping companies hire better candidates, faster. BountyJobs uses the only data-driven VMS that gives HR teams and hiring managers complete control and clarity. Through one contract, one portal, and unrivaled benchmarking data, BountyJobs partners to help you simplify, analyze, and then deliver unmatched velocity and results in landing candidates from direct hire agencies. bountyjobs.com