Using Metrics to Create a Six Sigma Hiring Process

If everybody does what everybody else does, it’s a safe bet to predict that everybody will get average results. The key to success is to do something before everybody else does it ó or do it faster, or do it better. In other words, don’t follow the leader, be the leader. This is especially true as you begin to implement effective metrics programs. First, don’t get caught in a common trap: most recruiting department rely too heavily on historical metrics to manage their departments. This only works if you’re an employer of choice seeing plenty of top candidates or the economy isn’t changing much. While historical or reporting metrics are better than no metrics at all, they are not as meaningful as they need to be. They get published too late after the event occurs to have much value. Using reporting metrics to control current processes is like using the freeway exit signs to plan your next road trip. When you’re reacting to events, you’re working way too hard to be average. Many accounting departments are branded as too reactive with not enough forward thinking. Using reporting metrics to run a recruiting department will guarantee a similar reputation. In my opinion, the objective of metrics is to provide insight into what’s going on today, and to anticipate what will happen tomorrow. This allows you to correct current problems immediately (when they occur), and prevent potential problems from ever occurring. There are two classes of metrics aside from reporting metrics that allow you to do this effectively: process-control metrics and forward-looking metrics. Using them successfully can be the key to converting your hiring process into a strategic asset, not just a cost of doing business. Here’s a quick summary of all three classes of metrics and some tips on how to use metrics to create a Six Sigma hiring process. Reporting Metrics These tell you what happened after something happened. Some examples include cost per hire, time to hire, candidate by sourcing channel, and candidate response rates by sourcing channel. I’m not too fond of reporting metrics. Since they only tell you how you did, they have little diagnostic value. It takes too long to make changes to see the impact, since the feedback loop is too long. By the time you’ve corrected the problem, something else comes up that you should be working on. For example, you might discover that a certain job board is losing or gaining steam. By the time you discover this, it’s too late to do anything about it. If you tend to react to problems rather than anticipating them, you might be relying too heavily on reporting metrics. A slow economy can mask this problem, since things aren’t changing much. Once the economy shifts gears, you’ll need other metrics to guide you along. (Remember the other old car adage: you don’t need a speedometer in a parking lot, but that doesn’t mean you don’t want one.) Process-Control Metrics These tell you what’s happening now. The value of process control metrics is that they allow you to gain insight into a core activity of the hiring process, to determine if it’s running smoothly, and if it isn’t, to make real-time changes. Some of these activities include candidate response rates to ads (these tell you the impact of your current recruitment programs), daily and weekly sendouts by recruiter (hiring managers agreeing to interview a candidate) to track recruiter productivity, open/close requisition ratio (new requisitions divided by hires) to give you a clue to workload, and my personal favorite, the sendouts-per-hire ratio followed on a weekly trend. (Sendouts per hire is an all-encompassing measure of the recruiting process. If it’s above three something’s amiss. See my article The Best Metric of Them All.) Trends of all of these are important, so convert all of your tables to charts and graphs. Trend lines tell you what’s happening and if your process improvement programs are working. If they are, you can rest assured that when your next reporting metrics report comes out, cost per hire, time to fill, and candidate quality will all show positive results. Forward-Looking Metrics These tell you what’s likely to happen in the future. Forward-looking metrics allow you to anticipate potential problems before they become problems. With this information, you’re able to implement changes to prevent or minimize the impact. This is what all good managers do, but somehow recruiting managers as a class seem to spend an excessive amount of time reacting to situations rather than planning for them. If you feel you’re susceptible to this charge, you might want to consider implementing some type of forward-looking metrics programs. Workforce planning is the most obvious. While this is not a metric, it’s the key to planning the recruiting department’s staffing needs and sourcing channel strategies. Without a workforce plan, you’re already starting out in a reactive mode. (Every good budgeting system includes staffing needs by department, so this has to be available.) If you do have an annual workforce plan, you can ask your hiring managers to provide monthly updates. This will tell you if your hiring needs are going up or down. If you don’t have a workforce plan, then make sure you track the changes in open requisitions on a monthly basis. Go to weekly once you see this rising. Make sure the data is real time. If you have to wait for this information, you’ve simply converted an important forward-looking tool into just another reporting metric. Also track the number of employees voluntarily leaving. When this increases, it’s indicative of a strengthening economy. In this case, you will not only you have to replace those leaving, but you’ll also have more difficulty finding new employees. To get another sense of this, track ad response rates for any changes. Fewer candidates responding to ads is a clue to a strengthening economy. You also might want to start asking candidates how many different companies they’re interviewing with, and when possible, how long it took to get an offer extended. Keep track of this data: it offers great clues to a tightening labor market. If hiring managers aren’t seeing enough strong candidates from the recruiting department in a timely manner, they will go outside. Track the number of contracts let out to search firms and agencies. Bet that cost per hire will be rising. Also, track the increase or decrease in contractors being used or any outsourcing programs being discussed. While there are other forward-looking metrics you can consider, these will give you a sense of what’s about to happen. Metrics and Technology I had an opportunity to manage a 250-person manufacturing operation at an early age. As a team we were responsible for managing production schedules, handling purchasing, managing inventory levels, balancing labor, controlling overhead costs, and controlling quality and scrap rates. Daily metrics were the key to survival. In those days, you wanted to know about any problems within minutes of their occurring. Unfortunately, due to weak systems and our own ineptitude, we usually found out within hours or days. We wound up with a lot of scrap. Nowadays, systems are far superior. Take advantage of them. Strong systems have been the key to making Six Sigma process quality possible. The recruiting department needs to take more advantage of systems technology. An ATS offers more capabilities than just managing data. Great process control information is now available instantaneously. When this is coupled with forward-looking metrics, a Six Sigma approach is possible. Six Sigma quality is less than 1 error in 100,000. While Six Sigma is not realistic for hiring, important lessons can be learned by using Six Sigma principles to improve all phases of the recruiting process. The first is the recognition that metrics are important. The second is that the most important metrics are those that allow you to control the process when the event occurs or before it does. Reporting or historical metrics only tell you how much scrap you have, not how to eliminate it. This is actually acceptable if events aren’t changing too much. Once the economy changes direction, up or down, reporting metrics become useless, since it’s too late to do anything about it. Now is the time to consider using more real time and forward-looking metrics. The economy is about to change direction. Good metrics will tell you exactly when.