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Updated August 24, 2022You’re reading an excerpt of The Holloway Guide to Technical Recruiting and Hiring, a book by Osman (Ozzie) Osman and over 45 other contributors. It is the most authoritative resource on growing software engineering teams effectively, written by and for hiring managers, recruiters, interviewers, and candidates. Purchase the book to support the author and the ad-free Holloway reading experience. You get instant digital access, over 800 links and references, commentary and future updates, and a high-quality PDF download.
It’s important to have a set of metrics that you can use to evaluate, diagnose, and improve your hiring funnel. Metrics can also help you predict whether your activities are putting you on track to hit your hiring goals. There is no single metric that encompasses the health of the funnel. We present several commonly used metrics that, combined, can help you understand how your recruiting process is functioning.
Reviewing the number of candidates, or volume of candidates, at each stage gives a broad sense of your hiring funnel. Because this metric is easy to calculate, and it’s hard to have any insight without it, most companies will review their volume regularly.
Conversion rates (pass-through rates or yields) measure the percentage of candidates who move from one stage to the next—for example, the percentage of candidates who make it to an onsite interview after a phone interview.
The offer acceptance rate measures the percentage of candidates who accept an offer of employment from the company, whether before or after negotiating the offer’s terms, and is a particularly commonly used conversion rate.
Conversion rates give you a breakdown of where you lose candidates in your funnel. A low conversion rate at one stage might indicate that you are judging candidates too harshly (or incorrectly) at that stage, but it could also indicate that you are being too lenient in preceding stages. It’s also important to break down the loss at each stage by the major force behind it: whether it was company-driven (you decided not to move forward with a candidate) or candidate-driven (candidates could be pulling out of your process due to a poor experience).
Source: Lightspeed Venture’s Startup Hiring Trends report (2017-2018)
Efficiency metrics in hiring and recruiting measure the rate and cost of candidate progression through a hiring funnel. These metrics can be used for planning (knowing how long, on average, it takes to fill a position) and budgeting (deciding how much to budget for recruiting in the future).
Time-based metrics, such as time-to-fill or time-to-hire, are an efficiency metric that measures how quickly candidates move through a hiring funnel. Time end-to-end can be measured, or, for more fine-tuned diagnostics, the time between any two stages can be measured (for instance, maybe the team takes too long to schedule interviews).
Cost per hire is an efficiency metric that measures the financial expenditure required to fill an open position. Standardized ways of calculating cost-per-hire divide total expenditures by the number of hires, but any meaningful method can be used. For instance, Aline Lerner encourages engineering functions to calculate the cost of engineering time (interviewing, writing feedback, debriefing) per hire because this makes up a bulk of hiring costs. Many components of cost-per-hire are tightly coupled to conversion rates—in general, the earlier you can weed out candidates who wouldn’t have been a fit, the less time and money you will spend on them.
cautionSome companies use efficiency metrics to judge how their recruiting function is performing—but they don’t capture the actual value your process is producing. You could be hiring candidates quickly and cheaply, only to later realize that they aren’t a fit for your company, and be forced to start again.
Effectiveness metrics measure how well a company’s goals in hiring and recruiting are met. Effectiveness metrics can also challenge a company to review its goals when ostensible success still leaves something lacking. In these ways, they capture important information that efficiency metrics can overlook.
Quality of hire is an effectiveness metric that attempts to provide a more holistic metric by looking at the value created by new employees. There’s no single, standard way of measuring this, but most variations look at how an employee is faring some time after being hired by considering data like performance reviews, employee engagement surveys, or retention. Downsides of the quality-of-hire metric are that it takes a long time to measure and may conflate candidates’ quality with factors outside their control, such as on-boarding and new-hire management.
Candidate-driven metrics are an effectiveness metric gathered through surveys, which can help measure the candidate experience and provide further insight into possible improvements in your process. These metrics can be as simple as calculating a Net Promoter Score (NPS) or include more in-depth questions about a candidate’s experience. Larger companies might administer these surveys formally, but sometimes a simple, informal debrief with a subset of your candidates will help surface issues.
Smaller companies might opt to look at just a subset of these metrics. For instance, some startups might just look at funnel volume and offer acceptance rates on a regular basis, and only calculate other metrics should the need arise.
Larger companies may calculate many more metrics, and might even segment them in different ways:
Segmenting conversion rates by candidate source (referrals, applicants, sourced candidates) can help assess how different sources are performing.
Splitting out metrics along diversity axes can help uncover where in the process candidates that could add to your team’s diversity are dropping out or being rejected.
Calculating metrics like per-interviewer conversion rates can help identify opportunities for giving feedback to particular interviewers.
Metrics are only as valuable as they are useful in helping you improve your processes. “A Modern Take on Data-Driven Recruiting from a Google Recruiting Lead” debunks a few myths about some of the more commonly used metrics and goes into detail about how to use past data to improve your future hiring performance.