THE TECHNACIOUS RECRUITER NEWSLETTER

July 24, 2008   view past issues

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Feature: The False Security of Feel Good Metrics

A recent research paper from the analysts at Wachovia Capital Markets had this to say about job boards: “Our checks indicate marketing budgets continue shifting from online postings and resume database, to emerging strategies like keyword search and social networking, at an accelerating rate. ROI is the key driver, as employers seek the better measurability of CPC/CPA [cost per click/cost per action] and attempt to reduce unutilized services.” While I applaud any move toward more rationale spending of recruitment advertising budgets, I don’t think CPC/CPA is the answer. Such metrics may make us feel good, but they do not provide us with meaningful insight into the effectiveness of our investment.

The first problem with these metrics is that they are incomplete. They measure candidate behavior, not recruiting results. It’s nice to know how many people clicked on an ad and viewed it and how many people subsequently acted on what they saw (i.e., applied for the position). The former tells us something about the number of people an advertising venue or Web-site can attract, while the latter provides some insight into how well we are writing our job postings. The problem is that neither tells us anything about our results, whether our advertising investment actually led to a hire. A new employee. That’s the real bottom line, right? And neither CPC nor CPA tell us anything about that.

In fact, these metrics can even be misleading. They can cause us to invest our employer’s money in the wrong places. How? If a source generates a lot of ad views (as measured by CPC) or a lot of applications (as measured by CPA), but those ad views and/or applications come from unqualified candidates, then investing in the source with the best CPC or CPA is actually a waste of money. We’re actually improving the efficiency of our ineffectiveness.

Feel good metrics give us the illusion of managing our recruitment advertising budget wisely, but they don’t give us the information we need to do so. The make us feel as if we’re on top of the situation, even as they make it harder to perceive what’s actually going on. They give us data, but not insight. And HR/recruiting teams don’t need more data. They don’t need to feel good; they need to see the impact of their decisions more clearly so they can direct the best recruitment advertising to those locations where it will do the most good.

What metrics can do that? In my opinion, there are just two. Instead of Cost per Click and Cost per Action, I suggest you focus on Cost per Hiring Source (CPHS) and Quality of Hire per Source (QHPS). You see, the Wachovia analysts had it wrong. The goal for recruiters is not to maximize the enterprise’s ROI; it is to optimize it. Rather than simply minimizing costs (per click, per action or per anything else), we should focus on identifying the best sources of the best yield. And, the best sources of the best yield are those which produce the greatest number of high caliber new hires at the lowest cost. Let me explain what I mean.

Cost per Hiring Source (CPHS)

This metric measures the flow of new employees into an organization by source. In other words, it identifies where a recruitment advertising spend produces the most new hires in each of the specific career fields for which an organization recruits. Unlike such “strategic” metrics as the Recruiting Efficiency Index which measure overall effectiveness, CPHS is very tactical. We can use the metric to make accurate spending decisions. To determine where to invest our limited advertising dollars, we simply select the site or sites with the lowest cost per new employee delivered to our organization.

In effect, CPHS measures cost-per-hire, but it does so in a way that is very different from that used in the traditional cost per hire (CPH) metric. These differences occur in two important areas:

  • Traditional CPH measures what your costs are. CPHS measures what your cost are and where. The first metric enables you to maximize your ROI by minimizing your costs. The second enables you to optimize your ROI by minimizing your costs at the source. It not only tells you what to do, but where to do it.
  • Traditional CPH is a global metric that is determined by averaging the cost per hire across all of an organization’s career fields. It is a general measure that can hide critical cost variations in specific career fields. For that reason and because the best advertising is always targeted to a specific audience, CPHS is calculated by individual career field. It is not a global measure, but a community one. It tells you which source produces the best results (i.e., the lowest cost per hire) in a specific career field.
  • Quality of Hire per Source (QHPS)

    Presumably, the decision to hire a candidate is a measure of their quality. Unless the organization’s strategy is to excel by hiring mediocre talent (in which case, it has bigger problems than how to spend its advertising dollars effectively), a new hire is, by definition, a quality hire. In other words, the measure of a source’s quality is an organization’s decision to select a person found there rather than a person found at some other source.

    The downside to this measure, of course, is that it says nothing about performance on-the-job. While that outcome can be (and often is) significantly influenced (for better or worse) by the quality of supervision, it is important to identify those sources which yield the people who perform best after they are hired. That’s what Quality of Hire per Source is intended to do. It identifies which sources provide new hires who make the greatest contribution to their unit. It is the product of two factors:

  • The rank order value of each new hire’s contribution by reverse numerical quartile (i.e., if a person’s performance places them in the first quartile, they are assigned a value of four; if it places them in the fourth quartile, they are assigned a value of one). For example, if source A produced three-out-of-ten employees in a unit and they are rank ordered as being in the first, second and second quartile; and source B produced four new hires ranked ordered as being in the second, third, fourth and fourth quartiles, then this factor would be calculated as follows: A = 4 + 3 + 3 or 10, while B = 3 + 2 +1 + 1 or 7.
  • The company’s average gross profit or what is commonly referred to EBITDA (i.e., earnings before interest, taxes, depreciation and amortization) per employee. For example, if a company generated an EBITDA of $1,000,000 and had 10,000 employees, then its average gross profit per employee would be $100.
  • The company’s QHPS for source A is 10 x $100 or $1,000; the QHPS for source B is 7 x $100 or $700. To optimize the organization’s ROI, therefore, it should invest in advertising at source A.

    Of the two metrics above, QHPS is undoubtedly the more controversial for at least two reasons.

  • The rank order value factor, by itself, differentiates the relative contribution of new hires from each source so why bother translating it into profitability per source?
  • There are other measures of employee quality (e.g., revenue per employee, individual performance appraisal scores) that could be used so why pick profitability?
  • Using profitability, expressed in hard dollar terms, recognizes a simple reality of life in today’s enterprise. It is the one parameter that will resonate best with an organization’s senior leadership. It is a measure they understand and respect-a key ingredient in building the business case for continued investment even in difficult economic times. And, while certain line units may generate more profit per employee than other units, our goal is to identify the relative bottom line impact of one source versus another. The only way to do that is by using the organization-wide average of profit per employee as our baseline.

    It’s hard enough, in the best of times, to apply metrics effectively. In today’s challenging economic environment, recruiters are not well served by metrics that are incomplete, metrics that make them feel good but don’t help them make smart investment decisions. For my money, the only metrics they should use are those which tell them where they will get the best results. And, the best results can only be defined as new employees who contribute effectively on-the-job. That’s how you optimize your ROI.

    Thanks for reading,

    Peter

    P.S. READER’S ALERT: Don’t miss the write-up below on WEDDLE’s latest book-Finding Needles in a Haystack. Shally Steckerl called it “A rare and uniquely useful reference guide for recruiters!”.

    P.S.S. Thank You! I’m very grateful to the following people for helping to make the launch of my new book, Recognizing Richard Rabbit such a grand success:

  • Don Ramer, Industry Leader and CEO of Arbita
  • Dave Mendoza, Master Cybersleuth and architect of SixDegrees
  • Jason Davis, Visionary and founder of RecruitingBlogs.com
  • Dave Opton, Thoughtful Innovator and founder of ExecuNet
  • Many thanks, guys. I’m forever in your debt.


    This Issue’s Sponsor: Recognizing Richard Rabbit

    This issue of WEDDLE’s newsletter is brought to you through the generous support of Recognizing Richard Rabbit, Peter Weddle’s big bestseller in a little book that is this year’s first choice for summer reading.

    Recognizing Richard Rabbit is a fable for adults, young and not so young. In the genre of Who Moved My Cheese?, it’s a tale about some forest friends that make an amazing discovery by trying to help one of their own. They don’t uncover the key to organizational change, however, or to setting strategic goals for the enterprise. No, Recognizing Richard Rabbit is a much more personal book and its gift is unique to each and every reader.

    This story is not about self-improvement, but about self exploration. It is all about finding the secret to authentic living. To being your own true self. How does Recognizing Richard Rabbit do that? Unlike traditional fables, this tale unfolds in two synchronized parts: one in fiction-the fable, the other in nonfiction-a parallel self-interview. In essence, you are invited to tap both the creative and the analytic sides of your brain-to probe the whole of your inherent talent-so you can find the pathway to the person you were meant to be.

    Make this the summer when you figure out how to meet the person of your dreams-the one who lives inside you. Get your copy of Recognizing Richard Rabbit today. All you have to do is call WEDDLE’s at 317.598.9768 or click here. So, don’t delay. Make sure you have Recognizing Richard Rabbit packed in your suitcase for your summer vacation.


    Section Two: Site News You Can Use

    Monster published a study of men and their desire for “Dad-friendly” benefits. The results affirm a growing trend among men to be more engaged in the lives of their children and more committed to child rearing activities. Among the 1,000+ fathers who responded:

  • 66% of those with toddlers said they would take advantage of flexible work schedules if they were offered by their employer;
  • 71% of those with a child under the age of 5 said they would take paternity leave if it was offered by their employer; and
  • 48% of those with school age children said they would use paternity leave if it was offered by their employer.
  • Why should these findings be of interest to recruiters and HR professionals? Because better than eight-out-of-ten (82%) of those surveyed said they viewed companies which provided such benefits more favorably than those that did not, and in the War for the Best Talent that’s a real and important competitive advantage.

    Classified Intelligence reported on the results of a study by ABC which found that those who watched ads on both the network and its Web-site bought more of a product than those who watched ads on a single medium. Viewers who saw ads on ABC.com spent $69.46, those who saw the same ads on ABC TV spent $82.81, while those who saw the ads on both media spent $104.60. What were they buying? Listerine mouthwash. How can that help recruiters? Well, if you can sell more of something as lacking in sizzle as mouthwash with ads in more places, think what you could do selling employment opportunities that way. In other words, to give your employer a fresh, minty look, post your jobs in multiple venues. Candidates need to see your opportunity (and your brand) in several locations, not just multiple times at the same location. The multiple venues provide a greater probability of recognition-they increase the ability of your ad to break through the clutter and into the consciousness of the viewer; the multiple impressions, on the other hand, provide reinforcement-they increase the likelihood that a person will act on their recognition of an opportunity. As the ABC study confirms, you need both-recognition and reinforcement-to advertise effectively in today’s cluttered and frenetic environment.

    The School of Medicine at Stanford University conducted a study which found that one-in-eight Americans exhibit at least one sign of Internet addiction. Although the research was completed in 2006, it is particularly relevant today. Since stress often triggers compulsive behavior, today’s difficult economic situation is likely to increase the incidence of the disorder. Who is it most likely to affect? According to the study, the typical sufferer is a single, college-educated, white male in his 30s. What happens to them? They spend 30 hours or more per week on nonessential computer use, sapping both their on-the-job performance and productivity in the process. What do they do online? They constantly check email, make blog entries, visit travel or news-related Web-sites and chat areas. In other words, they are not visiting porn or gambling sites or playing online games, which is what most organizational firewalls are designed to prevent. They’re busy doing the kinds of things that organizations typically permit online, but they are not contributing to the work that needs to get done. What can you do? First, develop and promulgate specific standards for the use of computers and the Internet at work. Define what the Web is supposed to be used for and what it’s not. Second, educate employees on what addictive Internet behavior looks like and on the harm it can do to their careers. Third, train supervisors to be on the lookout for addictive Internet behavior among their team and on where to go to get the appropriate assistance for those who need it.

    WEDDLE’s released a powerful new tool for recruiters. Called Finding Needles in a Haystack, it’s the first comprehensive listing of keywords for successfully searching resume databases online and off. The book provides thousands of search terms and phrases for the:

  • engineering,
  • finance,
  • healthcare,
  • human resources,
  • sales & marketing,
  • technology,
  • and other fields.
  • If you’re not getting the yield you need from job board resume databases, data mining or even your own resume management system, this is the reference book for you. In fact, sourcing guru Shally Steckerl described this book as “A rare and uniquely useful reference guide for recruiters!” It doesn’t get any better than that! To order your copy, please call WEDDLE’s at 317.598.9768 or click here. Get Finding Needles in a Haystack today!

    WEDDLE’s also offers a number of other publications for recruiters seeking to win the War for the Best Talent and maximize their ROI … their return on the Internet. They include:

  • WEDDLE’s 2007/8 Guide to Employment Sites on the Internet. Called the “Zagat of the online employment industry” by the American Staffing Association, it provides full-page profiles of 350 of the best job boards in a range of occupations, industries and locations;
  • WEDDLE’s 2007/8 Directory of Employment Related Internet Sites. The “address book of the online employment industry,” it lists over 9,000 sites and organizes them by the occupational fields, industries and geographies on which they focus; and
  • WEDDLE’s 2007/8 Guide to Association Web Sites. The key to the “hidden talent market” online, it details the recruiting resources and capabilities that are provided at the Web-sites of over 1,900 associations and societies.
  • Postcards from Space: Being the Best in Online Recruitment & HR Management. A compilation of Peter Weddle’s columns for The Wall Street Journal, it provides a complete introduction to the Best Practices for sourcing, recruiting and retaining talent online.
  • Generalship: HR Leadership in a Time of War. The only primer on leadership that focuses on the unique challenges of the HR professional waging both a War for Relevancy in the modern corporation and a War for Talent in the 21st Century labor market.
  • So make sure you’re at the top of your game, get your WEDDLE’s books today. Click here or call WEDDLE’s at 317.598.9768.


    Section Three: Site Profiles

    Site Spotlite … from the pages of WEDDLE’s 2007/8 Guides and Directories

    There are 40,000 job boards now in operation in North America and an equal number operating elsewhere around the world. The key to recruiting top talent online, therefore, is knowing where to find and how to select the best sites for each of your requirements. WEDDLE’s 2007/8 Guide identifies 350 of the top sites worldwide and provides the information you need to determine which job boards will deliver the optimum yield for you. For example:

    AllRetailJobs.com

    http://www.allretailjobs.com

    Post full time jobs: Yes

    Post part time, contract or consulting jobs: Yes-All

    Distribution of jobs: International-USA, Canada

    Fee to post a job: $201-300/posting

    Posting period: 60 days

    Can posting be linked to your site: Yes

    Resume database: Yes

    Number of resumes: 200,000+

    Source of resumes: Direct from individuals

    Top occupations among visitors: Store Manager, Buyer, Merchandiser, Sales & Marketing

    Other services for employers: Banner advertising, Status reports: Banners, Postings

    Member, International Association of Employment Web Sites: Yes


    Get Recognizing Richard Rabbit Today!

    This issue of WEDDLE’s newsletter is brought to you through the generous support of Recognizing Richard Rabbit, Peter Weddle’s big bestseller in a little book that is this year’s first choice for summer reading.

    Recognizing Richard Rabbit is a fable for adults, young and not so young. In the genre of Who Moved My Cheese?, it’s a tale about some forest friends that make an amazing discovery by trying to help one of their own. They don’t uncover the key to organizational change, however, or to setting strategic goals for the enterprise. No, Recognizing Richard Rabbit is a much more personal book and its gift is unique to each and every reader.

    This story is not about self-improvement, but about self exploration. It is all about finding the secret to authentic living. To being your own true self. How does Recognizing Richard Rabbit do that? Unlike traditional fables, this tale unfolds in two synchronized parts: one in fiction-the fable, the other in nonfiction-a parallel self-interview. In essence, you are invited to tap both the creative and the analytic sides of your brain-to probe the whole of your inherent talent-so you can find the pathway to the person you were meant to be.

    Make this the summer when you figure out how to meet the person of your dreams-the one who lives inside you. Get your copy of Recognizing Richard Rabbit today. All you have to do is call WEDDLE’s at 317.598.9768 or click here. So, don’t delay. Make sure you have Recognizing Richard Rabbit packed in your suitcase for your summer vacation.