Use Business Metrics to Inform Your Recruiting Strategy

Retention and employee engagement rates can help you get a sense of the efficiency of your hiring efforts. They are often measures of how well your business is doing. However, it’s helpful to dig deeper into the data. Measuring how your recruitment strategies support – or inhibit – your company’s larger business goals give you important insights into the value of your talent acquisition strategy.

How to use business metrics to inform your recruiting strategy

There are numerous ways to use business metrics to inform your recruiting strategy. LinkedIn Talent Solutions, for example, offers a list of 12 different calculations that you can perform, including formulas to determine employee satisfaction rate, quality of hire and employee referrals.

However, if you want to gain visibility into whether the hires you make are actually contributing to your company’s bottom line, and by how much, it’s important to conduct some other calculations. A major one is revenue per full-time employee (FTE).

Revenue per FTE takes the total amount of revenue generated by a company in a fiscal year and divides it by the number of FTEs at the organization, as the Society for Human Resource Management (SHRM) explained. A higher number likely reflects that each employee at your organization is a productive worker who furthers your business goals. A lower number may mean you have a worker efficiency problem.

Another important factor to look at is HR-expense-to-FTE ratio. As detailed in the “How Organizational Staff Size Influences HR Metrics” report by SHRM, this ratio shows the amount of human resource spend allocated to each individual FTE. While HR-expense-to-FTE ratio is typically larger for smaller organizations, the report noted that investing in recruitment software such as an applicant tracking system (ATS) can enable companies to scale effectively as they grow in size and ultimately reduce their ratio. SHRM found the average HR-expense-to-FTE ratio to be $2,986.

Using this data to make improvements

Metrics like the ones above can be used to tweak recruitment as well as overall business strategies at your organization.

If you’re finding that your revenue per FTE is lacking, consider ways that you can more strategically hire new talent. Surveying current employees and talking with department managers can help you understand which technical skills or competencies are lacking in your existing workforce, and then this information can be applied when making new hires. Expanding the size of your workforce can potentially be a way to fill in these knowledge and skill gaps.

However, hiring new talent may not always be your most sensible option. Depending on your company’s situation, you may be able to offer training and professional development opportunities to your current employees. They’ll learn skills that may not have been as critical for them when they first started at your organization.

Overall, it’s important for every organization to measure the business ROI of its recruitment strategies. Get started and ensure its methods really do result in a more profitable and productive company.

Items to remember:

Revenue-per-FTE: Total revenue in a fiscal year divided by the number of full-time employees.
HR-expense-to-FTE: The ratio of HR spend to individual full-time employee.
An ATS helps you scale in size but reduce the HR-expense-to-FTE ratio.
Hiring new talent and/or expanding professional development can also help improve your recruiting ROI.