Effective talent management needs to be measured and not just managed. As the adage goes, “if you can’t measure it, you can’t manage it.” When it comes to measurement, there are a host of different metrics you can use. However, we propose starting with the following 4 which are arguably the most important for any small to mid-sized scaling business:
Cost of new hires
Hiring can be extremely expensive if a scaling business uses agencies to fill most vacancies, as many do in my experience. So, it is vital to measure how much new hires are costing the business. This enables you to decide where to invest your recruitment budget and how to attract better candidates. Glassdoor, the employee review and insights company, estimated that the average cost to hire was £3000 in 2020, but this is likely to be significantly more if the candidates you need have in-demand skills or are at a senior or managerial level.
Cost per hire is relatively straightforward to measure as it simply involves dividing the total hiring costs by the number of hires for any given period. The total hiring costs should take account of external costs including job advertising costs, agency fees and pre-hire assessments while internal costs include referral bonuses, in-house recruiters, and in-house systems such as an applicant tracking system.
The best ways to reduce cost per hire are to use less expensive hiring channels including referrals, job boards and LinkedIn. You should also consider total talent solutions such as outsourcing, sub-contracting and offshoring work where project-based work and roles can be done more cost-effectively by skilled people outside the business. As a quick win, I would strongly recommend a generous, engaging and well-communicated referral program, as this can save a company a significant amount and generally leads to better-quality candidates.
Internal fill rate
This is, in my experience, one of the most important metrics for talent analytics. It measures the percentage of key roles (both managerial and non-managerial) filled by internal hires in a given period. For example, many top companies ranked in the “Best Companies to Work For” league tables aim for at least 80% of such positions to be filled from within the company. This is a crucial measure as it provides a good indication of your company’s success in retaining, developing, and progressing top talent.
It is important to note that it isn’t always desirable to have most roles filled by internal candidates, particularly when you are looking to transform the culture, strategy, or performance of the business. It is typically beneficial to bring fresh talent into the company to encourage diversity, different perspectives, and fresh thinking.
Retention of key talent
Many growing companies fail to measure the retention of key talent. This is a grave mistake as this metric provides a way of tracking how successful you are at creating the type of work environment that attracts and motivates top-flight talent.
It is important to stress that this measure is different from a general turnover measure which looks at what percentage of the workforce are leaving in any given time, typically each quarter or year.
While general turnover figures are important, retention of key talent is a much more targeted measure that looks at the turnover of your “A-players”, those who are likely to be the greatest contributors to your company’s success.
In addition to this metric, I would strongly suggest conducting “exit interviews” with all key people who resign to explore their reasons for leaving. This feedback together with engagement research (incl. focus groups, ongoing dialogue and engagement surveys) will provide HR and management with a good basis for making improvements to employee engagement and retention.
Number of employee ideas and idea conversation rate
For scaling companies to succeed in increasingly competitive, fast-paced markets, they need to create the type of work environment where people feel willing to openly share their ideas to improve products, processes, and teamwork.
However, in our experience, very few companies track the number of business improvement ideas they get from employees together with the adoption of these by the business. This is a big oversight as these metrics provide a good indication of the levels of innovation, commitment, and engagement of the workforce.
To get the most from their people, every scaling business will benefit from identifying a handful of critical talent objectives and metrics, such as those above, that are aligned with their overall business and people strategies. This HR scorecard will help you track and improve the effectiveness of your talent programs and initiatives, enabling you to derive maximum returns on your investment in people.