Internal and External Metrics

There are two types of metrics. Those metrics that drive client adoption / success and those metrics that you use to make yourself a better business.

 

Client metric: Yesterday’s discussion of “Strike Zone.” Important to client because it demonstrates the recruitment business’ ability to meet the client’s business needs.

 

Internal metric: Almost all metrics that are used in recruitment right now, including open reqs, time-to-fill, cost-per-hire.

 

Don’t let metrics get you into the place where you are continually proving that you are an expendable, tactical, internal staff function. Corporate recruiting must be a strategic P&L business function. The metrics that you use to communicate with your clients must be different than the metrics that you use to run your business better.

 

Here is the classic example of this point: Cost-per-hire. Cost-per-hire is a useful internal metric to help drive process efficiency for high volume positions. Inability to drive the CPH down may drive you to consider outsourcing certain recruitment problems to higher efficiency operations before your executive team determines that you cost too much for the return you generate. But you should never, ever expose this metric outside the recruiting business. Ford doesn’t give you numbers on defect rates on its assembly line. It does tell you that J.D. Power has determined that it has great buyer satisfaction with quality.

 

“Well how do I measure how cost effective I am in delivering my service?”

 

You don’t. At least not from the client’s perspective. You think like a business and compete for internal dollars either based on efficiency of service (you are the low cost provider, which is proven on a case-by-case basis as you bid for jobs) or the quality of result (you provide results that are superior to what your competitors can deliver). If you are selling quality of result then you should be able to get premium pricing.

 

Who are your competitors? Everybody who can do your job cheaper, faster and / or better. The obvious competitors are retained and contingency search firms. It is a useful exercise to go through and identify your competitors and their market strengths and weaknesses. And trust me, you do have competitors for your dollars.

 

Now here is the hard part. You want to encourage the competition. You want to invite the agencies in to compete head-to-head with you. It’s the only way that you can truly be accountable to the hiring authority for their business results. You want to think like a business and win the deal. More than sitting down with CFOs and talking about money, this is the kind of behavior that will make people stand up and take notice. For all their prognostication about how to make recruiting a strategic resource, most of the consultants miss a simple fact: recruiting can’t talk about money (as in earning it, not spending it), so they find it difficult to find a way to have a conversation with people who care about nothing other than how to inspire Wall Street (your executive team). So even if from a business school perspective it shouldn’t be true, from an operational reality it is a fact: income makes you strategic.

 

“Give me six months of competition. At the end of that time we can make an apples-to-apples comparison between the cost of service I provide versus my competition.”

 

I can hear the jaws dropping now. “Why the hell would we do that?” Two reasons.

 

1 – An increasing number of companies are outsourcing their recruiting departments. Exactly how safe do you think your job is anyway? At least this plan gives you 6 months.

2 – This is the only way to make recruiting a profit center. If your clients have a pool of dollars they can use for services and they chose you, then you can run a profitable business. You can have more leverage over discretionary spending. More capital to invest in expanding the influence of your business. You can invest in business consultants. You can own OD. You can actually start to get a return on your business.

 

How to measure a P&L on an internal business? Since you are returning dollars to the same pool from whence they came can you really say that you are making a “profit”?

 

Think of it this way: if the company spent those dollars on external firms they would have to show a loss. Every dollar difference between your cost of service delivery and the amount of money paid to you by the business lines is a profit if every dollar given to another firm to do the same thing would be a loss.