To measure how effective your talent strategy is, there are several key talent management metrics that you can track and analyze.
Savvy founders constantly measure and monitor their startups using metrics to ensure that they are moving in the right direction. When they see an anomaly in the numbers, they will drill down and make an interpretation, and then make an adjustment if necessary.
If you are running a startup or an innovation lab, I assume you already know this methodology well. If you don’t, here is a guide to get you started: Startup Series Part 3: You make what you measure.
An overview of talent management metrics
Managing your tech talents well is an essential part of a tech business. Therefore it is important to add some talent management metrics to the list of metrics you are already tracking.
The diagram below shows what metrics to use and what they measure.
By collecting the necessary data from your operation, you can calculate the metrics rather easily. We show the formulas in the list below.
A common analysis is to do a comparison with past numbers or industry norms. The comparison will reveal any gaps in your talent management.
1. Drop-off rate (recruitment pipeline)
= the number of candidates dropped off at the end of each step / the number of candidates at the start of the step.
It is used to measure the effectiveness of the upstream flow in the recruitment pipeline. E.g. if you have a high drop-off rate in your white-boarding session, perhaps your phone screening is too easy.
If the voluntary drop-off rate is high (e.g. many candidates decided not to attend the interviews), it could mean the candidate experience is poor.
Try to get candidate feedback to understand why a drop-off rate is high.
2. Offer acceptance rate (recruitment pipeline)
= the number of offers accepted / total number of offers.
If this rate is not 1, it means someone has declined your offer despite having gone through hoops to go for all the interviews. It usually means the candidate experience is bad or he has gotten a better offer from some other company.
To find out which case it is, try to get feedback from the candidates.
3. Employee feedback
Qualitative metric measuring employee engagement.
If your company is small or has a flat structure, you probably work alongside with the tech team and are able to observe if they are engaged and committed to their work. Otherwise you would need an employee engagement tool (I will review one in future) or to hold regular review sessions.
If you care to listen, employee feedback will reveal any problems at the management level or in the team culture. For larger organisations, there are more metrics for you to measure employee engagement.
4. Employee turnover rate
= total number of separations (resignations, dismissals, retirements and layoffs) in a year / average number of employees in the same year.
This is a metric that measures the overall health of your talent management.
If a company has a high turnover rate, it will struggle while trying to meet its development and innovation targets. It will also incur high costs in order to constantly recruit and train new talents to fill any vacancies.
5. Average tenure
= the average number of years your employees have spent in your organization before leaving.
This is an alternative metric to employee turnover rate. It allows convenient comparison with industry norms because such data is readily available.
6. Time to hire
= the average number of days it takes for a candidate to accept an offer counting from the day of initial contact.
This metric reveals how efficient your recruitment and hiring process is. Long time to hire is a common cause of poor candidate experience leading to high drop-off rate.
A tech company usually has longer time to hire than non-tech companies. Interviews and technical assessment spanning several weeks are becoming the norm. So a well-tuned, efficient recruitment pipeline will give you an edge over your competitors.
Tips: you can also measure smaller intervals, e.g. time to interview acceptance or time to offer, etc to locate the bottleneck in your recruitment pipeline.
7. Cost per hire
= total cost including recruiter placement fee, HR’s salary, engineers’ time spent on conducting interviews (converted to dollar amount), etc per successful hire.
This is another efficiency metric, but expressed in financial terms.
Take note that this is not a metric to optimize for. Because if the company’s core competency is technology, the cost of hire of a competent software engineer is negligible compared to the value he/she is able to create in his/her tenure.
Optimize for retention instead. In that way, you will lower the overall cost of your hiring process.
8. Glassdoor reviews, social media buzz
The words of mouth around your employer brand.
They are for monitoring what job seekers are saying about your employer brand. Generally speaking, the better your employer reputation, the lower your recruitment and hiring cost will be. You should aim to attract talents through peer-to-peer recommendations without trying hard to find them.
However these are considered noisy metrics and require great care to analyze.
When these metrics are tracked together with the usual business and financial metrics, you can paint an overall picture of your tech business. With some analysis, you will be able to find out how much your engineering talents contribute to the bottom line of your business.
If you have a suggestion on what things to measure, do share it with us. We are constantly on a lookout for new ideas.