Essential Recruitment Metrics for Portfolio Companies

The Value of Tracking & Measuring The Talent Management Function (And How) 

Measuring the talent management function is vital to ensure that an organization effectively recruits and retains the best talent. When talent management is lacking, several problems can arise that affect the whole company and the bottom line, including: 

  • Inefficient Recruitment Process: A poorly performing recruitment process can lead to a longer time-to-fill, higher cost-per-hire, and a lower applicant-to-hire ratio. The results? Fewer positions are filled, and more money is spent on talent acquisition than necessary. 
  • High Turnover Rate: The Society for Human Resource Management (SHRM) reported that replacing an employee can cost a company six to nine months of an individual’s salary. (That’s around $30,000 for an employee who makes $60,000 annually. Ouch!) Learn the top reasons portfolio company employees quit and what you can do about it. 
  • Lack of Diversity and Inclusion: Limited DEI initiatives can lead to a lack of different perspectives and ideas, negatively impacting decision-making and financial performance. Employers who foster and support a culture of DEI draw excellent applicants and, more importantly, retain them longer. According to Forbes, organizations with a strong DEI presence are five times likelier to foster an innovative attitude than those with less welcoming environments. 
  • Poor Employee Engagement: Poor employee engagement can lead to lower productivity, higher turnover rates, and a negative impact on company culture. According to Gallup’s State of the Global Workplace, it cost organizations around the world $7.8 trillion in lost productivity in 2022 alone. 

By monitoring the recruitment performance of their portfolio companies, private equity firms can ensure that they are effectively recruiting and retaining the best talent at the right price. A consistent and data-driven approach to talent acquisition will help ensure the portfolio companies’ success and growth and, ultimately, the returns for the private equity firm’s investors. Additionally, by identifying recruitment challenges early, private equity firms can mitigate potential risks and ensure a smooth operation.

By taking a data-driven approach and monitoring the performance of their portfolio companies, private equity firms can ensure that they are effectively recruiting and retaining the best talent at the right price. Additionally, by identifying recruitment challenges early on, firms can mitigate potential risks and ensure a smooth operation.  

The Top 5 Portfolio Company Recruitment and Retention Metrics 

The most crucial step toward a high-performing talent management function is setting up appropriate data and measurements. While there is no shortage of recruitment and retention metrics, not all are equally significant or useful. To get you started, we’ve hand-picked our top five: 

1. Time-to-Fill 

Time-to-fill measures how long it takes to fill an open position from when it is posted. This KPI indicates the recruitment process’s efficiency and the company’s ability to fill open positions quickly. A long time-to-fill can suggest that the recruitment process could be faster or that the company needs help finding the right candidates. 

2. Cost-per-Hire 

Cost-per-hire measures the cost of recruiting and hiring a new employee, including advertising, recruiting agency fees, and other expenses. 

High cost-per-hire can suggest overspending or that the recruitment process is inefficient.   

3. Applicant-to-Hire 

The applicant-to-hire ratio measures the number of applicants for a position compared to the number of hires. A large applicant-to-hire ratio may indicate greater interest in the jobs offered by an organization. A lower ratio may signal better applicant conversion rates. 

4. Turnover Rate 

SHRM defines turnover rate as the frequency of employees joining and leaving an organization. This indicator is calculated by dividing the monthly separation rate by the typical payroll size, then multiplying the result by 100.  

Employee turnover is a crucial statistic for evaluating the effectiveness of human resources departments or HR management software. A low turnover rate suggests that your staff members are motivated, engaged, and satisfied enough to stick around for a while. 

5. Retention Rate 

Employee retention rates analyze how long your staff stays on the job and provides information about the working environment.  

In complement to turnover rate data, it offers a more comprehensive picture of employee resignations. A corporation should aim for an average personnel turnover rate of 10% and retention rates of 90% or more. 

Formulas To Measure Talent Acquisition and Retention 

Talent acquisition and retention formulas can provide a quantitative way to evaluate the talent management function and help identify areas where improvements are needed.  

Below is a list of formulas for the metrics mentioned above. 

  • Time-to-fill: (Number of days to fill the position)/ (Number of open positions) 
  • Cost-per-hire: (Total recruitment costs) / (Number of hires) 
  • Applicant-to-hire ratio: (Number of applicants) / (Number of hires) 
  • Turnover Rate: (Monthly Separation Rate)/ (Payroll Size) * 100 
  • Retention rate: (Number of employees who remain after a certain period) / (Total number of employees) 
  • Diversity and Inclusion: (Number of underrepresented group employees) / (Total number of employees) 

Organizations can use these formulas to track their recruitment performance over time, which can assist in identifying trends and patterns.   

It is essential to consider other factors, such as the company’s industry, location, and size, as well as the specific role and department, to interpret the results accurately. 

Many talent management measurement programs struggle to produce results due to a failure to offer evidence-based responses to critical workforce problems.  

KPIs for hiring are no exception. After assisting numerous private equity firms with their talent acquisition strategies, we discovered that for recruiting teams to make successful data-driven decisions, they must be able to:  

  • Connect hiring practices to KPIs for organizational performance  
  • Measure, monitor, and compare important hiring metrics  
  • Describe how workforce performance is impacted by hiring decisions.  
  • Deliver timely, digestible insights to stakeholders, including information on their potential impact and ROI 

In our ebook, Essential Recruitment KPIs for PE-Backed Portfolio Companies, you’ll learn about these and additional recruitment-focused KPIs that Hueman tracks and recommends to our partners. Download it here.