2 August 2020
Time to Hire is the worst hiring KPI in startups and this is why.
Defining KPIs. It’s not just something you can do to have some guidelines in your company. It’s something you should do to prevent a lack of expectation management in your company – because expectation management is one of the most important, yet highly undervalued components of success.
And defining KPIs is also something you should not only introduce to your sales team, but to all teams. So yes, hiring included – even if you don’t have someone for hiring/HR activities, you do need to determine goals and define KPIs.
The thing with for instance sales KPIs is that they are very tangible and most often quite easy to define. You as a founder probably started building up the sales organisation, so you got a feeling for estimating what someone should be able to achieve in your sales team. Moreover, these KPIs are even more easy to measure. Here at Equalture for instance, the main KPI of our sales team is new Monthly Recurring Revenue (MRR) – and there’s no way that this can cause any confusions.
When it comes to hiring, things might get more difficult. Hiring is about the tasks you execute to actually hire someone. And after that, responsibilities go to HR. Hiring KPIs, however, shouldn’t stop at the moment of hiring someone, because when focusing your hiring KPIs on the actual hiring process only, you will never be able to assess the actual success of this process. And even worse: You stimulate your team to focus on smoothening the hiring process for them on the short run, rather than the success of your team on the long run.
The worst hiring KPI I have ever heard of in startups (and unfortunately I hear this one from 99% of the startups out there): Time to Hire. Here’s why.
Our desires when defining KPIs
Before diving into the concept of Time to Hire, let’s first quickly describe the desires that startups are having when defining KPIs.
First of all, defining KPIs is something that most startups don’t like. It feels like overhead and it’s not going to add value to your business tomorrow. I do understand this mindset, because that’s how I felt as well in the beginning.
So we want to prevent ourselves from any additional, unnecessary work here. That’s why we will likely find ourselves in a situation where KPIs are defined by focusing on the following guidelines:
- It should be easy to define;
- It should be even more easy to measure;
- And it should be measurable quickly after an action or decision moment.
This goes for sales, support, engineering, and yes, unfortunately also for hiring.
Time to Hire: A misleading KPI
Please note that, for this story, I consider Time to Hire and number of positions to fill in x months as a comparable KPIs, since it’s both focused on the time frame to hire people.
Time to Hire ticks all the boxes when it comes to our desires for defining KPIs. It’s very easy to define, it’s even more easy to measure, and you can measure it right after you made a hiring decision.
A KPI, however, is a Key Performance Indicator, and therefore it should indicate the performance of a particular team/practice. So in the case of hiring, it should indicate how successful hiring is within the company. And that’s exactly why I believe that focusing on Time to Hire is dangerous.
How a time-element shifts focus
I believe that hiring someone should never be impacted by a time-element. And I also believe that the person responsible for hiring, whether it’s a recruiter or maybe just the founder him-/herself, should never be evaluated on a time-element either. Why? Well, because in 99% of all cases, time directly impacts accuracy as a result of shifting focus. Let me explain this more clearly.
Scenario 1: Focus on speed
Let’s say that the goal is company X is to either hire 10 people this quarter or fill a position within 30 days. Both goals are time-driven. And while you actually didn’t want this to happen, focus shifts away from quality to speed.
So this is what your recruiter or other responsible person for hiring will focus on when the main KPI is focused on time:
- Employer Branding – to enlarge the talent pool;
- Easier application procedures – to prevent any dropout.
Everything to attract people and prevent them from walking away.
There’s one element, however, that we seem to forget here. And that’s quality. Who cares about Time to Hire when the quality sucks? Who will ever celebrate the fact that someone was hired faster than the goal setting, if this person also walks out the door within a few months?
Time to Hire is an illusion. It’s seems such a safe KPI to focus on, since it’s so tangible and easy to control, but it’s actually the most irrelevant and dangerous one you will have in your startup.
Scenario 2: Focus on quality
Yes, I know that I’m now telling you a biased story since my startup Equalture offers a tool that helps you make higher-quality hiring decisions, but I do want to tell you how hiring KPIs work in our company anyway. Just to put my story into perspective.
We don’t care about time. We care about quality. And so our goal is to make sure that no one leaves our company within the first contract term. In other words: zero mishires. And yes, we know that’s a way too ambitious KPI, since we never met this KPI, even though we have a software that prevents startups and scaleups from poor hiring decisions. And that’s simply a result of learning how to use your own product as well as you want your customers to use it – but that’s a discussion for another blog.
So we focus on quality and we haven’t limited ourselves by any timeframes. And I know that it’s tempting to hire a lot of sales people in a short amount of time, because you hope that they will close some new deals for you soon. Reality, however, is likely to prove you wrong. The chance of making a mishire significantly increases, which costs you way more money in the long run. And when hiring such a high number of people in a short period of time, they will likely have a less personalised onboarding, which increases their ramp up time as well.
So rushing these things eventually will only cost you money. That’s why we focus on quality only. And by allowing you to focus on quality only, you will also focus on different things during the actual hiring procedure:
- Employer Branding is something you don’t need to spend too much money on, because the best marketing for a company is having happy people on board who stay for a long time and spread the word;
- Easier application procedures is something we wouldn’t even consider, because if someone doesn’t even want to take some additional time to properly apply to one of our jobs, then motivation will become an issue sooner or later anyway.
Instead of focusing on these aspects, this is what your recruiter or other responsible person for hiring will focus on when the main KPI is focused on quality:
- Tooling to collect more information about candidates to base your hiring decisions on;
- Tooling to assess your candidates’ potential as well, instead of only focusing on a resume;
- Interviews or introductory moments with the team to ensure that there’s a cultural fit.
And yes, this probably takes both the candidate and the company longer. But it will also result in someone staying longer at your company, which prevents you from needing to search new people over and over again, which is a huge cost driver.
So eventually, we are actually saving a lot of time. And therefore a lot of money. The difference, however, is that we don’t focus on it.
Co-Founder & CEO