When you first set up your recruiting business, you’re often so focused on getting some fillable job orders in place quickly that you may not take the time to plan out a strategy around performance measurement. And that can be the difference between success and failure when you make the decision to start your own recruiting agency.
Performance measurement? What does he mean by that?
Steph Curry is one of the most accurate three-point shooters in NBA history, with a career average of 44% from downtown – meaning when he shoots a three-pointer in a game (he makes on average 7 attempts per game), almost one out of every two tries will result in a made basket, or three points for his team. We know this stat because we track it (well, we don’t, but the people who do that kind of thing do.) For the Golden State Warriors (the team he plays for) or their opponent, and especially for Steph himself, it’s important to know this stat because it creates a baseline for measurement. In a game situation, the Warriors know if they need a clutch three-point basket, who to get the ball too, and they can design plays knowing the odds are almost 50/50 that Steph will make the shot if he takes it.
Steph, on the other hand, knows what he is capable of in game situations and at practice, so if he has a game where he makes less then 44% of his three-point attempts, he knows he under-performed. At the same time, if he completes 50% of them, he knows that had a better-than-normal outing.
The same goes for your recruiting business. You have to know what you are capable of to be able to measure your own performance – good, bad, or indifferent.
But how can you know what you are capable of when you’re just starting out?
That can be a challenge. Without any historical track record, it can be hard to know first WHAT to measure, WHY and WHEN to measure it and of course, what your own personal baseline looks like.
So, let’s works backwards and reverse engineer it. Start with this simple question: how much money do you want or need to make over the next 12 months?
Or perhaps a better question, what do you think is realistic number?
I’d say that if you are going off on your own in recruiting, you should set a goal for at least $125,000 in your first year. Granted that should not be your ceiling, but any less than that you’d have to ask yourself if it’s really worth the effort? Now I understand that for some of you, working as an independent recruiter may just be ancillary income – perhaps your spouse works full-time and the money you make from recruiting will be icing on the cake. That’s fine, but think about this: if the average salary for a direct-hire placement in the United States is $100,000, and you negotiate a conservative (but fair) fee of 20%, your average placement will net you $20,000. If you’re goal is $125k, you’ll need only make 6 placements in the first 12 months, or 1 placement every 2 months.
Seems entirely doable, does it not? And now you have your first performance measurement metric, or KPI (key performance indicator): a revenue goal of $125,000, or 6 direct-hire placements.
In order to know for sure whether you can make those numbers, you’ll have to know how much activity it will take you to make those placements, which brings us another batch of performance metrics around activity. You’ll want to know:
- How many calls/emails do I have to make to secure a job order?
- How many job orders do I need to work on at a given time to land a placement? (or how many CAN I balance working on at the same time?)
- How many candidates do I need to submit on a job order to get an interview?
- How many interviews do I need to set up on a job order to get an offer?
- How many offers are made that get accepted? (hopefully 100%!)
The easiest way to track your activity is to use a CRM (customer relationship management) system. The good news for independent recruiters is that many of the best ATS (applicant tracking systems) out there designed for our use, like CATSOne, include CRM functionality, so you can literally track EVERYTHING you do. It will take a tremendous amount of discipline to track every call you make (with Gmail and Outlook plugins the email part is automated), but I HIGHLY RECOMMEND you do this when you’re just starting out. Every recruiter’s metrics will be different – some recruiters will have better success getting job orders through email, others via phone, and others through meetings. But you have to know what is working for you and what isn’t, and the only way to do that is by tracking exactly what you do and measuring it over time.
Below you’ll see an example of my job order activity over the past 4 years. Because I am religious about tracking my job order activity, the system knows how many job orders I’ve opened up, how many candidates I submitted on each job order, how many interviews I generated and ultimately how many placements I’ve made:
The trends are pretty obvious – the more candidate submittals I make, the more interviews I get, and ultimately, the more placements. Judging by the chart, you’d assume 2016 was my best year financially, but the truth is, 2018 was better even though the # of placements was smaller (I had a high number of contractors working in 2018 that generated a significant amount of revenue).
Beyond tracking your own activity and revenue goals, as your business grows, you’ll want to start looking at your accounts receivables – especially for clients you place contractors with, how long do your invoices usually sit unpaid? You’ll need to know things like that if you’re making payroll every two weeks, especially when it comes time to establish a business line of credit with a bank so you know what you need to draw and when in order to make payroll.
In future posts I’ll talk more about performance measurement, but this should give you a good start. Remember, it’s all about the numbers: you can’t measure what you don’t track, and you can’t improve what you don’t measure.
Now let’s go make some placements!