In defence of KPIs (and what the evidence suggests)

Key Performance Indicators (KPIs) are one of the most misunderstood concepts in the recruitment sector.

To clarify what KPIs are: KPIs are the most important activities and results that underpin the level of performance required for the successful fulfilment of a person’s role.

The effective use of KPIs leverages an employee’s time, leading to higher performance.

If undertaking a specific number of effective meetings with qualified prospects within a specific timeframe is the most important activity for generating a new vacancy, then this is valuable information to know.

If this piece of information is not known to the leader or consultant, then the consultant is simply guessing as to the most important activity worthy of prioritising ahead of any other activity. The consultant might guess accurately, they probably won’t.

Your business has KPIs; they exist whether you want them to, or not. Would you prefer to know them or be ignorant of them?

Only an owner who doesn’t care about improving profitability or productivity would willingly be ignorant of employee and business KPIs.

KPIs gain a bad reputation through one or more of the following:

i) The KPIs set are really NKPIs (Not KPIs ie the activities or results being measured and reported are not the most important ones that underpin performance)
ii) Unreliable measuring, recording and reporting of KPIs
iii) Leaders use KPI reports as a blunt instrument as a means to improve employee performance.

The misguided or confused thinking around KPIs is ongoing problem across our industry.

This week I saw, yet again, a recruitment agency, via their website, point the finger at KPIs; accusing them of perpetuating the ills, as they saw them, of our industry.

“Use of individual KPIs to assess a recruiter’s performance led recruiters to work against one another, rather than as a cohesive team with a common goal.”

The first two words of that sentence should be replaced by the following five words “The way poor leaders misuse ….” to make the statement accurate.

When KPIs are ignored the causes of underperformance are simply a guess. When the right KPIs are used it’s much easier to establish what is causing underperformance.

If a professional tennis player is not improving her world ranking then she knows winning more matches is essential.

If the same player doesn’t know her match KPIs (percentage of first serves won, unforced errors, break points converted etc) then she is only guessing what aspect of her game needs the most work in order to improve. No sane professional player would step onto the practise court not knowing exactly what aspect of her game is the most important one to improve, yet many recruitment agency owners operate exactly this way.

A No KPI culture lacks evidence-based feedback or data about what skills are the most important ones to improve. In this type of culture structured L&D seems unimportant or a luxury, rather than as a predictable way to improve individual, and hence team, performance.

The ultimate consequence of a No KPI culture is a recruitment agency whose performance is overwhelmingly driven by luck, trial and error, general economic conditions or a disproportionate reliance on the performance of a small percentage of clients (or employees). All these things make it almost impossible to accurately forecast the business’s future performance, even in the short term.

Might there be any evidence for my assertions about KPIs?

Every six months, for the past two years, HHMC has released an updated Asia Pacific Recruitment Industry Business Intentions Survey.

As the authors’ state:

The objective of the report is to understand business confidence and intentions over time. We measure both the intention and the lack of intention to take specific action as both are significant to measuring confidence. We segment this across geography, company maturity and company size to identify some interesting trends.

There were 230 participants in the July 2019 survey, with 92 per cent of them having an Australian-based head office.

The report goes into some detail about company results in sales and profit as well as owner expectations with respect to growth opportunities and barriers to growth.

In this specific edition of the survey, respected recruitment industry trainer and coach, Sophie Robertson, partnered with HHMC to survey recruitment agency owners about their attitude and strategies with respect to their employees’ learning and development.

Strategy consultant, Paula O’Connell of Oconsult provided additional analysis and commentary on the sub-set of small (fewer than 10 staff) and medium-sized (11 – 50 staff) agencies.

I extracted the following from the report:

1. Performance measures “More and more business owners I speak with are reluctant to use KPIs to manage their teams.”

2. Learning and development

a) 41% of companies have an ad hoc focus on learning and development
b) Less than a quarter of companies promote based on competency levels

3. The difference between what owners predict and what subsequently happens

a) Consistently, the vast majority of small and medium-sized agencies anticipate growth; however, a good number of them fall short when they report their actual revenue results in the following survey period, six months later (see chart below).

b) Conversely, very few of these same agencies  expect a decline, yet an average of 22% of small and 14% of medium-sized agencies report a decrease in revenue in the following survey period (see chart below).

 

 

 

 

 

 

 

 

KPIs – essential business tool or lead in the saddlebag?

 

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1 Comment

  1. Phil Isard on 30/08/2019 at 2:06 pm

    Thanks Ross, you know what is funny; some recruiters come out of Hays for example, and want a non-KPI environment, but already so well trained and honed, that it is somewhat inbuilt that they understand the importance of certain activities and ratio’s already…

    There are so many things that are great about KPI’s for recruiters. I think the 2 that stand out are firstly, the ability to Self Manage, which is only enabled by the second, understanding your individual ratio’s (note: you only get from the gathering accurate data).

    If client visits typically pick up jobs (ave 0.5 job per visit for example), you have a fill rate of 30%, a target of $30k a month, and an average fee of $10k. Then you need maintain 22 visits a month. Knowing and planning for this is leveraging this performance indicator, and a consultant can and should do this themselves. if you love client meeting – easy, if you don’t then it’ll take some effort. (note: this is just an example, so no need to pick into, as I know there are other factors)

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