Performance measurement is a fundamental process to the majority of recruitment firms. This process allows a senior manager to analyse the current and projected performance of the company, team or individual by measuring billings, activities and forecasts. It is absolutely critical to the sustainability and growth of a recruitment business.

Where business owners get into trouble, however, is in not having the most appropriate KPIs in place. They are left scratching their heads when forecast performance does not eventuate, regardless of what activity levels had previously indicated. Placements aren't happening or if they are, they fall over within the guarantee period. Previously loyal clients switch to another provider or don't extend an invitation to tender for their panel. Candidates reject offers at the last moment. Consequently, staff retention becomes an expensive issue.

Overall, the business just isn't running smoothly.

One high-impact way of making significant improvements is to change the metrics upon which activities and performance are measured. As a benchmark, the 2003 Recruitment Industry Performance Report prepared by Navigator Consulting found that the top weekly metrics used by recruitment firms were, in order of popularity:

1. Placements
2. Client visits by consultants
3. Contractor/temp hours
4. Jobs received
5. Client interviews with candidates
6. Consultant interviews with candidates
7. Number of CVs sent to clients.

It is interesting to note that without exception these are quantitative activity measures, with none yielding any meaningful qualitative data. Take client visits as an example. Consultants might be hitting their activity target, but the effectiveness of the activity is not apparent.

A balanced performance measurement system includes a number of metrics that are indicators of quality, not just quantity, metrics that can quickly diagnose areas for improvement or predict client satisfaction and future results. Here are five suggestions:

1. Interview to hire ratio. This is a useful indicator of process quality, a consultant's understanding of job briefs and candidate quality. A ratio in excess of 3:1 (excluding candidates reverse-marketed) suggests that clients are interviewing unsuitable candidates, which contributes to low client satisfaction. It also suggests that the consultant has not taken the time to fully understand the client's requirements.
2. Closure rate. This is a percentage of jobs filled (again excluding candidates placed by reverse marketing), which is an indicator of opportunity cost, client relationship quality and confidence of the consulting team. A closure rate of less than 70% is an indicator that consultants are not generating revenue from more than one-third of their effort. It also suggests a heavy participation in competitive contingency situations, which tends to sacrifice quality for speed, again contributing to lower client satisfaction.
3. Fallover ratio. What percentage of jobs filled subsequently fall over? This is a very effective indicator of process quality, suggesting that consultants are not asking the right questions throughout the recruitment cycle to uncover problems before they occur. Naturally, this should be as close to zero as possible.
4. Exclusivity. During the economic downturn of the last three years, exclusivity seemed to lose its importance as many firms tried to list as many opportunities as possible. However, measuring the number of exclusive assignments is great as an indicator of the strength of client relationships, perceived value and consultant confidence. So what is the benchmark? For a low-volume, boutique business 80% exclusivity is a healthy target. For companies with a high proportion of business coming from PSAs, the norm appears to be in the 10%-20% range.
5. Resumes submitted to client interview ratio. Otherwise known as presentation:interview, this metric works well in conjunction with the interview:hire ratio as a complimentary indicator of process quality and true understanding of client's needs. Top performing practitioners know that every resume submitted should lead to an interview. A ratio of 2:1 or more suggests that consultants are not taking the time to understand the brief, effectively assess candidates or control the process, as more than half of candidates presented are not interviewed.

These five metrics can provide the balance between quantitative and qualitative metrics in a performance measurement system. More importantly, they allow a senior manager to diagnose areas for improvement quickly and effectively without resorting to time-consuming assignment audits.

To find out if your clients and candidates are receiving the service they deserve, or to discover how much of your consulting team's efforts are going unrewarded, address the imbalance and immediately improve the performance of your business.