Imagine running a business where you have no idea where revenue comes from or your associated cost to generate it (AKA: expenses). Imagine running a business where you have no idea what your profit margin is? Crazy, right? Well guess what; that’s the way most of you run your business.

To be specific, most recruiters have no idea how to or chose not to use the most important tools on a regular basis, analytics to determine where business comes from and how much money is made. Now, truth be told, I was an accountant before I got into recruiting so I understood the immense value of this tool and it came easy to me…but it’s easy for you too.

Analytics are the fastest way to see how you make money and what you should do to make more of it. Analytics tell you everything…you can’t hide from the results.

Analytics can be broken down into two groups: Business and Staff.

Business

As a business owner you need to know your return on investment or ROI. (I will only discuss the business aspect, not staffing your office). This is broken down between the cost to acquire a client/candidate and the associated revenue generated. In the accounting world it’s called the “matching” principle. So the first question is; what are your costs to acquire client/candidate. There are fixed and variable. Fixed is just that, fixed - no matter how much business you do the expenses are the same. Variable is again, just that, variable – you can spend more or less but should only do so based on ROI. Fixed would include rent, phones, insurance, utilities, etc. Variable would include entertaining, ATS, job boards, advertising, directories, etc.

The first thing you need to do is see where you generate your revenue and the matched expense.

Example #1: You place a $500 ad with a job board (and let’s say the opportunity cost (discussed below) is $100) and make a $25,000 free from a candidate who responded. You don’t need a 10 key to determine the ROI is huge!

Example #2: From that same ad you put a candidate who isn’t right for that job in your ATS and 6 months later you place them for a $15,000 fee. Now your $500 resulted in $40,000 in revenue. You need to track this to determine where you invest your variable costs.

Example #3: You spend $2,000 a year on directories that require cold calling and make one $20,000 fee. Initially you would say that’s a great ROI. But what you also have to analyze is how much time was spent sourcing that placement and put a dollar to it.

An important aspect to analytics is understanding “opportunity cost”. Opportunity cost is the cost of any activity measured in terms of the value of the best alternative that is not chosen (that is foregone). It is the sacrifice related to the second best choice available to someone, or group, who has picked among several mutually exclusive choices. Get it?

Staff

This is much easier. You should always be analyzing your staff performance and this is how you do it.

1. Number of calls (or emails, although I hate emails) to number of connects,
2. Number of connects to meetings,
3. Meetings to interviews,
4. Interviews to offers,
5. Offers to placements.

This can easily be done for clients as well. In the calls/connects section you need to determine the source; directories, job boards, Internet, ad responses, etc.

This group of analytics is the easiest way to determine who is doing what and how well they are doing it. It also removes emotion so it’s easy to confront an underperforming staff and help them.  You can't argue math!

Analytics: Live by them!