Choosing KPIs to evaluate skills-first hiring

Skill-based hiring, also known as skills-first hiring, can benefit your company. However, assessing your hiring program requires the right metrics. To start, it’s helpful to consider what your company is hoping to achieve. Common skills-first hiring goals may include:

• Larger candidate pool
• Faster hiring times
• Lower hiring costs
• Increased diversity
• Better productivity
• Lower employee turnover
• Higher employee satisfaction

Based on your unique objectives, you can identify the key performance metrics (KPIs) for measuring the success of skills-based hiring.

Recruitment and hiring metrics

Implemented effectively, skills-based hiring can transform the recruitment process. It opens your company up to a wider range of candidates, such as applicants who didn’t have access to a traditional university education.

To determine if a skills-first approach is improving your company’s hiring process, some metrics to track include:

• Number of applications. Calculate the number of applications you receive for each position, and compare it to the figures from before the skills-based hiring system.
• Applicant diversity. Many businesses turn to skills-first hiring to attract a greater variety of people. Applicant diversity KPIs can help you identify hidden biases in your skills assessments or job postings.
• Time to fill/time to hire. Effective skills-based hiring can reduce the number of days it takes to fill each position (time to fill) and the time that elapses between a candidate’s application submission and job-offer acceptance (time to hire). 
• Cost per hire. If your skills-first approach is leading to more applications from quality candidates and a quicker hiring process, your cost per hire should go down.
• Offer acceptance rate. This metric lets you evaluate how many candidates have accepted job offers. If the rate drops after a skills-first hiring round, you might need to reevaluate discrepancies between candidates’ expectations and the reality of the role, company or compensation package.

Workforce metrics

The ROI of skills-first hiring becomes more apparent after new hires join the company. When the system is working well, you can build a more diverse, happy and productive workforce and decrease turnover.

Metrics that can help with measuring the success of skills-based hiring in the workforce include:

• New-hire diversity. This metric measures how well your hiring program is bringing in people from a variety of backgrounds. You can compare it to previous workforce diversity figures to gauge the overall success of your skills-based hiring plan. 
• New-hire turnover . Measuring turnover—the percentage of new hires who leave your company within a specific period of time—can help you determine if employees are thriving in their new jobs. If the number is higher than expected, it could indicate a need for more thorough onboarding, better skill matching or a change in company culture.
• Workforce productivity. When new employees have skills relevant to their positions, they may be more likely to be productive. Monitor your workforce’s productivity using metrics such as revenue per employee, number of billable hours or the percentage of missed vs. met deadlines.
• New-hire satisfaction. Tracking job satisfaction for each new hire can help you measure employees’ general level of happiness at your company. You can measure changes in job satisfaction over time and in response to cultural and training initiatives.

Tips for measuring the success of skills-first hiring

Identifying the right KPIs is the first step in tracking a skills-based hiring initiative. Once you have a set of metrics, it’s time to start gathering data. Here are some tips for measuring success:

• Establish a baseline. Using data from before the change in hiring practices, calculate each metric. This gives you a basis for comparison.
• Report regularly. Calculate each of your KPIs at regular intervals, and note any trends and significant changes. If you use a business intelligence program, consider creating a dedicated dashboard for hiring and workforce metrics. This data can help you track progress over time and identify problems early on.
• Communicate. Each time you report on a KPI, discuss it with HR and company leadership. It’s a great way to keep everyone in the loop, discuss problems and identify issues to watch.
• Take action. If your skills-based hiring metrics aren’t performing as expected, make changes. Even small tweaks, such as a change in job-posting language or a refined skills assessment, can create big results.
• Talk to new hires. Ask them about their experience with recruitment, hiring and onboarding and ask for feedback. They’re well-positioned to help you understand what the company can do better to improve the process in the future.

Related: IBM’s Wendy Wick on How AI Is Evolving Skills-based Hiring

FAQs about tracking the performance of skills-based hiring

What is a KPI in skills-first recruitment?

A key performance indicator (KPI) in recruitment is a metric that helps you determine whether your company’s skills-based hiring practices are successful. It provides a quantitative way to assess hiring initiatives regarding job postings, skills assessments, hiring speed and the employee experience.

Metrics aren’t the only way to evaluate recruitment practices, but they help provide an objective lens through which to view the hiring process. Common recruitment KPIs include time to hire, cost to hire and the percentage of applicants that make it to the next step.

Is skills-based hiring better than traditional hiring?

The success of skills-based hiring can vary by company and position. Some roles are well-suited to this method, particularly those with specific education or licensing requirements, may require a more traditional approach.

This difference isn’t always clear, which is why it’s important to measure success. As you monitor KPIs for different roles at your company, you might notice that certain positions aren’t as compatible with a skills-based approach.

How can you improve the performance of skills-based hiring?

If your metrics show that your skills-based hiring initiatives aren’t working as intended, it’s important to investigate the root cause. If new hires have lower productivity levels, you may need to schedule more training, create a stronger internal support system or provide more time for questions.