Businesses are constantly looking for new and more accurate ways to measure performance and accountability with their staffing agency partners. This is often done using Key Performance Indicators (KPIs). Not only do KPIs help businesses manage contingency labour costs and evaluate efficiencies, they can also help staffing agencies. It’s essential for an agency to not only understand why businesses rely on these metrics but also how to manage and evaluate their own performance.
KPIs for Staffing Agencies
1. Time to fill
One KPI business clients look for is an agency’s time to fill. This measures how long a particular temp position stays open before the agency is able to fill it. While relevant to the client, this is equally important to the agency. If your agency is taking a long time to fill a position, it’s an indication that you may need to revisit your recruiting strategy for that position. Maybe it’s an economic trend in your market. It could be a large employer has moved into your area and is offering a higher wage. Use this data to improve your strategy and think about the growing role of technology in reducing these times.
2. Fill rates
Businesses rely on fill rates to gauge an agency’s ability to manage the load. This can be valuable information to the agency as well in adequately managing expectations. Don’t take on a job order for 100 temporary workers if you know your pipeline will only accommodate 50 workers. Be honest with your client and make sure your fill rates accurately represent your efforts and capabilities.
If you’re consistently missing the mark with your fill rates metrics, it could indicate that you need to reconsider your capacity or investigate tech that can help manage your fill rates.
Conversion rates apply to temporary candidates that have been hired permanently by the client. Many agencies offer reduced rates for conversions. Conversion rates are great selling tools for staffing agencies. A high conversion rate implies your ability as an agency to submit great candidates to the positions. These candidates are great enough in fact that the client hires them permanently. This speaks volumes about your agency’s process and can be leveraged to reinforce existing client relationships and build new ones.
Businesses want to know they are creating a positive work environment. When employees leave, they want to know why. The same strategy applies to temporary workers as well. Managing turnover is vital for any staffing agency, but diving deeper to understand and improve turnover is mandatory. Exit interviews and reviews can help an agency determine if there is an issue with shift work, a particular supervisor, or the job itself. These details can help troubleshoot efforts internally, during orientations to set proper expectations and with recruiting strategy.
Many staffing leaders argue that redeployment has become the most important metric for your agency to track in order to maximize profitability. Because of the expense to onboard new candidates (which has increased in many verticals because of COVID) and the cost associated to get candidates through every stage of the funnel, a focus on increasing your redeployment could mean big gains for your agency. In order to do so, it’s important that you focus on creating the best possible experience for your workers so that they choose to return to you, job after job.
6. Gross Profit Margin (GPM)
A simple way to know if a business is running efficiently is by calculating the GPM – the profitable percentage of revenue prior to calculating operating costs. This is an equally important KPI for staffing agencies. If the GPM for your staffing agency is low, it may be showing you that the costs of running your business are too high. It can help you analyze if changes need to be made to improve efficiencies and lower overall costs.
Since gross margins depend highly on the economic cycle. According to Staffing Industry Analysts’ 2021 report, the gross margins in 2020 ranged from 15.6% to 39.4% with an average of 25.2%. It’s important to keep up to date with the averages in the industry to help you gauge what a good margin is.
7. Revenue per client
For the business looking to explore or diversify their other offerings, this KPI can be very meaningful. For the staffing agency, this KPI shows you how much revenue your agency is making from each client you take on. If it’s low or is decreasing over time, it can be a good indicator that changes need to be made (such as diversifying your portfolio of clients) or that there are opportunities to offer more services for your client.
8. Net Promoter Score (NPS)
Businesses are often looking for new ways to get feedback from customers to assess the quality of their products or services. If you’ve ever called customer service and been requested to fill out a quick survey, this is often in relation to NPS. An NPS is an important metric for quality and applies to staffing KPIs as well.
Typically calculated by sending a survey with a 1-100 index, agencies can use this to assess the quality of placements from both the clients’ and candidates’ point of view. In other words, as client satisfaction scores and candidate satisfaction scores. Not only will these surveys show that you care about the quality of the services provided, but they can also help you understand how likely they are to refer you or come back.
9. Client Retention Rate
A business will want to know if their staffing partner is losing clients and why. When this happens to a firm, it’s typically indicative of at least one of two things. Perhaps there is a lack of effective use of resources or the product or service was less than favourable. By paying attention to your agency’s Client Retention Rate, you can better understand how to build your firm’s reputation and increase loyalty and profit by improving your clients’ experiences.
It’s always easier to use the vendors you already have contracts in place with. Understanding what your clients are looking for to retain them and building on or diversifying your firm’s offerings (consider these 5 lessons from high-growth staffing agencies) should increase your Customer Retention Rate.
The ability to check your candidates’ engagement with you is extremely important. After all, they are the core of your recruiter’s work. If you are using the right staffing platform or app, this is something you should be able to check easily. Are your candidates actively updating their information and engaging with you or have they disappeared off your radar completely? It can tell you how many, over what period of time, and what you can do to bring back that relationship. By understanding what happened you can build that relationship again.
There are a lot of different communication avenues available to engage candidates: email, texting, etc. And while different people have different preferences and there are occasions for all types, an overwhelming majority respond more favourably to branded instant messages.