Recruitment Source Ratio – what and why?

Staff exit studies consistently cite ‘lack of internal career opportunities’ as a key turnover driver.  Therefore, organisations that support meaningful career paths for their staff can achieve competitive advantage in terms of staff retention.  Associated advantages can include:

Recruitment Source Ratio provides a measure of internal career opportunities, as it shows the ratio of internal hires to external hires.

For example the North American All Industry median for this metric has been around 1.7 in recent years. This indicates an average of 1.7 internal recruits for every external recruit.  This metric will be increasingly important for organisations that wish to highlight internal development of their workforce.

 What is a good result?

There is no ‘universal target’ for Recruitment Source Ratio as each organisation’s ideal outcome will be influenced by its context and strategies.  For example, an organisation going through a period of rapid workforce growth will have a relatively low Recruitment Source Ratio as additional headcount will naturally be external hires.  On the other hand, relatively stable organisations with a policy to maximise internal career opportunities are likely to target the 75^th percentile of a benchmark group. 

Infohrm’s North American benchmarks suggest that other significant differences exist within the typical organisation.  For example, Chart 3 shows that Exempt staff are significantly more likely than Non-Exempt staff to gain promotion/transfer within the organisation.  Similarly, Full-time staff are significantly more likely than part-time to gain promotion/transfer.  These results suggest that the typical organization does not have strong policies to provide internal career opportunities for Non-Exempt and Part-time staff.  The implications of this for staff retention and engagement could be significant.

What should I do now?

So, what does it all mean?  Your response will depend on your organisation’s context and objectives.  The first step is to analyse these in conjunction with the organisation’s recruitment, retention and development strategies, and decide upon an appropriate Recruitment Source Ratio target for relevant workforce groupings within your organisation.

In addition to analysing by age, exempt status and full-time/part-time status (as discussed above), appropriate dimensions for analysis include job role, business unit, gender, tenure and ethnicity.

At the same time, you should identify pockets in your organisation that experience problems such as high turnover and/or low engagement.  In such cases, is there a relationship with a low Recruitment Source Ratio?  If so, increased career opportunities could assist to reduce turnover and increase engagement. In designing such career opportunities, it is important to recognise the value of lateral moves as well as promotions.

Limitations

Recruitment Source Ratio indicates the volume of external and internal hires relative to one another; it does not show the volume of hires relative to the size of the workforce.  Recruitment Source Ratio does not measure the cost of hiring internally or externally nor the quality of the hires.  It also does not measure internal movement opportunities that might have prevented a likely termination.

Variations

• Recruitment Source Ratio - Executives
• Recruitment Source Ratio - Exempt
• Recruitment Source Ratio - Managers
• Recruitment Source Ratio – Non-Exempt

Related Measures

• Average Time to Fill
• Career Path Ratio
• Cross-Function Mobility
• External Hire Rate
• Internal Hire Rate
• Internal Placement Rate
• Net Hire Ratio
• New Position Recruitment Rate
• Operating Expense per FTE
• Organisational Tenure Staffing Breakdown
• Recruitment Cost per Hire
• Termination

Data Sourcing

Organisations typically source data related to both external hires and internal movements from the job table of an HRIS. An alternative method of calculation for this measure is to use only those internal hires that are documented as filling a requisition in a recruitment system. This is a more difficult method of capturing internal hires and is more difficult to benchmark, but it might suit certain organisations well for the particular information they seek from this measure.