How to set the KEY PERFORMANCE INDICATOR (KPI) for Your Recruitment Agency

kpiMany new agencies that have started their own recruitment agencies are having the basic problem of setting a KPI for their recruitment consultants. There are concerns that whether the KPI set are either too high or set at a level that are too low.

When the KPI are set too high, the problem is that the recruitment consultants will feel very pressured and not able to hit the KPI, if they are not able to hit the KPI, then there will be possibility that they are not able to receive any commissions and of course when money is on the line, it will affect their own performance and morale too.

When KPI are set too low, it will not be able to bring in good profit margins for the company and eventually the company overheads will be higher that the sales in total and that will be a possibility that company will face a financial crisis.

Let’s look at what is KPI – Key Performance Indicator

Key Performance Indicator is a set of numbers or target set for the sales person, in this case is the recruitment consultant where they will need to achieve in a specific period, usually within the calendar month itself.

KPI can be measure in the total sales generated, total resume send to clients, total interviews arranged with the clients or even total number of new clients secured. The type of KPI will be fixed by the boss of the company or the General Manager of the company where it will be set and to be followed by the consulting team.

Most of the time, many companies will use the total sales of the recruitment consultant as their KPI, which is to say that in this case, they will set a multiplier to their salary earned per month and that will be their sales target or we called it the KPI.

For example, if the salary of the recruitment consultant is $3,000 gross monthly and if the company set the KPI as 4 times the salary, then the KPI will be $3,000 x 4 = $12,000. That will be the KPI every month.

Some companies will use a lower multiplier such as 3 times, 2.5 times or even 2 times the salary and if the recruitment consultants reached their KPI, then they will be entitled for additional allowances or commissions. Other companies will set the KPI based on a fixed figure such as $6,000 or $10,000 to make calculation easier.

There are no hard and fast rule to set what will be the KPI for the recruitment consultants, it will very much depends on the direction of the company, whether to squeeze the most dollar from the recruitment consultants or create a non KPI environment where people will be free and easy to bring out more from the consultants.

Regardless of whether it is based on sales figures or other indicators as a KPI, what most important is that KPI is a basic benchmark for a company and the consultants. As such the level of KPI will need to be managed properly so that the company survival and consultant morale will be balanced.

Dougles Chan is the Recruitment Guru – Author of Financial Success in Recruitment Industry, Recruitment Consultant Winning Formula & Job Seeker Power Manual. He is the adviser for his clients in agencies and companies that want to push their company to another higher level.

 

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2 comments for “How to set the KEY PERFORMANCE INDICATOR (KPI) for Your Recruitment Agency

  1. Tina Kfoury
    March 7, 2013 at 10:53 am

    What would be an ultimate commission scheme based on 3 months salary targets. Your input is highly appreciated as we are redesigning our commissions plan for our consultants.

    • Administrator
      March 7, 2013 at 3:20 pm

      Hi Tina,

      There are many factors to consider:
      - The employers profit level
      - The staff ability to achieve
      - The market overall condition
      - The market general practice

      Once you are able to determine the above and other internal direction the firm is heading, you will be able to have a good feel on what are the best for your side

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