Source of Hire

What source of hire is

Source of hire (مصدر التعيين) is the distribution of the people hired in a period across the channels they came from. It is a figure about outputs: of twenty hires, how many came from an employee referral, how many from a paid advertisement and how many from direct search. A hire can be attributed to any channel the organisation recruits through, campus recruitment among them.

Source of hire is not the same as the distribution of applicants across channels, even though the two can sit on one dashboard and be given the same name. Confusing them can reverse a decision, because the channel that brings in the most people need not be the one that brings in the most hires.

Source of hire and source of applicants: two bases, two rankings

Take a quarter in which 600 people applied and 20 were hired, spread across four channels:

• A paid job board: 380 applicants and 6 hires.
• Employee referral: 40 applicants and 7 hires.
• Direct search: 55 applicants and 4 hires.
• The organisation’s own website: 125 applicants and 3 hires.

The paid job board’s share of applicants is 380 out of 600, or about 63%, and its share of hires is 6 out of 20, or 30%. Referral’s share of applicants is 40 out of 600, or about 6.7%, and its share of hires is 7 out of 20, or 35%.

So the channel that ranks first by number of applicants ranks second by number of hires, and the channel that supplies one applicant in every fifteen supplies more than a third of everyone hired. The conversion rate of each channel shows why: 6 out of 380, or about 1.6%, for the paid job board; 7 out of 40, or 17.5%, for referral; 4 out of 55, or about 7.3%, for direct search; and 3 out of 125, or 2.4%, for the website.

The conversion rate is the figure on which to base a decision, rather than a channel’s share of applicants or its share of hires taken alone. A channel converting at 1.6% takes about eleven times as much screening time for each hire it produces as a channel converting at 17.5%, and that time is paid for even though it appears on no invoice.

The figures in the example are assumed. They are there to show how the shares and rates are calculated and how the reading changes with the base; they describe no market and recommend no channel.

The attribution rule behind a source of hire figure

One candidate can pass through more than one channel. They see the advertisement on a paid job board, then a colleague who works for you speaks to them and encourages them, and then they go to the organisation’s website and apply there. Which channel did this hire come from?

• Under a first touch rule: the paid job board, because it was the first thing that told the candidate about the vacancy.
• Under a last touch rule: the website, because that is where the application was made.
• Under the candidate’s own account: the referral, because that is what the candidate says prompted the application.

Three rules produce three figures from the same event, and each answers a different question. The last touch is the one a system can record without asking anyone, because the point of submission is what the system sees. What it records is where the application arrived, which need not be what prompted it. For that reason the candidate can be asked directly at application, and the answer kept in the applicant tracking system beside what the system recorded, so that the two figures stay side by side and neither replaces the other.

All three rules are in use, and the definition of source of hire does not choose among them. What it requires is that the rule be written down and held constant. An organisation that changed its rule between one quarter and the next and then reported that referrals had fallen has said nothing about referrals.

Employee referral in source of hire: the channel that undercounts itself

Employee referral is a channel whose hires can be recorded under another channel’s name. The employee tells a friend, the friend applies through the website or through the paid job board, and the hire is logged against the place of application rather than against its cause.

The effect compounds: the channel appears weaker than it is, so spending on it is cut, so it does weaken in the following quarter, and the first decision then looks right. The loop closes on itself. An answer given at application can be shaped by what the candidate thinks the employer wants to hear, so the question that can expose the loop is the same question put again once the person has been hired, when that consideration no longer shapes the answer.

How much this misrecording takes away from the referral channel is another matter: we found no published measurement of its size.

The opposite error also occurs: recording everyone known to someone inside the organisation as a referral, even when the employee did nothing. The difference between acquaintance and referral is that a referral is an act, attributed to the person who performed it, and it earns whatever the organisation’s referral policy provides for.

Source of hire and the cost of each channel

Add two costs to the earlier figures. Spending on the paid job board in the quarter was SAR 48,000, and referral bonuses were paid at SAR 5,000 per hire, which is SAR 35,000 for the seven.

• Cost per hire from the paid job board: SAR 48,000 divided by 6, which is SAR 8,000.
• Cost per hire from referral: SAR 35,000 divided by 7, which is SAR 5,000.

The hasty conclusion is to move the first channel’s budget to the second. That conclusion does not hold, because referral is a channel capped by the number of people your employees know who are suitable and willing to move, and that number does not grow when the bonus is doubled. Doubling the amount may produce ten referrals instead of seven, or it may produce none, and in either case it raises the cost of each hire.

A channel is therefore judged on its cost and its ceiling together. An expensive channel with no ceiling remains necessary for whatever exceeds the ceiling of the cheaper one. The items that make up the cost are set out under cost per hire.

Internal hires in source of hire reporting

A position filled by an existing employee was filled through a channel that has a cost and a ceiling of its own. Even so, it can be left out of a source of hire report, because it never passes through an advertisement. The figures are then taken as the distribution of all hires when they are the distribution of external hires only.

Suppose four positions in the example were filled internally. Then 24 positions are filled rather than 20, the paid job board’s share falls from 30% to 6 out of 24, or 25%, and referral’s share falls from 35% to 7 out of 24, or about 29%. None of the channels has changed; the base has widened to include positions that were already being filled.

The more useful report shows both figures: a distribution across everything filled, to show how much of the need internal mobility met, and a distribution across external hires alone, so that the channels the organisation spends on can be compared with one another.

Judging a channel by source of hire takes a year, not a quarter

A channel’s share of hires is known in the same quarter, but its value is known only after some time has passed for the people it brought in. The simplest measure is how many of them remain after twelve months, a retention rate taken for each channel’s group of hires.

Take the two larger channels in the example. Of the seven hired through referral, 6 remain, about 86%. Of the six hired from the paid job board, 3 remain, or 50%. The cost per hire still in post after a year becomes SAR 35,000 divided by 6, about SAR 5,833, for referral, and SAR 48,000 divided by 3, which is SAR 16,000, for the paid job board.

The gap that ran from SAR 5,000 to SAR 8,000 now runs from SAR 5,833 to SAR 16,000: measured on the people who stayed, it is more than three times as wide. That calls for the source to be recorded in the employee’s file and not only in the recruitment report, because otherwise someone who leaves after a year cannot be linked to the channel they came from.

What source of hire is not

• Talent sourcing. It is an activity that finds a candidate where they are and brings them forward. Source of hire is a later measurement that says where the people hired came from. Direct search is one of the channels source of hire measures, not another name for it.
• Quality of hire. Source of hire says where from; it does not say whether the hire worked out. A channel that supplies half of all hires and the largest share of those who leave in the first year is a poor channel with a figure that looks excellent, and only reading the two measures together reveals it.
• Source of applicants. That is the other base described above. It is shown beside source of hire and does not replace it.

Rules on advertising vacancies and on processing the personal data of applicants have their own sources, and the definition of source of hire does not address them.

What distorts a source of hire reading

• A channel with too few hires. A channel that produced a single hire cannot carry a meaningful conversion rate, and a rate resting on one hire can double with a second.
• Pooling very different occupations. The channel that works for a technical role is not the one that works for a field role, and a single figure for the whole organisation can hide the fact that one of the two channels works in only half of the positions.
• Ignoring withdrawals. A channel that brings candidates who accept offers and then never start can look strong on hires, after which the vacancy opens again. That is caught only by counting the people who started, not the people who accepted.
• A change in spending within the period. Comparing a channel’s rate across two quarters, in one of which its spending was paused for a month, compares two situations rather than two performances.

Before money moves from one channel to another under source of hire

Source of hire is a measure that needs three figures for each channel: how many applicants it brought, how many hires, and at what cost. Anyone who takes one of these alone describes the channel as something other than what it is.

The last question before spending is moved: can the channel that looks cheaper bring in twice what it brought before? If the answer is no, the money moved to it raises its cost without adding to its hires, and the channel it was taken from remains necessary for what the other cannot carry.

This is an explanation of the concept, not legal advice.

Related terms

• Cost per Hire
• Retention Rate
• Campus Recruitment
• Candidate Experience
• Contingency Recruitment