Yield Ratio: All You Need to Know
You may have heard of the term ‘yield ratio,’ which is often used in the corporate finance industry. However, a yield ratio is also an HR metric that greatly improves your recruitment and selection process.
Despite being a key performance indicator for any HR team, it’s not always clear what it means, how to calculate yield ratio, the exact yield ratio formula, and how to start tracking it in your organization. It is a must-use metric for any manager, recruiter, or HR team. This guide will tell you everything you need to know about the yield ratio.
Contents
What is the yield ratio?
Why calculate yield ratio?
Yield ratio formula
How to calculate yield ratio
What is a good yield ratio?
What is the yield ratio?
Yield ratio is a recruiting metric that indicates the percentage of candidates’ movements from one part of the hiring process to the next. The ratio measures movements between each stage (e.g., from application to screening calls) but also from start to finish (number application to a number of hires).
An example of how a recruitment yield pyramid would look in practice can be seen below:
You may have heard the term yield ratio in the finance field. The dividend yield ratio is used in finance to calculate how much a company pays out in dividends annually in relation to its stock price. The recruiting yield ratio measures something else but is equally as valuable and essential to any organization.
Why calculate yield ratio?
There are several reasons why it is useful to calculate a yield ratio:
- Measuring the effectiveness of sourcing strategies – You’re able to assess whether your sourcing and recruitment strategy are yielding the desired result. Some sourcing strategies include social media, job boards, an external agency, referrals, etc. For example, you could assess the effectiveness of a particular job board by calculating a yield ratio. If your job opening receives 1,000 CVs submitted on a specific job board, and only 2% of them were able to pass the screening phase, this would be a low yield. You didn’t attract many qualified candidates. It could signify that the market is weak, or that the job advert is written was not effective. You could use this ratio across all sources and assess which strategy best serves your needs.
- Pinpointing bottlenecks in your recruitment process – Time to hire measures the time between the moment your prospective hire enters your pipeline through sourcing or application and the moment they accept your job offer. It is a crucial point of focus for recruiters, as costs increase the longer it takes to hire someone. A yield ratio is one way to improve the efficiency of the recruitment process, as it pinpoints the bottlenecks in the cycle. As an example, there may be an assignment that is disproportionately difficult and has a low number of candidates that are able to pass. It could also identify an interviewer with unrealistic expectations. Or potentially, your initial screening process is eliminating suitable candidates because of the filters applied.
- Identifying bias in the process – A yield ratio helps identify any interview bias or inherent biases you may have in the recruitment process. For example, your screening process may result in an equal number of male and female applicants, but you notice that only three males are being interviewed at the final round. This may indicate a gender bias somewhere along the recruitment process, which this metric can help identify.
And all of this information helps you make your recruitment process more effective and fair.
As an example of this in practice, the FBI used the yield ratio to overhaul their recruitment process. This process was rigorous; they calculated that every year, they needed at least 16,000 applicants to fill the number of seats available. However, in 2016, the FBI received only 12,000 applications. They knew that if they wanted to find new agents, they had to get more applicants in and track how they progressed through the recruiting process.
The FBI also tackled diversity in its special agent’s ranks when redesigning their selection process. While the matter of diversity was multi-layered and required a holistic solution, the FBI was able to identify which part of their recruiting process was creating undue adverse conditions for underrepresented candidate pools.
After a deep analysis of over 2,000 interviews and various analyses and calculations, they determined that the interview questions used were outdated. In like manner, the entrance exam was no longer relevant. To solve this, managers and interviewers underwent unconscious bias and interview training. The FBI also shortened the application process, which initially required too much information in a short space of time.
Yield ratio formula
The yield ratio is a fairly straightforward calculation that can be done using the below formula:
Number of candidates results from the stage/number of candidates that passed through the stage = Yield Ratio.
So, for example, the stages may be:
- The screening process to first interview or
- Second interview to the final stage
- First interview to the final stage
The ratio all depends on the stage that you are trying to calculate the yield for.
Of course, you can also calculate the ratio across the recruiting funnel – from application to hire. This will give you an indication of how many applicants you typically need to make one hire, just as the FBI did.
How to calculate yield ratio
Now let’s go through practical steps on how to calculate the yield ratio.
First of all, you need to collect data to be able to track this metric, for instance, the number of candidates in each stage of the recruitment process, or demographic data. The good news is that your Applicant Tracking System (ATS) can help you collect the data you need.
The ratio is calculated as simply as it is stated. For example, if 150 people (110 females and 40 males) applied through on the job board, and 10 of them made it to the final round interview, of which 9 of them were male, your calculation would look like this:
10 / 150 x 100% = 6.6%
Your female yield ratio would look like this:
1 / 110 x 100% = 0.9%
That would represent a 0.9% push-through rate for females in this stage of the recruitment process, which would be very low. As a solution, you may want to look at the process, if there are any inherent biases or questions that discriminate explicitly or implicitly against females.
Another example: If you have 100 candidates completing the case study, and 5 of them made it to a group assessment (the next stage), your calculation would be:
5 / 100 x 100% = 5%
That would mean only 5% of the candidates made it through the process. This would create a bottleneck – i.e., you’re assigning a case study to too many candidates, and a majority of them are not qualified. That means you’re wasting both your and candidates’ time. Also, you would not have enough candidates to proceed with a group assessment, so your recruitment process would be compromised.
This is why a yield ratio becomes valuable because now you can dive deeper into the issue. The results might indicate that you need to change who you are assigning the case study to and create stricter shortlisting criteria. You might decide to assign it later in the selection process. It might also mean that your case study is disproportionately hard and you should change it.
Consider your assessment rate, too. For example, if candidates needed to score 80% on the case study, and only five candidates made it through, you may want to change it to 60%. This would allow more candidates through and a higher quality recruitment process.
What is a good yield ratio?
Is 50% a good yield ratio? 5%? Or 10%?
There’s no direct answer. It is all based on your targeting and selection criteria, and on the stage of the recruiting process you’re calculating the ratio for.
For example, if you have a 25% yield ratio from applicants to screening interview, it may indicate that your job advertising campaign is going well but is also too broad. In the end, you need to limit the number of people to select the very best talent. You may want to adjust your filters and campaigns or shortlisting criteria to be more specific and targeted.
By tracking this metric across different demographic groups, you’re making sure that you’re mitigating against adverse impact in your recruiting efforts.
A further best practice would be to calculate recruiting yield ratios in your various departments (e.g., legal, IT, finance) and make a comparison. Track the metric across seniority level as well.
In general, when calculating and tracking yield ratios across your organization, analyze and interpret the results carefully. It will help you get a more granular understanding of where your recruitment and selection process needs adjusting. For instance, while your yield ratio for entry-level jobs might be similar for females and males, you might uncover differences for more senior positions.
You could also take it a step further and measure the yield ratios of individual recruiters. Depending on the outcome of these ratios, you’re able to facilitate cross-sharing of knowledge among managers and recruiters. They can share best practices and techniques that produce the highest quality candidates.
You can also use industry benchmarks to compare your company to. In this case, it is important to take into consideration the specific characteristics of your organization, namely its size and the industry you’re in, and the characteristics of a role in question.
A Jobvite report provides industry benchmarks that you can compare your process to. Take the data with a grain of salt, as the labor market has changed since Jobvite collected these benchmarks.
2016 2017 2018 Click to Apply (%) 7.5% 7.5% 5.6% Career Site Pageviews to Applicants (%) 8% 13% 18% Applicants per Open Requisition (#) 52 36 29 Applicants to Interviews (%) 15.25% 12.31% 12% Interviews to Offers (%) 19.78% 28% 28% Offers to Hires (%) 83% 90.64% 95% Top to Bottom Conversion (%) 0.19% 0.41% 0.56% Average Time-to-Fill (Days) 39 38 38
These are generic benchmarks, but the report also refers to specific industries including healthcare, manufacturing, or professional services that you can check out.
A final word
The yield ratio is a valuable metric for your HR and recruiting team. It not only helps you plan your recruitment activities (and budget) better, it also makes your recruitment process more efficient and effective and reduces bias.
Collect the data in your ATS and make conducting analyses a continuous process to boost your recruitment activities.
If you want to future-proof your HR skill set and develop new HR competencies, check out our All You Can Learn Certification Program!
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