The importance of having visibility on all recruitment KPIs is immeasurable. However, if companies want to be more strategic and fully understand the health of their recruitment funnel, it’s important to be aware of the application-to-hire ratio.
The application-to-hire (or app-to-hire) ratio helps shape expectations around the hiring process, and it’s vital to know how many applications hiring professionals typically need to receive to successfully make a hire. In addition, if a company is in heavy competition for qualified talent, understanding the ratio can help identify key areas in the recruitment strategies with room for improvement.
When hiring professionals break it down, it's actually quite simple – and it’s essential to measure to understand what the actual hiring goals are. Read on to learn more about application-to-hire ratios, how to calculate them, and their importance.
An app-to-hire is how many applications for a position it takes to make one hire. Or in other terms, how many applications do hiring professionals need to receive to get the number of hires that are needed?
App-to-hire ratios can vary by job type, location, health of the labor market, etc. (also, pre-pandemic app-to-hire ratios were a little bit more stable). Other factors that are going to affect this ratio, for better or for worse, and they can influence whether a company has a high or low app-to-hire ratio.
It’s crucial when looking at an app-to-hire ratio to understand what the actual hiring goals are – i.e. how many applications are hiring professionals aiming for to meet the hiring goals?
App-to-hire ratios can vary, and it’s important to check in to see where a company’s ratio falls in the range. For example, if a recruiter needs a lot of applications to make a hire (i.e. if it takes 50 applications to make one hire), the recruiter could look at that as being good – since the recruiter has a lot of applicants in the talent pool to choose from to make that hire. However, this also means that the recruiter is turning away more candidates than they probably need to be, which can lead to a poor candidate experience. Hiring professionals don't want to be turning away too many candidates, because nobody likes being rejected – then how likely are candidates going to reapply or speak highly about the company?
On the flip side of it, a low app-to-hire ratio could be a good thing. For example, it could mean that out of 10 applications a recruiter has, they would have someone that is qualified – and therefore able to make a hire and have less people to reject.
Hiring professionals should be aware that quality plays a factor in the ratio of this as well. If a company has 10 high-quality candidates, then they're going to be able to make a hire. However, if a company has 70 unqualified candidates, they might not be able to make a hire and need to wait until they receive 200 applications to make a hire. This is why app-to-hire ratios can vary in a wide range for many companies, and that is okay!
Tip: A higher or a lower rate ratio is neither good nor bad. It can depend on the industry, the role, and the needs of the position. However, if hiring professionals have a higher app-to-hire ratio, they should consider what to do to help the candidate experience when rejecting candidates.
The app-to-hire ratio helps companies understand what application goals they have – and therefore how they are on pace with them. For example, if recruiters know that they need 1000 applications to fill 15 openings, and they see that they only have a fraction of those applications in the pipeline and ATS, then they’re going to need to do some serious advertising and campaigns or initiatives, sourcing referrals, etc. to turn up the volume. It’s important to have an understanding of a few things: Is the team on pace to meet hiring goals? Do recruiters have a good application flow coming in? What is the application deficit?
Also, hiring professionals can't know how many applications they need to drive with advertising without knowing how many applications are already in the pipeline. For larger companies, this metric is probably going to be more important than for smaller companies. If it’s a small company, hiring professionals probably have a decent understanding of how the application flow coming in feels for the number of open postings. But if it’s a large enterprise, how do hiring professionals know if 25,000 applications will fill the pipeline versus 30,000? This is where hiring professionals are going to need to get more prescriptive with understanding if they’re on base.
The more applications that come in means that the funnel is going to be steeper. As stated above, hiring professionals are going to have more people to weed out versus if the ratio is smaller, or if there are fewer applicants in the funnel. Only a percentage of those applicants are going to get through and potentially be hired. However, recruiters don't want the applicant pool to be too small. To elaborate, they don't want to not have enough applicants that are quality to choose from, but they don't want to be turning away too many candidates.
To combat this, recruiters need to ask the question about how often the app-to-hire ratio should be measured or how often it changes? Measuring if it's shifting can become an indicator of other health or changes in the funnel that might affect the quality, the volume of applicants, and the recruitment strategies needed to fill the roles.
Hiring professionals should also ask themselves: Does the current app-to-hire ratio feel healthy, or does it not? For example, if it's 10:1, and the quality of the candidate is good, then 10:1 is where the company needs to be. But if 10:1 feels like scraping the bottom of the barrel and the company would be lucky if one out of those 10 candidates is qualified, then the company might need to adjust the app-to-hire ratio higher.
Measuring an app-to-hire ratio quarterly will allow companies to adjust their hiring goals. It’s important to take a pulse check to see if there are changes and what the reasons for the changes are – for example, if it was a quality issue or a specific source issue. Other questions recruiters should ask are: Has organic application volume gone down? What else influences that change? How does the budget spent affect the ratio?
The down funnel effect would be if a company spent more money to get more applicants and the hiring goal stayed the same. Then, that would be more candidates and by default, the ratio would go up – also filling the pipeline with more candidates to sift through. This is why it’s important to regularly check the app-to-hire ratio to understand the health of the funnel and take a pulse check to see if anything needs to be adjusted.
It's tough to say whether helping a company’s app-to-hire ratio is increasing it or decreasing it. This is why it’s key to understand the app-to-ratio and learn how to be more strategic about setting and adjusting application goals in marketing campaigns, help plan their budget, and measure changes in the health of the funnel.
If you’d like to learn more about your app-to-hire ratio and how it can help your hiring goals, we'd love to help!