Capacity modeling essentials: Understanding past performance and forecasting the future

4 mins, 46 secs read time

How many recruiters does it take to hire 10 engineers? No, this isn’t the setup for a talent acquisition joke – it’s a legitimate question, and one that’s critical to answer accurately. Okta’s Director of Recruiting Operations & Analytics Shane Noe puts it this way, “The most important part of my job is capacity modeling.”

Shane says there’s a lot riding on your ability to get capacity modeling right: “The entire business depends on recruiting and our ability to deliver hires. If we can’t deliver the salespeople, we can’t sell the product. If we can’t deliver the engineers, we can’t build the product.”

How do you set up capacity modeling so you can both understand past performance and forecast future abilities? At the Greenhouse Roadshow 2019 in San Francisco, Shane walked through each of the steps he recommends for building a capacity model.

Are you more of a visual learner? You can check out all the slides from Shane’s presentation here.

Why Do You Need Capacity Modeling?

Capacity modeling helps you understand what has been happening in the past, allowing you to better predict what’s likely to happen in the future. It also helps you get a better grasp on what’s working (and what’s not) and build credibility within your organization. As a former finance guy, Shane shares an insider’s perspective that using data to back up your requests also makes it much easier to get additional budget.

Shane breaks down capacity modeling into two major categories: determining your historical productivity and predicting future performance. Let’s look at each in more detail.

Part 1: Determine Your Historical Productivity

Begin by deciding how you’ll group your data. Some points to consider include what you think the business will want to see, how your recruiting team is organized and how organizations are grouped for budgeting purposes. If you’re unsure where to start, Shane recommends copying your finance team’s hierarchy. You’ll also want to separate outliers such as difficult hires, university hires/interns and executives.

Next, you’ll want to summarize the number of “signs” you get each quarter, which is the number of candidates who sign offers with your company. You can also count “starts” based on the date new hires start – just make sure not to conflate the two. Shane recommends using your HRIS since it should provide the most reliable data. The chart below shows sample data for 2018 broken down by geography and business unit.

Then you’ll determine your historical recruiting assignments for recruiters and sourcers. Shane cautions that this is the most labor-intensive step and recommends creating a template you can send that asks each person how much time they spent each quarter supporting different business units. Ask them to estimate the percentage of time they spent rather than the number of offers or searches they completed.

Once you have the percentages, you can sum up the fractions of recruiters and sourcers working on each group. For this step, Shane excludes managers and coordinators.

Now it’s time to take the number of signs and divide them by the number of full-time equivalent recruiters and sourcers to calculate productivity. Whenever possible, look at data over at least a few quarters – Shane recommends two years – so that you can begin to identify trends. If you don’t have data going back that far, just work with what you have. If you know there were any outlier quarters such as times when you had a hiring freeze, be sure to remove those from your calculations.

At this point, you’ll have a pretty good sense of where you’ve been spending your time, how productive you’ve been with that time and where it’s easier and harder to hire by group.

Part 2: Forecasting Future Performance

Once you have a good grasp on past performance, you can use those numbers to forecast into the future.

For the purposes of this exercise, Shane showed the following chart, asking us to imagine that it’s the end of 2018 and we’re looking to forecast for 2019.

Shane recommends doing the math backwards. Start with productivity and multiply it by the expected number of recruiters to get your forecasted number of signs. You can use these numbers to tell finance how many people you’re equipped to hire each quarter.

You now have a capacity model! You can now answer questions such as how many recruiters and sourcers you have supporting each group and how that’s changed over time, how much harder it is to hire in one department compared to another, how many recruiters you need to support next year’s hiring plan and more.

Once you’ve gone through all these steps, you can go on to do more complex calculations such as determining your cost per hire. If you’d like to explore this topic in more detail, be sure to check out the video of Shane’s presentation here.

Wish you’d been there to see this talk live? Watch the full session recap video.