Updated: Oct 4, 2020
If you’ve ever worked with a sales funnel or even been on a product team, the chances are you’ve heard of the Pirate Model by Dave McClure. Also known as AARRR, the framework is an important part of the lean startup philosophy and can be used as an analytical tool to monitor the behaviour of customers at various stages of your product. This has implications for how you position your product and how your product is priced. In turn, AARRR helps companies to build their Customer Lifetime Value alongside other key metrics.
But how is this relevant to recruiting you might be asking? If you consider AARRR merely as a way to track actionable metrics for different strategies, it can also be used as a way to measure the health of your hiring pipeline.
Let’s start with the concept of Employee Lifetime Value, defined by Maia Josebachvili as “the total net value over time that an employee brings to an organization”. It is the job of the HR department of any company to build this value over time.
Employee Lifetime Value is a critical input for the AARRR framework for recruiting. The way people are handled from acquisition through to referral defines the longevity and quality of their value to a given organization. Hiring teams can optimize each part of the funnel in order to build this lifetime value and ensure a company can get more value out of its team.
With this in mind, let’s walk through each step of a recruiter’s AARRR pipeline and understand the dynamics of how to maximize that part of the funnel.
1. Acquisition - How do employees find you?
This is the first critical part of your hiring pipeline - attracting talent in a crowded marketplace. As we’ve touched on in some of our other posts, there are a variety of ways you can build an impactful employer brand using storytelling and content.
Job descriptions and paid advertising no longer cut it as your only acquisition funnels. In order to build that lifetime value you need from a potential employee, recruiters need to attract the right talent. And this right talent is probably looking for more than just a salary as the chart below highlights.
Whether it’s sourcing internal or external talent, building an innovative acquisition strategy can trickle down into the rest of the pipeline to ensure happier team members.
2. Activation - How do you deliver a great onboarding experience?
Now you’ve identified the right candidate and they’ve accepted your offer. What next?
Those first few days and weeks for a new hire are crucial in defining their motivation for the role ahead. Designing an impactful and personal onboarding process should be a priority for fast-growing teams which may prioritize other things in its place. Onboarding helps new hires adjust to their new environment, and supports them in getting up to speed in their jobs so they can quickly become productive, contributing members of the organization.
As a company, your activation KPIs should be focused on the engagement and performance of new hires at regular time intervals during their first 12 months. This can be an interesting way to understand if the onboarding process is effective.
3. Retention - How do you retain employees?
Just like churn on a subscription business, high employee turnover can be an indicator that your company culture isn’t delivering what’s important to your team. Retention is a crucial part of your talent pipeline as it measures how happy your employees truly are.
Retaining employees starts with making the workplace culture somewhere they will enjoy being. Are they challenged in their daily job? Is there work valued by their manager? Are they being encouraged and supporting learning new skills? Investing in retention is investing in the company’s overall productivity. In this sense, retention is a crucial metric for any growing team to measure proactively.
4. Revenue - How do you measure efficiency and productivity?
Ultimately your role when hiring is to help the company grow. Retaining high quality employees means that they are contributing to this growth on a daily basis.
Measuring this KPI can take many forms depending on your management style. Do you measure the output of an employee? Or is their ongoing contribution to the team more valuable?
Either way, the ability of a team member to contribute to the company’s growth whether directly or indirectly, is a crucial part of their overall lifetime value.
5. Referral - Do employees refer your company as a good place to work?
Last but not least, a happy team member is one that shouts to all their friends about how great it is to work at your company. That’s really all there is to it.
When an employee has been ‘activated’ to know their worth in the company and is satisfied by the results they deliver, they will let others know. It’s human nature.
So recruiters need to ensure the culture and people they hire are diverse enough to allow different team members to flourish.
The Pirate Model can be a useful framework to design and measure your talent pipeline. AARRR helps recruiters to understand that getting a hire to sign is just the tip of the iceberg for a successful overall hire. Ensuring that team members are onboarded correctly, challenged in their role, contributing to growth and diffusing the company culture positively are all important aspects of this process.
There is no specific formula to building this overall Employee Lifetime Value, but using this AARRR framework can help you begin to think about your own company’s talent pipeline and begin to experiment with improving each part of it.