Untangling Quality of Hire
Ok, real talk.
Never before have companies spent more money on hiring than they do today. Worse, much of this money is wasted when a bad hire is made. HBR explains that “Only about a third of U.S. companies report that they monitor whether their hiring practices lead to good employees; few of them do so carefully”
What is a good hire though? Surely the answer is rooted in candidate quality or quality of hire (QoH) - a metric long touted as “the holy grail” of hiring metrics. This metric evaluates the value newly hired employees bring to an organization. According to Workable, this could refer to successfully completing tasks over the long term, improving the quality of their own work, and even how they contribute to helping others.
While it sounds simple, QoH is the hardest metric for hiring teams to measure, often involving a minimum six-month time delay. Riddled with other inconsistent considerations, understanding what a good hire means to most companies is no easy task, but in this post we’re certainly going to try!
Defining Quality of Hire for Everyone
There are many different aspects to hiring and the processes for doing so are inconsistent between different companies and organizations. Broad measurement of the success of these processes is difficult as a result.
Factors such as recruitment and sourcing strategy should be considered alongside candidate screening and selection methods, not to mention onboarding, training, and the entire candidate experience. All of these aspects will contribute to the quality of a new employee's performance.
When companies look inwards to understand what good quality of hire means to them they have to revert back to what they were initially trying to achieve. Was it a candidate who could do the job? Or, as Lou Adler CEO of The Adler Group says, was it ROI that the organization was considering at the end of the hiring process? The answer to this question lies uniquely within each organization out there.
Analyzing the result is more complex than defining the goal. As stated above, the employee experience post-hire can be deterministic. If the new hire is amazing but has a horrible manager that can’t be a reflection of the hiring team’s performance, says the Society for Human Resources Management (SHRM). Similarly, the new employee could get poached by another company with a better offer, and again this can’t be helped or avoided, therefore shouldn’t be factored into whether a hiring team made a good hire or not.
Defining performance quality can even get more complicated considering that metrics can take place pre and post-hire. Smart Recruiters explains:
“Pre-hire quality may include new-hire attrition, time-to-hire, and candidate assessment scores, whereas post-hire would look at the time it took the employee to come up to speed, performance and/or productivity measurements, and peer rankings.”
A good hire could refer to the quality of the hiring team’s performance leading up to the offer, or the new employee's performance and perceived value after being hired. While all of these pre and post-hiring metrics tell a good story, it’s hard to identify just one system to measure the quality of hiring performance. For example, Indeed says that the following feedback mechanisms could be considered:
- Employee engagement: how often they participate in company events and how invested they are in company success
- Job performance: how effectively they fulfill duties and responsibilities
- Turnover rates: how quickly they leave the company after an offer letter is received
- Team feedback: consider asking other employees for feedback (performance, attitude contributions)
- Client feedback: gather information about how they interact with your customers and the experience they provide through surveys
- Training time: how much time it takes for them to be comfortable and productive
These are all great but how do teams choose one, some, or all? It can even be difficult to get internal stakeholders to sign off and agree on standardized metrics around good performance. In fact, SHRM says “The most difficult challenge after defining quality of hire is getting buy-in and agreement with your HR partners, finance, and the executive team.”
Measuring a Quality of Hire Across the Board
Despite the fact that measuring hiring quality is difficult due to a lack of consistency, there are recommended ways to evaluate whether it was good or not. Beamery suggests the following techniques to measure hiring quality methodically:
- Conducting performance reviews
- Tracking retention and turnover rates over time
- Measuring hiring manager satisfaction
- Measuring hiring manager satisfaction
- Measuring Employee Lifetime Value
These are great starting points. When soliciting team feedback or even hiring manager satisfaction, ERE suggests asking the following true or false questions:
- I would make this hire again
- This new hire has the right attitude to be successful at this organization
- This new hire has the right skills to be successful at this organization
These provide a basic indication of whether or not that new employee was a good hire or not.
Technology can also help teams get a better understanding of their quality of hire. For example, applicant tracking systems, talent relationship management software, pre-employment assessments, and employee performance management systems are already providing hiring teams with data about hiring quality.
That said, hiring teams need to get into the nitty gritty of their technology systems if they’re to depend on their evaluation. For example, new customer-facing employees can pass a standardized language test but still perform poorly. That’s because these tests don’t actually measure what matters (skills), instead, they focus on the pronunciation and repetition of short sentences, or multiple-choice questions about generic topics, with few relevant scenarios. Customer-facing employees should also have skills like the ability to actively listen, pay attention to detail, express empathy, and so on. The skills for each role in each industry are unique and should be defined when evaluating a good hire as well.
Take the time to define the metrics that make sense for your team’s processes and the roles you’re hiring for. Collectively these will paint the picture of your quality of hire. Once you have these there are a number of different ways to calculate the QoH.
Formula 1 and 2 from Indeed:
- Quality of Hire (%) = (productivity + client feedback + training time + engagement) /
total number of indicators
- Quality of Hire (%) = (Job Performance + Ramp-up Time + Engagement + Cultural Fit)/
*All should be scored out of 100, N = number of variables used
Formula 3 from Beamery:
- Overall Quality of Hire (%) = [Avg. Quality of Hire score + (100 – Turnover Rate*)] /
*Turnover rate = the number of hired employees who were fired or quit, divided by the total number hired
Formula 4 from Google:
- Quality of Hire = [Quality Input 1 + Quality Input 2 + Quality Input 3 /
# of Inputs] x 100
Formula 5 from Interview Stream:
- Quality of Hire = (Metric 1 % + Metric 2 % + Metric 3 %* + …) /
(Total number of metrics)
*Input the calculated percentages of each metric you have chosen to calculate, and divide by the number of metrics.
Your team has to decide what good means and measure accordingly. Plug your metrics into the most suitable quality-of-hire formula above to see where you stand with your latest hire. Because at the end of the day, if you’re not measuring good quality hiring, you can expect a 60% employee turnover every three years.
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