Research from Cielo and others shows that companies place tremendous value on the ability to predict who will become a quality employee. The trouble is that few have been able to successfully define what quality means for their business. Part of the challenge stems from the disconnect that exists between talent acquisition and hiring managers, as well as a reliance on subjective, often anecdotal, feedback that is not useful for objectively improving quality.
The good news is, you can change that for your company and help it rise above. Starting now.
90%
of business leaders agree that consistently delivering quality hires should be the top priority for talent acquisition
What is quality of hire?
Quality of Hire is a group of meaningful measurements – unique to each company and role – that define success in hiring and retaining the right talent to fuel the business.
When you break that down, you get:
Meaningful Measurements
You want to measure elements that actually contribute to the organization’s success. These may include metrics such as retention rate, time to productivity. What makes them meaningful is your ability to count them objectively rather than subjectively.
Unique to Each Company and Role
No single company or role can define success for another. The quality measurements for your organization’s graphic designers, for instance, will be different than the measurements for your sales team.
Define Success in Hiring and Retaining Talent
The data you measure should point to your definition of a successful hire. Think of these as key performance indicators on an individual level. Ask yourself what a person in this role should be achieving to add value to the organization.
Fuel the Business
Through Quality of Hire measurements, you should not only understand how your organization defines success, but how each individual in the organization contributes to that. Starting at the business level, then drilling down to HR and the recruiting process, you will be able to determine the types of individuals who will add value to your business.
It does not matter how others define quality if those characteristics are not true for your organization or the roles you are evaluating.
Why measure quality of hire?
To turn data into a useful tool to measure Quality of Hire, start with this simple question: “How does our organization define success?”
This is the lens through which you must choose what data to measure – as well as how to measure it. Then you need to prove that measuring Quality of Hire will be worth the time and effort.
ERE reports that only 58% of recruiting departments say they measure Quality of Hire, so this leaves a tremendous opportunity for your organization to start measuring it and stand out.
Fortunately, executives across the globe are finally acknowledging how important talent is to their success, so momentum is building for putting more Quality of Hire measurements in place. This is vital as the increasing demand for top talent has made quality candidates harder to find than ever before.
The Adler GroupIf you’re not measuring Quality of Hire, you’re not hiring the best people.
Annual financial impact of high performers
Creating a base of metrics to benchmark from will help you predict who will make a quality employee in the future. This should make it clear that measuring Quality of Hire is essential to an organization’s continued success.
productivity in operations roles
profit in general management roles
revenue in sales roles
The impact of pivotal employees is important to keep in mind as you develop a plan to measure quality. You may find that it is more beneficial to focus on key roles first, and then expand your measurements later to other groups of employees. After analyzing the HR data of more than 1,000 companies and 20 million employees, Hewitt Associates found that with a mere 10-point increase in quality, a Fortune 500 company can increase its bottom line by between $70 million to $160 million over three years.
Uncovering the financial impact of Quality of Hire on the bottom line is not always simple, but there is no need for you to tackle this on your own. Your accounting and finance colleagues are valuable allies who can help you determine more precise dollar amounts. Be sure to bring them on board during this process.
The quality of hire measurement continuum
Cielo’s Quality of Hire Measurement Continuum is a scale of the ways organizations measure their Quality of Hire from “Most” to “Rare” based on the proportion of organizations that use each measurement.
Organizations most often self-identify with the “Most” category, basing Quality of Hire on whether the hiring manager is pleased with the recruiter’s performance. Others fall in the “Many” category, feeling that their chosen method is retention – particularly 90-day and one-year. A passionate but smaller minority choose “Some,” as they feel that Quality of Hire should be based on a new hire’s business contributions specific to their role over their first two years.
Hiring manager satisfaction (most)
More than anything, hiring managers want consistent quality hires from their talent acquisition teams. So, tracking their satisfaction is a good way to determine just how well recruiters are aligning with those needs and expectations. Cases where there is immediate concern, such as with onboarding and short-term attrition, will become apparent. Over time this will lead to trends being identified that could show whether there are differences in satisfaction based on factors such as physical location, department or job types.
It is important to keep in mind, however, that satisfaction is a subjective measurement dependent upon the opinion – and response rate – of individual hiring managers. While it is possible to sometimes get a hint at larger trends or problems, mostly it is surface concerns that are identified.
Reduced attrition (many)
Reduced attrition is a great example of a quantifiable metric with clear, objective results. While employees who are not a good fit do not benefit the company by sticking around, keeping strong employees longer saves you money. If a high-performing employee leaves within the first 6 to 12 months (or worse, weeks), you lose the time and money you have invested in them, a percentage of their salary (typically somewhere in the range of 20%), plus the costs of the vacancy and to refill the role.
Tracking this also has the added benefit of improving your Employee Value Proposition (EVP) as you look to attract more workers. They will see that this is a place where people can stay and succeed.
On-the-job competency (some)
Say a web developer at your organization typically reaches full productivity within three weeks of starting a job. However, there is one new web developer who takes seven weeks to reach that same level. Compiling data about your average time-to-productivity makes this an easy red flag and provides you with a baseline from which you can gauge subsequent improvements.
Error rates can say a lot about the quality of a new hire. While high error rates do not necessarily mean the employee is unskilled, it may indicate that they are not a good fit in the role for which they were hired. This may be especially useful for individuals in financial roles, where there is little room for error. Instituting skills assessments and/or work simulations based on the success of high performers is a good way to ensure the individuals being hired are capable of performing their duties.
Tracking this data does require a certain level of sophistication and consistency in an organization’s recruitment process, so it will not work for everyone. Getting true results requires patience and an ongoing effort.
Personal achievements (few)
This measure also requires an investment of time and a recognition that some roles are too fluid for useful measurement. But if it is done well, the results are definitive. Employees who are highly satisfied in their role and at their company are more engaged and effective. They challenge themselves to hit stretch goals, get more involved in their work community and push for better business results.
You will see trends emerge and be able to identify high-performing employees. There is also the opportunity to correlate sourcing methods with levels of performance. Do employees who responded to a certain job advertisement end up performing better than employees who were referred? Tracking this data opens up the possibility of finding that out.
Business outcomes (rare)
Measuring business outcomes resonates well with the C-suite and investors, and it is well-suited for high-volume roles or senior leaders where measurable outcomes – such as revenue growth and sales-per-hire are clearly defined. In sales roles, for instance, while there are many variables, they ultimately have the same objective: booking and generating revenue. If the average is 10 sales per quarter, and one salesperson only has two sales, then you have something to work with.
Organizations often see themselves in multiple continuum categories, a result most likely tied to an organization’s increased sophistication. After all, no method is better than any other – they are equally valid and merely identify how an organization measures value. Which of these is most appropriate will vary by company, department and role.
While the numbers are objective, what they mean is not necessarily clear. There can be many other factors that affect business outcomes outside of recruitment methods, but it is almost always a good place to start. If there is a quality issue, take it back to the recruitment process and see what the variables were between the performing and underperforming hires.
Defining and measuring Quality of Hire comes with challenges, but the benefits it brings make it worthwhile.
How do I overcome challenges to measuring quality of hire?
Arriving at a place where your organization is ready to measure Quality of Hire and benefit from it does not come without effort. The top four challenges are:
- No common agreement on critical roles
- Difficulty tracking and reporting
- Perceptions are subjective
- Expectations are unclear
These challenges often arise from companies trying to evaluate all employees together. Instead, start by evaluating only the highest-priority roles within your organization, i.e., the highest revenue generators or 40% of a prioritized list. Working closely with hiring managers and senior leaders to arrive at consistent and agreed-upon definitions will then help keep the practice manageable by making sure you are getting only the most meaningful and impactful data.
It is also critical to understand who should be held accountable for integrating Quality of Hire into an organization. Senior leaders, talent management, talent acquisition and hiring managers all play critical roles in answering the following questions:
- What are our most critical roles in the organization?
- What are the traits that correlate most directly with quality performance in those roles?
- How can we quantifiably measure those traits?
- When and how often should those measures be assessed?
- How can we use what we know to predict future success?
How can I improve quality of hire?
We have found six common levers that lead to stronger hiring results, improved workforce performance and better Quality of Hire.
There is no silver bullet and no magic formula that work in every environment. These are simply areas you can monitor and adjust to make sure you are on the best path to quality for your organization.
1. Employee Value Proposition
Your Employee Value Proposition (EVP) is the primary message candidates receive about your company aside from your public brand, and it is key to achieving better Quality of Hire. Smart EVPs will attract the candidates you want while turning away those who would not make a good fit. Think of it as your organization taking a side in the classic “The Beatles or The Rolling Stones” debate – one side appeals to some individuals more than the other.
The right message will create an emotional connection with your target audience and highlight points of difference that encourage them to work for your business instead of another. You need to monitor and update your EVP periodically, but it is one of the few tools you can implement that will bolster your recruitment efforts while you sleep.
2. Workforce planning
Workforce planning and retention metrics include the cost of turnover, workforce stability, workforce capacity, turnover rate and reason, voluntary termination by top performers and key position turnover rates.
To further develop a picture of your workforce quality, consider collecting data on new business growth, physical work location, offshoring, economic trends, retirees and the transfer of knowledge.
There are tools available that can help you track these metrics, including services such as human capital forecasting and retention diagnostics. Understanding this data will help you predict your future talent needs.
3. Hiring manager experience
Your organization’s hiring managers define recruitment quality, which arguably makes their opinions the most important. But there is often a disconnect between HR and hiring managers.
According to a study performed by the Corporate Executive Board Recruiting Roundtable, the majority of recruiters (57%) feel that hiring managers do not understand recruiting, while an even larger majority (63%) of hiring managers feel that recruiters do not understand the jobs they are trying to fill. Something is clearly broken between talent acquisition and hiring managers, so you must find the root of this disconnect and bridge the gap to truly deliver quality talent.
4. Talent management
While traditional talent management focuses on hiring and turnover, today’s talent management must be more integrated into the business. It must link business priorities and critical workforce issues and drive results through organizational enhancements.
Effective talent management improves an organization through strong succession planning, bench strength assessments, human capital metrics year over year, current and future organization charts, special emphasis areas, employee profiles and action plans. These are strategic measures and data points that are becoming even more important for properly analyzing the quality of your hires. Without them, you are essentially crossing your fingers and hoping everything works out for the best.
5. Employee orientation
A case study from Texas Instruments showed that employees who complete orientation reach full productivity 60 days faster than employees who do not. Corning found that 69% more employees remained at the same company after three years if they completed orientation compared to those who did not.
Seeing as the value of talent increases over time, the importance of having employees complete orientation should be self-evident. Make sure you have a robust onboarding program to convert candidates into employees and keep your quality hires in place.
6. Cost-per-hire
First-year turnover is often considered a telling indicator of quality. According to PwC Saratoga, “The average cost of turnover for new hires is equivalent to one and a half times the annual pay of the departing employee.”
So while it might be tempting to spend less per hire to reduce costs, it actually becomes more expensive over time. According to Bersin by Deloitte, doubling spending per hire results in 40% less new hire attrition and 20% faster time to fill. Finding the right mix for your organization can have a substantial impact on your Quality of Hire.
Author of “Good to Great”The old adage about people being your greatest asset is not true. People aren’t your greatest asset. The right people are!
Defining and measuring Quality of Hire certainly comes with challenges, but it also brings benefits that make it clearly worth the effort. It is not a stretch to say that Quality of Hire is essential to your organization’s success. Accurately measuring, leveraging and predicting it adds dividends to your bottom line.
No single metric perfectly determines Quality of Hire, so you must start with a basic understanding of the traits that matter most to your organization – by role – and increase your sophistication as you learn. Using Cielo’s Quality of Hire Continuum on page 6 will help you determine the metrics that work best for your organization. Do not wait until you think you have perfected the process to implement measurements, or you will never get started. Begin with the end in mind and tie your measurements to business outcomes and financial impact. Frequently assess your Quality of Hire levers.
To truly benefit the organization, you must report your findings regularly, consistently and comparatively – and communicate them broadly. The future of your organization depends on it.
