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How to Measure Whether You’re Hiring Good People

by Mar 5, 2013, 5:32 am ET

HR should be every company’s ‘killer app.’ What could possibly be more important than who gets hired…” — Jack Welch, ex-CEO of GE 

I wish more CEOs and their respective CFOs agreed with the statement above. The companies that do follow this mantra seem to prosper (GE, Google, Facebook, Mayo Clinic, Starbucks, and others that invest in hiring and developing talent.) Quality hires impact a company’s ability to execute its mission, reach its milestones, be profitable and ultimately increase shareholder value.

I’m going to talk here about how to measure this quality.

Quality of hire is an index, an aggregation of relevant metrics. The first challenge is to define the metrics. The most difficult challenge after definition is getting buy-in and agreement with your HR partners, finance, and then the executive team. This is a collaborative effort to move from quality of hire 1.0 (efficiency metrics) to quality-of-hire metrics 2.0 (effectiveness metrics tied to the success of the company)

Your quality-of-hire metrics should help guide your overall talent acquisition strategy and tell the story of HR effectiveness at pre-hire and post-hire levels. The goal of the story should be to influence senior (C-suite) leadership to buy-in on quality of hire and/or invest in the hiring process.

I’ve worked on quality-of-hire metrics for many different companies (From Cisco to WellPoint) and seen different approaches, methodologies, and systems. Efficiency metrics are the basics: time to fill; cost per hire; attrition rates are still measured and still relevant. Some companies can only measure these metrics — quality of hire 1.0. For quality of hire to have an impact, we have to move to metrics that reflect effectiveness, or quality of hire 2.0.

There are two dimensions of quality of hire: Recruitment-focused quality measures and post-hire contribution/performance quality measure/index. These effectiveness metrics are distinct and should be treated as such. They are analogous to pre- and post-hire metrics.

In one study (listed here, about quality of hire) of major Fortune 500s, only 33% of those companies had a quality-of-hire metric. All measured turnover but there was no consistent metric they used for quality. So it still has a way to become more accepted.

Quality of hire is measured in different ways across different companies and industries. There is no one size fits all. Turnover, performance review, and hiring manager satisfaction are acceptable proxy measurements as long as you understand their limitations. They are not quality of hire measures by themselves.

Start With the Talent Acquisition Strategy

Talent acquisition’s mission is about Right Talent, Right Time, Right Work, and Right Place. Our organizational development friends would add right cultural fit, but I think we can incorporate that into the notion of right talent.  As such, a recruiting-focused quality of hire and post-hire quality-of-hire metric (index) should be defined.

The talent strategy has to align to the business outcomes (vision/strategy of your CEO and head of HR).

To get at the index, here are some metrics I’ve used that align to business outcomes:

  • Quality of Slate (pipeline measure) — This demonstrates strength in talent mapping, sourcing, knowing your competition and presenting the most qualified candidates.
  • New Hire Attrition – Talent acquisition really has no impact beyond a specific time, but at early stages we do.
  • Assessment Score For Critical Roles.
  • Brand Equity — I’ve used various surveys.
  • Candidate Experience – An elusive metric, but important to brand equity.
  • % of diverse staff hired in upper management — Building a diverse workforce contribute to overall business goals/strategy. This could be a hires-based and/or pipeline-driven metric.
  • Time to Fill for Critical Roles – An important process metric that should not be over-emphasized .

These are a lot of measures. Include cost per hire as well. Pick the critical ones for your organization. I’ve seen and used different approaches to capture these metrics above.

Take these measures and calculate a score/index.

My view for a pre-hire quality of hire is to simplify:

Quality of Hire = Quality Slate + Diversity + New Hire Attrition + Pre-Hire Scores (if applicable) + TTF / N where n=5 in this case (# of indicators)

Now comes the tricky part. I’ve worked with different stakeholders to conduct regression analysis to align quality of hire metrics with Revenue, EBITDA, and other company goals — both pre-hire and post-hire. This brings it back to the relevant outcomes that contribute to shareholder value and/or profitability. You will have to partner with Finance. It’s a commitment and a long term process. The first time you do it means little as there’s nothing to compare. After the following year, quarter by quarter, it starts having meaning once aligned to business outcomes. Dr. John Sullivan made a great point in his comment below this article: “Convert any quality-of-hire metrics into dollars. Saying you improved 12% doesn’t get a COO or CFO’s eye nearly as fast as saying that this year’s new hires produce an average of $87,000 more revenue than last year’s hires”.

You need to use the right analytics and approach to get at metrics that share this type of story!

Now, let’s look at post-hire. Factors like performance, turnover, and engagement all become relevant.

Post Hire — Quality of Hire 1.0

It is easy to get a perspective on quality of hire from both a hiring manager survey and/or a 360 tool. Make it simple.

Checkster is one cost-effective tool, very effective in doing 360 quality-of-hire reviews with existing employees — this way, peers, and the manager and other executives have an opportunity to provide feedback on the employee. Usually between 6-9 months is a good time after they start is a good time. This is a simple, fairly cost-effective way to get at that data. This tool can be integrated into quality of hire 2.0.

Quality of Hire 2.0 – It Needs to the Tell the Whole Story And Line Up to Your Business Outcomes

Here are a few questions to create a post-hire metric:

  • In terms of productivity, when was the employee fully productive?
  • Do peers and colleagues rank the employee as one of the best, or just average?
  • Are they a cultural fit?

At a former employer, a major health benefits company, it used a formula to create a score based on these questions above and it added a category they called “associate contribution,” which is the same as a performance score from a performance review. It used a percentage. The quality-of-hire index needed to be greater than 90% for it to be a high quality of hire score.

It has a dedicated HR metrics team. Many companies don’t. And it’s still in the early stages for this metric, but I’m curious where it goes.

Quality of Hire = Performance + Productivity + Culture + 360 Comparison/N

This is the quality metric that I liked the most. It’s a comprehensive formula.

Some companies also include an engagement score. Highly productive, highly engaged employees are the best hires. Sounds like commonsense.

Implementing pre-and post-hire quality-of-hire metrics is a big challenge. You need to ensure your ATS can get the data you need, and/or look at other options. Some tech companies dedicated to recruitment metrics can integrate to your ATS and have made good attempts, but are still far away in this area. I can share my horror stories if contacted directly.

What’s the Future? Quality of Hire 3.0

That’s when we get social media and big data get involved through the entire talent lifecycle for regular employees but also including contingent workforces also. When we get to integrate that data — to get at networked intelligence — truly seeing patterns, being able to forecast and identify best talent profiles quickly … that could be a game-changer.

This article is provided for informational purposes only and is not intended to offer specific legal advice. You should consult your legal counsel regarding any threatened or pending litigation.

  • http://PreemploymentDirectory.com Barry Nixon

    Thank you for an outstanding post that advances the thinking about quality of hires. Too often articles simply restate the current state of knowledge, but yours goes much further and equally important addresses an issue that is significant to the future success of a business. I hope more HR Managers embrace what you are offering them because it is a ticket to corporate success.

    Barry

  • Keith Halperin

    A quality hire is one who makes his/her manager(s) look good at all times, is completely loyal, and totally dispensable when no longer useful.

    -kh

  • http://community.ere.net/blogs/the-careerxroads-annex/ Gerry Crispin

    Nicely done Shanil. Thank you. One of the best overviews I’ve seen. I’m also a fan of of Rob Macintosh’s thoughts on this subject.Hopefully we’ll see the development of a working group to create a quality of hire ‘standard’ definition.

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  • http://www.linkedin.com/in/shanil/ Shanil Kaderali

    Barry: Thank You for your comments.

    Keith: I may use that quote in the future.

    Gerry: I hope you are well. You made an amazing comment about measuring quality that inspired me:”the need of an organization to study and predict performance expected as a measure of the individuals they select. To be able to improve how we find, screen and select people who truly perform is less a creative art than a science but it requires discipline, data and the application of the scientific method”

    The Workforce Planning pingback was really good.

  • Howard Adamsky

    I agree with Welsh but if HR, using todays measurement of respect and effectiveness, became the killer app, we would be a third world nation is under a month.

    Howard

  • http://www.shakercg.com Joseph Murphy

    Nice article Shanil
    Here are a few add-on points for consideration.
    Quality of hire can be measured via two types of performance data.
    Subjective: Ratings of observed behaviors, such as behaviorally anchored competency scales.
    Objective: Performance outcomes captured in the form of numbers.

    There is an underlying assumption with subjective measures that an individual rated higher on a valued behavior (job specific competency) is a more valuable employee. These are however, still opinions, and difficult to use in a calculation that documents value.

    With objective measures, performance outcomes may be easily equated with dollar values, and thus contribute to a quantitative ROI analysis.

    Some jobs do not have clear, specific performance metrics that are captured. Captured being the operative word.
    Without data capture, there can be no analysis. Without analysis, no insights, and quality of hire remains elusive.

    Quality, it has been said, is determined by the customer. Who is the customer and what outcomes are important in talent acquisition?
    If it is hiring manager and their opinion, a survey will work for QOH.
    If it is the hiring manager and their department’s production goals, then opinion may not be an adequate metric.

    As an exercise, ask the hiring manager to produce a list of the objective performance metrics for the job. If there is enough people in the job, calculate a group average. Quality of hire may then be viewed as new hire performance that lifts the average of the group.

    For more to think about, take a lesson from Lake Wobegon

  • Keith Halperin

    @ Shanil: Thank you.
    @ Howard: We ARE becoming a third world nation (economically), but it’s taking longer than a month.
    @ Joseph: Well-said.
    A question: Is an arrogant, selfish “prima donna” who greatly exceeds “the numbers” but makes it harder for other people to make their’s a better or a worse hire than a pleasant, helpful, team player who just makes “the numbers” but helps others do as well?…Unless you have the criteria created by neutral parties, objective data can be as potentially biased as subjective data to reflect what it is the criteria-creator/ quality-evaluator wants it to mean…

    70% Cheers, 10% Boos, 20% Unsure,

    Keith

  • http://www.linkedin.com/in/shanil/ Shanil Kaderali

    Joseph: Great comments and insight. Hiring managers producing a list of objective performance metrics for the job is a sound advice. For a quick QofH measure, a 360 survey I think works effectively though as you note, it is subjective. Addresses point Keith made above too.

  • http://www.shakercg.com Joseph Murphy

    @Keith:
    One ‘prima donna’ that has negative impact on the performance of one or more would have to exceed the value of lost production from all affected parties. In most cases,I put forth, that is not plausible.

    Prima donnas are highly over valued, more distuptive than calculated, and often a source of what we term ‘controllale turnover.’ A very costly, and also not calculated net drain of talent and dollars.

    @Shanil
    360 surveys vary significantly in the quality of the questions , job relevance, and the rating scale (frequency, effectiness, proficiency, etc.) This is particualry true with off-the-shelf surveys. The user settles for how closely existing survey content matches essential performance drivers. And may in fact distort or misdirect focus on easy to observe, interesting, yet less important behaviors. As we are reminded, what gets measured is valued. While a valuable source of data and points of view on an individual’s behavior, 360s are not the same as behaviorally anchored rating scales.

  • Keith Halperin

    @ Shanil: Thank you. It also depends on how the 260 is conducted- if you have everyone ther together, they can be subject to “group think” and other biases.

    @ Joseph: I agree with you. At the same time one hiring manager’s arrogant prima donn a” is another hiring manager’s “A-player, Fabulous 5%er” that s/he absolutely must have.

    Cheers,

    Keith

  • http://www.alpha-omega.com.au Gordon Alderson

    I like to Keep It Simple and Sensible.
    Six months after a person starts a new job ask the Hiring Manager:
    “If you had known this person six months ago as well as you do now would you have started them in the job?”
    “Yes” is success; even if they have moved on.
    “No” is failure; even if they re still in the job.

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  • Loren De Laine

    I’m keen to see how big data and social media metrics will be integrated. From a recruitment perspective, that would be utopia!

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  • http://www.clinicalstaffingreviews.com/ Fred Elmore

    This was a great refreshing article as it provides a reminder of how important it is to hire the right individual to begin with…and some ideas on how to track the reality. For those of you who work with recruiters, I would love to see you hold them as accountable to these metrics as we hold our IT companies accountable to server up time. http://www.clinicalstaffingreviews.com/would-you-buy-sushi-at-the-7-eleven/

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