How to Measure Whether You’re Hiring Good People

Mar 5, 2013

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.

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