Quality of Hire: The Top Recruiting Metric

We talk about “top” talent and “top” performers, but how do you know you’ve reached the “top”? Is there some kind of altitude marker? A sign that reads “Welcome to the Top”? Unfortunately, no. But of all the recruiting metrics in your talent capital toolbox, one indicates a recruiting job-well-done above the rest: Quality of Hire.

Every CEO, manager, and corporate investor knows that hiring the best people is what ultimately drives an organization’s long-term success. Yet the recruiting metrics most companies employ evaluate efficiency rather than quality. Metrics like “time-to-fill” and “cost-per-hire” only tell us about the process, not its impact.

What matters most is how new hires perform and how much they contribute to your organization’s growth and goals. “Top” performers can exponentially increase your productivity and profitability, while those with lower standards can damage your bottom line and plummet your reputation. Those numbers far outweigh how much time it took to fill their position. Yet the question remains: How do you evaluate the quality of your hires?

Determining Quality of Hire: Across Your Organization

If you were to deduce a formula for calculating how well your organization is hiring overall, it would look something like this:

Quality of Hire = (PR + HP + HR) / N

  • PR = Average job performance rating of new hires
  • HP = % of new hires reaching acceptable productivity with acceptable time frame
  • HR = % of new hires retained after one year
  • N = number of indicators

Example:

  • PR = Average 3.5 on a 5.0 scale = 70%
  • HP = Of 100 hires made one year ago, 75 are meeting acceptable productivity levels = 75%
  • HR = 20% turnover = 80% HR
  • N = 3
  • Quality of Hire = (70 + 75 + 80) / 3 = 75

The result is a quality level of 75% for new hires made in one year throughout an organization. Calculations can be modified to reflect hires made by quarter, bi-annually, or in increments of two, three, five years, etc. It all depends on how much or how often you choose to measure and report.

This formula gives a good indication of how close or how far an organization is from reaching its collective hiring goals. However, filling in the variables can be a bit tricky.

Determining Quality of Hire: Per Individual Hire

When we sit down and break down the above formula, we begin to see where calculations are cut and dry, and where they need further attention and work. “Number of indicators” and “number of hires retained” are easily quantifiable. But variables like “job performance” and “acceptable productivity” need to be further defined before they can mean anything numerically. How do you turn “job performance” into a number?

Most organizations use a numeric rating system to evaluate the performance and productivity of new hires. On a scale of 1 to 5, how well is Hire B performing X? This requires clearly outlining a position’s expectations and objectives, and what Xs are important to assess according to your organization’s goals. X = new business leads generated. X = number of sales increase. X = number of findings submitted. You define the criteria. Only then will “quality” take on significant, measurable meaning when you tally up your hiring scores. The key is tying your talent management strategy and measurements to your business objectives and results.

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Keep it as simple as possible. Don’t try to include too many X-factors in your metrics program. That can get overwhelming or dilute decisive outcomes. Work with key stakeholders (CFO, top managers, hiring manager, etc.) to ensure credibility. And tie revenue per hire to dollar impact across your organization whenever possible to demonstrate the value of high-quality performers.

And keep track of your hiring progress! Identify a baseline. Measure annually (using your new handy-dandy formula). Note your best hiring sources and factors that indicated new-hire success (as well as those that didn’t). Share your results and reward your recruiters and hiring managers along the way.

Because the best way to know you’ve reached the top is to look back and see how far you’ve come.

Stephen Lowisz
With nearly two decades of experience in the recruitment industry, Steve Lowisz is a highly regarded trainer and speaker on all things talent. A leader of sourcing and staffing engagements for companies throughout the world, he has a unique perspective of the industry, its challenges, and its present and future opportunities. His passion is to educate and equip recruitment professionals and hiring executives with the tools and techniques required to create e?ective recruitment functions and processes. His unique and sometimes unconventional delivery style is engaging, challenging, and thought-provoking for recruiters new to the industry, all the way up to the seasoned CEO seeking the best talent. He is also the force behind the Recruitment Education Institute and is the author of the forthcoming book, “Recruit or Get Out of the Way.”