De-Mystifying Quality of Hire
Recruiters and business leaders have the same goal. Find the ideal person who will be able to perform the job and make valuable contributions to the future of the company. While making high quality hires is the ultimate goal, the concept of what it means to hire quality employees and confusion about how to measure it has continued to plague talent acquisition teams.
To realize the full benefits of this metric, we should start by de-mystifying the definition and measurement of ‘quality of hire’ and clarifying steps recruiting teams can take to demonstrate this important outcome.
Quality is in the eye of the beholder
At a basic level, the quality of new hires indicates a new employee is contributing to and adding value to the organization. Quality of hire is often defined as how well a new hire performs on the job, fits with the corporate or team culture, and/or whether they stay with the company.
Let’s look at each of these starting with the retention of new hires.
If a new hire leaves the organization or is terminated, especially in the first six to twelve months, it is often seen as an indicator of a poor hiring decision. Turnover within the first year can imply that the new hire was not a good cultural fit for the role, or did not have the ability to reach a productive level in the expected time.
As a result, new hire turnover has often become the proxy for ‘quality of hire’, reflecting both fit and performance. Especially in the absence of more specific information. New hire retention is not a bad definition of quality of hire, but it is a lagging indicator and doesn’t really give you insight into what went wrong unless you dig deeper.
A more targeted definition of quality of hire focuses on whether the new employee is performing the job well. The first step, however, is to clarify with managers what level of performance is expected of a new employee and how long it takes to demonstrate that performance.
In some roles where performance is more quantitatively measured, this may be simpler. For example, a new salesperson may be expected to meet a specific revenue target in 9-12 months. In other roles, the definition of ‘good’ performance and the expected ramp time to reach that level is more subjective.
Having a clear definition of performance expectations is essential if this is how your organization defines quality of hire.
It can be even more challenging to define what it means for someone to be a good cultural fit to your organization, and therefore a ‘quality’ hire.
Zappos takes action early in that person’s tenure if it doesn’t seem like the right match. It is important to clearly define what it means to be a good cultural fit, and determine if it is an indicator of a need for more short-term adjustment or a true long term mismatch.
Quality can also be defined as a combination of these 3 factors or even other indicators. It can also vary by department or job.
These complexities simply mean it is essential to decide what definition is important for your organization and will resonate with business leaders, who want to know how effectively the talent acquisition process results in hires who add value to the team and the company.
Realistic measurement is key
Once you decide on what a quality hire truly means in your organization, it is now time to measure it. Let’s go back to our three definitions – retention, performance, and fit.
A good place to start is new hire turnover. But not all turnover is created equal, so choose your data wisely. Typically, turnover within 90 days of hire – voluntary and involuntary – indicates a bad hire. For many jobs, this is the point in time when a person is expected to be settled into a job, complete initial training and on-boarding, and perform independently.
The timeframe for when a new hire is expected to be performing well in a job varies widely, so talk to your managers about what they consider a reasonable milestone. However, turnover within the first 90 days is a good place to start.
Collecting performance data as the indicator of quality of hire is the most frequent measure for quality of hire, but can have its challenges. Manager ratings are not standardized and some organizations have abandoned numerical ratings altogether.
Other more objective measures of performance such as sales revenue or call center metrics are ideal. They may be difficult to access regularly, but certainly worth the effort especially for critical roles.
An alternative to obtaining performance measures directly is to ask the hiring managers. Post-hire surveys can provide feedback from managers of their satisfaction with the hiring process and quality of candidates, as well as with the performance and cultural fit of the new hire.
The downside of a hiring manager survey is that it can be cumbersome if a manager has many hires, and response rates may be low. The benefits are that you are consistently collecting data from your clients directly related to the insights you need to continuously measure the quality of hire and improve the hiring process.
Create meaningful insights
With the input of business leaders and managers on how to define quality of hire and how to realistically measure it, it is important to decide upfront how the information will be used. Determine in advance how the data will be reported and set expectations for interpreting the results.
For example, if it is reported that “70% of employees hired within the last 6 months achieved a performance rating of ‘meets expectations’ or above”, what does that actually mean to a business leader? Is it good? Bad? Managers can assist with establishing expectations and targets for what quality really means.
Most importantly, analysis of the talent acquisition process using quality of hire data as a key outcome can provide insights into variables such as source effectiveness, recruiter competency, alignment of job requirements, the accuracy of screening and selection tools, interview effectiveness, and hiring manager decisions.
Note that these definitions and measures of quality of hire are lagging indicators. Over time the analysis can reveal factors that are key predictors of quality of hire, and it is possible to create leading indicators by identifying quality candidates who are more likely to stay, perform, and fit in the organization.
This approach allows you to make adjustments to the hiring process in a more timely manner and minimize the likelihood of a bad hire.
Measure what matters
Quality of hire is likely the metric that matters most to business leaders. Therefore the definition and approach for measurement of quality should be decided in partnership with business leaders. Demonstrating that the recruiting and hiring process results in new employees who are productive, a good match with the corporate culture, and who are likely to contribute to the success of the organization over time is a critical step towards demonstrating the business impact of your talent team.