Hiring GlossaryWhat is quality of hire?
What is quality of hire?
How do you know you’ve got an effective recruiting strategy and a well-oiled recruiting process? You might look at metrics like your company’s revenue, market share or even your net promoter score to measure your customers’ satisfaction. These are all ways of seeing how well your company is performing, but it’s difficult to tie them directly to your recruiting efforts.
At some point, most talent acquisition (TA) teams are looking for ways to demonstrate the impact they’re making on the company, and in these cases, they’ll often consider measuring quality of hire.
What exactly do we mean by the term “quality of hire”? There’s no industry standard definition, though for most TA professionals it refers to how effectively new hires perform in their roles and contribute to the organization.
For example, here’s how Cole Napper, former Senior Director of Talent and Analytics at Booster, described his approach: “When I think about quality of hire, I think about it objectively and subjectively. On the objective side, at Booster, we’re using this for all of our frontline population. We have things like productivity scores, safety scores, driver safety, a variety of different metrics, and essentially, you just take an average of those, 30, 60, 90 days into the job. It’s very simple and everybody is on board.” For employees at Booster’s headquarters, Cole said it’s a little more complicated, but still possible to measure quality of hire by asking managers questions like, “Would you rehire this person?” or “How is this person contributing to the success of the team?”
Part of the reason why it’s so hard to nail down a definition for this term is that there are a number of factors that can influence quality of hire, including how well your job description and interview process reflect the requirements of the role, the effectiveness of your company onboarding process and the ability of the new hire’s manager to set expectations and guide the new hire to success. As you can see, many of these factors fall outside the TA team’s responsibility, so things get complicated quickly!
Why measuring quality of hire is important
No matter what definition you decide on, most TA teams are interested in measuring quality of hire because it’s a way of connecting their work to the business’s goals and outcomes. In other words, it’s a way to show you can be strategic business partners and not just order-takers for the rest of the company. Plus, creating a connection between the TA team’s activities and business outcomes helps make the case for investing more in the TA team and in additional tools and technology, since the company is likely to see a return on these investments.
If you’re consistently hitting your quality of hire goals (however you choose to define them), you’ll have engaged, productive employees who want to stick around. The vision of your company that you’ve presented during the recruiting process will be close enough to the reality that new hires show up to work excited and enthusiastic about their work and the problems they’re solving.
Key indicators of quality of hire
We’ve already discussed that there’s no single way to measure quality of hire, but there are a few key indicators that you might want to consider:
- Performance metrics
Performance metrics look at how a new hire is adding value to your company, which might include things like meeting a sales quota, launching a new product or campaign or achieving a specific customer satisfaction or customer retention rate. You might also measure the percentage of new hires who are promoted within a given period of time.
- Time to productivity and training success metrics
Just like quality of hire, the definition of “time to productivity” might vary from one company to another, but it could include measuring how long it takes new hires to reach milestones like being able to generate specific results, work independently or complete projects with minimal supervision.
- Turnover and retention metrics
These metrics give a rough indication of whether a new hire is a good fit for your company, since employees who feel productive and engaged are likely to want to stay in a role. But they don’t necessarily tell the whole story because there are many causes for attrition that fall outside the TA team’s responsibility, like the new hire’s relationship with their manager or the company’s onboarding process (or lack of one!).
- Hiring manager satisfaction
TA teams can measure hiring manager satisfaction at different points in a new hire’s journey by sending a simple survey that asks something like: “How satisfied are you with your new hire?” or “How well is the new hire meeting your expectations?”
How to measure quality of hire effectively
Let’s consider how a few different TA teams and experts approach measuring quality of hire.
- Probation completion, meeting specific performance outcomes and promotions
Blacklane – the premier provider of chauffeur services globally in more than 50 countries – measures how many new hires complete probation, meet specific performance outcomes and achieve promotions. Learn more about Blacklane’s approach to measuring quality of hire (and how they were able to increase this number by more than 20%).
- A combination of performance, productivity and retention
Recruiting resource website ERE offers the following approach to calculating quality of hire:
First, you’ll need your average job performance rating of new hires (PR), your percentage of new hires reaching acceptable productivity within an acceptable time frame (HP), your percentage of new hires retained after one year (HR) and your total number of indicators.
You can then perform this calculation: Quality of hire = (PR + HP + HR) / N
For example, if the average job performance rating of new hires is 3.5 on a 5.0 scale, your PR is 70%. If, out of 100 hires made one year ago, 75 are meeting acceptable productivity levels, your HP is 75%. If 20% of your new hires have left within a year, your HR is 80%. The total number of indicators is 3, so the quality of hire calculation would look like this:
(70 + 75 + 80) / 3 = 75
- Profitability for the company
Lou Adler, CEO and founder of The Adler Group and a well-respected thought leader within the TA community, believes you can measure quality of hire with the profit an employee generates compared to average employees. He offers the following advice on calculating this and making the case for investing in quality of hire:
Step 1: Determine the revenue per employee at your company (you can do this by dividing last year’s total revenue by the number of people in your company).
Step 2: Calculate the variable profit margin per employee. For most companies, this is between 30–50%. Multiplying this percent by the revenue per employee will give you an estimate of the average incremental profit each employee generates.
Step 3: Estimate the increased profit contribution for hiring a top-third employee. You can estimate that the performance of those in the top third is about 20–25% above the average.
Step 4: Figure out the investment required to hire the top third of candidates, since there will be more upfront costs involved in terms of hiring additional recruiters, training them, selecting more advanced technology and potentially offering higher salaries.
Strategies to improve quality of hire
Once you’ve begun to measure quality of hire and have a benchmark in place, you can start to experiment with different ways to improve it. Here are a few ideas to try out:
- Improve your recruiting and candidate selection processes with structured hiring
If your goal is to increase the number of hires who meet or exceed the expectations for their roles, structured hiring can help. With this approach, you clearly define success criteria before opening the role and design interviews to assess candidates on these qualities. It’s pretty intuitive when you think about it – defining what success looks like makes it much easier to be successful! But if you’re new to this approach, we have plenty of resources to help you.
- Use technology to collect data and report on your progress
While it is possible to manually collect many of the metrics and key indicators we’ve mentioned in this article, it might take you a considerable amount of time to do so – and the calculations are only as good as your math skills. Finding the right recruiting technology (for example, an applicant tracking system or ATS) can help by storing all your data in a single place, and many tools (like Greenhouse!) can automatically generate reports for you, saving you time and reducing the chances of human error.
- Focus on building your employer brand and enhancing your candidate experience
Another way of improving your quality of hire is by focusing on the people who eventually become new hires – your candidates. When you intentionally build an employer brand that’s an authentic reflection of your company culture, you’re more likely to attract candidates who are aligned. And investing in a thoughtful candidate experience – which can include things like ensuring everyone gets timely responses, keeping them informed of their application status and helping them feel prepared for interviews – also increases the likelihood you’ll end up with new hires who are already bought into your company’s success.
Next steps to a higher quality of hire
We’ve explored why quality of hire can be difficult to define, considered a few key indicators and approaches to measuring it and looked at a few ways of improving it. Now you might be wondering what’s next.
Cole Napper, the former Senior Director of Talent and Analytics at Booster, who we introduced earlier, outlined a few steps:
- Step 1: Agree on some standard practices, such as when you’ll do a quality of hire assessment and how you’ll do it. For example, you might choose a few standard questions you’ll ask the hiring manager 30 days after a new hire’s start date.
- Step 2: Begin collecting this information to establish a baseline.
- Step 3: Layer in more complexity over time.
Remember: It’s all about starting somewhere and prioritizing progress over perfection! While it’s not always easy, investing in your quality of hire can lead to more efficient hiring processes, happier hiring managers and new hires and better company performance – which is definitely worth the effort.
Read more featured resources here:
