Best Practices for Achieving Talent Success Maturity
Measuring Quality of Hire — A Practical Model
With insight from
Kyle Lagunas
Research Manager, Emerging Trends Technologies — Talent Acquisition & Staffing Services, International Data Corporation
An analyst specializing in talent acquisition, Kyle keeps tabs on key practices in sourcing, recruiting, assessing, hiring, and retention strategies and technologies. Through primary research and deep analysis, he keeps today’s business leaders in touch with important conversations and emerging trends in the rapidly changing world of talent. Kyle has spent the last several years offering a fresh take on the role of technology as part of an integrated talent strategy, and focuses on providing actionable insights to keep leading organizations a step ahead.
Prior to joining IDC, Kyle founded Lighthouse Research & Advisory where he conducted independent research in talent trends and technologies as Principal Analyst. Before setting out on his own, he launched the talent acquisition practice at Brandon Hall Group and led major research projects on the state of talent acquisition, high-performance recruitment marketing, and onboarding as a driver of employee engagement. As the HR Analyst at Software Advice — a Gartner company — he supported the newly created lead-generation practice for HR technology vendors through a successful brand and content marketing strategy.
Libby Sartain
Former CHRO, Professional Board Member
Libby Sartain is an independent advisor, working with companies on human resource issues. With more than 30 years of experience in human resources, she is also an author and frequent speaker, using her HR leadership and management experience at companies in technology, transportation and manufacturing. She led human resources at Yahoo! and Southwest Airlines during transformative periods. Both companies were among Fortune magazine’s “Best Places to Work” during her tenure. She is the former board chair of the Society for Human Resource Management and is on the board of Manpower Group and is the Vice Chair of the Board of AARP.
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Who it’s for:
Hiring managers, HR managers, recruiters -
What you’ll get:
A quality-of-hire survey form and a guide for how to use it and interpret the results -
Why you need it:
Quality of hire is the most important measure of recruiting performance -
When it applies in the talent success process:
At the end of the candidate’s initial ramping-up period
Quality of hire is widely considered to be the holy grail of recruiting metrics. Reducing time- and cost-to-fill creates one-time value for each hire, but making a better hire will deliver greater results for as long as that person remains with the company. Quality-of-hire metrics can demonstrate with hard data when it’s worth spending more time or money to hire better. Even when budget and deadlines are fixed, these metrics will help to ensure limited resources are deployed to maximum value. This article will provide a practical approach for gathering this vital statistic through a simple process that’s accessible to organizations of any size or resource level.
Quality of Hire: What It Is and Why You Should Measure It
According to LinkedIn Talent Solutions’ Global Recruiting Trends 2016, quality of hire continues to be the most valuable metric and key performance indicator for the corporate recruiting function. This is true even as today’s competitive environment has placed increased emphasis on time to fill.
“What is the single most valuable metric that you use to track your recruiting team’s performance today?”
“One top-notch engineer is worth 300 times or more … than the average … We would rather lose an entire incoming class of engineering graduates than one exceptional technologist.” — Alan Eustace, former Google Senior Vice President, Engineering and Research
Quality of hire is a metric derived from evaluating your hires based on how well they perform against any of several benchmarks, including role-specific competencies, company values, the likelihood they will succeed in meeting established goals, and manager satisfaction.
In short, quality of hire is the acid test that shows whether your recruiting process is making you stronger or weaker. For example, if you have 10 percent turnover and growth of 10 percent, over three years you will have replaced 60 percent of your people. That’s a huge opportunity to build a stronger team or a weaker one — and being able to measure quality of hire is the leading indicator of where you’re headed.
Quality of hire is the metric that enables you to manage your process, budget, and all of your available resources to increase the number of A-players you hire.
The Whole-company Benefits of Measuring and Applying Quality-of-hire Metrics
Quality-of-hire metrics help guide your overall talent acquisition strategy — and tell the story of HR’s hiring effectiveness. Even more important, quality-of-hire metrics yield operational, tactical, and strategic benefits to every participant in the talent management life cycle. Important caveat here: everyone makes mistakes, including recruiters. Companies periodically (even “often”) hire the wrong person for a role. Measurement isn’t meant to imply that poor measurement should force out supposedly “bad” recruiters. It’s meant to imply that you apply the same rigor to your recruiting process and analyses as you would to your financial metrics. Then, you learn and grow from these measurements.
Quality-of-hire Metrics Benefit Sourcing
- Better allocate sourcing budgets. Quality-of-hire metrics can be tracked by source to identify what channels produce A-player hires — and at what cost.
- Refine and improve your sourcing plans. It’s not just which sources you hire from, it’s which sources you hire the most A-players from.
Quality-of-hire Metrics Benefit Recruiters and Hiring Managers
- Help identify where processes break down. For example, quality-of-hire metrics let you see whether certain managers or recruiters consistently hire better or worse than others. From there, you can evaluate the differences in their hiring practices.
Quality-of-hire Metrics Benefit HR
- Identify your company’s top recruiters — and identify the weak ones — by seeing who’s delivering high-quality hires.
- Put data in HR’s hands to prove its contribution to the business (for example, showing trends in better quality-of-hire metrics over time).
- Get visibility into how cost cutting and other business changes impact the quality of hires (by tracking changes in quality-of-hire metrics against cost-cutting measures, for example).
- Get a competitive advantage by identifying where your high-quality hires are coming from and shifting your sourcing strategy accordingly.
Quality-of-hire Metrics Benefit the Company
- Become an industry leader with quality hires who produce new ideas and innovation.
- Create continuous improvement in the company’s people processes.
- Reduce turnover in top positions. High turnover can hurt your brand and affect how analysts value your company.
- Top talent attracts top talent: A-players frequently want to work with other A-players.
Kyle’s Take
One of my favorite metrics in talent acquisition is the number of candidates submitted versus those accepted. It provides a few different dimensions of insight: It’s usually a good indicator of recruiter performance, it’s a strong indicator of hiring manger satisfaction, and it’s also a good indicator of quality of candidate when reviewed in the aggregate. The worst metrics for monitoring (and fostering) quality candidates and thereby quality hires, however, are the metrics we’re most commonly held accountable to: time to fill and cost per hire. Of course, we need oversight into process efficiency and resource optimization, but I rarely see these metrics used as such. Rather, they send a very clear message: get us the best talent you can… but do it quick, and do it cheap. Not exactly the stuff that compelling employer brand is made of, is it?
— Kyle Lagunas, Research Manager, Emerging Trends Technologies - Talent Acquisition & Staffing Services, International Data Corporation
A Template for a Quality-of-hire Review
There are myriad methods for determining quality of hire and collecting the data you need to put the program to good use. In general, however, they share four common sources of measurements to help determine quality of hire:
- Manager satisfaction
- Productivity measures
- Performance reviews
- Turnover and retention
The manager survey and measuring direct productivity are the most effective and beneficial methods to measure quality of hire. Many companies, however, still rely on the annual performance review and turnover or retention rates to measure quality of hire. These methods are not only more complicated than manager surveys and productivity measures, they also return messy data, and as a result, are less helpful for improving your recruiting process and hiring more A-players.
First, we’ll explain performance reviews and turnover or retention measurements and how many companies use them — and get data that isn’t really reliable for determining quality of hire. Then we’ll show a simple way to measure quality of hire using a manager survey that’s easy to interpret and yields accurate results you can use to improve your hiring process.
Performance Reviews
Performance reviews represent a potential source of information of on-the-job performance and can sometimes be used to determine whether the recruiting process is reliable in selecting quality candidates. But they’re often conducted too late to be used to making much-needed immediate changes in the recruiting process.
If you used competency-based job descriptions that led to competency-based reviews, this is an opportunity to see if the competencies seem accurate toward performing in the role successfully. If you found and hired a candidate who seemed to meet all the competencies, but their 30-, 60-, and 90-day review processes are coming back with poor scores, it might be time to reassess the competencies needed in the role.
Performance reviews can often put a finer point on the opinions obtained from a manager’s review, if you also perform a manager’s survey.
The downside to using performance reviews is that the timing may not be optimal for obtaining quality-of-hire metrics at the end of a newly hired employee’s ramping-up period. They are often not done for six months or even a year after an employee’s date of hire.
If you use a 30-, 60-, and 90-day review cycle (i.e., monthly for the first three months), some of these concerns can be negated. If you use recruiting software, finding an option that combines recruiting, onboarding, and performance reviews (holistic as opposed to ending once the recruiting process is over) will make this easier.
Turnover and Retention
Many companies use turnover rate as a measure of quality of hire because they believe a high turnover rate indicates problems with the quality of their workforce. When using turnover rate as a metric, optimal success comes from breaking it into two parts:
- Voluntary turnover
- New hires terminated for performance
Generally, the second measure — employees terminated for performance — is a better indicator of quality of hire than voluntary turnover rates. Turnover because of poor performance is more likely to indicate you have a serious problem in the hiring process. But turnover for performance is also a relatively blunt tool that can’t differentiate without closer inspection and assessment between degrees of quality or productivity as the root cause for bad performance.
For these reasons, measuring turnover rates isn’t automatically a good measure of quality of hire.
Libby’s Take
Let’s face it, we all make hiring mistakes. I have made a few. The key is not to perpetuate the mistake by letting a bad hire linger on. At Southwest Airlines, we actually encouraged our leaders to cut their losses if the new hire wasn’t performing as expected within the first 30, 60, and 90 days, depending on the role. When someone is new to a job, they should put their best foot forward. It doesn’t get better, employees are not like fine wine. So, if you find you have made a hiring mistake, cut your losses. Don’t worry about the metrics or the optics. It’s better not to waste any unnecessary time trying to make it work.
— Libby Sartain, Former CHRO, Professional Board Member
Manager Satisfaction Survey
Fundamentally, the question for managers is simply, “Would you hire this person again?”
The expectations of managers ultimately determine the standards for the quality of a new hire — and future hires. A straightforward and simple measure of quality of hire is to ask the manager if the employee has met the pre-hire expectations.
A well-structured manager’s survey will capture opinions objectively and can be all you need to start assessing quality-of-hire metrics and applying them to your sourcing and recruiting initiatives.
Typically conducted after 180 days on the job, this assessment provides valuable insight into hiring decisions and onboarding processes that can be incorporated into the recruiting process. This template should be customized to benchmark against role and core company competencies by adding in one or both sections. Doing this allows you to compare the hire to the quality of all new hires and to your company as a whole.
| Question | Type | Scale | Custom Scale Description |
|---|---|---|---|
| How is this new hire performing to date compared with their teammates and peers? | Standard | 5-point | |
| How does this new hire’s performance to date compare with your expectations for their role? | Standard | 5-point | |
| Do you feel this person was a good hire for the company? | Standard | Yes/No | Yes — This new hire is a good fit for the company. No — This new hire is not a good fit for the company. |
| How likely is this new hire to stay with the organization? (How likely do you think this new hire is to grow with the company in the years to come?) | Standard | 5-point | 5 — Extremely likely to stay and grow 4 — Likely to stay and grow 3 — Unclear if they will stay and grow 2 — Mostly unlikely to stay and grow 1 — Extremely unlikely to stay and grow |
| Do you feel there is a good fit between this new hire and their role? | Standard | Yes/No | Yes — This new hire is performing well in this role. No — This new hire is not performing well in this role. |
| Please compare this new hire’s time to productivity in their role to similar teammates or peers. | Standard | 5-point | |
| How is this new hire performing on their goals to date? | Goal Review | 5-point | |
| Include role-based competencies and measure the new hire against these. | Standard | 5-point | |
| Include company competencies or values and measure the new hire against these. | Standard | 5-point | |
| Please describe what went well in the process of finding this new hire. | Q&A | N/A | |
| Please describe what could be improved in future hiring processes. | Q&A | N/A | |
| Would you hire this person again for this role? | Standard, Final Review Question | Yes/No | Yes — This new hire is performing at or above expectations. No — This new hire is not performing as expected. |
Productivity
Perhaps the most rigorous approach to measuring quality-of-hire is to measure productivity on the job. This is especially valid if the pre-hire expectations included specific targets for productivity.
You can determine productivity through the manager’s quality-of-hire survey or by directly measuring the new hire’s productivity. Either way, it’s important to measure quality of hire on productivity benchmarks that are specific to the new hire’s job function and to be accurate.
Taking accurate productivity measurements can mean more than simply counting the number of products made or sold, or the number of services performed. For example, a worker in a toy factory might produce 100 toys each day. But if most of those toys are defective, that employee’s productivity level is not very high, and work time and materials are both being wasted.
Universal Class, an online continuing education class for business, explains eight of the top methods for accurately measuring employee productivity. Here are those methods with examples for each.
Top 8 Ways to Measure Productivity
Method 1: Management by Objectives
Productivity is measured in ways that reveal how well an employee’s output is contributing to your company’s goals and targets.
Learn more.
Employees must first be given clear, individual productivity goals to work toward and the tools and information they need to meet those goals. If your company’s goal is to increase customer retention by 25 percent over the next year, you'll need to decide what kind of training and incentives you'll use to ensure that employees are ready to help you achieve that goal. Annual or six-month employee evaluations should reveal accomplishments such as "reduced customer complaints by 20 percent" and "found solutions to customer problems on a consistent basis."
Method 2: Measuring Productivity Quantitatively
Productivity is measured by the number of parts or products an employee produces in a particular period of time, such as per hour, day, or month.
Learn more.
Productivity can be quickly calculated with productivity software or on a spreadsheet, revealing the number of products an employee produces or contributes to in a given time period. Those numbers are then averaged to reveal productivity gains or losses over time. Output can be measured either by the volume or quantity of products created, or by the financial value of the product or service.
Method 3: 360-degree Feedback
Productivity is based on the feedback and comments of co-workers.
Learn more.
This method can only be used if the employees in your organization interact with one another a great deal and all of the evaluators know and understand the employee’s overall role and function, daily work duties, professional credentials, and communication skills. To learn more about the 360-degree performance review, see our article “Easy-to-use Manager 360 Performance Review.”
Method 4: Measuring Sales Productivity
Measuring a sales representative’s productivity with complete accuracy can be challenging because many factors affect a salesperson’s output.
Learn more.
Examples of the different aspects of productivity that can be measured within a given time period include total number of sales completed, total amount of sales made in dollars, number of calls made to current customers, number of sales made to current customers, number of new customers gained, number of calls made to potential new customers, and expenses per sale or new customer acquisition. To accurately evaluate these or any other sales productivity numbers, you first need to establish a baseline for sales productivity that suits your particular business size, market, and product type.
Method 5: Measuring Service Productivity
Measuring service productivity can be more challenging than measuring product output, but accurate measurements can still be created if you establish clear goals that align with your business goals and mission.
Learn more.
Customer service productivity can be measured in many ways, including how long it takes for a customer to be served (such as call-waiting or in-person-waiting times), how long it takes for a customer's order to be completed, customer retention rates (the percentage of customers who return at least once), how customers are retained, how often or how many products are returned, and how many customer complaints are received in a given period. Whatever set of criteria you choose, first create your baseline — your business's best service level under current conditions — and measure employee productivity against that.
Method 6: Measuring Time Management Productivity
Determine productivity by recording how employees use their work time.
Learn more.
Accurately measuring employee time management will reveal how much time is spent accomplishing work duties in a timely way, as well as how much time is lost to illness or excessive time off, non-work-related conversations, and distractions such as texting and social media. Although this method can help employees and managers set goals for reducing lost time, the bigger your business gets, the harder it can be to accurately measure the time management of individual employees. Software programs are available to accurately measure how much time employees actually spend (or don't spend) being productive.
Method 7: Measuring Productivity by Profit
Measuring by profits involves watching only the bottom line. Unlike other methods of measuring productivity, only higher-level functions are closely watched.
Learn more.
Measuring productivity purely in terms of profit gained is becoming the preferred type of measurement for many small and midsize businesses. This method ensures that productivity measurements don't keep employees from working creatively or take a great deal of management's time. As business consultant Roger Bryan of RCBryan & Associates says, "Watch the money and everything will fall in line."
Method 8: Measuring the Quality of Tasks Completed
This method measures productivity only by whether the work assigned actually gets done.
Learn more.
Some companies and performance-management experts prefer this method because with personal and professional lives increasingly blending and overlapping, they feel it’s more accurate to measure productivity by completion of tasks rather than by minutes spent at the office. Examples of what is measured with this method include completion of individual or group tasks within projects, or progression through a project. A number of productivity software tools are available to aid managers in tracking project and task completion.
The Quality of Hire Report — Putting the Metrics to Use
Quality-of-hire metrics can guide you to make refinements in any step of your recruiting life cycle — job descriptions, sourcing plans, candidate selection, and candidate interviews.
The ultimate goal is using quality-of-hire metrics to clearly see trends among the quality of your new hires and begin to make mindful, specific adjustments in your recruiting process.
- Learn more about creating effective job descriptions.
- Learn more about sourcing plans.
- Learn more about developing a better interviewing process.
Five Immediate Applications of Quality-of-hire Metrics — and What They Can Look Like
Once you’ve identified your quality-of-hire metrics, you can divide them up by sources, hiring managers or recruiters, department, turnover rates, and other factors to see how you can apply them to improving your hiring process. Being able to represent your data visually will help, too — especially in the context of presentations aimed at improving your talent management life cycle.
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The metric: Sources (job boards, social networks, etc.) that generate the highest number of quality hires
How to use it: Drop sources that don’t deliver high-quality candidates. Put more effort into using sources that do result in A-player hires. Also, review how you’re using sources that are on the low end and make sure your job descriptions are appropriate to their audience.
What it looks like: This type of report will typically look something like this:
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The metric: Positions with higher-than-average turnover
How to use it: These are roles for which successful candidates are often hardest to find. Review the job descriptions to make sure they align with the jobs. For example, for a retail salesperson, make sure the job description clearly and accurately defines what’s expected on the job and isn’t too vague — or even inaccurate. You might also evaluate sourcing channels of these jobs and compare them against sources for positions that have a larger share of high-quality hires. You may need to change sourcing channels.
What it looks like: Your report data should be organized around hires, terminations, and turnover by position and quarter.
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The metric: Quality of hire in one business unit (or other defined group) compared with another
How to use it: Look at job descriptions and sourcing for one group compared with another. Among business units, look, for example, at the employees who managers felt were high-quality hires and examine differences among how business units sourced hires and differences in their interview processes, preparation of job descriptions, and manager reviews.
What it looks like: You should be able to look at job requisitions, headcount plan-to-hire, time-to-hire, and quality-of-hire statistics and sort them by department and even individual hiring manager.
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The metric: Positions with lower-than-average performers
How to use it: One of the most likely reasons for seeing consistently below-average performance is that the competencies are misaligned with the role or the job role is poorly defined. Another reason is that the necessary outcomes for the position are out of scope and beyond the experience or abilities of the people you’re hiring for it. You will need to revisit job roles and (likely) compensation for these positions.
What it looks like: Your report data should be organized around hires, positions, and scores from your performance reports.
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The metric: Recruiters or interviewers who do well gauging future performance compared with those who struggle
How to use it: Start by identifying interviewers (HR and hiring managers) who are bringing in more quality hires. Then, for example, compare their process for interviewing and screening candidates. You’re not necessarily segmenting this by specific interviewer or technique. Rather, you’re seeing how different recruiters and hiring managers follow your established process.
What it looks like: Use a software program that gives you the basic data on each candidate, but also allows for hiring manager and HR notes on specific screening processes. Dashboards can also include a skills or competencies component, which allows you to track how different recruiters are defining candidates. This might lead you to see that some hiring managers view new hires more myopically, which is leading to low-quality hires.
