If a thing is worth doing, it’s worth doing well.
Often times, we get so hung up about hiring a new rock star employee, filling an empty position and replacing someone who unexpectedly left that we forget about what matters the most – the quality of hire.
This frequently overlooked hiring metric can show you what’s working in your hiring processes and where there’s room for improvements. Here is what quality of hire is, how you can measure it, as well as the potential hurdles you can run into.
What is the quality of hire?
One of the most important hiring metrics, quality of hire is the value that a new employee brings to an organization. It shows how much an employee contributes to your overall performance as an organization.
According to statistics by Jobbatical, quality of hire is the most important measure of success for 31% of all recruiters. On the other hand, research shows that less than 20% of all candidates who apply for jobs end up being top performers.
Clearly, quality of hire is important, but at the same time, recruiters and hiring managers are struggling with implementing it into their hiring process.
Why you should measure the quality of hire
Before going into details on how to do it, you first need to know why you need to spend time and money on measuring your quality of hire. Just like other hiring metrics, it’s vital to analyzing and improving your hiring process and getting better candidates.
First, by measuring your quality of hire, you will be able to save money. As we’ve written before, hiring someone new can cost a big chunk of money. If you learn that your current efforts result in a poor quality of hire and a loss for your company, you can improve them and save money.
Second, you will be able to quantify the performance of your HR team. You can see whether their efforts are paying off or not and how good they are at finding suitable candidates – whether it’s in-house or an agency that’s doing the recruitment.
Moreover, you can link your quality of hire with other factors to draw important conclusions. For example, you may find out that job boards produce the lowest quality of hire or that candidates with a certain background produce the highest quality of hire.
Ultimately, it’s all about the old saying – you can’t improve what you cannot measure, and more data is always beneficial for improving your hiring processes.
How to measure the quality of hire
Unlike time to fill or cost of hire, quality of hire isn’t a straightforward metric. The reason is that each company chooses its own indicators for quality of hire. This means that the formula for calculating is pretty simple:
Indicator 1 + Indicator 2 + Indicator 3 + Indicator 4 / Number of indicators
As you can see, the number and type of indicators you choose will determine what your quality of hire really describes. Here are a few indicators which recruiters normally use.
Quality of hire indicators
Job performance is one of the most important metrics for each employee. Essentially, it’s how well an employee can perform their job. You can measure it using performance reviews, which is fairly difficult to quantify. Alternatively, you can choose a set number of milestones and achievements and mark them off as the employee performs them.
Employee retention rate is the amount of time an employee sticks around after hiring. This is an excellent indicator to include in your calculation, but it takes a long time to have data which you can use. The second issue is that employees sometimes leave because of external reasons (moving elsewhere, getting another offer, etc.) and internal reasons unrelated to the employee (poor manager, dysfunctional team, etc.).
Ramp-up time is the amount of time it takes for a new hire to become fully productive in their role and they actually start making a profit for the company. This depends on the employee, as well as your onboarding and training procedures.
Hiring manager satisfaction is self-explanatory – how happy they are with a new hire’s performance. This can be expressed as a percentage or on a scale.
Employee progress tells you whether an employee was able to get promoted in their career and at which rate.
Culture fit is how much the employee fits into your documented company culture. Needless to say, this can be pretty hard to quantify.
Pre-hire quality includes a wide range of factors before the employee even starts working with your company. These include assessment scores, candidate attrition, time to fill and many others.
The bottom line is – there are as many indicators for quality of hire as you wish them to be. Depending on your goals, choose the ones that impact your company the most, whether it’s in terms of revenue, employee retention or some other north star metric.
Some issues with measuring the quality of hire
The first problem is that there are far too many indicators to take them all into account. There is no universal way of measurement, you have to choose what’s important for your specific company and measure the quality based on those factors.
The second problem is that the majority of indicators are entirely subjective. Values such as job performance, employee productivity and hiring manager satisfaction depend on the person who’s supplying these values. In other words, it’s hardly ever a scientifically backed value. The results you get can be very skewed, depending on the source of the information.
Third, in order to measure the quality of hire, a company needs to collect additional data. Hiring processes can be fairly complex and this is another extra step to add, which probably won’t make your HR team too happy.
The bottom line is that you can’t decide with your HR team to start measuring the quality of hire today and get valuable data tomorrow. It will take months to years to choose the right indicators, find ways to collect data, standardize your procedures until you come up with a way that gives you data which you can use.
So you have a poor quality of hire…
You’ve gone through the process, found the indicators you want to use and you got the first results back. It turns out that your quality of hire is not all that good – and here’s what you can do about it.
First, analyze your results and find out where you’re underperforming. If a certain indicator is off, you can use the quality of hire as a way to diagnose what’s causing you to get poor quality hires. For example, you may find out that your job ad is a bottleneck and you can use this information to write better ads and job descriptions. You can find out that your retention is poor because there is no clear career progression.
Even if you have struggles defining proper values, the insights you gain from assessing your quality of hire can help you find, hire and retain better candidates.
Although there are certain difficulties when measuring the quality of hire, it is one of the most important hiring metrics to assess the quality of your applicants and the performance of your HR team. As hiring becomes more data-driven with each day, measuring and improving the quality of hire will become easier.