Measuring Quality of Hire in Recruiting

Posted by Eric Putkonen on 12/21/2016 in Recruiting articles |

Per the Global Recruiting Trends 2017 by LinkedIn, in the top 3 of recruiting metrics we see “length of stay” and “hiring manager satisfaction.”  Both of these point towards quality of hire.  Another main recruiting metric is “time to fill,” but this metric is about recruiting efficiency and not quality of hire.

“Length of stay” has some logical merit to show quality of hire, but it has less and less meaning over time.  For new hires that stay for 3 years versus 5 years…is it really a matter of quality of hire?  Perhaps life circumstances changed, elements of the department changed, inability to keep up with market salary, or a number of other variables start to have more weight the more time passes.  So “length of stay” doesn’t matter as much as retention and turnover rates after 1st year of employment for new hires.

Some caution must be used with the first year of employment turnover and retention rates, because failures in onboarding, ineffective management, or poisonous environment could account for the turnover.  So exit interviews should be conducted to watch for problems in the process that really are not due to quality of hire.

Now if you keep track of your first year hires retention and turnover rates, you still don’t know if you hired someone who meets expectations by just coming in every day to do the job or someone who is a top performer who is exceeding expectations.

I would like to see retention and turnover rates to be paired with the performance reviews from year to year (or however often it is done on a company wide basis) for the first couple of years.  That way you would not only see if the person stayed with the company, but you would also see the performance ratings and get a better picture of how good of a hire was made.

Of course, the performance reviews have to be good.  They have to have specific measurable goals.  Each level of performance must be clearly defined, so that consistently and objectively you can say someone exceeded or met expectations (or whatever labels you give levels of performance).  It can not be up to opinion and hiring manager bias.  Also, the bell-curve idea or compared to others on the team idea are contrary to objective levels of measurement.  If you can’t have everyone get 5 out of 5, then it is not an objective measure.  Because a team full of stars would be ideal and everyone would get 5 out of 5 as they all exceed expectations.

LinkedIn’s report also mentioned “hiring manager satisfaction” as another common recruiting metric (in the top three).  While it is good to ask the hiring managers about their satisfaction regarding a new hire, you need well developed surveys…and that is a topic unto itself.  But I would say “new hire satisfaction” is another survey that should be given to get a bit more well-rounded view.  Also both should be asked to give a rating in the survey of how each feels the new hire is a cultural fit for the company (now that time has passed).  I have heard of 360 surveys with team members to gauge cultural fit as well.

I would ask the hiring manager to supply the date when the new employee became fully productive and the date when the manager thought the new hire would be fully productive.  The latter should be asked for upon hiring the person and the former should be received by the manager upon reaching full productivity.  Again, this should be an objective and clearly defined level of performance.

Now you can’t just ask give a standard time frame to full productivity because some positions take a long time to get up and running.  Also, sometimes hiring managers will hire someone knowing it will take a little longer or less to get them up and running.  So if you ask for both these dates, you can see the difference and that will help gauge how well the hire was from that standpoint of better or worse than expected.  This needs to be referenced and compared to new hire surveys about adequate onboarding, adequate direction from management, clear goals, etc. because a failure at the beginning will slow the ramp up time through no fault of the quality of hire.  The question also remains…is it realistic – the desired time to full productivity?

I have heard some organizations try to capture productivity levels via revenue or percentage of goals.  As I said before, these numbers could be lower or higher depending on the successes or failures of onboarding, management, organizational changes, etc. and not failures in hiring process.  But productivity levels have some merit, because if you hire a sales associate to the team who is outselling everyone…that was a fabulous hire (potentially).

Whenever productivity is being measured though, it is important to have valid measures.  I know some sales people are measured by the number of calls they make a day.  This is a poor measure, because the goal is how many people you have spoken with…not the number of calls.  If you can make fewer calls, but talk to as many people or more people…who is really the more productive?  A step further is number of sales, because you may talk to a lot of people but not get them to buy anything.  A step further is total revenue in sales, because you may get people to buy but never much or any bigger ticket items.  I have seen all of these being used as metrics, so you need to make sure you are really measuring what is important.

You may need to measure how well the rest of the team likes the new hire, because if the same sales associate is really the wrong fit culturally…and is disliked…and doing things uncharacteristic of the culture, then you may see the rest of the team’s productivity dropping due to the poisonous new hire.  Individually, the person may have high productivity…but as a whole for the team the new hire is not a good fit and messing up team.  Although a high producer individually, it would be wise to let go of this person and return the team to its former high productivity and find someone a better fit for the team.

Employee engagement might be another metric of quality of hire, but it is difficult to measure employee engagement.  Also there are periods of higher and lower engagement depending on what is going on with the job and environment.  Then there is the question of whether we hired someone who is prone to engagement (or high engagement)?  This was the question and topic I posed in an earlier post, “Recruiting for Employee Engagement.”  Lastly, I have seen too many poor questionnaires and surveys trying to measure employee engagement, so I know the survey must be well designed and well thought out…and tested for validity.

As I hope the article is pointing out, this is a very complex topic with a lot of moving parts and variables.  Whatever measures of quality of hire that are created, it would be wise to have a period of time of testing the metrics to make sure they are valid and directly correlate to quality of hire.

If we used all these measures, we could create a single score with all of them:

Calculating individual quality of hire

( hiring manager satisfaction % + new hire satisfaction % + ( productivity level % OR time to productivity differential as % ) + job performance as % + (hiring manager + new hire culture fit % / 2) + engagement level % ) / N (number of indicators used – if all of these, then  6)

quality of hireThis assumes equal weighting of all of the above indicators.  To get the overall quality of hire for recruiter and/or department, you would take the average of all quality of hires as a % X (1 – (turnover rate X (100 / whatever % deemed a total failure in quality of hire))).  So if a total failure in quality of hire would result in 20% turn over after 1 year…that is you think 1 out of 5 would leave or be fired within the first year if the system was not working at all…then 100/20 = 5 and thus the turnover rate would have a multiplier of 5.

So if you have an overage quality of hire of 85 (out of a 100) and you had a 5% turnover rate, the overall quality of hire would be 63.75  (.85 X .75 (1-(.05X5))X 100).

Of course, you could weight any of the individual indicators in the same way…by setting levels that you decided would indicate a total failure in quality of hire.  So if a job performance of 30% is a total failure…then you could give it 2 or 3 times the weighting to make changes in the value more significant.  This will give truer numbers because how often are you really going to see someone score 30% or less in performance?  In reality, a much higher number than 30% is considered a failure in quality of hire.

Yes, this will lower your quality of hire scores – but what value is it really to have any score (or survey) come back year after year with 80s or even 90s for a score?  You are not trying to have a high rating to show off to management…you are trying to get a true number to improve upon.

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