The 2017 Talent Benchmarketing Report indicates that just 23% of recruiters measure quality of hire. It’s often seen as being ambiguous; after all, isn’t everyone’s idea of quality subjective? But it really doesn’t need to be elusive.
If you know what to measure, it’s actually really simple to track. And when it’s recorded accurately it can be improved accordingly.
Many recruiters shy away simply because they don’t know where to start, but for those that do; only 33% of TA professionals who measure quality of hire (QoH) feel like they’re using strong tactics to do so, and only 5% believe their tactics are top draw .
You’re probably wondering, how can a company measure hiring quality? So let’s get to it.
What is Quality of Hire and Why Does it Matter?
An employee’s ‘quality’ refers to the value a person brings to an organisation. ‘Value’ typically refers to the contributions of an employee to the company’s long-term success. This might include their daily tasks, how much they help others, or the notable improvement in work quality since their arrival. Quality of hire is, therefore, a measurement of this value after an initial period of time after joining the business (usually 3-12 months).
39% of talent leaders say that quality of hire is the most valuable metric to evaluate recruitment performance . The measure, usually a hard number, can be leveraged to improve your hiring strategy, minimise costs from hiring mistakes and ultimately help your teams hire better employees.
In addition to measuring how successful a new hire becomes, hiring quality is also used to measure the success of the company’s recruiting efforts as a whole.
If the metric is low and new hires aren’t performing, you’ll need to take a look at the recruiting team. Why aren’t they sourcing and selecting suitable candidates?
The importance of this metric is undeniable. Despite its tricky nature, measuring QoH is worth it. It identifies any weaknesses with your hiring process so you can adjust and improve accordingly.
Common Indicators of Quality of Hire
In order to measure QoH effectively, the first step is to decide which indicators of quality you are going to use. We recommend choosing a diverse range of criteria that gives you a holistic picture of how well the employee has performed.
To begin with, let’s take a look at the most common indicators companies use.
- Job performance (100-point scale)
In 2017 LinkedIn found that role performance was the most popular measurement used to calculate quality. It involves grading employee performance on a 100-point scale. Again, there is no standardized way to do this, you could use their manager’s appraisal forms, peer or customer ratings. Either way, it’s important to consider job performance while trying to measure a new hire’s quality.
- Employee retention
How long are employees staying on? The longer an employee works for a business, the more they contribute. Track the turnover rates of new hires and who the top performers are, and then leverage this to calculate an overall score. Retention is trickier to measure than other metrics and can be influenced by factors outside of QoH.
- Speed to productivity
Sometimes known as ramp-up time. This is the amount of time that a new hire takes to reach full productivity in their role at the company.
Measured as the percentage of new hires that achieve full productivity within a set timeframe. One way to measure this is to look at a new hire’s % of goals achieved.
- Employee Lifetime Value
This represents the total net value that an employee brings to your organization. A person’s Employee Lifetime Value (ELV) is measured over their tenure at the organisation — from the first day to the last.
- Pre-hire metrics
Pre-hire assessments are designed to help predict the top performers. This is a proactive measure to aid hirers in predicting QoH early on in the recruitment funnel. Look for scores on tests and aptitude assessments as an indicator of their likely performance in role.
Example: A high-volume hiring client of ours recently discovered that candidates who score well on their customised pre-hire assessment were 3 times less likely to leave in the first 90 days and 5 times more likely to get a highly recommended performance rating.
At ThriveMap, we always combine pre-hire assessment data with post-hire performance data to make improvements to the predictive powers of our pre-hire assessments over time.
How to Accurately Calculate Quality of Hire?
With your chosen indicators on hand, it’s time to calculate your hiring quality.
It’s important to state that a one size fits all approach to QoH will not work. You’ll need to adapt the formula according to the goals and priorities of the organisation, as well as the requirements of each individual position.
After finalising that criteria, use the following formula to measure it:
Enter the performance indicators most relevant to the position. These need to be measured on a scale of 0-100 for consistency. If you’re not already using that scale in performance reviews you’ll need to change things around. Otherwise, this formula will not work for you.
Google has put together a few examples to highlight how the formula works in practice:
Example #1: Employee A is a salesperson at a small marketing agency. HR decides to evaluate the quality of hire for salespeople based on sales goals, 360 reviews, and hiring-manager satisfaction scores. In the first year, Employee A meets 100% of her sales targets. Her 360 reviews are very positive, showing a 95% satisfaction rate among her peers. Her hiring manager reports that he is very happy with her performance; he rates her 92/100.
Example #2: Employee B is a receptionist at the same company. HR decides to evaluate the quality of hire for this position based solely on 360 reviews and hiring-manager satisfaction scores. Employee B’s 360 reviews show an 80% satisfaction rate among his peers. His hiring manager rates his performance as a 75/100.
Considerations when Measuring QoH
It takes time for a new employee to get up to speed with a new company. Don’t jump on the evaluation too quickly or you won’t get useful insights. We recommend waiting at least 6 months before capturing data.
It’s also useful to calculate the overall QoH, by averaging the scores of all your new employees. This will give you an idea about how effective your overall talent acquisition is. In order to do this, use this formula:
Overall QoH (%) = [Avg. QoH score + (100 – Turnover Rate)] / 2
You can also create a formula to be used companywide to calculate an overall quality of hiring score:
Overall QoH (%) = (PR + HP + HR) / 3
- PR = Average job performance rating of all new company hires
- HP = % of new hires with acceptable ramp-up time to reach full productivity
- HR = % of new hires that are retained after one year of employment
These formulas are there for your company to adapt. They need to fit around your business goals. Utilise them as a starting point that will guide you in the right direction.
How to collect quality data
Measuring new hire performance is all about getting the right data.
Some are easier than others, such as retention rates, turnover, and quantifiable performance goals – such as the number of sales.
However, other data sources are not typically part of the everyday reporting operations and can be difficult to keep an eye on. Surveys are your friend here and come in different forms:
- Surveys asking managers to rate a new hire’s performance
- Employee engagement surveys for new hires
- 360 surveys asking managers, peers and team members about a new hire’s fit and performance
- Surveys asking hired or rejected candidates to give feedback on the hiring process
6 Final Tips for Measuring Hiring Quality
One thing to remember is to try and keep things simple and not overcomplicate the process:
- Define measurable objectives of each position, communicate them to candidates in the job description
- Decide which of these indicators to include in your QoH score
- Decide on what time period to measure them over (e.g. 3 months, 9 months)
- Choose, construct and deliver effective surveys (if using subjective measures)
- Communicate your metrics – keep it transparent
- Feedback any data into your hiring process – what are your recruiters, or your assessments missing in their selection?
As the table below shows, companies aren’t exactly confident in their current QoH measurements:
Many companies are turning to data to improve their hiring processes and reduce employee turnover. Recruiters know that in order to be successful, it’s important to track key recruitment metrics and measure the effectiveness of their recruitment efforts.
Quality of hire has a lot of useful applications, but don’t rely on it as your sole metric. Instead, use it as a signpost to guide you towards the best hires and refine your recruiting process.
We hope this post has explained that the process doesn’t have to be arduous. What’s required is a standardisation of your company’s approach to measuring hiring outcomes so the data you collect is consistent and can be compared.