An aggregate study that measured the quality of output of production workers found two things: 1) the top third of all performers produced 1.7 times the value of average workers and 2) the difference between the top third performers versus average performers was found to be, at minimum, 40% of their annual salary.
Measuring quality of hire is not just about placing the best people in the right roles in order to decrease turnover. It also has a massive impact on overall productivity and organizational performance. For those that don’t believe quality of hire is a metric you can accurately measure, we beg to differ. Common myths are that “We’ll know it when we see it”, “You can’t quantify it”, and “The same factors apply to every position.” In reality, quality of hire can be described by hiring managers and peers, can be measured, tracked and improved, and specific combinations of factors/data should be unique to every position. The factors that impact quality should be evaluated in varying combinations depending on the position and should include experience, motivation, fit, and KSAs (knowledge, skills and ability). For example, a nuclear engineer might have a weighted analysis of KSAs (70%), experience (20%), motivation (5%) and fit (5%), while a Silicon Valley internet company employee may require motivation (55%), KSAs (20%), fit (15%), and experience (10%).
Quality of hire is defined differently by various organizations and there are a multitude of resources to aid in determining how to define and measure it. However, with minimal data typically available for quantifying the quality of hire metric (a recent report from professional services firm Hudson states that of the 60% of organizations that currently measure quality of hire, they have only been doing so for less than two years), where do you begin? The first step to any measurement is to define what you’re looking for. Figure out what defines quality of hire for your organization and for each individual role. What factors will you look at in making your determination: Time to fill a position? Tenure? Necessary time to fill skill gaps? Once you determine how you will define it, you can determine what statistics you can use to aid your assessment.
According to Hudson, the majority of organizations monitor three major metrics above all others when it comes to measuring quality of hire. These are 1) retention of new hires; 2) hiring manager feedback; and 3) employee performance appraisal ratings. Even though there are many statistics an organization can use to quantify quality of hire (ex. manufacturing environments may track productivity), Hudson found that few companies go beyond these three metrics.
The next important factor to consider is the quality and reliability of the data that is collected, as well as how many types of data are evaluated. Hudson explains:
“If an organization does not collect performance appraisal information systematically or if this information is perceived to be unreliable, then it loses its value. It’s also necessary to cross-reference metrics to create a multidimensional view of performance when measuring quality of hire — a single metric in isolation may not reveal the full story. For example, using only data relating to retention of new hires may be unhelpful if a company does not have a strong performance culture and therefore retains poorly performing employees. Similarly, using employee performance ratings without integrating retention data only tells half the tale; an organization that hires good people who leave within the first six to 12 months needs to know more. The final, and perhaps most critical point, is that quality is relative. A quality hire in one job family will be different to another. When defining quality, you need to think about it in terms of job families and select the measures relating to business performance for that segment of your workforce.”
How should you be collecting this data? The most common data sources listed in the Hudson report are:
Recruitment Systems which “generally house data on the number, location, role type and source of new hires, as well as resumes, competency ratings and test results. They may also include metrics such as time to hire, interview/placement ratios and hiring manager satisfaction.”
HRIS which usually cover employment and promotions history, performance appraisal data and retention and engagement statistics.
Finance Systems which often contain employee-related finance data, such as revenue or profit per employee and/or performance related to budget.
Once data is collected, you will need to qualify each piece and weight it accordingly in order to come up with your overall quality of hire statistics. After you define what quality of hire means to your organization and depending on how data is collected and analyzed, the quality of hire metric will be a beneficial piece of information that can be used to improve morale and profitability by way of better job fit and increased productivity.
Traci Kingery, PHR is an HR Professional and freelance writer based in the Midwest, specializing in immigration and talent management. When she’s not improving unemployment, she keeps busy with her husband and four children.